New York City Bar Association Publishes Formal Opinion Addressing Qualification of Advance Settlement Authority

On August 31, 2022, the New York City Bar Association Professional Ethics Committee issued an opinion on the ethical limitations and concerns raised by a client giving advance settlement authority to the client. See NYCBA Formal Op. 2022-2 (Aug. 31, 2022). Here is the summary the opinion prepared by the New York City Bar Association:

The Professional Ethics Committee issued an opinion on the extent and scope of authority when a client authorizes their attorney to negotiate a settlement on the client’s behalf. Although it is clear that a client can give advance settlement authority to their lawyer at the outset of the engagement or at any time during the representation, the extent and scope of such authority is not unfettered and is limited under the New York Rules of Professional Conduct in certain respects that the lawyer may not ignore or disregard. Among other considerations, the client may revoke such authority at any time and the lawyer is under a continuing duty to communicate with the client concerning material developments and to keep the client reasonably informed about the status of the matter, including all settlement offers; the lawyer should exercise caution in agreeing to a settlement within a previously authorized range if the assumptions underlying the client’s delegation are no longer current; and the lawyer is ethically obligated to disclose information which may be critical to the client’s decision whether to revoke such authority. On the other hand, the lawyer is not obligated to pursue what he or she regards as unreasonable settlement demands or litigation strategy.

See id. at 1.

Settlement Authority in Louisiana

The law presumes that a lawyer has authority to engage in settlement negotiations on behalf of a client. See, e.g.Williams v. Williams, No. 2006-CA-0358, 2007 WL 441360, at *7 (La. Ct. App. 1st Cir. Feb. 9, 2007), remanded by Williams v. Williams, 970 So. 2d 633 (La. Ct. App. 1st Cir. 2007); Grimes v. Ciba-Geigy Corp., 684 So. 2d 1159, 1160 (La. Ct. App. 1st Cir. 1996); Singleton v. Bunge Corp., 364 So. 2d 1321, 1325 (La. Ct. App. 4th Cir. 1978). However, a lawyer has absolutely no authority to settle a matter without express client authority. See La. Civ. Code Ann. art. 2997(5) (2016) (requiring express authority for mandatary to “[e]nter into a compromise or refer a matter to arbitration”); see also In re Beal, 117 So. 3d 501, 503 (La. 2013); In re Schnyder, 918 So. 2d 455, 460 (La. 2006); Grimes, 684 So. 2d at 1160; Fredric Hayes, Inc. v. Rollins, 435 So. 2d 1151, 1152 (La. Ct. App. 3d Cir. 1983); Thornton v. Willis, 106 So. 2d 337, 340 (La. Ct. App. 2d Cir. 1958) (holding that even though a settlement was entered into by a lawyer in the “utmost good faith,” the client was not bound because the lawyer did not have express or implied authority to do so); see also Restatement (Third) of the Law Governing Lawyers § 22(1) (2000); but see In re Butler, 264 So. 3d 414, 420 (La. 2019) (holding the lawyer did not violate Rule 1.2 because the lawyer had a “reasonable understanding that [the lawyer] had the authority to settle [the client’s] suit.”). Indeed, Louisiana Rule 1.8(k) prohibits a lawyer from obtaining authority to settle prior to obtaining the client’s informed consent to the particular terms. Once the client provides that informed consent, however, the lawyer may obtain a client’s authorization to endorse and negotiate any settlement check. 

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