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Ethics Advisory Opinion 10-04

September 09, 2010

South Carolina Bar Ethics Advisory Opinion 10-04

SC Rules of Professional Conduct: 5.6, 1.6, 1.9

A lawsuit is filed in a SC Court. A settlement is reached whereby the defendant agrees to pay the plaintiff a sum of money. The settlement does not require court approval. As part of the proposed settlement, defendant desires that Lawyer A, the lawyer for the plaintiff, agree that Lawyer A may not identify or use the defendant's name for "commercial or commercially-related publicity purposes." Lawyer A may identify generally "a settlement was achieved against an industry" - ie: trucking or retail store. The fact that Lawyer A has sued the defendant is a matter of public record and nothing filed in the case was under seal.


Would Lawyer's agreement to the confidential settlement on behalf of his client be ethical under the current rules?


It is improper for a lawyer to become personally obligated in a client's settlement agreement to refrain from identifying the defendant as a part of the lawyer's business.


While confidentiality provisions in settlement agreements generally are not unethical, they generally prohibit a client's disclosure of information, not a lawyer's disclosure. The lawyer need not become a party to the agreement to effectuate ordinary settlement confidentiality. Any prohibition on a lawyer's disclosure of information should come from the client's rights under 1.6 and 1.9 to instruct the lawyer not to reveal information protected by those rules. The information sought to be held confidential under this inquiry-the mere identity of an opposing party-is not by itself so protected.

Furthermore, Rule 5.6(b) prohibits settlement agreements that reach information not reached by 1.6. The lawyer's disclosure or non-disclosure of Rule 1.6 information is that client's to decide. But when a settlement agreement purports to directly restrict the lawyer's own action by making the lawyer a party to the agreement, Rule 5.6(b) disallows such a restriction if it affects the lawyer's right to practice law. The identity of an opposing party, by itself, is not information the lawyer's disclosure of which requires client consent under Rule 1.6 but does affect the lawyer's practice.

Although Rule 1.6 broadly refers to any "information relating to the representation," the commentary discloses that that concept is not boundless. For example, Comment 5 states that it aimed at both client-specific information and other information that could lead a reasonable person to infer client-specific information. The Comment further states that discussing cases as hypothetical scenarios, for example, does not require client consent provided the hypothetical is not so specific or unique that the audience might recognize the specific matter being discussed.

The Committee believes that the mere identity of a defendant, without more, ordinarily is not information that would lead a commercial audience to infer case-specific information; therefore it is not protected by Rule 1.6 and may not be restricted by agreement directly between a lawyer and an opposing party.

Rule 1.9 provides a specific exception for the use of information related to a past matter that has become generally known. See Rule 1.9(c)(1). The existence of lawsuits is often reported in the media and thus becomes generally known. Because that exception is contained in subsection (c)(1) regarding the lawyer's future use of information and not subsection (c)(2) regarding the lawyer's disclosure of information, Rule 1.9(c) could be read as excepting generally known information only from the prohibition on the lawyer's use of it adverse to the client but not from the prohibition on the lawyer's disclosure of it. Such a reading seems to strain logic. A better reading of the rule is that the exception in (c)(1) is encompassed by the exception in (c)(2), which allows disclosure "as these Rules would permit or require with respect to a client."

Other jurisdictions and the ABA have concluded that Rule 5.6(b) prohibits settlement agreements from restricting a lawyer's right to solicit certain clients or categories of clients. ABA Formal Op. 00-417 ("An agreement not to use information learned during the representation effectively would restrict the lawyer's right to practice and hence would violate Rule 5.6(b)"). Ethics Advisory opinions from Texas and Colorado reach similar conclusions, although those opinions are not factually on all fours with this inquiry in that they dealt only with solicitation, whereas the present inquiry involves a restriction on the lawyer's use of the defendant’s identity for "commercial or commercially-related publicity purposes." Clearly this includes both advertising and solicitation. The Committee finds it illogical for Rule 5.6(b) to prohibit agreements that would keep a party’s name out of individual solicitations but not out of advertisements. Rule 5.6(b) protects a lawyer's access to the legal market, and that protection is implicated by advertisements and solicitations equally.

The Texas Advisory Committee found that Rule 5.6(b) prohibited restrictions on solicitations because it found solicitations to be the practice of law. Texas Ethics Op. 505 (1994). We need not come to the same conclusion, as 5.6 was not intended to merely protect against specific practice-of-law prohibitions but is aimed more broadly at lawyers’ access to legal markets and, more importantly, clients' access to lawyers of their choosing. Thus advertising and solicitation need not themselves be regarded as the practice of law in order for them to be protected by Rule 5.6.

The Committee advises that lawyers generally should not become parties to their clients' settlement agreements because it creates contractual obligations or rights for the lawyer individually. This conflict puts the lawyer in the untenable position of evaluating obligations not arising from the lawyer's engagement agreement with the client for the benefit of the client, but conferred by the lawyer directly to the opposing party. Such agreements are unnecessary because, to the extent they obligate the lawyer not to reveal information protected by Rule 1.6-terms of the settlement and circumstances of the case-the same can be accomplished by obligating the client to neither reveal the information nor consent to anyone else’s revelation of it. For Rule-1.6-protected information, the lawyer's participation in the agreement is unnecessary. For unprotected information, the lawyer's participation is improper.

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