Legal Ethics Corner

Ethics Corner is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.


The Ethics of Statutory Attorney Fee Waivers in Settlement Discussions

In the latest ethics opinion from the State Bar’s Standing Committee on Professional Responsibility and Conduct (COPRAC) (Formal Opinion No. 2009-176), the State Bar’s ethics committee addresses the following scenario:

Attorney A prosecutes a lawsuit on behalf of Client against Defendant who is represented by Attorney B. Client has a statutory right to an award of attorney’s fees. The fee agreement between Attorney A and Client entitles A to the greater of a one-third contingency fee or the statutory fee award. Attorney B communicates a $20,000 settlement offer that is conditioned on Client waiving the statutory right to attorney’s fees. If accepted, Attorney A will receive far less than the value of the time she has invested in Client’s case.

Although COPRAC’s discussion centers primarily on fee awards under the federal Civil Rights Attorney’s Fees Awards Act of 1976, its implications are broader in scope.

COPRAC posits three questions:

  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?

 

The hat-trick response to all three is…no.

  1. Despite having rendered services far greater in value than the $20,000 fee-waiver settlement offer, Attorney A cannot veto a settlement that Client wishes to accept. Attorney A must communicate the offer to Client and consummate the settlement per Client’s wishes. It is the Client—and not Attorney A—who possesses, and can waive, the right to seek the fee award.
  2. Under the facts of the scenario, Attorney B does not violate any ethical obligation. Again, because the right to seek fees belongs to Client and not to Client’s attorney, Client can decide to waive the same. A settlement under such terms might well further both parties’ interests, and allowing the waiver is consistent with the strong policy of encouraging settlements.
  3. Attorney B does not violate any ethical obligation by recommending or conveying fee-waiver settlement offers in cases generally. “We believe that, in the absence of any holding of unlawfulness under any fee-shifting statute, fee-waiver settlement offers—which are not proscribed by any rule, statutory provision, or judicial decision—are not ethically prohibited in cases generally.” (Formal Opinion No. 2009-176 at p.5.)

Despite the above, COPRAC notes that under some fee-shifting statutes, the lawyer is entitled to the statutory attorney’s fees actually awarded. (See, Flannery v. Prentice (2001) 26 Cal.4th 572, 577 [110 Cal.Rptr.2d 809] [absent an agreement to the contrary, attorney’s fees awarded under the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.) belong to the lawyer].)

It should be noted that COPRAC’s opinions are advisory only and are not binding on any court/tribunal, the State Bar, any agency thereof, or on any attorney. Nonetheless, they provide significant guidance on ethical issues, and attorneys do well to search COPRAC opinions for any ethical issues they face. One often finds that an ethical question has already been specifically addressed. All COPRAC opinions, with a summary of each, can be found here: Ethics Opinions - Index (See the left hand column.) Formal Opinion No. 2009-176, addressed above, can be found here: 2009-176

--Luis E. Ventura

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**