Settling Claims With Clients

Settling Claims With Clients

Once an error has given a client a malpractice claim, the lawyer may try to resolve it, and Model Rule 1.8(h)(2) sets the condition. A lawyer may not settle a claim or potential claim for malpractice liability with an unrepresented client or former client unless that person is advised in writing of the desirability of seeking independent legal counsel and is given a reasonable opportunity to seek that advice in connection with the settlement.¹ Rule 1.8(h) contains two prohibitions. The first bars an agreement that prospectively limits the lawyer's liability unless the client is independently represented in making it, and (h)(2) is the second.²

The rule does not forbid settlement. It attaches a condition, and two phrases fix how far the condition reaches. The first phrase, claim or potential claim, applies the condition before the client has sued and before the client has asserted anything.³ The second phrase, client or former client, means the lawyer gains nothing by waiting for the representation to end. The condition protects only a person who is unrepresented, because a client whose own lawyer is negotiating the release already has the adviser the rule exists to supply. The text also regulates how the release is obtained, and it says nothing about how much is paid for it.

The condition exists because a lawyer who may owe a client money for malpractice has a personal interest that cuts against the client's. Rule 1.7(a)(2) treats a lawyer's personal interest as a possible material limitation on the representation. Rule 1.8 singles out recurring situations in which that conflict is likely and sometimes sets consent or disclosure requirements that differ from the general rule.⁴ Written advice about independent counsel fits that pattern. The lawyer who proposes the settlement is the party who pays, and that lawyer may also be the only adviser the client has consulted. An unrepresented client may not know what the claim is worth or that a release surrenders it.

Each part of the condition fills a separate gap. The writing gives the client advice that can be kept, reread, and carried to another lawyer, so it cannot dissolve into a passing remark. The reasonable opportunity makes the advice usable, because a client who is told to seek counsel and then pressed to sign that same day has been told something there is no chance to act on.

The contrast with (h)(1) explains why the safeguards differ. A prospective limit is agreed to before any error exists, when no one can know what a mistake might cost, so the rule demands actual independent representation, with a real adviser present when the clause is made.⁵ A settlement concerns a problem that already exists or can be identified, so the rule asks for less: written advice and a reasonable opportunity to consult counsel. The client remains free to decline and settle without a lawyer. The two rules therefore turn on different facts. Under (h)(1) the question is whether the client was independently represented, and under (h)(2) the question is whether the lawyer gave written advice and the time to act on it. A letter urging independent counsel, sent to a new client before the client signs a retainer that caps the lawyer's malpractice liability, does not rescue the cap, because the safeguard (h)(1) names is representation, and a letter is a different thing.

The lawyer in that scene committed two separate failures, and either one alone would have violated the rule. A letter handed over at the kitchen table and followed by a demand for an immediate signature would still leave the client without a reasonable opportunity, since advice given at the moment of signing leaves no time to use it.

That lawyer has complied with Rule 1.8(h)(2), even though the client never engaged counsel. The rule requires the opportunity, and whether the client uses it is the client's own choice.

The wording of the settlement sentence varies. One formulation of the rule, quoted in an opinion, provides that a lawyer shall not settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection with the settlement.⁶ Two features stand out. The word first fixes the order, so the written advice must precede the settlement. The sentence also tells the client that independent representation is appropriate, which is more pointed than the Model Rule's reference to its desirability. As quoted, it does not repeat the reasonable-opportunity language, but the practical point survives the difference in wording, since advice delivered with a demand for an immediate signature defeats its own purpose.

A release obtained in violation of these rules exposes the lawyer to discipline and is likely to be held unenforceable.⁷ The two consequences protect different interests. Discipline answers the lawyer's conduct in obtaining the signature, so it can follow even if the client later concedes that the payment was generous. Unenforceability protects the client's claim, because a court that refuses to honor the release leaves the client free to pursue the malpractice claim. A lawyer who skips the letter to save a day therefore risks paying for a release that does not hold and then facing the claim anyway.

The fourth step is the one most often overlooked, since a lawyer who sends a letter may assume the letter alone completes the duty.