5/12/2015 AGGREGATE PROCEEDINGS PURPOSE OF AGGREGATE PROCEEDINGS

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1 Pretrial Practice :00 P.M. PANEL TOPIC SETTLEMENT AGGREGATE SETTLEMENT CONCERNS May 12, 2015 New York, New York Kelly Strange Crawford, Esq. AGGREGATE PROCEEDINGS Class Actions SINGLE LAW SUIT PROCEEDING UNDER FEDERAL RULE OF CIVIL PROCEDURE 23, OR A STATE COURT EQUIVALENT WHEREBY INDIVIDUAL CLAIMS ARE JOINED TOGETHER FOR RESOLUTION BY SATISFYING BASIC CONCEPTS OF NUMEROSITY, COMMONALITY, TYPICALITY AND REPRESENTATIVENESS Aggregated Litigation LITIGATION PROCEEDING AS INDIVIDUAL CLAIMS THAT ARE ADMINISTRATIVELY COORDINATED FOR DISCOVERY OR FOR TRIAL. THIS MAY BE ACCOMPLISHED CASE MANAGEMENT TOOLS SUCH AS MULTI DISTRICT LITIGATION ( MDL ) 2 PURPOSE OF AGGREGATE PROCEEDINGS PURSUIT OF JUSTICE BY: Enforcing substantive rights; Promoting efficient use of litigation resources; Facilitating binding resolutions of civil disputes; Facilitating accurate and just resolutions of civil disputes by trial or settlement 3 1

SATISFYING BASIC CONCEPTS OF NUMEROSITY, COMMONALITY, TYPICALITY AND REPRESENTATIVENESS Aggregated Litigation LITIGATION PROCEEDING AS INDIVIDUAL CLAIMS THAT ARE ADMINISTRATIVELY COORDINATED FOR

2 AGGREGATE SETTLEMENT An aggregate settlement or aggregated agreement occurs when two or more clients who are represented by the same lawyer together resolve their claims or defenses or pleas. It is not necessary that all of the lawyer s clients facing criminal charges, having claims against the same parties, or having defenses against the same claims, participate in the matter s resolution for it to be an aggregate settlement or an aggregated settlement. The rule applies when any two or more clients consents to have their matters resolved together ABA COMMITTEE ON ETHICS AND PROFESSIONAL RESPONSIBILITY, FORMAL OPINION (2006) 4 AGGREGATE SETTLEMENT SIGNIFICANT DIFFERENCE There are significant differences between class and non class cases that require these two types of cases to be treated differently for purposes of settlement ALI Principles of the Law, Aggregate Settlements (2009), MRPC 1.2(a) A lawyer shall abide by a client s decision whether to settle a matter. 6 2

resolution for it to be an aggregate settlement or an aggregated settlement.

3 MRPC 1.8(g) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients... unless each client gives informed consent, in a writing signed by the client. The lawyer's disclosure shall include the existence and nature of all the claims involved and of the participation of each person in the settlement. 7 MRPC 1.6(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent 8 MRPC 1.7(a)(2) A lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer 9 3

The lawyer's disclosure shall include the existence and nature of all the claims involved and of the participation of each person in the settlement. 7 MRPC 1.

4 MRPC 1.4(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. 10 PURPOSE OF THE Regarding Aggregate Settlements The purpose of the rules is to deter lawyers from favoring one client over another in settlement negotiations by requiring that lawyers reveal to all clients information relevant to the proposed settlement. The rules recognize that circumstances can change from the point of initial representation and consideration of settlement options in an aggregate representation can cause divergent, if not outright conflicting interests among clients to emerge. 11 GUIDANCE FROM THE AMERICAN LAW INSTITUTE Aggregate claim settlement requires written informed consent of each claimant. Informed Consent requires that each client be permitted to review the settlements of all other persons subject to the aggregate settlement or the formula by which the settlement will be divided. Informed Consent also requires complete disclosure of the total financial interest of the claimant s counsel. ALI Principles of the Law, Aggregate Settlements (2009),

clients information relevant to the proposed settlement.

5 GUIDANCE FROM OPINIONS (RECOMMENDED DISCLOSURES) ABA Formal Op (February 10, 2006) The total amount of the aggregate settlement A description of all claims, defenses, or please covered by the settlement. The terms of each client s participation in the settlement, including the settlement considerations to be contributed and/or received by each client. The total fees and costs to be paid to the lawyer pursuant to the settlement if they will be paid, in whole or in part, from settlement proceeds or by an opposing party or parties. The method for apportioning fees and costs among clients. 13 GUIDANCE FROM OPINIONS (YOU COULD GET SUED!) BOOTH V. DAVIS, 2010 US DIST. LEXIS (U.S.D.C. D. Minn.) Court sanctioned plaintiffs counsel for not advising clients of the terms and impact of their settlement as compared to the aggregate settlement. The breaches also gave rise to a claim for legal malpractice. The former clients sued for fraud, breach of contract, breach of fiduciary duty, professional negligence and negligent misrepresentation. Court noted that breaches of RPCs and violations of ethics rules may also breach an independent legal duty (such as a fiduciary duty) and give rise to a cause of action. 14 GUIDANCE FROM OPINIONS (YOU COULD GET SUED!) Johnson v. Nextel Communications, Inc., 660 F. 3d 131 (2d Cir. 2011) Former clients sued attorneys as part of a putative class for breach of fiduciary duty. The settlement involved payments on a sliding scale the former clients, but also provided that the law firm would be paid to persuade its clients to dismiss any claims against defendant and also to act as a consultant to the defendant. Further, the law firm agreed not to represent any future clients against the defendant. The Court ruled that the agreement the law firm entered thoroughly undermined its ability to deal fairly, honestly, and with undivided loyalty to its clients. Further, the Court ruled that the clients could not have consented to this conflict. 15 5

The terms of each client s participation in the settlement, including the settlement considerations to be contributed and/or received by each client.

6 GUIDANCE FROM OPINIONS (YOU COULD GET SUED!) In re Guidant Corp. Implantable Defibrillators., 2009 WL (D. Minn. Dec. 15, 2009) Attorney never communicated the projected range of proposed settlement awards to clients at the time the clients were asked to sign the settlement documents. The Court fined the attorney $50,000 for contribution to the detriment of the MDL and referred the attorney to the Minnesota Office of Professional Responsibility and to the Chief Disciplinary Counsel for the State bar of Texas and other jurisdictions. 16 DEFENSE COUNSEL ALSO NEEDS TO BE AWARE The ethical rules and case law seem to focus on the plaintiffs counsel. Defense counsel in aggregate proceedings also need to avoid any violation of the ethical standards or conduct that deviates from the standard of care in representing defendants Defense counsel also need to understand the implications of these rules and how they play in the dynamics of successful aggregate settlements 17 MUSTS The lawyer must advise each client of the total amount or result of the settlement agreement. The lawyer must advise each client of the amount and nature of every client s participation in the settlement agreement. Must obtain client consent to sharing settlement details with each other; Settlement allocation is a zero sum game. The lawyer must advise each client of the fees and costs to be paid the lawyer from the proceeds by an opposing party or parties. 18 6

The Court fined the attorney $50,000 for contribution to the detriment of the MDL and referred the attorney to the Minnesota Office of Professional Responsibility and to the Chief Disciplinary

7 MUSTS The lawyer must advise each client of the total amount of attorney s fees and costs regardless of whether the fees and/or costs will be paid, in whole or in part, from the proceeds of the settlement or by an opposing party or parties. The lawyer must advise each client of the method by which the costs are to be apportioned to each client. 19 MUST NOTS!!! Obtain consent prior to settlement offer (advance consent) A client may not waive the right to approve the terms of an aggregate settlement negotiated by her counsel. The very idea of an advance waiver is a contraindication of the literal requirement of informed consent See, NYC Eth. Op , 2009 WL (N.Y.C. Assn. B. Comm. Prof. Jud. Eth.) (The majority view, and the view of this Committee, is that a client may not waive her individual right to approve the terms of a proposed aggregate settlement that would, if accepted, bind her along with other parties jointly represented by the same counsel. ) See, In re Hoffman, 833 So. 2d 425 (La. 2004) (invalidating advance informed consent of an aggregate settlement.); Tax Authority, Inc. v. Jackson Hewitt, Inc., 187 N.J. 4, 898 A. 2d 512 (2006) ( forbidding attorney from obtaining advance consent because a client must have actual knowledge of the terms of the settlement and agree to them.) 20 MUST NOTS!!! Note: Alternative to aggregate settlement rule. The ALI does provide for the possibility of an alternative to the aggregate settlement rule. It is found in Section 3.17 and it is complicated. It nevertheless still requires that the approval process be knowingly and voluntarily made, in writing, signed after full disclosure, and vests all decision making power in the claimants either collectively or through some pre established structure, but by no means with the attorney. See, ALI Principles of the Law, Aggregate Settlements (2009),

!! Obtain consent prior to settlement offer (advance consent) A client may not waive the right to approve the terms of an aggregate settlement negotiated by her counsel.

8 MUST NOTS!!! Negotiate / communicate with a person the lawyer knows to be represented by counsel in the lawsuit. Buy off adversary s attorney (e.g., preclude another attorney from representing clients in future litigation against another party; or retaining as a consultant) Employ requirements that counsel keep confidential public information regarding the litigation such as the identity of the defendant, the allegations alleged in the complaint and the fact of settlement. 22 MUST NOTS!!! Employ requirements that prohibit counsel from disclosing information concerning the business or operations of the opposing party. Employ requirements that counsel turn over work product to opposing counsel. Employ requirements that bar counsel from subpoenaing certain records or fact witnesses in future actions against the opposing party. 23 Pretrial Practice 2015 HAPPY NEGOTIATING!! 8

, preclude another attorney from representing clients in future litigation against another party; or retaining as a consultant) Employ requirements that counsel keep confidential public information

THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS FORMAL OPINION 2009-6 AGGREGATE SETTLEMENTS

THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS FORMAL OPINION 2009-6 AGGREGATE SETTLEMENTS TOPIC: Multiple Representations; Aggregate Settlements; Advance