By Katie Parker
Imagine the scenario – you’ve met with a potential client, and he has a promising personal injury case. You’re excited to take it on. You’ve just started building your PI practice, and this case looks like a great next step for you. But, your initial conversations have raised a few concerns. In particular, you fear you may have some “client control” issues, and you worry he may present difficulties when it comes to agreeing to a reasonable settlement proposal. As you spoke with him, you sensed more than a bit of stubbornness, and he seemed to have strong opinions about the law and the value of his case.
The positives outweigh the negatives, though, and you’ve managed tough clients before. Plus, you’ve been working on an idea to handle exactly this type of scenario — you’re going to preempt any disagreements about settlement value up front, by addressing them in the engagement agreement. You draft up the contingency fee agreement and include this language: “CLIENT agrees that if a settlement offer is tendered in the case by any defendants and the ATTORNEY believes in good faith that the settlement offer is in the CLIENT’s best interest, and should be accepted, CLIENT authorizes ATTORNEY to accept said offer on CLIENT’s behalf, at ATTORNEY’s sole discretion.”
You and the new client sign the engagement agreement, and you’re feeling confident that this new client has effectively granted you advance authorization to settle the case.
Not so fast. Alarm bells should be going off because the Court of Appeal in Amjadi v. Brown, 68 Cal. App. 5th 383 (2021) considered just such a provision. There, a new firm took on a PI case on the eve of trial, included this clause in their retainer agreement, and accepted a settlement offer that their client, the plaintiff, had previously rejected. The client fired her lawyers, objected to the settlement, and the trial court nevertheless dismissed the case and denied the client’s motion to vacate the dismissal.
On appeal, the court agreed that the retainer agreement clause was void: “We hold an attorney may not settle a client’s case over the client’s objection and any provision of a retainer agreement purporting to give an attorney such authority violates the Rules of Professional Conduct and is void.” 68 Cal. App. 5th at 389. The Court cited:
- Rule 1.2(a): “A lawyer shall abide by a client’s decision to settle a matter.” The court noted that on its face, the provision violated this rule. Id. at 388.
- Rule 1.7(b), which prohibits a lawyer from acting with a conflict of interest. The court said: “The provision creates an immediate, direct conflict of interest … whenever the client and attorney disagree about settlement.” Id.
- Rule 1.6(a) and Bus. & Prof. Code 6149. Regarding confidentiality, the court noted that the provision “forces the attorney to disclose details of the retainer agreement to opposing counsel in order to become effective.” Id. This is exactly what happened in Amjadi — the attorneys settled the case, plaintiff fired those attorneys and objected to the settlement, and in order to defend the settlement, the attorneys disclosed the disputed provision of their retainer agreement.
The unethical conduct at issue in Amjadi had immediate consequences. Beyond reversing the judgment and awarding the plaintiff her costs on appeal, the Court of Appeal found that the attorneys who drafted the provision at issue and settled the case over their client’s objection violated Rules 1.2, 1.6, and 1.7, and referred them to the State Bar. Id. at 391.
Amjadi provides an example of just one way an attorney can run afoul of the ethical rules in drafting an engagement agreement, with significant consequences.