1 CREATIVE SETTLEMENT TECHNIQUES RICARDO 0. CEDILLO JASON R. CLIFFE Davis, Adad & Cedillo, hc. San Antonio, Texas ADVANCED CIVIL TRIAL LAW State Bar of Texas San Antonio - August, 1996 Fort Worth - September, 19% Houston - October, 1996
3 " RICARDO G. CEDILLO Davis, A d d & Cedillo, Inc 7710 Jones Maltsberger, Suite 400 San Antonio, Texas (210) 8224x66 FAX: (210) ' RICARDO G. CEDILLO, born San Buenaventura, Coahuila, Mexico, May 26, 1953; admitted to bar, 1979, Texas; also admitted to practice before U.S. District Court, Western District of Texas, Northern District of Texas, Southern District of Texas, and the U. S. Court of Appeals, Fifth Circuit. Preparatory education St. Mary's University (B.A., mgna cum laude, 1974); Trinity University (M.S., 1976); legal education, Harvard University (J.D., 1979). William Sessions American Inns of Court (Masters). Author: "A Constitutional Analysis of the English Li,iteracy Requirement of the Naturalization Act", 14 St. Mary's Law Journal 897 (1983); "Evidence: Expert Witneswa and Opinion Testimony", State Bar of Texas Advanced Civil Trial Court, 1985; "Handling Expert Witnesses: The Law of Evidence, Courtroom Realities, and Practice Considerations", Advanced Civil Trial Course, South Texas College of Law, 1985; "How to Offer and Exclude Evidence", University of Houston Law Center & Litigation Section of the State Bar of Texas, 1988 and 1990; "How to Make the Most of Your Expert*, Advanced Civil Litigation Short Course, South Texas College of Law, 1988; "The Battle for the Clients: Ethical Considerations of Leaving a Law Firm", Advanced Civil Litigation Short Course, Sou& Texas College of Law, 1988; "Document Destruction in Business Litigation From a Practitioner's Point-of-View: The Ethical Rules vs. Practical Realities", 20 St. Mary's Law Joumal, 1989; "Jury Selection: Voir Dire Examination and Challenges", Advanced Civil Litigation Course, University of Houston Law Center & Litigation Section of the State Bar of Texas, 1989; *Effective Examination of Experts", University of Houston Short Course, 1989; "Jury Selection: Voir Dire, Examination and Challenges", Advanced Civil Litigation Cow, University of Houston Law Center, 1990; "How to Offer and Exclude Evidence" and "Effective Examination of Experts', University of Houston Law Center, 1990; "Ethics and Malpractice Prevention in Cwsumer Litigation", DTPA and Consumer Law Institute, University of Houston Law Center, 1990; 'Damage Issues in Commercial Litigation", Mexican American Bar kssociation, CLE Seminar, 199D; "Ethical Cmsidirations l.the Use And Pruntation of Evidence", University of Houston Law Center, CLE - "How to Offer & Exclude Evidence", 1993; "Jury Voit Dire,Expert Testimony, What Jwors Really Think", 11th Aunual Trial Tactics Seminar, University of Texas at Austin, Dallas, 1993; "One Do= Tips to Reduce Discovery Costs', Advanced Evidence and Discovery Institute, University of Houston Law Foundation, 1994; "One Dozen Tips to Reduce Discovery Costs", Advanced Evidence and Discovery Institute, University of Houston Law Foundation, Member: State Bar of Texas, American Bar Association, Hispanic National Bar Association, Mexican-American Bar Association. Language: Spanish. Mr. Cedillo practices primarily in the area of bushes8 litigation.
5 Creative Settlement Techniques B-i TABLE OF CONTENTS. PREPARATION. PREPARATION. PREPARATION... 1 III. USE OF SETTLEMENT NEGOTIATIONS TO OBTAIN DISCOVERY... 3 A. Problem Solving Negotiations... 4 B. Competitive Style... 4 C. Coopwative Style... 5 A. Confidentiality... 5 G. Finalizing the Settlement... 8 VI. ETRICAL CONSIDERATIONS IN SETTLEMENT NEGOTIATIONS... 8 A. Ethical Obligations to Client... 8 B. Ethical Obligations to Opposition... 9 W. CONCLUSION... 10
7 Creative Settlement Techniques B-1 CREATIVE -MEW TECHNIQUES I. INTRODUCTION Generally, during all settlement negotiations the overriding goal of the parties is to obtain a settlement which is most beneficial to their clients. To obtain the "best possible settlement" a lawyer must prepare himself for the negotiations, prepare the client for the negotiations, how the dispute thoroughly, plan a negotiating tactic, arm himself with the knowledge associated with settlement terms, and remain flexible so that the lawyer can adjust to his adversary. In this paper I discuss these issues and volunteer some of my opinions as to how you can obtain the best possible settlement. IT. PREPAEZATION, PREPARATION, PREPARATION. Up to this point, you have most likely been preparing your case for trial. This mode of preparation - pretrial litigation - produces a very different evaluation of a case than that resulting from preparations for settlement. Litigators often become the fight, believing blindly that their side of the case is in the right and working their way, step by step, to the winner's circle. Now, though, once it is determined that settlement negotiations should commence, it is important to discard the blinders and shift the focus to a more objective viewpoint. The goal of settlement preparation is not necessarily to prepare the best case possible but to attempt to see the dispute as would a judge or jury. This mode of preparation will allow you to value the case more reasonably, to consider the true likelihood of a favorable verdict, aad to provide better, more objective advice to your client. A. Know the Facts. The first step toward such an objective viewpoint is to investigate the facts. Although this investigation begins with the essential facts giving rise to the dispute, it is oftentimes even more important to know the facts which may be brought forth along the way. These emingly unimportant facts bear new importance if, for example, they affect the credibility of a claim or other testimony. The most effective way to investigate fully the facts of the case is to actually talk with the witnasea. Too often attorneys rely on recorded statements taken months or years earlier and sometimes even on their client's belief as to a particular witness' knowledge. In doing so, they miss key pieces of information which would have affected their settlement evaluation. Fwther, they lack essential information regarding the witness' ability to testify before a jury, such as their appearance, sincerity, etc. Regardless of what you may believe a witness will say, if a jury will not believe or connect with the witness, his testimony is meaningless. Finally, it is important to consider any difficulty you may have in getting a witness to testify at trial. Although other methods exist to ensure their participation, such as using dqmition testimony, the method used may affect the impact of the witness' testimony. B. Know the Law. Once your investigation bas uncovered the evidence available to each side, you must determine what evidence will actually make it to the jury box. Too o h settlement negotiations break down kuse one side is unable to narrow their focus to the evidence that will be considered by the jury, instead believing their case strong based on extrazleous facts or inadmissible evidence. Thus, the next step in settlement preparation must be to research the law which will be applicable at
8 B-2 Creative ~ettlmeht Techniques - trial. Although such research may not pduce a clear and unecfuivocal answer, it will certainly give you a better idea, and a substantiated basis, From which you can make a well-ieasolied opinion or evaluation of the case. Because a ruling as to the admissibility of a key piece of evidence may alter the perceived value of the case, it is important to avoid relying on your experience or "gut feelings" in this regard, Instead, prepare your evaluation of the law as if you are trying to convince the judge at trial. Such preparation will not only prove helpful later in the event negotiations break down, but will enable you to now counter, with a reasoned approach, any argumemt during negotiations regarding the importance of ceain evidence. bgal restarch will also aid in determining what causes of action form the crux of the lawsuit and what claims may be disposed of by motion for summary judgment or directed verdict, Often, it. is clear that one or two causes of action are the focus of each party. Settlement evaluations and negotiations should be focused accordingly. C. Know the Venue. Finally, your investigation should focus on the venue in which the lawsuit will be tried. Your evaluation of the facts, witnesses and the law may be affected by the particular venue or judge you will encounter at trial. Important factors in this regard include potential biases common to particular communities, whether the opposing attorney or yourself has a reputation (good or bad) in the community, and whether the parties and witnesses will conuect with potential jurors from that community. Moreover, the background of the judge may provide insight into probable rulings regarding evidentiary matters and pending motions. Again, the focus of a settlement evaluation is to consider howa judge or jury will view your case - not any judge or jury, but the judge and jury which will actually take the case. D. Set the Stage. Once you have not only seen the big picture, but have come to a well-founded idea of the more narrowed picture which will be set befom a jury, it is time to set the stage for negotiations. If you have time, draft and file any special exceptions which will help you narrow the issues for trial. Also consider amending any pleadings on file. Even if you don't have time for a hearing, motions for summary judgment are often excellent tools to increase leverage during negotiations. However, a motion is worthless if it does not convince the other side of the strength of you position. Another positioning tactic is the filing of discovery requests. Merely filing such requests, even if they will not be answered prior to negotiations, may serve to alert the other side to your intentions and the possible breadth of discovery. It will also enlighten the other side about possible expenses associated with discovery, a factor which should come into play in any settlement evaluation. E. Prepare Your Client. After investigating, researching and preparing an objective settlement evaluation, it is time to talk with your client. The most important goal of your discussion will be to orient your client's goals with your own. Although your evaluation will set out your perceived value of the case, digcussion is often necessary to ensure the client not only understands your evaluation, but agrees with it md ' is ready to extend settlement authority accordingly.
9 Creative Settlement Techniques B-3 For "greener" clients, it may be important to explain in advance what they will likely encounter during negotiations. For example, explain that settlement negotiations ate an avenue of compromise. Otherwise, they may simply consider it a way to "win" the case without incurring all of the expenses normally associated with doing so. A client may also need to be prepared for the tactics of opposing parties and counsel. Describe to the client what you know about the other side's style, mannerisms and attitudes. Further, prepare the client for hard line tactics. Advise the client to keep a straight face no matter what is thrown out during negotiations. Hopefully, you have prepared them regarding the weaknesses in the case, but ensure that they are prepared for new information at all times. Finally, alert your client to the fact that although they are enmuraged to 'have their say," certain facts or evidence shouid remain confidential. Make it known that will determine if and when information should be shared for tactical reasons. In this way, the client will feet involved but will look to you for strategic decisions throughout the negotiations. At this point, you have drawn a picture for your client, in the form of a settlement evaluation. Hopfully, this picture resembles closely the picture which will be seen at trial, and evaluates the case objwtively, with both upper and lower limits. Now, it is time to convince the opposing party thst your picture is the correct one. IlI. USE OF SlETTLEMENT NEGOTIATIONS TO OBTAIN DISCOVERY. Although preparation is the key to d ing aa informed evaluation of your case, settlement negotiations may begin early in the case. Many attorneys feel that negotiations should not be used as a discovery tool, faring the other side m y not be sincere in their desire to settle. However, it is important to consider the savings in time and expense which may come as a result of early, sad mccessful, compromise. If such is the case, and preparation is limited, it is still necessary to obtain essential information regarding the basis for the opposing party's claim or defense. For example, an informed offer simply cannot be made unless you have same pmf of the plaintiffs damages. Likewise, a plaintiff could not reasanably take into account a defense such as one based on a signed release without proof of same. Thus, the exchange of pertinent information not onfy allows you to evaluate your own case fairly, but may p d e the other side to evaluate the case similarly. While a party in negotiations taking place after investigation and preparation might come to the table with a pretty set strategy, it is important in early negotiations to maintain flexibility. With the exchange of information, you must continually reevaluate your position. Thus, it is even more important to have available a client representative with not only full authority, but discretion to settle the claim. IV. SETIZEMENT TECHNIQUES. Although settlement preparation is a key part of succ~ssful negotiations, it is equally important to consider settlement styles and approaches. The style one uses either via correspondence, telephone or in face-to-face negotiations can, and usually will be, the difference in whether or not a deal gets done. The horse must always proceed the cart. Thus, the preliminary question is: Are you bargaining from a position of strength or one of weakness? The answer to this question, and those pmnted above, should be considered in choosing the appropriate techniques.
10 B4 - - Creative Wement Techniaues There are many different negotiating techniques and depending on the author, there are many aames for ' the same techniques. The three I am going to discuss are fairly broad categories. I will borrow the aames from Dodd Gifford's text and refer to them as the commtitive style, wouerativ~ style, and the problemsolving style. No one style is necessarily better than the others. Depending on the lawyer, one style may work better than another, or for that matter, you may simply enjoy using one more than the others. Nonetheless, a flexible lawyer can leanr to be an effective negotiator by using all three of the techniquehi as dictated by a given negotiation; kind of like hitting to all fields. Similarly, it is important to remain flexible throughout the negotiation and alter your style when appropriate; i.e., go with the pitch. A. Problem Solving Negotiations. To utilize this style, you must have maperation from the opposition. The negotiation must be one of integration with both parties desiring a resolution to the dispute. If a negotiation has a number;, of issues involved, then this is likely to be a successful style. Professor Gifford has opined that this style has two basic forms: 1. "bridging proposals"; and 2. "logrolling agreements". A brideine vrowsal is used when both parties negotiate an issue to obscure sach other's interests with respect to that issue. A Joerollina amssm%qt involves parties trading cwcesians on d i h t issues, such that both parties receive greater overall satisfaction than if they had conceded or compromised on all ** l' In some negotiations, a lawyer's ability ta use the non-competitive negotiating styles will depend I, sv ' I ^ I on the willingness of the opposing lawyer. Normally, lawyers who do not have a rapport may' begin with competitive styles and eventually use a non-competitive technique, Additionally, if one is bargaiaiag from a position of significantly less power, the competitive style is normally not very effective. The negotiator should remain flexible throughout the negotiatibn in deciding whetber to change styles or not. B. Competitive Style. The competitive technique depends on the souices of leverage in a given dispute. In the planning stage, a lawyer should chart out the key issues snd the lawyer's greatest, and least, sources of leverage. En the competitive phase of a negotiation, the lawyer can fire her leverage arrow6 until the opposition reaches submission, or at least a compromise. Though the proper use of the competitive tactic requim a negotiator to camouflage or hide his lowest acceptable settlement, thus convincing an opponent that the competitive negotiator has a greater perceived leverage than actusl leverage, the most difficult task for the competitive negotiator is to determine the settlement most advantageous to his client and also acceptable to the o*sition. However, through the successful use of the competitive style, one can alter the settlement mges of one's adversaries to your benefit. One must be careful not to take this technique too fiu for a variety of reasons. At the very least, it is an onerous task to get a bloody carcass (the beaten opposition) to sign settlement documents. Thus, put the sword to your opponent's neck, but do not chop it off.
11 a Creative Settlement Techniques B-5 C. Cooperative Style. The goal of the cooperative technique is to reach a settlement that is fair for both parties. An effective way to negotiate in this manner is to use objective criteria and use select terminology such ss fair, just, and reasonable. This can be a very effective tactic in a business negotiation, particularly when supported by credible data or outside sources, such as market values, professional standards, scientific judgments and external costs. V. SPECIFIC SE'LTILEMENT TERMS. Once you have reached a settlement, your work is far from complete. During the coum of settlement negotiations, many lawyers focus solely on dollars in exchange for a releasa and leave the terms of the settlement to be negotiated after an amount bas been agreed upon. However, I have found that in some cases, the terms are so cmcial that they can substantially effect the settlement amount. I highly recommend that every lawyer sit down with their client and discuss what key terms are perceived by the client as an essential element of a settlement. This is particularly true for our business clients. Does the client want a confidentiality agreement and, if so, is he willing to pay for it? Doss the client desire a structured settlement? Are their other possible responsible parties such that you may want to take an assignment of the claimant's rights? Generally, a release only releases thorn persons specifically identified or named in the releasing document. Puncan v, Gessna Aircraft Co., 665 S.W.2d 414 (Tex. 1984). If you are involved in complex litigation, it is important to draft a release carefully and specifically to avoid dming claims not intended to be released. Thus, depmding on the issues, a clear concise statement of the dispute can be an initial obstacle ia drafting your settlement documents. Settlement documents are iakrpmted under traditional theories of contract law and must be suppod by consideration. Fraud, duress and illegality are all basis for courts refusing to enforcs settlement agreement& A. Confidentiality. One key term that can be essential to a party is a confidentiality agreement. The party that voluntarily discloses canfidential or proprietary information may want to ksop the disclosure under controls that are as tight as possible. However, sometimes the recipient of the information may want to maximize its uaa of the information. A carefully negotiated and drafted confidentiality agreement can balance these competing interests. A confidentiality agreement should broadly and comprehensively define the information disclosed, whether before or after the execution of the agreement. Information that the recipient would want to keep outside the scope of the agreement include: a information that is or becomes publicly available; information the interested party already has, information disclosed to the interested party by a third party; a information developed by the interested party independently; and
12 B-6 Creative Settlement Techniques, information that the intemted is required to disclose. Additionally a comprehensive confidentiality agreement should also include, if appropriate: permitted USM and disclosures; retun of the information; procedures for permissible~disclosure; remedies upon disclosure, for example: - attorney's fees, waiver of jury trial, and representation of rightful disclosure; - venue provisions, rights to equitablekmsdies; and indemnification; - possible liquidated damages clause; e' the term of the agreement. As in all areas of the legal practice, watch out for qualifying language because while one haod giveth, the other may be taking it back. For example, if a party is permitted to disclose &be proprietary information if ordered by a valid subpoena issued by a court of competent jurisdiction the burden has been placed on the discloser to make legal decisions regarding - the validity of the order and the compekce of the issuing court. B. dssignment. Generally, in Texas, causes of action, including personal injury actions, are assignable. Duke v. Brookshire Grocerv Comwanv, 568 S.W.2d 470 (Tex. Civ. App. - Texarkana 1978, no writ). Thus, a settling party may want to negotiate an assignment of the releasor's claims a gw any and all other parties involved in the transaction, incident, or accident. However, in personal injury actions there has been some recent case law limiting the assignability of certain claims. Charles v. Tamez, 878 S.W.2d 201 (Tex. App. - Corpus Christi 1994, no writ). C. Structured Settlements. Structured settlements are centrally a product of Section 104(a)(2) of the Internal Revenue Code which recognizes personal injury sad wrongw death settlement fuda to be tax exempt and extends this exemption status to funds which ara paid in periodic installments. If you repment insurance companies in personal injury actions, you're probably fairly well versed in structured settlements. Nevertheless, it is important to remember that many insurers prefer the use of a structured settlement rather than a one time cash payment. Most of the major insurers have life companies that will write an annuity thus keeping the settlement funds in the hands of the insurer until the payments come due. On the flip side, an individual claimant may be more willing to settle when presetlied with a structured settlement because of the appearance that he or she is receiving more money, even if over time. This is particularly true if payments are to be made for life and thus the claimant can see a steady income stream for the future. I
13 Creative Settlement Techniques B-7 If represented by counsel, a claimmt's attorney may fmd structured sett1emant.s as au attractive vehicle to resolve those claims or cases where a client is holding up a settlement that you know she should take, yet the client is convinced a jury will award him millions as a result of a minor impact accident tbat only required a couple of trips to a chiropractor. Please note that it is extremely important to use the appropriate documentation in stnrctuting settlements so that your client obtains the tax advantages to which they m y be entitled. Several revenue rulings have held that in determining taxability issues you should look to the plaintiffs complaint. Thus, the final complaint should only allege damages for personal injury. If you have bystander claims, you should draft the settlement documents to reflect language that they are being settled by the cash payment and the structured payments are tied to the penmnal injury claims. Any punitive damage claims should be deleted from the final petition. Of course, you may want to seek the services of an accountant for the answers to the taxability questions. D. Choice of Law. A choice of law clause may be the most commonly overlooked clause in the drafting of a settlement agreement. A choice of law clause is particularly importaut when drafts of documentf3 are sent via fax or mail to parties in other states, or outside the country, for revision8 andlor sigxlahlrss. Parties can choose the state's law that is to be applied to the interpretation of a contract, as well as the venue andlor forum. The presence ot absence, ~IJ the case may be, of a choice of law clause can affect the enforceability of all of the other clauses in your settlement documents. E. Bet Deal. In a case involving multiple defendants, a plaintiff can settle with one or more of the defendants and provide that the plaintiff will not enter into a mom favorable settlement with other defendants without giving the settling defendant a refund. This is also refed to as a "Most Favored Nations Clause" or "Refund Clause." A "Best Deal" clause can be particularly useful in a complex case or a toxic tort case, whm attorney's fees become an integral factor in tbe settlement equation. Similarly, a plaintiff ia these types of cases can urn a "Best Deal" settlement to help fund the litigation against the non-settling defendants. Thus, the clauses have utility for both plaintiffs and defendants. The timing element as to when you determine the refund is a key to the enfozwability of the clause. The refund can be tied to settlement with other parties, entry of a judgment, a final nonappalable judgment, or just about any other event, to determine whether a refund is owed. F. Miscellaneous. Other clauses you may want to consider in your settlement documents include: indemnity; covenant not to sue; covenant not to execute; or a a non-compete clause.
14 B-8 Creative!kttlement Techniques, G. Rdizing the Settlement. Always talc0 precautions to insure you have obtained a full rnl~sl~e from the partits you intend to settle with. For example, if you are settling with person8 lacking legal capacity remember that you must Beelr: court approval of the settlement. Additionally, lately we bave seen a lot of common law wives, &ranged spouses, and children born out of wedlock papping into pemnal injury claims. This should serve to remind us that in these cases, the defense and plaintiffs attorneys should always ask for the hal decres of a divorce, a birth certificate, or other pmf of familial relationship. Additionally, in almost all wrongful death settlements, you may wmt to consider opeaing a probate estate so that you can have the court determine the heirs and approve of the W. E~CAL CONSIDBRATIONS IN SETTLEMENT NEGOTIATIONS. A. Ethical Obligations to Client. The Texas Disciplinary Rule of Professional Conduct 1.02(a)(2) provides that a lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter, except as authorized by law. Hopefully, in preparing for settlement negotiations, you have ensured that you and your client value the case similarly and have evaluated the opposition in a like manner. However, at times negotiations may bring forth information not considered in your evaluation. Although you should counsel your client to weigh such new information carefully and possibly await decision until further investigation and/or research, if your client wishes to settle, you must do m. Further, Rule 1.02 requires atl attorney to communicate offer of settlement to the client.,' Thus, even if the offer is seemingly outragmus and unreasonable, it must be passed on. To. * ensure that your client will not react out of feat or intimidation as the opposing party would hope a in such a case, it would be prudent to include with the offer an evaluation of the case. If,, however, prior discussions with your client have lefi it clear that the settlement offer will not be accepted, Rule 1.03 advises that you need not pass it on to the client. Although the client has the ultimate decision regarding settlement, the lawyer must make sure that it is an informed one. Texas Disciplinary Rule of Professional Conduct 2.01 provides that "in advising or otherwise representing a client, a lawyer shall exercise independent professional judgment and render candid advise." In addition, Rule 1.03(b) requires that "a lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation." Together, these provisions make it clear that a lawyer must provide the client with candid, clear, and comprehensive advice which will allow the clht to make an informed decision about any potential settlement offer. Once a decision is made, hawever, the lawyer must abide by the client's wishes. In some situations where a client wishes to accept a settlement contrary to the lawyer's advice, I recommend having your client sign an acknowledgment that he is settling the case wntrsry to your recommendation. This af course can be dangerous if your client then backs out of the settlement and you lose at trial, thus I would reserve this tactic for exceptional situations. b addition to these concerns, the economic interests involved in a settlement negotiation can raim ethical considerations for both sides of the bar. Rule 3.02 stah that "in the course of litigation, a lawyer shall not take a position that unreasonably increases the costs or other burdens of the case or that unreasonably delays resolution of the matter." This rule can be implicated by both ths
15 Creative Settlement Techniques B-9 decision to make an offer, and the decision to accept a settlement offer. A lawyer must be mindful to offer candid advice about the poteptial cost of either failing to offer a settlement or refusing to agree to a settlement offer. Each of these decisions can potentially increase the costs and risks of pursuing the case. Other Rules of Professional Conduct govern specific situations which a lawyer may be confronted with during the settlement process. Rule l.os(f) provides that "a lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the client." This rule requires a lawyer to handle each client's settlement claim separately and to conform to the ethical canons discussed abave with taspect to each client. Irr addition, Rule 5.06 states that "a lawyer shall not participate in offering at making an agreemeat in wbich a restriction on the lawyer's right to practice is part of the settlement of a suit of controvemy." These specific rules may not be implicated often; however, it is important to remember that a violation of these rules could result in disciplinary action. Finally, the potential for conflicts of interest which may arise during settlement negotiations should be a primary concern if insurauce i m am involved. In such cases, the attorney represents the insured, but is paid by the insurance company. Rule 1.08 of the Texas Disciplinary Rules of Professional Conduct specifically prohibits such a relationship unless the client cor18e~~ts and the "lawyer's independence of professional judgment* is adequately protected and ensured. Moreover, the same rule requires that, even in such a tripartite relationship, the attorney must maintain the appropriate confidentiality as required by Texas Disciplinary Rule of Professional Conduct The Texas Supreme Court has specifically stated that counsel owes the same loyalty to the insured as if the bured had pemdly bired him. Bmulovers'Cas. Co. v. Tillev, 496 S.W.2.d 552, flex. 1973). However, the attorney also owes a duty to the insurance company in that the insurer has sought and paid for his services. Conflicts arise, for example, when the settlement offer is higher than policy limits or when them is a question of coverage. h either situation, the idsurance company may have less inclination to settle than does the insured. To protect the client (the insured), you must inform the insured of any exposure he may face if, in fact, coverage is M ed or if a judgment is rehlmed in excess of policy limits. If the insured runs no risk of exposure, i.e. the claimed damages or settlement demand is less than policy limits, your duty is merely to obtain an advantageous attlement for the insurer. B. Ethical Obligations to Opposition. In addition to etbical obligations owed by a lawyer to bis client, a lawyer m t also abide by ethical mans when negotiating with opposing counsel. As a negotiator, a lawyer sedrsl a d t advantageous to the client but this must be done consistent with the requirements of hwsgt dealing with others. There are no specific rules of Professional Conduct governing settlement negotiation tactics, however, the requirement to "maintain the highest standards of ethical conduct" applies. Therefore, a lawyer should not misrepresent facts or in any way deal dishonestly with another lawyer during settlement negotiations. Moreover, throughout the settlement process, a lawyer should be mindful of the Pmmble to the Texas Rules of Professional Conduct's admonition: Each lawyer's own conscious is the touchstme against which to test the extent to which his actions may rise above the disciplinary standards prescribed by
16 B-10' " Creative Settlement Techniques them rules. The desire for the respect and confidence of the members of the profession and of the mciety which it serves provides the lawyer the incentive to attain the highest possible degree of ethical conduct. The possible loss of h t respect and confidence is the ultimate sanction. So long as its practitioners are guided by these principles, the law will continue to be a noble profession. This is its greatness and its strength, which permit of no compromise. Tex. C3ov't. Code Ann. T.2, Subt. Q, App. A, Art (Preamble: A Lawyer's Responsibilities, cmt. 9). CONCLUSION As we are all aware, disputes come in many shapes and sizes, and therefore, I would never recommend that you employ all of these techniques in all of your settlement negotiations. Clients' nee& differ, the amounts involved in a dispute differ, and the willingness of your opposition to resolve a dispute may differ as well. However, it is important for all of us to take a step, or two, back and look at the forsst. We should ask ourselves: WHAT IS THE BEST POSSIBLE SETTLEMENT FOR OUR CLIENT IN THIS DISPUTE? HOW DO WE OBTAIN THE BEST POSSIBLE SETTLEMENT? DID I OBTAIN A GOOD SETTLEMENT? We must remember that lawyers exist to help others, and helping others by enforcing their rights, plaintiff or defense, is our professim.. The bore creative we are in achieving a s+tlent that favombly resolves.$, our clients' disputes, the more we will have succeeded as individuals, as a profession, and as a society.