Ethics Opinion 386

Aggregate Settlements

Lawyers frequently represent multiple clients in civil litigation. As the matters proceed, the lawyers may seek to obtain an aggregate settlement for their clients. However, when lawyers attempt to settle matters on behalf of multiple clients, issues may arise that are not present in individual representations. This opinion provides guidance for lawyers on how to navigate the disciplinary rules and advise their clients when representing multiple clients in civil matters that could lead to aggregate settlements.¹

D.C. Rule of Professional Conduct 1.8(f) states:

• A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims for or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, unless each client gives informed consent in a writing signed by the client after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.²

The D.C. Rules of Professional Conduct (D.C. Rules or Rules) do not define the term “aggregate settlement,” but ABA Formal Opinion 06-438 (2006) provides that an aggregate settlement “occurs when two or more clients who are represented by the same lawyer together resolve their claims or defenses or pleas.”³ The ALI Principles of the Law of Aggregate Litigation, Section 3.16, defines aggregate settlements as

• (a) . . . a settlement of the claims of two or more individual claimants in which the resolution of the claims is interdependent; (b) The resolution of claims in a non-class aggregate settlement is interdependent if: (1) the defendant’s acceptance of the settlement is contingent upon the acceptance by a number or specified percentage of claimants; or (2) the value of each claim is not based solely on individual case-by-case facts and negotiations.

Although the precise definition of aggregate settlements remains unresolved under the Rules, the core of Rule 1.8(f) is that a lawyer who represents multiple clients in a matter or related matter must obtain all clients’ informed consent in writing and provide adequate disclosures in connection with a settlement on their behalf.

As the text of Rule 1.8(f) indicates, lawyers may enter into aggregate settlements on behalf of their clients if the clients are fully informed about the settlement, including the financial or other consideration they and the lawyers’ other clients are receiving. In addition, at the outset of a joint representation, pursuant to the conflict-of-interest rules, lawyers must ensure that they are appropriately advising their clients of the risks associated with the multiple representations, including settlement risks. They must also ensure that they provide their clients with accurate information about the nature and scope of the settlement prior to obtaining their clients’ written consent to the settlement.

Applicable Rules

• 1.0 (Terminology)
• 1.2 (Scope of Representation)
• 1.4 (Communication)
• 1.6 (Confidentiality of Information)
• 1.7 (Conflict of Interest: General Rule)
• 1.9 (Conflict of Interest: Former Client)
• 1.8 (Conflict of Interest: Specific Rules)
• 1.16 (Declining or Terminating Representation)

Inquiry

1. What steps must a lawyer representing multiple clients take to ensure that the clients fully understand the nature and scope of any aggregate settlement into which they may enter?


2. What rules must lawyers follow when representing clients in matters involving aggregate settlements?

Discussion

A. Engagement of Clients in a Joint Representation Involving a Potential Aggregate Settlement

A lawyer who represents multiple clients must initially ensure that there is no conflict between or among the clients that may prohibit the joint representation.⁴ If there are conflicts, the lawyer must determine whether the conflicts may be waived, fully disclose the nature of the conflicts to the clients, and obtain the clients’ informed consent before proceeding with the joint representation.⁵ The lawyer must be mindful that “[i]n a joint representation, a lawyer owes ethical duties of loyalty and confidentiality, as well as the duty to inform, to each client.”⁶ This means that, throughout the representation, the lawyer may not favor one client over another but rather must treat each equally.

Typically, aggregate settlements occur in the context of the representation of multiple clients in the same matter. Rule 1.8(f), however, is not restricted to the representation of clients in one matter. A lawyer may represent multiple clients, for example, in several matters against the same party for violations of a form agreement. If the lawyer resolves the matters through an aggregate settlement, the lawyer must abide by Rule 1.8(f) and any other applicable rules.

Under Rule 1.8(f), aggregate settlements are permissible, so long as each client provides informed consent in writing after full disclosure by the lawyer of the terms of the settlement.⁷ However, a lawyer ordinarily may not rely upon an advance waiver from a client under which the client agrees not to object to the terms of a future aggregate settlement. We agree with the ABA’s admonition that the disclosures required “must be made in the context of a specific offer or demand. Accordingly, the informed consent required by the rule generally cannot be obtained in advance of the formulation of such offer or demand.” ABA Opinion 06-438. See also In re Hoffman, 883 So. 2d 425, 433 (La. 2004) (informed consent cannot be avoided by obtaining client consent in advance of a future decision by the attorney or by a majority of the clients about the merits of an aggregate settlement); Tax Authority v. Jackson Hewitt, 898 A.2d 512, 522 (N.J. 2006) (the rule “forbids an attorney from obtaining consent in advance from multiple clients that each will abide by a majority decision in respect of an aggregate settlement. Before a client may be bound by a settlement, he or she must have knowledge of the terms of the settlement and agree to them.”) Thus, informed consent cannot be obtained from a client until the terms of the settlement are known and have been fully disclosed to the client, which ordinarily is not possible until the proposed settlement is offered or demanded. Otherwise, a client’s advance waiver could result in adverse consequences to the client who may ultimately receive an unfavorable settlement to which the client would not have agreed had the terms been fully explained at the time of the settlement.

The information concerning the potential aggregate settlement that the lawyer receives from and discloses to his clients is protected by Rule 1.6. While ordinarily a lawyer cannot disclose the privileged and confidential information of a client to others, in a multiple representation the lawyer is required to disclose relevant information among the joint clients as necessary to keep each client adequately informed; accordingly, at the outset of the joint representation, the lawyer should obtain the informed consent from all clients to share privileged and confidential information among the group.⁸ The lawyer should also advise the clients that, should a dispute arise, the attorney-client privilege may no longer be available against other members of the commonly represented group on issues on which they have received advice from counsel. Comment 15 to Rule 1.7 states:

• A particularly important factor in determining the appropriateness of common representation is the effect on client-lawyer confidentiality and the attorney-client privilege. With regard to the attorney-client privilege, the prevailing rule is that, as between commonly represented clients, the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised.⁹

If settlement of claims or defenses is at issue in a lawyer’s representation of multiple clients, the lawyer should explain the risks involved:

• Differences in willingness to make or accept an offer of settlement are among the risks of common representation of multiple clients by a single lawyer. Under Rule 1.7, this is one of the risks that should be discussed before undertaking the representation, as part of the process of obtaining the clients’ informed consent.¹⁰

B. Entering Into the Aggregate Settlement Agreement

The nature of an aggregate settlement agreement is such that two or more clients of a lawyer resolve the matter at once, through a negotiation. Unlike in a class action, however, the fairness of the settlement is not reviewed by a judge. Class action litigants have inherent protections under Rule 23 of the Federal and D.C. Superior Court Rules of Civil Procedure. Among other things, under Rule 23 in both federal court and the courts of the District of Columbia, notice must be provided to the litigants and the court must approve the settlement. Non-class aggregate settlements do not provide such protections as noted in In Re Kennedy: “The absence of those safeguards to protect collective action clients from the unfair or unethical settlement of their claims necessitates maintaining the protections of Rule 1.8(f) for collective actions such as the one in this case.”¹¹ Although there is no explicit exception in Rule 1.8(f) for aggregate settlements in class actions, there is little doubt that non-class aggregate settlements present particular concerns due to a lack of court oversight of the resolution of the matter, which Rule 1.8(f) is designed to address.

The comments to Rule 1.8(f) set forth what disclosures a lawyer must make to the clients before an aggregate settlement is made or accepted on their behalf: “the lawyer must inform each of them about all the material terms of the settlement, including what the other clients will receive or pay if the settlement or plea offer is accepted.”¹² For the settlement to be binding, each client must provide informed consent in writing.

ABA Opinion 06-438 sets forth a list of minimal disclosures a lawyer should make to the clients to whom a settlement offer is made, the pertinent portions of which are as follows:

• The total amount of the aggregate settlement or the result of the aggregate agreement.
• The existence and nature of all of the claims and defenses involved in the aggregate settlement.
• The details of every other client’s participation in the aggregate settlement, whether it be their settlement contribution, their settlement receipts, or any other contribution or receipt of something of value as a result of the aggregate resolution.
• The total fees and costs to be paid to the lawyer as a result of the aggregate settlement, if the lawyer’s fees and/or costs will be paid, in whole or in part, from the proceeds of the settlement or by an opposing party or parties.
• The method by which the costs (including costs already paid by the lawyer as well as costs to be paid out of the settlement proceeds) are to be apportioned among them.

The ABA opinion’s list of minimum disclosures is consistent with Comment 12 to Rule 1.8. The specific information the lawyer should disclose to the clients, however, will ultimately depend upon the nature of the case and the information the clients will need to make intelligent and informed decisions on whether to approve the proposed resolution. As the Kennedy court suggested, in aggregate settlements conflicts between the lawyer and the clients, or between or among the clients, may occur. A lawyer may have an incentive to maximize the amount of money he or she may obtain through settlement. Or the lawyer may wish to streamline the settlement process so that the matter may be resolved more easily and with less administrative burden. This incentive may lead the lawyer to fail to disclose adequately to the clients the full terms of the settlement or to construct arrangements with the clients that run afoul of the rules.

In the Kennedy case, for example, Respondent retained 67% of the settlement funds for himself, and distributed the rest to his clients, without informing them of the terms of the settlement or the percentage he had taken. The court determined that the lawyer had violated Rule 1.8(f), among other rules. Kennedy, 281 A.3d at 42-43. See also Florida Bar v. Kane, 202 So.3d 11 (Fla. 2016) (upholding disbarment of three lawyers who entered into an aggregate settlement in which the lawyers had complete discretion over the disbursement of funds to their clients); In re Gatti, 333 P.3d 994, 1004 (Or. 2014) (lawyer violated rule on aggregate settlement by not obtaining clients’ informed consent, in writing, to the formula he used to divide the defendants’ lump-sum settlement offers).

An arrangement that some lawyers have employed in the past is obtaining the clients’ advance consent to accept the majority’s decision on whether to accept the terms of the aggregate settlement. Such an approach, however, is impermissible. The lawyer has a duty to all the clients. To the extent that one or more clients disagree with the terms of the aggregate settlement, the settlement cannot proceed. Under Rule 1.2(a), a lawyer “shall abide by a client’s decision whether to accept an offer of settlement of a matter. In a criminal case, the lawyer shall abide by the client’s decision, after consultation with the lawyer, as to a plea to be entered.” See also D.C. Bar Legal Ethics Opinion 289 (“[Rule 1.2(a)] is designed to preserve the client’s right to accept or reject a settlement offer, and it requires that a client be able to exercise his or her judgment at the time the offer is communicated . . . [A] client’s right to accept or reject a settlement offer is absolute. . .”).

Accordingly, it is ultimately each client’s decision, not a decision for a majority of clients in a multiple representation, whether to accept or reject a settlement. Indeed, many courts have determined that “majority rule” arrangements violate Rule 1.8(f) or its equivalent. See, e.g., The Tax Authority, Inc. v. Jackson Hewitt, Inc., 898 A/2d 512. 522 (N.J. 2006); Knisley v. City of Jacksonville, 147 Ill. App. 3d 116, 121 (1986) (“[T]he arrangement presented allowing the majority to govern the rights of the minority is violative of the basic tenets of the attorney-client relationship in that it delegates to the attorney powers which allow him to act not only contrary to the wishes of his client, but to act in a manner disloyal to his client and to his client’s interests.”); Hayes v. Eagle-Picher Industries, Inc., 513 F.2d 892, 894-95 (10th Cir. 1975).

Similarly, the Rules do not permit the construction of a committee or smaller group of jointly represented clients to decide for the entire group whether to accept an aggregate settlement, or other like arrangements. See, e.g., Abbott v. Kidder Peabody & Co., 42 F. Supp. 2d 1046, 1050-51 (D. Colo. 1999). While an appointed committee may try to accept only an aggregate settlement that it deems fair to all litigants, each individual client is entitled to determine whether to accept or reject a settlement after being fully informed of its terms.

Issues about a lawyer’s ability to continue to represent multiple clients typically arise when one or more clients approve, and others reject, a settlement proposal. The lawyer may or may not be able to continue to represent any of the clients. A lawyer confronted with such a scenario should carefully review Rules 1.6, 1.7, 1.8, 1.9, and 1.16 for guidance. In particular, the lawyer will need to determine, among other things, whether continuing representation of one or more clients will be adversely affected by representation of, or continuing duties to, the other clients. Further, depending on the particular facts, the lawyer may or may not need to obtain the informed consent from all clients to continue to represent all clients or a subset of clients in the matter.

C. Other Issues

Non-class settlements that may involve hundreds or thousands of plaintiffs present special challenges. It may be difficult to obtain the approval of every plaintiff to such an aggregate settlement. The clients may be concerned about their privacy, not wanting every other jointly represented client to learn about the details of their respective case and the amount of funds they will receive. Individual clients may also be concerned about the settlement becoming public. Or they may simply have different views on the terms of a settlement.

The language of Rule 1.8(f) is helpful in resolving these issues. An attorney must disclose to each individual client “the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.” The rule does not require that the client’s name and the personal details of each client’s claim be disclosed. Accordingly, with the clients’ written consent, where privacy concerns are at issue, a lawyer may be able to reveal the nature of each individual’s claim without disclosing the specific identity of each individual client.¹³

Conclusion

The representation of multiple clients creates unique issues concerning conflicts, confidentiality, and duties of loyalty, among others, of which lawyers need to be mindful. Representing multiple clients in settlement discussions touches upon all these issues and more. It is critical that lawyers fully inform their clients at the outset of the representation of the potential conflicts that can occur in the context of settlement discussions, and that they provide complete information to their clients about the nature of any settlement proposal, including the amounts they and other clients will receive and full details of the settlement, so that the clients can provide informed consent in writing, or interpose any objections they may have, to the terms of the settlement.

Published: November 2023

1. Rule 1.8(f) refers to aggregate settlements in civil and criminal matters. This Opinion, however, addresses aggregate settlements in civil matters only.
2. Under Rule 1.0(b), “`consultation’ denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.” “Informed consent” under Rule 1.0(e) “denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” Rule 1.0(o) defines writing as “a tangible or electronic record of a communication or representation, including handwriting, typewriting, printing, phot stating, photography, audio or video recording, and e-mail.” Under the Rule, a “signed” writing “includes an electronic sound, symbol or process attached to or logically associated with a writing and executed or adopted by a person with the intent to sign the writing.”
3. The ABA Model Rule on aggregate settlements is 1.8(g), which is substantially similar to D.C. Rule 1.8(f).
4. See Rule 1.7(b).
5. See Rule 1.7(c).
6. D.C. Legal Ethics Opinion 296 (2000).
7. Rule 1.8(f) specifically refers to aggregate settlements. Rule 1.4(c) generally requires that lawyers communicate all offers of settlement to their clients: “A lawyer who receives an offer of settlement in a civil case . . . shall inform the client promptly of the substance of the communication.”
8. See Rule 1.6 cmt. 12; Rule 1.7 cmt. 16.
9. Comment 16 of Rule 1.7 addresses confidentiality in joint representations in further detail, and states:

• As to the duty of confidentiality, continued common representation will almost certainly be inadequate if one client asks the lawyer not to disclose to the other client information relevant to the common representation. This is so because the lawyer has an equal duty of loyalty to each client, and each client has the right to be informed of anything bearing on the representation that might affect that client’s interests and the right to expect that the lawyer will use that information to that client’s benefit . . . The lawyer should, at the outset of the common representation and as part of the process of obtaining each client’s informed consent, advise each client that information relevant to the common representation will be shared, and explain the circumstances in which the lawyer may have to withdraw from any or all representations if one client later objects to continued common representation or sharing of such information.

Moreover, there may be situations in which the lawyer must disclose information received from one joint to other joint clients, even if the disclosing client asks that the information be kept in confidence. See D.C. LEO 327 (2005).
10. Rule 1.8 cmt. 12.
11. In re Kennedy, 281 A.3d 36, 42-43 (D.C. 2022).
12. See Rule 1.8 cmt. 12.
13. For a more detailed discussion of these issues, see Charles Silver & Lynn A. Baker, Mass Lawsuits and the Aggregate Settlement Rule, 32 Wake Forest L. Rev. 733, 756-759 (1997).