Why the Rule Exists

Rule 5.6(b) forbids a lawyer to participate in offering or making “an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.”¹ The command overrides a bargain that the client and the opposing party may both want, and a settlement ordinarily belongs to the people who sign it. A rule that displaces the signers owes an explanation. The explanation also does practical work: it tells you whether an unfamiliar term falls inside the rule.

The rationale has two parts, and each places the harm in a different spot. The first harm lands outside the negotiation, on clients who will need a lawyer later and who never see the settlement. The second arises inside it, among the client, the lawyer, and the opposing party, once the lawyer’s future practice carries a price. When a fact pattern offers a term the text does not obviously cover, ask who ends up paying for it and whose interests the lawyer now serves.

Protecting Future Clients’ Choice

Client choice is the first reason. Comment 1 to Rule 5.6 explains that agreements restricting lawyers’ right to practice after leaving a firm “not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer.”² Professors Hazard and Hodes and attorney Peter Jarvis describe the rule as “designed to protect present and potential clients from a diminution of their ability to choose counsel.”³ Both statements arise in the setting of departing lawyers, where the rule bars non-competition terms that would keep a lawyer from practicing in the area or from accepting retention by the firm’s former clients.⁴ Paragraph (b) applies the same principle to a different bargain.

A claimant who has not yet hired a lawyer, or who does not yet know of an injury, is a potential client, and that claimant takes no part in the settlement. If the settlement bars the firm from taking similar claims, the pool of lawyers shrinks for someone who never agreed to the shrinkage and may never learn of it. The lawyer who disappears from that pool is often the one the later claimant would most want: the lawyer who has already litigated this kind of claim against this opponent.

The settling parties cannot cure the problem by agreeing, because the cost falls on someone else. The client is paid, the opponent receives what it bought, and the lawyer is bound, so everyone with a voice at the table either gains or is constrained. The people who lose have no voice, and a lawyer’s availability to them is not the client’s to sell, the lawyer’s to sell, or the opponent’s to buy. Contract law supplies the general principle: a contract formed without any bargaining misconduct may still be unenforceable because the contract itself violates, or runs directly contrary to, some public policy.⁵ Fair process does not save a term that offends the policy, a point the next section develops.

One judicial opinion states the competitive side of the point in terms of a “client market.” It recognizes “the existence of a ‘client market’ which is divided among lawyers within a particular locality,” but insists that the division of that market “can be ethically achieved only through individual performance and the ‘establishment of a well-merited reputation for professional capacity and fidelity to trust.’”⁶ A settlement term that bars a firm from a class of claims divides the market by contract instead of by performance, and the claimants in that class pay for the division.

Cohen v. Lord, Day & Lord supplies the phrase that names the affected group. The opinion says that restrictions of this kind run contrary to what has been termed “the better rationale” for rule 5.6 and DR 2-108(A): that they “impinge upon the right of future clients to free choice of counsel,” a formulation it takes from Hazard and Hodes and from Wolfram’s treatise.⁷ “Future clients” does the work in settlement cases, because it names the people the agreement affects and cannot consult.

Many students assume that an ethics rule on practice restrictions protects the judicial process. The better view is that the fundamental reason for the ethical prohibition against restrictive covenants is protection of clients’ right to engage lawyers of their choice, and a restriction on practice may or may not interfere with the judicial process.⁸ A second error follows from the first when a fact pattern gives the settling client a generous payment and a willing signature and asks whether the clause is acceptable. The payment is beside the point. The interest at stake belongs to people outside the deal, and the settling client cannot consent for them.

One term separates the two settlements, and the size of the payment plays no part in the comparison. The analysis asks only what the term does to the lawyers available to people who never negotiated.

Removing Leverage Over Counsel

The second reason operates inside the negotiation, where an opponent can pay for something other than the client’s claim. Hazard, Hodes, and Jarvis say the rule protects “both individual lawyers and clients from illegitimate anticompetitive practices that will distort the market and ultimately drive up the price of legal services.”¹⁰ A settlement gives an opponent an opening for exactly that practice, because a restriction on the lawyer can be written into the price. Once the restriction is on the table, two incentives appear that did not exist before, one held by the opponent and one by the lawyer, and a rule that forbids the restriction removes both.

The opponent’s incentive comes first. An opponent that expects more suits has reason to pay for the exit of the lawyer who beat it once, since that lawyer is the one it least wants to meet again. The value of the exit is set by the litigation the opponent expects to face, not by the worth of the present claim. The opponent can therefore pay more than the claim deserves, and the excess buys the lawyer’s departure.

The lawyer’s incentive follows from the opponent’s, because the lawyer alone can deliver what the opponent is buying. The client’s interest is a settlement that reflects the value of the client’s own claim, and the lawyer’s duty is to advise on that basis. Once the offer depends on the lawyer’s withdrawal from future matters, though, a recommendation to accept requires the lawyer to weigh personal practice against the client’s larger recovery. A lawyer who values the practice has reason to talk the client out of an offer the client should take. A lawyer willing to step aside has reason to talk the client into a deal whose size is explained by the exit and not the claim. The client sees one large number and cannot tell how much of it paid for the claim and how much for the exit, so the client cannot discount the advice for the lawyer’s stake.

The Benlate litigation shows how much money can sit in a multi-case settlement. DuPont made substantial offers for every case except Davis’s, and the amounts exceeded what the clients could reasonably have expected to recover at trial.¹¹ Yet these nineteen clients had only marginal claims unless their cases were tied to the Davis case. An offer above trial value raises no problem under Rule 5.6(b) by itself, since the rule reaches restrictions on practice. The danger appears when a surplus of that kind arrives with a request that the firm give up a category of future work, because no one in the room can then say how much was paid for the claims and how much for the exit. Marginal claims sharpen the problem: clients holding them have the least basis for judging whether a number is generous because of the claims or because of something else, and the firm would advise them while its own docket sat in the same package.

A stem on this point often tempts you to ask whether the clients were harmed, since the premium flows to them and they may come out ahead. The rule does not turn on that question. It addresses the incentives the term creates: the opponent’s willingness to pay for the removal of an expert, and the lawyer’s temptation to weigh a practice against a payout. Ask instead whether the lawyer’s future availability is part of what the offer buys.