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Unethical Demands in Settlement Agreements in Medical Malpractice Cases
Mark Abramson & Kevin Dugan
Settlements are commonly used mutual agreements to end a dispute on terms deemed acceptable to both sides. Public policy strongly supports the settlement of disputes through means other than litigation. Moreover, particularly in its current financial state, the court system strongly encourages settlement of conflicts in lieu of full litigation.
Traditionally, certain information in settlement agreements has been kept confidential, such as the precise terms or value of the settlement. This is particularly common in medical malpractice cases or in cases where a settlement is for a large sum. Increasingly, however, defense attorneys seek to restrict the use of information that is already part of the public record. This includes the fact of settlement, the names of parties and counsel, and the facts of the case.
In a recent ethics opinion, the New Hampshire Bar Association opined on when restrictions placed on an attorney in a settlement agreement can violate the New Hampshire Rules of Professional Conduct. Specifically, the Ethics Committee addressed the matter of a restriction on the use of information by a plaintiff’s attorney that was already public. The Ethics Committee found that such a restriction ran afoul of the rule against the restriction of an attorney’s right to practice, Rule 5.6(b). In so doing, the Ethics Committee declared that insistence on complete and total confidentiality in a settlement agreement is unethical.
Rule 5.6(b) states that “[a] lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.” ABA Formal Op. 93-371 articulates the three policy considerations underlying this rule. First, there is a risk that the public’s access to the best attorney for a particular case will be curtailed. Second, such a restraint could be motivated by an effort to “buy off” counsel, rather than to resolve the dispute. Third, a restriction on an attorney’s right to practice may place him or her in a position where the interests of the current client are in conflict with those of future clients.
II. Direct v. Indirect Restrictions on the Right to Practice in Unilateral Settlement Agreements
Rule 5.6(b) is intended to protect against both direct and indirect restrictions on the right to practice in settlement agreements. A term that would constitute a direct restriction is a settlement agreement that includes terms precluding a plaintiff’s attorney from representing future clients against the named defendant. Such restraints on the right to practice are readily identifiable, and clearly run contrary to the principles underlying Rule 5.6(b). Indirect restrictions on the right to practice are no less of a violation.
Indirect restrictions on the right to practice generally involve restraints on the use of information. For example, a settlement agreement that includes a prohibition on an attorney’s use of information learned during the course of representing a client could result in that same attorney being unable to represent future clients in similar situations. In an instance where multiple potential plaintiffs exist against one defendant, where all injuries arise out of the same incident, a ban on the use of any information gained by an attorney in representing one of those clients would serve to effectively prohibit the attorney from subsequently representing any of the others in the future. This robs the public of its right to not only freely choose counsel of its choice, but to obtain the most qualified counsel for a particular case.
Further, the Ethics Committee highlights the practical problems associated with such restraints as follows:
It would be difficult, if not impossible, for an attorney to compartmentalize or disregard all that has been learned during such representation or recall with any precision when the information was obtained. As a result, a bar on the use of information gained during a representation would expose an attorney to potential violations of the settlement agreement in virtually every subsequent representation involving similar legal or factual issues.
Finally, there is the risk that restrictions on the use of information will create conflicts of interest between the attorney and both present and future clients. For these reasons, the Ethics Committee concluded that Rule 5.6(b) is intended to prohibit both direct and indirect restrictions on the right to practice. This “serves the important policy consideration of protecting the right of non-settling clients to identify and hire qualified counsel whose judgment and expertise remains free from restrictive, private settlement arrangements.” The opinion goes on to state that Rule 5.6(b) can serve to preserve “the ability of attorneys to utilize the legal experience and substantive knowledge gained during their practice in a manner that does not risk materially limiting responsibilities to a client under Rule 1.7 (Conflicts of Interest), nor disadvantage a former client under Rule 1.9 (Duties to Former Clients).”
III. Disclosure of Public v. Private Information in Settlement Agreements
The specific query before the New Hampshire Bar Association Ethics Committee was whether defense counsel could, through a settlement agreement, restrict the plaintiff’s counsel’s right to disclose publicly available information.
The Ethics Committee first distinguished between the disclosure of private and public information. Pieces of information commonly found to be private and appropriate for confidentiality are the amount and terms of the settlement. Specific facts of the case, if never disclosed to the public, may also be restricted without violating Rule 5.6(b). The rationale for this being that such a provision is consistent with the general duty of confidentiality imposed by Rule 1.6, which survives termination of the attorney client relationship under Rule 1.9(c)(2).
Restrictions on the disclosure of public information are another matter. By its nature, there is no legitimate rationale to insist on confidentiality of public information. There is a distinction, however, between information contained in the pleadings submitted to court and information learned through discovery that would be inadmissible or simply irrelevant at trial. The Ethics Committee noted, for example, that disclosure of the fact that a defendant had been sued “x” times before, even if part of the public record, could be restricted by a settlement agreement. This is because it does not implicate Rule 5.6(b), in that that particular information would be of no use to the plaintiff’s attorney in the practice of law. On the other hand, a similar fact that may not be restricted would be the fact that the defendant had been sued a number of times in the past by the plaintiff’s attorney himself. Such information would be useful to clients in seeking out experienced and knowledgeable counsel, and thus implicates Rule 5.6(b).
There is no bright line New Hampshire rule on what is an acceptable restriction of public information. Other jurisdictions, however, have articulated general tests to assist parties in determining whether a settlement agreement contains terms that will survive an ethical challenge. For example, the Colorado Bar Association Ethics Committee has stated that:
[T]he test of the propriety of a settlement provision under Rule 5.6(b) is whether it would restrain a lawyer’s exercise of independent judgment on behalf of other clients to an extent greater than that of an independent attorney not subject to such a limitation. Material restrictions obtained with an eye towards thwarting a non-settling claimant from obtaining counsel of choice fail this test.
It went on to state that “[a]lthough public policy favors fair settlements, the public policy favoring full access to legal assistance should prevail.”
The motivations behind defense attorneys’ insistence on full confidentiality are obvious: self-interest and self-preservation. The less information available to the public about how the defendant was negligent, the less information about how the defendant will settle a claim, the easier it is for the defendant to maintain a stronger position in settlement negotiations, or to avoid liability outright. In her recently published memoirs, Judge Nancy Gertner recounts just such a case from the early years of her practice that highlights the risks of confidential settlements.
In 1977, Judge Gertner took on a client who had been the victim of repeated sexual abuse at the hands of her psychiatrist, “Dr. X.” Prior to trial, the matter settled for a confidential amount. In addition, Dr. X was to admit no guilt in any formal papers, and the client was to withdraw her complaint before the Board of Registration in Medicine. In other words, there was no evidence of Dr. X’s malpractice. Judge Gertner ends the tale with this disturbing conclusion:
In the summer of 1997, I was having my hair done. The hairdresser, making conversation, reported that he had just been a juror in state court. The case was against a doctor for malpractice. The claim was that he had sex with a woman patient. The hairdresser said that while the jury felt for the woman, they simply could not believe her rather than him, especially because no other women complained. The doctor was exonerated. “What was the doctor’s name?” I asked. It was Dr. X.
The implications are clear. A defendant unburdened by a legal history may continue his or her path with no checks on his or her ability to do harm. Moreover, as demonstrated by Judge Gertner’s experience, crucial corroborating evidence in the event of a future malpractice action is lost. Particularly in the medical field, where the position of doctor is automatically granted a certain degree of trust, such information is crucial. Potential patients have a right to know of the probable quality of a given doctor before joining his or her practice. Access to this information therefore works both ways. It allows the public to mitigate exposure to malpractice by selecting the best physicians and psychiatrists available. Then, should one become a victim of malpractice, it allows the public to select the best attorney for their needs.
Our firm uses settlement information on our website and our blog to inform potential clients of our areas of expertise and success in similar cases. On numerous occasions a new client has come to our office claiming to have seen a factual scenario similar to his or her own on the website, and this informed his or her decision to approach us. This information may also be of use to other plaintiff’s attorneys. In the Verdicts and Settlements section of this publication are descriptions of cases, damages, and settlement amounts (if disclosed). Having access to such information allows attorneys to more accurately value their cases and make demands, enabling them to better serve their clients. For example, demand letters to insurance companies may be accompanied by similar, previously settled cases to support the demanded amount. Defense attorneys, too, can benefit from the use of such information, as they will be able to give accurate estimates to insurance companies deciding how much to place in reserve for a given claim.
Information gained in the course of litigation is valuable to both the attorney and his or her future clients. Information that is generally public – the facts of the case, the valuation of damages – is particularly useful to other practitioners. Further, this information is invaluable to individuals in selecting the best attorney for their case. The Ethics Committee has now unequivocally found restrictions on the use of this information to be unethical, and therefore defense attorneys’ continued insistence on such restraints on the use of publicly available information is unquestionably invalid.
 New Hampshire Bar Association Ethics Committee Op. 2009-10/6.
 Id. at 5.
 Id. at 6.
 Colorado Bar Association Ethics Committee Op. 92, at 1 (June 19, 1993).
 Id. (citing Dallas Legal Ethics Committee, Op. 1982-5).
 Nancy Gertner, In defense of Women: Memoirs of an Unrepentant Advocate (Beacon Press 2011).
 Id. at 82.