Inside Track: Ethical Dilemmas: Can a Lawyer Draft an Engagement Agreement that Delegates Authority to Settle to the Lawyer?:

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Format: MM/DD/YYYY
  • November
    19
    2014

    Ethical Dilemmas: Can a Lawyer Draft an Engagement Agreement that Delegates Authority to Settle to the Lawyer?

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    Nov. 19, 2014 – This month’s Ethical Dilemmas question offers guidance on whether a lawyer can include in an engagement letter a provision that delegates authority to settle to the lawyer or requires the lawyer’s consent before settling a matter.

    Question

    A prospective client has contacted me about representing him in a Fair Debt Collection Practices Act case, which permits fee shifting. A colleague suggested that I include in the engagement agreement a provision requiring the prospective client to agree to continue prosecution of the matter through trial, unless I consent to settlement. Is this ethical?

    Answer

    Such a provision is a clear violation of SCR 20:1.2(a), which requires a lawyer to abide by a client’s decision whether to settle a matter. It is uncontroverted that the client controls settlement of the client’s matter, and lawyers who ignore the client’s instructions with respect to settlement or who settle matters without the client’s consent are routinely disciplined.

    Lawyers may not circumvent this rule by drafting engagement agreements that delegate the authority to settle to the lawyer,1 or that require the lawyer’s consent to settle2. Furthermore, a lawyer’s engagement agreement may not impose financial penalties on a client who does not follow the lawyer’s advice with respect to settlement.3 Similarly, a provision in an engagement agreement that gave the lawyer the right to withdraw and receive quantum meruit compensation if the client rejected the lawyer’s settlement advice was found to be unethical.4 Settlement decisions – good, bad or indifferent – are for the client alone, and the lawyer must abide by those decisions.

    Endnotes

    1 See, e.g., North Carolina Ethics Op. 145 (1993).

    2 See, e.g., New York County Ethics Op. 699 (1994).

    3 See, e.g., Nebraska Ethics Op. 95-1 (1995); Connecticut Informal Ethics Opinion 99-18 (1999).

    4 Philadelphia Ethics Op. 2001-1.




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