By Shelly Skinner
California’s legal ethics rules are designed to protect the public and the integrity of the legal system, while promoting the administration of justice and confidence in the legal profession. Cal. Rule of Prof. Conduct 1.0. Attorney candor is crucial to achieving these aims. While the legal ethics rules set forth many aspects of the duty of candor, this article will focus on the duty to communicate settlement offers in civil matters.
Rule 1.4.1 (Communication of Settlement Offers)
California Rule of Professional Conduct 1.4.1(a)(2) requires a lawyer to “promptly communicate to the lawyer’s client … all amounts, terms, and conditions of any written offer of settlement made to the client in all [non-criminal] matters.” This is reiterated in California Business and Professions Code Section 6103.5(a), which states that a “licensee of the State Bar shall promptly communicate to the licensee’s client all amounts, terms, and conditions of any written offer of settlement made by or on behalf of an opposing party.” And in fact, both Rule 1.4.1 and Business and Professions Code define “client” to include any person with the authority to accept a settlement offer, or in a class action, is a named representative of the class. See Cal. Rule of Prof. Conduct 1.4.1(b); Cal. Bus. & Prof. Code §6103.5(a).
The duty to communicate settlement offers was emphasized in Victorino v. FCA U.S. LLC, 322 F.R.D. 403 (S.D. Cal. 2017), a class action matter in which the defendant proposed a settlement offer to the plaintiff’s attorney, but the plaintiff’s attorney did not convey it to the plaintiff. Consequently, the defendant’s counsel claimed that the plaintiff’s attorney had violated California predecessor Rule of Professional Conduct 3-510, which was applicable at the time and which, like current Rule 1.4.1(a)(2), required an attorney to communicate to the client “all amounts, terms, and conditions of any written offer of settlement made to the client in all [non-criminal] matters.” The plaintiff contended that their attorney had not been obligated to communicate the offer because (1) it was invalid under state law, (2) the plaintiff would have rejected it anyway, and (3) it was a litigation tactic designed to create a conflict of interest. However, the court determined that Rule 3-510 did not contain an exception regarding the types of written settlement offers that must be communicated to the client. Further, the court stated that the attorney’s failure to communicate the settlement offer to their client was not only contrary to Rule 3-510, but also raised a question as to the attorney’s integrity and trustworthiness in representing the interests of the class. Thus, by violating the legal ethics rule regarding communication of settlement offers, counsel had caused the judge to question their integrity and ability to represent a party. That situation is harmful to both the attorney’s reputation and the client’s case.
Note, that to avoid violating the duty to communicate settlement offers as articulated in Rule 1.4.1, attorneys must look a bit beyond the actual rule. Thus, the comment to California Rule of Professional Conduct 1.4.1 places another affirmative duty on lawyers. Specifically, the comment states that an “oral offer of settlement made to the client in a civil matter must also be communicated if it is a ‘significant development’ under rule 1.4.” While the text of Rule 1.4.1(a) requires lawyers to promptly communicate written offers, the word “promptly” is omitted from the comment, which deals with oral offers. However, just because the rule does not explicitly state that an attorney must communicate oral settlement offers promptly, it is generally good practice to treat oral settlement offers the same as written ones. Indeed, the fact that an oral offer has been made might be significant to the client, who may want time to consider the terms and consult with family and friends about it, as the offer might change their personal or financial decisions.
Rule 1.2(a) (Scope of Representation and Allocation of Authority)
Some attorneys may wonder why a lawyer would not communicate a settlement offer to their client. While California Rule 1.2(a) provides that a lawyer “shall abide by a client’s decision whether to settle a matter,” an attorney may be tempted not to communicate a settlement offer to their client is if it is so low that the attorney will not be able to recover fees. Take, for instance, the fact pattern in State Bar Formal Opinion 2009-176, where the defense attorney conveyed to the plaintiff’s attorney an offer of $20,000. If the plaintiff had accepted the offer, then the plaintiff’s counsel would have received far less than the $100,000 her time in the case was valued at. The State Bar Opinion states that the plaintiff’s attorney was ethically obligated to inform the client of the settlement offer and to consummate the settlement in accordance with the client’s wishes, even if it reduced the likelihood of recovering some or all of the plaintiff’s attorney’s fees. Further, California Business and Professions Code Section 6128(b) states that “Every attorney is guilty of a misdemeanor who willfully delays his client’s suit with a view to his own gain.” In fact, if an attorney, for purposes of their own financial gain, does not communicate a settlement offer to their client, and therefore prolongs the case, the attorney could go to county jail for up to six months and be fined up to $2500. Cal. Bus. & Prof. Code § 6128 (“Any violation of the provisions of this section is punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars [$2,500], or by both.”)
Conclusion
Attorneys are bound by explicit requirements regarding the duty to communicate settlement offers to their clients. Abiding by these duties and demonstrating candor to clients promotes confidence in the legal system and protects the aims of California’s legal ethics rules.
Bio: Shelly Skinner is licensed in Alabama and Texas. She served as a federal attorney for 12 years, including as Special Ethics Counsel at the National Labor Relations Board. She is now focused on the ethical use of technology to increase access to justice issues.