Required Disclosures

Required Disclosures

The second sentence of Rule 1.8(g) fixes the minimum content of the disclosure that must precede every client’s consent: “The lawyer’s disclosure shall include the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.”¹ The sentence names two subjects. One is what is being resolved, meaning the claims or pleas and what each consists of. The other is who is resolving it and on what terms, meaning the participation of each person. “Include” sets a floor, not a ceiling, and the commentary on the rule builds on that floor with a longer list of items, covered in the subsections below.²

The disclosure is the price of the lawyer’s participation, not a bar to it. The commentary stresses that a lawyer may negotiate for an aggregate settlement or plea bargain, whether by initiating the offer or by responding to one; what the lawyer must obtain is advance consent from each client.³ Because that consent depends on the disclosure, the lawyer has no discretion over which facts to share. The lawyer may not withhold any information, for example by declining to tell one client the nature or amount of the offer made to another.⁴

The rule is strict about information because an aggregate deal makes each client’s outcome depend on the others’. A client who sees only a personal share cannot tell whether the package favors someone else, and the commentary warns that an interdependent proposal may be more advantageous to one client than to another.⁵ New Jersey’s Supreme Court stated the purpose in a sentence: when a lawyer represents more than one client, each client has the right to accept or reject the settlement after the terms are known.⁶ Disclosure is how a client learns the terms.

The three subsections that follow take the disclosure in the rule’s own order: the claims and pleas involved, each person’s participation, and then fees and costs, which the rule’s text omits but the commentary treats as part of an adequate disclosure.

Claims and Pleas Involved

The first subject of the disclosure is “the existence and nature of all the claims or pleas involved.”⁷ Each word does work. Existence tells the client which matters the package resolves, so that no claim or plea is swept in unnoticed. Nature tells the client what those matters consist of, which takes more than a list of names or docket numbers. “All” carries the most weight, because it extends the duty past the client’s own claim or plea to every one the deal disposes of.

A client needs that breadth because fairness in a package depends on what the whole contains. A dollar figure means little alone. An even split among five claimants tells a client with a catastrophic injury something very different from what it tells a client with a minor one, and only a client who knows the nature of the other claims can read it.

The commentary’s list adds defenses: the disclosure should cover the existence and nature of all of the claims, defenses, or pleas involved in the aggregate settlement or aggregated agreement.⁸ A client who learns that a defense threatens another claimant’s recovery can see why the shares differ and judge whether the difference is justified.

The rule’s text never says that the client must be told the total, and New Jersey’s experience shows why that silence is no license to withhold it. The New Jersey rule quoted in the litigation conditions an aggregate settlement on each client’s consent after consultation, including disclosure of the existence and nature of all the claims or pleas and of each person’s participation. It does not mention the total amount.⁹ The trial court treated the omission as meaningful. It reasoned that the former Model Code provision, DR 5-106, had required disclosure of the total settlement amount before each plaintiff’s approval and that RPC 1.8(g) did not, and on that footing it concluded that a weighted-majority provision in the plaintiffs’ retainer agreement did not violate the rule.¹⁰ The Supreme Court sided with the Appellate Division, which had taken the position that any textual differences between the old rule and the new one were without significance, because both rest on each client’s right to accept or reject the settlement once the terms are known.¹¹ The size of the whole is among those terms. A lawyer should therefore disclose the total, and should not read a rule’s silence on a subject as permission to leave it out.

The criminal side works the same way, because the rule treats pleas as the counterpart of claims.

Each Person's Participation

The second clause of the disclosure sentence requires “the participation of each person in the settlement.”¹³ The first clause told the client what is being resolved. This clause tells the client who is resolving it and on what terms: what each person puts into the deal and what each takes out. “Each” matters here as it does in the consent requirement. A lawyer who describes only the client’s own position has left out the information the clause demands.

The rule’s text does not define participation, so the content comes from the commentary. It directs the lawyer to disclose the details of every other client’s participation, whether that means settlement contributions, settlement receipts, the resolution of criminal charges, or any other contribution or receipt of something of value as a result of the aggregate resolution.¹⁴ The last phrase leaves the category open. Money is the usual currency of a civil settlement, but the commentary reaches anything of value, so a benefit that never appears on the payment schedule still counts. Its own illustration is the favored client: if one client is favored over the others by receiving non-monetary remuneration, that fact must be disclosed to the others.¹⁵

The total tells a client how large the pie is, but not how it is cut, and the cut is what the client is deciding about. The commentary warns that when an interdependent proposal is more advantageous to one client than to another, the balance among the clients may be difficult or impossible to strike.¹⁶ A client who does not know that another client receives more, or receives something extra, cannot judge whether the division is fair and has no occasion to object. Non-cash benefits sharpen the problem, because an even split of the dollars can hide an uneven deal. The lawyer owes duties to every client and can tilt a package toward one of them; only a client who sees every person’s participation can catch the tilt and protest it.

The rule does not demand equal contributions. A lopsided split may be exactly right. What the rule demands is that each client learn the split before agreeing. Armed with it, the electrician may accept, bargain for a smaller share, or refuse. The division of value stays a matter for the clients and the negotiation, and the disclosure requirement ensures that each client makes that choice with the facts.

The New Jersey litigation shows what the failure looks like from the client’s side. One plaintiff claimed that his lawyer had not fully informed him of the facts and circumstances of the proposed settlement and had not answered his questions, although the case itself turned on a weighted-majority provision in the retainer agreement, taken up in a later section.¹⁷

A lawyer may be tempted to treat another client’s terms as that client’s private business, especially when that client would prefer that a benefit stay quiet. The rule’s structure answers the temptation, because disclosure is a condition of the lawyer’s participation. The lawyer may not take part in making the aggregate deal unless each client has consented in a signed writing after a disclosure that includes each person’s participation.¹⁸ A lawyer who feels bound to secrecy has therefore found no exception to the rule; the lawyer has found a reason not to take part in concluding the deal on those terms. A client who wants a side benefit kept quiet is asking the lawyer to collect the other clients’ signatures on incomplete information, and signatures collected that way do not meet the rule.

Fees and Costs

Rule 1.8(g) says nothing about the lawyer’s own fee or about litigation costs; its disclosure sentence names only the claims or pleas involved and each person’s participation.²⁰ The commentary’s list of what the disclosure should include adds two items the text omits.²¹ The first is the total fees and costs the lawyer will receive as a result of the aggregate settlement, when the fees or costs will be paid in whole or in part from the settlement proceeds or by an opposing party. The second is the method by which costs will be apportioned among the clients, covering both costs the lawyer has already paid and costs to be paid out of the proceeds.²²

Both items bear on what each client will actually receive. A fee paid from the settlement fund comes out of money that would otherwise be divided among the clients, so the gross share on a client’s schedule is not what the client keeps. Costs raise a second question. The lawyer has usually advanced expenses for the whole group, and the clients repay them from the proceeds; dividing them equally, in proportion to each client’s recovery, or by some other formula produces a different net figure for each client. A client who does not know the formula cannot work out what the deal is worth. When the fee comes from the proceeds or from the other side, its size also depends on the very deal the clients are asked to approve, and a client weighing the lawyer’s advice to accept is entitled to know that. A fee paid by the opposing party is the version easiest to keep out of sight, because it never appears on any client’s schedule.

A stem in which every client holds a signed consent and a schedule of gross shares invites the conclusion that the disclosure was complete. Ask instead where the lawyer’s fee comes from and whether anyone told the clients how the advanced costs would be split. If the fee comes from the proceeds or from the opposing party and the clients heard only their gross figures, the disclosure falls short of the commentary’s list.