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Advisory Opinion 39

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State Disciplinary Board
Advisory Opinion No. 39
July 20, 1984

Propriety of Defendant's Tender of Lump Sum Settlement Offers to Plaintiffs in Federal Civil Rights Actions Wherein Statutory Attorney Fees are Provided for Successful Plaintiffs

Pursuant to the provisions of Rule 4-223 of the Rules and Regulations of the Organization and Government of the State Bar of Georgia (219 Ga. 873, as amended), the State Disciplinary Board of the State Bar of Georgia, after a proper request for such, renders its opinion concerning the proper interpretation of the Code of Professional Responsibility of the State Bar of Georgia.

Questions Presented: In the U.S. District Court, plaintiff files his claim alleging a violation of first and fourteenth amendments as well as 42 USC §1983, etc. Plaintiff's counsel is typically a corresponding attorney with the American Civil liberties Union. The defendant is typically a private physician, private hospital or drug rehabilitation facility.

Related state claims are frequently also raised in such cases, including charges of false imprisonment, battery, medical negligence and violation of state laws regarding involuntary hospitalization, etc. In addition to amounts sought for compensatory and punitive damages, there is also a prayer if not expressly contained in the complaint then, implicitly under the U.S. Code, for statutory attorney's fees under 42 USC §1988.

If it is determined during the course of the pre-trial discovery process that an offer to settle the case should be extended to the plaintiffs, such an offer would typically be in the form of a lump sum which would represent the total amount to be paid by the insurance carrier for compensatory and punitive damages as well as any attorney's fees. Neither the defendant nor the insurance carrier would have any interest as to how that lump sum would be divided between the plaintiff and his attorney, the only interest therein being that it represented the maximum extent of their exposure.

In a case involving alleged violations of Federal civil rights statutes pending the U.S. District Court in Georgia where the prevailing party would be entitled to reasonable attorney's fees as expenses of the litigation, is it unethical or in any way improper for the defendant, in an attempt to settle the case prior to trial, to offer a dollar amount representing the total of compensatory and punitive damages as well as attorney's fees which would be received by the plaintiff and his counsel?

If the answer to the foregoing is yes, could the ethical violation be cured by entering into an agreement between plaintiff, his attorneys and the defendant, agreeing upon an amount representing compensatory and punitive damages to be received by the plaintiff himself and a separate amount representing compensation for legal services?

Opinion: It should be first noted that to the extent that the foregoing questions involve interpretations of federal or other law, that the State Disciplinary Board is without authority to consider those aspects of this matter. This opinion will, therefore, address only the ethical aspects of the conduct in question according to the Georgia Code of Professional Responsibility. Furthermore, the State Disciplinary Board recognizes that since this inquiry arises in a federal setting, a separate body of federal ethical rules may apply and in responding, the State Disciplinary Board will not undertake to interpret any federal ethical rules.

The State Disciplinary Board is aware of at least one other Bar Association which has issued a written opinion concerning a similar, if not identical, fact situation. Having read and considered Opinion Nos. 80-94 and 82-80 of the Ethics Committee of the Association of the Bar of the City of New York, which opinions hold that it is unethical for a defendant's counsel to demand a waiver of statutory attorney fees from plaintiff as a condition for settlement in federal civil rights cases involving statutory attorney fees, we decline to adopt the position taken by the majority of that Committee in both of those two opinions. Briefly stated, those opinions held that defendant's demands for waiver of the statutory attorney fees "had the effect of placing the plaintiff's lawyers in conflict with their clients and undercutting the policies of the civil rights statutes which provided for fees and that accordingly the demands were prejudicial to the administration of justice." Opinion No. 82-80. We are instead, more persuaded by the position taken by the dissent in Opinion No. 82-80, which cited with approval the following language from the United States Supreme Court in White v. New Hampshire, 455 U.S. 445, 71 L. Ed. 2d 325, 332, n. 15 (1982), a case where the issue of the ethical propriety of simultaneous negotiation of attorney fees in federal civil rights actions was raised, but not actually decided:

"In considering whether to enter a negotiated settlement, a defendant may have good reason to demand to know his total liability from both damages and fees. Although such situations may raise difficult ethical issues for a plaintiff's attorney, we are reluctant to hold that no resolution is ever available to ethical counsel."

Although no provisions of the Georgia Code of Professional Responsibility appear to address this issue directly, Standard 45(f) of Bar Rule 4-102 states, in pertinent part, that a lawyer shall not "settle a legal proceeding or claim without obtaining proper authorization from his client." Implicit in this rule is the notion that attorneys must communicate with their clients concerning possible settlement of a cause of action, and offer the benefit of their professional advice and judgment so that the client's decision to make a settlement offer is as informed and intelligent a choice as is reasonably possible.

Clearly, in appropriate cases, the question of a defendant's liability for plaintiff's attorney fees, where so provided by statute, can be a significant factor in reaching a decision as to whether to make an offer of settlement. To force a defendant into proposing a settlement offer wherein plaintiffs statutory attorney fees are not negotiated and incorporated into the final settlement offer leaves a defendant in a position of exposure that is at best, uncertain, and at worst so tenuous that meaningful settlement proposals might never be made. Such a situation undeniably impedes the settlement process and is inimical to the resolution of disputes between parties. Accordingly, it is the opinion of this Board that it is not unethical for defendant's counsel to offer to plaintiff, under the facts presented, a lump sum settlement offer prior to trial for a dollar amount representing the total amount of damages and attorney fees for plaintiff's counsel.

Our resolution of this first question appears to make an answer the second question unnecessary.

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