New rule prohibits restrictions on future representation

The Benchers have added new Rule 7 of Chapter 4 of the Professional Conduct Handbook in order to prohibit a lawyer from agreeing to restrictions on future representation as part of a civil settlement for a client or other controversy. The new rule also prohibits a lawyer from participating in an offer or making an agreement that would restrict another lawyer’s right to practise. The rule states:

A lawyer must not participate in offering or making an agreement in which a restriction on any lawyer’s right to practise is part of the settlement of a client lawsuit or other controversy.

The Ethics Committee has been asked on a number of occasions to provide opinions on the propriety of lawyers making or accepting such offers. The issue has arisen in the past when a litigant, typically a defendant, makes an offer for settlement that contains a term that the opposing party’s lawyer must agree to refuse representation of future clients in separate similar actions against the litigant. Typically, the lawyer is asked to agree to a restriction in exchange for receiving a direct payment to the lawyer, which is in addition to settlement funds offered to the lawyer’s client. This scenario sometimes occurs when a defendant is willing to settle a single case and hopes to avoid the possibility of a large number of future claims arising out of the same circumstances.

The majority of Benchers approved the new rule because they were concerned that any restriction on a lawyer’s future representation created a conflict between the interests of client and lawyer — with the client’s interest lying in a swift and favourable settlement, and the lawyer’s interest in being free to earn future fees from prospective clients in the same area. Some Benchers were also concerned a restriction on future representation could create a conflict between the interests of present clients and those of potential future clients.

The Benchers were further of the view that the absence of a rule would permit wealthy clients to buy off lawyers who have represented similar clients in the past and may therefore be the most knowledgeable and effective advocates for any potential new client’s cause. This could have the effect of restricting public access to, potentially, the best available talent and might permit defendants to avoid fully compensating those they injure and thus undercut the deterrent value of the law.

The profession was invited to comment on the issue last year in the Benchers’ Bulletin. The Law Society received an overwhelming number of responses in favour of the creation of a rule prohibiting the offer or acceptance of such agreements.