Opinion No. 2013-4

(Inquiry No. 2013-4 )

Confidentiality in settlements


Inquiring counsel is not prohibited by Rule 8.4(c) or 8.4(d) of the New York Rules of Professional Responsibility from agreeing, as a condition of settlement of a medical malpractice action, to discontinue the action as against the individual physicians, and to settle solely with the defendant hospital, if it is so desired and directed by the client. This opinion does not address whether it is illegal to do so. If such agreement were to be found illegal under applicable laws, it would thereby be rendered unethical.


A retired attorney who has properly certified his status with the Office of Court Administration may continue to provide legal services to clients without restriction if those services are rendered without compensation and the client is fully informed of any material limitations that might be placed on the representation as a result of the attorney’s retired status—A retired attorney who agrees to hold funds or property in trust for clients must comply fully with Rule 1.15 concerning preservation of identity of funds and property of others—A retired attorney may give legal advice and provide legal services as an executor and trustee provided those services are rendered for no compensation—A retired attorney must disclose and explain his retired status to any prospective or current client with respect to any legal representation undertaken after retirement. But a retired attorney need not make any disclosure to third parties or adversaries with whom he deals on the client’s behalf, or alter office signage, personal stationary or directory listings to reveal that he is retired from practice.

Rule Provisions:
Rule 1.2(a)
Rule 1.6
Rule 3.3
Rule 4.1
Rule 8.4(b)
Rule 8.4(c)
Rule 8.4(d)

Facts Presented:
A medical malpractice case in which inquiring counsel represents the plaintiff against individual physicians and a hospital, is poised to settle. Defense counsel, however, has requested that inquiring counsel dismiss the case against the individual physicians prior to having the action formally settled against the hospital.

The reason for defense counsel’s request is so that the defendant physicians will according to counsel not be subject to the reporting requirements of the National Practitioner Data Bank for Adverse Information on Physicians and Other Health Care Practitioners (“NPDB”) (45 CFR Part 60, particularly 45 CFR 60.7).

Would inquiring counsel’s agreement to defense counsel’s request be ethical? The client wants the settlement.

It should initially be noted that this opinion addresses only the ethical question posed, and does not opine on the legality of the proposed arrangement. If illegal, it would also be unethical. Rule 8.4(b).

Rule 1.2(a) of the New York Rules of Professional Conduct provides, inter alia, that “[s]ubject to the provisions herein, a lawyer shall abide by a client’s decisions concerning the objectives of representation and, as required by Rule 1.4, shall consult with the client as to the means by which they are to be pursued. A lawyer shall abide by a client’s decision whether to settle a matter.” Comment [1] explains that “[p]aragraph (a) confers upon the client the ultimate authority to determine the purposes to be served by legal representation, within the limits imposed by law and the lawyer’s professional obligations. The decisions specified in paragraph (a), such as whether to settle a civil matter, must also be made by the client.”

Despite this directive, confidential settlements – those in which some aspect of the settlement, discovery, disclosure materials, or the entire case, are ultimately resolved by a protective or sealing court order or other litigation technique keeping them from public view – have been the subject of academic discussion. See e.g., Richard Zitrin, The Judicial Function: Justice Between the Parties, Or A Broader Public Interest?,32 Hofstra L. Rev. 1565 (2004); and Nick Saccone, Somewhere Between Florida, Texas And Federal Rule of Civil Procedure 26(C): A Balanced Approach To Protective Orders and Confidential Settlements, 39 U. Tol. L. Rev. 729 (2008).

The controversy is between those who believe that the public interest should trump a lawyer’s obligations to his or her individual clients, and thus limit the ability to keep confidential anything regarding the litigation, so that others who may have claims against the same defendant are able to more easily pursue those claims; and those who believe, inter alia, that the lawyer’s obligation should run to the client, that courts exist to resolve disputes that are brought to them by litigants, that litigants do not give up their privacy rights simply because they have walked, voluntarily or involuntarily, through the courthouse door, and that the court’s primary function – if not its exclusive function – is to decide cases according to substantive law, with potential broader collateral effects of litigation not allowed to defeat this primary purpose. Zitrin, supra, 32 Hofstra L. Review at 1578-1579, citing, Richard L. Marcus, Symposium In Honor Of Edward W. Cleary: Evidence and Procedure For the Future: The Discovery Confidentiality Controversy, 1991 U. Ill. L. Rev. 457, 466-470 (1991).

The Zitrin article represents an advocacy piece for the adoption of new court rules which would prohibit most confidentiality protections. However, the Zitrin article also raises two points which would argue against the competence of a Committee such as this one to mandate such a result in the guise of interpreting either Rule 8.4(c) (which provides that an attorney shall not “engage in conduct involving dishonesty, fraud, deceit or misrepresentation”) or Rule 8.4(d) (which provides that a lawyer or law firm shall not “engage in conduct that is prejudicial to the administration of justice.”).

Zitrin, as part of its argument, observes approvingly that there has been in the area of legal ethics generally a reduction in client confidentiality protections, and a departure from focusing solely on a duty of loyalty of attorneys to individual clients, in favor of purportedly broader societal interests. See, e.g., Rules 1.6(b) and 4.1(b) of the ABA Model Rules of Professional Conduct, and Rule 3.3 of the New York Rules of Professional Conduct. As Zitrin notes approvingly, “[w]e have reached the point where client confidentiality has been significantly limited in most states – and by most rule-makers – in a number of ways.” Zitrin, supra, 32 Hofstra L. Rev. at 1595.

However, as noted by Monroe Freedman and Abbe Smith, Understanding Lawyers’ Ethics (LexisNexis, 4th ed. 2010), this growing departure from client-centered duties is not universally favored. See §§ 5.01,et. seq. Current trends of this kind eat away at the client autonomy and human dignity which is the bedrock of the rule of law in a free society. See §§ 3.01,et. seq. The trend toward compelling the lawyer to act as an arm of “society,” rather than as advocate and counselor for and to the individual client, has not made as much headway in New York as elsewhere. Compare, the foregoing cited ABA Model Rules provisions, with Rules 1.6(b) and 4.1 of the New York Rules of Professional Conduct. For instance, ABA Model Rule 4.1(b) affirmatively requires a transactional lawyer to, under certain circumstances, mandatorily disclose information to their client’s adversary. The Appellate Divisions when adopting the New York Rules did not adopt Rule 4.1(b).

Zitrin, supra, 32 Hofstra L. Rev. at 1567-1568, 1578, 1594-1595, 1601 (footnotes omitted), also tacitly concedes that under the current ethical regimen, the practice when negotiating a settlement of focusing on the interests of the individual client, as opposed to society, in considering confidentiality protections, is permissible, where, as here, the result would benefit the client, and is desired and directed by the client. Modifications to, inter alia, the Rules of Professional Conduct (both by the ABA and New York) would be required to change this:

The rules of ethics generally (with narrow exceptions) require lawyers to put the interests of the client ahead of those of society . . . . Thus, lawyers feel bound to settle cases in ways that serve the needs of specific clients even if they potentially harm substantially the interests of society as a whole. Unless counsel are operating in one of the very few states with strong “sunshine in litigation” laws (and sometimes even then), they may feel that there is little that can be done when the defendant demands, and the plaintiff accepts, secrecy as a condition of obtaining information or resolving a case.
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Accordingly, I drafted proposed Rule 3.2(B) in 1998. The rule proposed to prohibit lawyers from “prevent[ing] or restrict[ing] the availability to the public of information that the lawyer reasonably believes directly concerns a substantial danger to the public health or safety.”
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In most jurisdictions, the real powers in determining the rules of ethics are our highest courts. These courts are our ultimate rule-makers.
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Until rules–both court rules and ethics rules–prevent the practice . . . [t]he attorney’s perceived duty of “zealous advocacy” will trump any possibility of disclosure. So long as such agreements are within bounds of the rules, they will be entered into regardless of any danger to the public, on the theory that the client’s best interest . . . must come first.

There are no New York ethics opinions addressing this issue of which this Committee is aware. The only ethics opinion which this Committee has reviewed addressing similar circumstances is Opinion 98-94 of the Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility, 1998 WL 988180.

In Pennsylvania Bar Association Opinion 98-94, the circumstance confronted by inquiring counsel was as follows:

You, as the Plaintiff’s attorney, have inquired about the propriety of a proposed Settlement Agreement, in a case involving claims pursuant to the Americans with Disabilities Act, Rehabilitation Act, and Wage Payment and Collection Law. The agreement requires the Plaintiff (1) to stipulate to the dismissal with prejudice and the striking from the Complaints of all references to the Americans with Disabilities Act and Rehabilitation Act claims, so that the Plaintiff’s sole record claim would be pursuant to the Wage Payment and Collection Law; and (2) to state, in paragraph 7(c) of the Settlement Agreement, that she has not been the victim of any form of illegal discrimination allegedly perpetrated by Defendant, and, as a result she has dismissed or withdrawn any and all claims for illegal discrimination as alleged in her federal court complaint. Paragraph 7(c) is in addition to standard boiler plate clauses that the Agreement is a compromise and settlement of a disputed claim and does not constitute an admission of liability or of any facts. (¶¶7(d) and (n)).

The Pennsylvania Bar Association concluded:

Although the question of whether illegal discrimination occurred is one of law rather than fact, the wording of the Settlement Agreement specifically has Plaintiff stating that she has not been the victim of discrimination, which is contrary both to her present belief and to the Complaints she previously filed and verified. Thus, this specific language may also raise an issue under Rule 8.4(c): “It is professional misconduct for a lawyer to: (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation.” Plaintiff verified her Complaint containing claims of discrimination. She is now being asked to sign a document specifically contradicting that verification.

Finally, requiring the Plaintiff to contradict her Complaints potentially violates Rule 4.1(a): “In the course of representing a client, a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person.” This relates specifically to future plaintiffs alleging discrimination by Defendant.

It is the opinion of this writer that the settlement as proposed would violate Rule 8.4(d), and because of Paragraph 7(e) may also violate Rule 8.4(c).

In New York, the discontinuance of a civil action may be accomplished by simply filing a written stipulation of discontinuance executed by counsel. NY Civil Practice Law and Rules, Rule 3217(a)(2). No “statements,” factual stipulations, or evidentiary recantations are required or are here being sought. Therefore, Pennsylvania Bar Association Opinion 98-24 is not applicable to the facts before this Committee.

Rule 3.2(B), since its proposal fifteen years ago, has not been adopted as part of either the New York Rules of Professional Conduct, or the ABA Model Rules of Professional Conduct. The imposition of an obligation to the broader society which would trump the attorney’s duty to the attorney’s client when entering into a settlement (1) would be counter to the established norms of the profession; (2) would be more characteristic of an authoritarian society than a free one (see, Understanding Lawyers’ Ethics, supra); (3) does not appear clearly supported on the facts as given; and (4) has been at least tacitly viewed as requiring a black-letter amendment to the Rules as written and adopted. This Committee declines to impose such an obligation under guise of interpreting Rule 8.4(c) and 8.4(d).

Inquiring counsel is not prohibited by Rule 8.4(c) or 8.4(d) of the New York Rules of Professional Responsibility from agreeing, as a condition of settlement of a medical malpractice action, to discontinue the action as against the individual physicians, and to settle solely with the defendant hospital, if it is so desired and directed by the client. This opinion does not address whether it is illegal to do so. If such agreement were to be found illegal under applicable laws, it would thereby be rendered unethical. [Approved by the Full Committee on October 9, 2013]