California Ethics Opinion 2009. ETH 2009-176. THE STATE BAR OF CALIFORNIASTANDING COMMITTEE ONPROFESSIONAL RESPONSIBILITY AND CONDUCTFORMAL OPINION NO. 2009-1762009ISSUES:In a lawsuit prosecuted by Attorney A against Defendant, Client has a statutory right to seek an award of attorney's fees. Attorney B, Defendant's counsel, makes a settlement offer, conditioned on Client's waiver of his statutory right to attorney's fees, that is insufficient to compensate Attorney A for her fees. (1) May Attorney A bar the settlement notwithstanding Client's desire to accept it? (2) Does Attorney B violate any ethical obligation by recommending or conveying the fee-waiver settlement offer in this case? (3) Does Attorney B violate any ethical obligation by recommending or conveying fee-waiver settlement offers in cases generally? DIGEST: 1. A lawyer must inform the client of a fee-waiver settlement offer and consummate the settlement in accordance with the client's wishes even if it reduces the likelihood of recovering some or all of his or her fees. 2. A lawyer does not violate any ethical obligation by recommending or conveying a fee-waiver settlement offer in a given case. 3. A lawyer does not violate any ethical obligation by recommending or conveying fee-waiver settlement offers in cases generally. AUTHORITIES INTERPRETED: Rules 1-500, 3-510, and former rule 2-109 of the Rules of Professional Conduct of the State Bar of California.(FN1) Business and Professions Code sections 6068, subdivisions (a), (b), (c) and (h), and 6103.5. STATEMENT OF FACTS Client engages Attorney A to prosecute a lawsuit against Defendant under the Act. In addition to creating substantive claims, the Act is a "fee shifting statute," granting a successful plaintiff a right to seek an award of attorney's fees. Client and Attorney A enter into a written fee agreement that is legally valid and ethically compliant. The fee agreement provides that Attorney A shall be paid a one-third contingent fee or the statutory award, whichever is greater. Attorney A has previously represented, and currently represents, others pursuing claims under the Act against Defendant. Attorney B, counsel for Defendant, has handled many of these matters and is responsible for defending Client's lawsuit. In the past, after settling claims under the Act, the plaintiffs have filed motions for attorney's fees. As a result, on Attorney B's recommendation, Defendant has decided to make fee-waiver settlement offers in lawsuits under the Act generally, and Attorney B has conveyed such offers. Extensive motion practice and pretrial discovery ensue in Client's lawsuit. Attorney B recommends to Defendant to make a fee-waiver settlement offer of $20,000, and Defendant accepts the recommendation. Attorney B conveys the settlement offer to Attorney A. If Client were to accept the settlement offer, Attorney A would receive far less than the value of the time she has invested in Client's lawsuit. The reasonable value of her services totals $100,000. In light of the evidence revealed in discovery, Attorney A believes Client's case to be winnable at trial and the fee-waiver settlement offer to be less than the potential value of Client's claim. Attorney A advises Client regarding her analysis of the merits, likelihood of success at trial, potential damages award, and the practicalities of litigation. Client, weary of litigation, decides the settlement offer is adequate and instructs Attorney A to accept it. DISCUSSION 1. Statutory Attorney's Fees A variety of statutes that create a substantive claim also grant the successful plaintiff a right to seek an award of attorney's fees.(FN2)Such "fee shifting statutes," often involving civil rights, have been the subject of much discussion by us and others.(FN3) Discussion has centered around the decision made by the United States Supreme Court in Evans v. Jeff D. (1986) 475 U.S. 717 [106 S.Ct. 1531] ("Jeff D."), a case involving the Civil Rights Attorney's Fees Awards Act of 1976 ("Fees Act"). Prior to the decision made in Jeff D., both the United States Courts of Appeals and state and local ethics committees were divided as to whether fee-waiver settlement offers were legally permissible and not ethically prohibited.(FN4) In general, opposition to such settlements focused on the risk of undermining the legislative purpose of enabling "private attorneys general" and interfering with the administration of justice. The ruling made in Jeff D. changed the debate. At the threshold, it held that fee-waiver settlement offers presented legal questions rather than ethical questions. (See, id. at p. 727 [any "duty" on the part of the trial court to reject a proposed fee-waiver settlement offer under the Fees Act "derives ultimately from the Fees Act rather than from the strictures of professional ethics"]; id. at p. 728 [the "defect, if any," in such a settlement...
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