ETHICS QUESTION OF THE MONTH
This content is generated by the Texas Center for Legal Ethics and is for informational purposes only. Look for the reasoning behind the answers at legalethicstexas.com.
Lawyer A represents 33 homeowners in a suit against Company X, which does seismic testing for the oil and gas industry. The company uses underground dynamite blasts to generate seismic waves. The homeowners have claimed structural damage to their foundations, walls, driveways, and sidewalks resulting from the seismic waves generated by Company X. The damage experienced by individual homeowners varies according to the value of their property, the extent of the damage, and the cost of repairs.
Lawyer A sent individual settlement demands to Company X for all 33 clients. After initial negotiations, 11 of the clients agreed to accept Company X’s settlement offers. The remaining 22 clients refused to accept Company X’s original individual offers. Lawyer A and Company X’s lawyers go to mediation to resolve the remaining 22 claims. At the end of the mediation, Company X offers a single gross settlement amount to resolve the remaining 22 claims and tells Lawyer A that, in return, it requires 22 releases or the overall offer will be withdrawn.
Lawyer A decides to apportion the gross amount among her clients, but holds back 10 percent of the gross amount in case there are any clients who don’t agree to their individual offers. Two clients refuse their settlement offers. Lawyer A uses most of the 10 percent that she held back to increase the offers to the two holdout clients, and they agree to the increased offer. Lawyer A then redistributes what is left of the 10 percent to the remaining 20 clients involved in the mediation on a pro rata basis so that the entire gross settlement amount offered by Company X is now distributed to the 22 clients involved in the mediation.
Which of these statements is most accurate?
A. Lawyer A has done an admirable job of
settling all of her clients’ claims in a complicated case and in a
difficult situation. Although imperfect in some ways, the settlement
method complies with the Texas disciplinary rules.
B. We don’t know enough detail about the settlement method to judge whether Lawyer A has fully complied with applicable disciplinary rules.
C. Lawyer A’s solution is permissible, except for holding back 10 percent of the gross settlement amount to disproportionately reward uncooperative clients.
D. Lawyer A should not have reached a settlement on behalf of the first 11 clients until the claims of the remaining 22 were also resolved. Therefore, none of the settlements are permissible under the Texas disciplinary rules.
The correct answer is B. For the reasoning behind the answer, go to legalethicstexas.com.TBJ
ABOUT THE CENTER
The Texas Center for Legal Ethics was created by three former chief justices of the Supreme Court of Texas to educate lawyers about ethics and professionalism. Lawyers can access the Texas Disciplinary Rules of Professional Conduct, the Texas Lawyer’s Creed, and a variety of other online ethics resources by computer or smart device at legalethicstexas.com.
The information contained in Ethics Question of the Month is intended to illustrate an ethics issue of general interest in the Texas legal community; it is not intended to provide ethics advice that applies regardless of particular facts. For specific legal ethics advice, readers are urged to consult the Texas Disciplinary Rules of Professional Conduct (including the official comments) and other authorities and/or a qualified legal ethics adviser.