Committee on Professional Ethics
QUESTION NO. 699
TOPIC: RETAINER OR FEE AGREEMENTS; SETTLEMENT; CONSENT OF LAWYER
DIGEST: A LAWYER MAY NOT INCLUDE IN A RETAINER OR FEE AGREEMENT A PROVISION THAT REQUIRES THE LAWYER’S CONSENT TO SETTLEMENT
CODE: DR 7-101(A)(1), 7-101(B)(1), EC 7-7
May a lawyer include in a retainer agreement with a client she proposes to represent on a contingent fee basis in a personal injury action a provision whereby the client agrees not to settle the action without the lawyer’s consent? The Inquirer advises that such provisions are “common” and has supplied the Committee a pre-printed standard form of retainer that specifically requires the lawyer’s “written consent” to a client’s settlement of an action.
A provision in a retainer agreement requiring the lawyer’s consent to settle an action is prohibited by the Code of Professional Responsibility. DR 7-101(A)(l) states that a lawyer shall not “[f]ail to seek the lawful objectives of the client.” DR 7-101(B)(1) provides that a lawyer may, “[w]here permissible, exercise professional judgment to waive or fail to assert a right or position of the client.” EC 7-7 makes clear that the discretion given to an attorney by DR 7-101(B)(1) is confined to those areas of legal representation “not affecting the merits of the cause or substantially prejudicing the rights of a client . . . . But otherwise the authority to make decisions is exclusively that of the client and . . . such decisions are binding on the lawyer.” EC 7-7 states that a typical example of such a decision is whether or not to settle a claim in a civil case.
On its face, the Code prohibits a lawyer from asserting the ability to disapprove a client’s decision to accept a settlement offer, Indeed, case law states that a provision in a retainer contract which requires the client to obtain the lawyer’s consent before settling a case is void as against public policy. Ward v. Orsini, 243 N.Y. 123 (1926) See also Giles.v. Russell, 567 P.2d 845 (Kan. 1977); Dannenberg v. Dannenberg, 100 P.2d 667 (Kan. 1940); Olive v. Williams, 257 S.E.2d 90 (N.C. App. 1979).
In ABA Formal Op. 326 (1970), which held that a lawyer has a duty to inform his client of all settlement offers made by the opposing party, the ABA cited with approval the proposition that a clause in a retainer agreement prohibiting a client from settling without the attorney’s consent is void as against public policy. See ABA 326 (1970).
A lawyer may not include in a retainer agreement a clause which prohibits a client from settling a case without the lawyer’s consent.
March 10, 1994