The aggregate settlement rule: a rule in search of a definition.

• Author: Fucile, Mark J.

WITH THE advent over the past quarter century of "global" settlements of "mass" torts, the aggregate settlement rule American Bar Association Model Rule of Professional Conduct 1.8(g)--has come to play an increasingly central role in the settlement calculus of counsel for plaintiff's and defendants alike. (1) Oddly, however, the term "aggregate settlement" has never been defined in the rule, its predecessors or its accompanying comments. The absence of a definition is not merely academic. Because ABA Model Rule 1.8(g) and its state cotinterparts (2) impose very strict disclosure obligations, failure to follow the rule raises the specter that the settlement involved will be unenforceable and creates the risk of a wide variety of other serious consequences to claimants' counsel that may effectively impede their willingness to entertain collective resolutions. (3) Given the severity of the rule's obligations and the attendant consequences if unmet, the absence of a definition creates significant practical uncertainty about when the rule does and does not apply. This definitional uncertainty becomes very real in an era when "'group" settlement conferences and multi-case mediations frequently put more than one case on the proverbial negotiating table at the same time.

This article will examine three facets of the aggregate settlement rule. First, the rule and attempts at an accompanying definition are surveyed. Second, the practical effects of the lack of a definition are discussed. Third, practical solutions from the defense perspective are offered to address the uncertainty arising from the absence of a clear definition.

1. The Aggregate Settlement Role and Attempts at a Definition

   ABA Model Rule 1.8(g) currently reads:

   A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, 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 or pleas involved and of the participation of each person in the settlement. The rule reached its present form as a part of the general "Ethics 2000" amendments to the ABA Model Rules adopted by the ABA House of Delegates in 2002. (4) A comment addressing the rule was added to Model Rule 1.8 at that same time:

   Aggregate Settlements [13] Differences in willingness to make or accept an offer of settlement are among the risks of common representation of multiple clients by a single lawyer. Under Rule 1.7, this is one of the risks that should be discussed before undertaking the representation, as part of the process of obtaining the clients' informed consent. In addition, Rule 1.2(a) protects each client's right to have the final say in deciding whether to accept or reject an offer of settlement and in deciding whether to enter a guilty or nolo contendere plea in a criminal case. The rule stated in this paragraph is a corollary of both these Rules and provides that, before any settlement offer or plea bargain is made or accepted on behalf of multiple clients, the lawyer must inform each of them about all the material terms of the settlement, including what the other clients will receive or pay if the settlement or plea offer is accepted. See also Rule 1.0(e) (definition of informed consent). Lawyers representing a class of plaintiffs or defendants, or those proceeding derivatively, may not have a full client-lawyer relationship with each member of the class; nevertheless, such lawyers must comply with applicable rules regulating notification of class members and other procedural requirements designed to ensure adequate protection of the entire class. Aside from the addition of the comment in 2002, the aggregate settlement rule has remained essentially unchanged since it was included in the original ABA Model Rules adopted in 1983 (5) and the former ABA Model Code of Professional Responsibility adopted in 1969. (6) Notably, however, the rule has never included a definition of "aggregate settlement." The legislative history of the rule does not illuminate this fundamental aspect either. The report of the "'Ethics 2000" Commission, for example, simply noted that "aggregate settlements entail settlement offers posing potentially serious conflicts of interest between the clients[.]" (7) It also emphasized tile point made in the comment that the rule does not include class actions: "[Comment 13] reminds lawyers involved in class actions that, while this Rule does not apply, lawyers must comply with procedural requirements regarding notification of the class." (8)

   A similar report accompanying the original 1983 Model Rules observed that then-new ABA Model Rule 1.8(g) was functionally similar to its predecessor under the ABA Model Code, DR 5 106(A). (9) The Model Code provision, in turn, cross-referenced an ABA formal ethics opinion from 1941 that did not deal with a multiple settlement with a "cf." cite. (10)

   State rules of professional conduct, which unlike the ABA Model Rules, are mandatory regulations, do little better. They largely mirror the ABA Model Rule. Those that do vary from the ABA Model Rule do so primarily by way of exclusion. Louisiana and North Dakota, for example, echo Comment 13 to ABA Model Rule 1.8(g) by specifically excluding class actions from their aggregate settlement rules. (11) Similarly, Ohio and New York exclude court-approved settlements...