Settlement Agreements

Increasingly, when parties to a lawsuit agree to confidentiality in a settlement agreement, the lawyers are also asked to agree to confidentiality. Parties may not want to see their settlement plastered on an opposing lawyer’s website.

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However, having a lawyer independently obligated to a settlement term creates legal and ethical problems for the lawyers.

Here are some of the concerns:

Counsel are not parties to the case and the other side isn’t paying the lawyer’s fees directly. Your client is paying your fees. As such, you need to ask if there is any consideration to support your agreement to confidentiality.
Your obligation is to your client alone and not to the opposing party. So, are you willing to create a direct obligation to the other party that might later conflict you with your own client? Isn’t that a violation of Sections 1.06 and 1.09 of the Texas Disciplinary Rules of Professional Conduct prohibiting conflicts of interest?
Your malpractice coverage might not protect you. Let’s walk through this. Say you were to blab about the settlement terms, you would have breached a contractual agreement to the other side. Your malpractice coverage probably does not cover your contractual breaches to third parties other than your client. HOWEVER, if only your client signs the confidentiality agreement and you do not, then if you talk about the settlement and on behalf of your client breach the obligation of confidentiality thereby exposing your client to liability, then your client’s claim against you would be for malpractice – a covered event for which you and you firm should be insured.
Often as part of these agreements, the opposing party asks you to acknowledge that you have spoken to your client, advised your client about the terms, that your client acknowledged to you he or she agreed, and that you found your client to have understood the terms. Not only does this raise the question of potential conflict, but it creates a question as to whether you have breached your client’s attorney/client privilege in violation of Section 1.05 of the Disciplinary Rules and Rule of Evidence 503. Remember, it is your client’s option to waive the privilege not yours.
Last, there is a concern for your opposing counsel that even in asking you to sign this kind of agreement or make that kind of acknowledgment, your opposing counsel is encouraging you to violate the Disciplinary Rules – which is for your opposing counsel a violation of Section 8.04(a)(1) by inducing another to violate the rules.

These are all serious concerns for the practitioner in handling requests of opposing counsel and opposing parties to you as lawyer to become obligated on your clients’ settlement agreements. I hope this helps you deal with these provisions in your practice.