The document discusses several hypothetical ethical issues that can arise in settlement negotiations and mediation. It addresses issues such as settling a case without client consent, negotiating with pro se parties, use of puffery and exaggeration in negotiations, complying with onerous client instructions, handling inadvertent disclosures, aggregate settlements, and restrictions in settlement agreements. The document provides analysis of the relevant ethics rules and opinions on each issue to help guide attorneys' conduct.

1. ETHICAL ISSUES IN SETTLEMENT NEGOTIATION AND MEDIATION
Edward K. Le, Esq.
Edward K. Le, PLLC
135 Park Ave N.
Renton, Wa 98057
(425) 336-2255
Email: edward@edwardkle.com
www.edwardkle.com

2. HYPOTHETICAL #1 - Settling a Case Without First Obtaining Client Consent
During meetings with your client, you learn that your client would like to
resolve the dispute for $100,000, but would be happy to settle at $70,000.
No other terms are discussed.
After suit is filed, the opposing party offers to settle the case for $85,000,
with a confidentiality agreement as an extra term. The offer ends at 5:00 pm
that day. You cannot reach your client by phone, email, or by any other
means.
Can you settle this case within the deadline without your client’s consent?

3. Washington State RPC 1.2(a)
“A lawyer shall abide by a client's decisions concerning the objectives of
representation and, as required by RPC 1.4, shall consult with the client as
to the means by which they are to be pursued. A lawyer may take such
action on behalf of the client as is impliedly authorized to carry out the
representation. A lawyer shall abide by a client's decision whether to
settle a matter. In a criminal case, the lawyer shall abide by the client's
decision, after consultation with the lawyer, as to a plea to be entered,
whether to waive jury trial and whether the client will testify.”

4. Comment 3 to RPC 1.2 :
“At the outset of a representation, the client may authorize the
lawyer to take specific action on the client's behalf without further
consultation. Absent a material change in circumstances and subject to
Rule 1.4, a lawyer may rely on such an advance authorization. The
client may, however, revoke such authority at any time.”

5. HYPOTHETICAL #2 - Settlement Negotiations with Pro Se
• You represent a client who fell and was injured by defective handrails in a home
where he/she is a guest. You value the case as being worth $300,000 and
Homeowner agrees to pay. You draft a Stipulated Judgment for the homeowner
to sign and a promissory note to pay the judgment within thirty days or risk his
wages being garnish and his assets being executed.
• May you prepare the Stipulated Judgment and promissory note for the
unrepresented homeowner to sign?
• What if the homeowner asked you directly whether or not the stipulated
judgment and agreement is fair?

6. Comment 2 to RPC 4.3:
“This Rule does not prohibit a lawyer from negotiating the terms of a
transaction or settling a dispute with an unrepresented person. So long
as the lawyer has explained that the lawyer represents an adverse party and
is not representing the person, the lawyer may inform the person of the
terms on which the lawyer's client will enter into an agreement or settle
a matter, prepare documents that require the person's signature and
explain the lawyer's own view of the meaning of the document or the
lawyer's view of the underlying legal obligations.”

7. RPC 4.3
“In dealing on behalf of a client with a person who is not represented
by a lawyer, a lawyer shall not state or imply that the lawyer is
disinterested. When the lawyer knows or reasonably should know that the
unrepresented person misunderstands the lawyer's role in the matter, the
lawyer shall make reasonable efforts to correct the misunderstanding. The
lawyer shall not give legal advice to an unrepresented person, other
than the advice to secure the services of another legal practitioner, if
the lawyer knows or reasonably should know that the interests of such a
person are or have a reasonable possibility of being in conflict with the
interests of the client.”

8. As Comment 2 to RPC 4.3 further states, this rule is not always absolute
and it “distinguishes between situations involving unrepresented persons
whose interests may be adverse to those of the lawyer's client and those in
which the person's interests are not in conflict with the client's.” That is
because “in the former situation, the possibility that the lawyer will
compromise the unrepresented person's interests is so great that the Rule
prohibits the giving of any advice, apart from the advice to obtain the
services of another legal practitioner.”

9. HYPOTHETICAL #3 - Use of Puffery and Exaggeration
• During the course of a personal injury mediation, as you prepare
for settlement negotiations, you discover that your client's medical
bills total $40,000. May you tell the other side that the medical
bills actually total $50,000?
• What if your client instructs you to tell the other side that he/she
has $50,000 in medical bills when you know it is actually
$40,000?

10. RPC 8.4 prohibits a lawyer from making false statements of material fact or
law to third parties, and from failing to disclose material facts when necessary to
avoid assisting criminal or fraudulent conduct by a client.
“It is professional misconduct for a lawyer to:
(b) commit a criminal act that reflects adversely on the lawyer's honesty,
trustworthiness or fitness as a lawyer in other respects;
(c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice.”

11. RPC 4.1 states as follows:
“In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person; or
(b) fail to disclose a material fact to a third person when disclosure is
necessary to avoid assisting a criminal or fraudulent act by a client, unless
disclosure is prohibited by Rule 1.6.”

12. • What about the scenario where the attorney believes that the value of a
case with $50,000 is only worth $200,000 in settlement value, but tells
the other side that he/she value this case as being more than $300,000?
• Or the scenario where the attorney knows he has a weak case but tells
other side that he has a strong case. Does that constitute an ethical
violation?
• According to the According to the “Ethical Guidelines for Settlement
Negotiations” published by the ABA Comm. on Ethics & Prof’l
Responsibility,” it appears that an attorney’s use of puffery or
exaggeration about his/her valuation of the case is considered ethical.

13. Statements made by an attorney about a party’s willingness to compromise
or resolve a dispute, about the value of case that an attorney places on a
case, statements from attorneys about their belief in the strength or
weakness of a party’s factual or legal positions or case all qualify as
permissible embellishments under ABA Model Rule 4.1 rather than as a
material misrepresentation.
MODEL RULES OF PROF’L CONDUCT, r. 4.1 comment 2 (2016)

14. HYPOTHETICAL #4 - Onerous Client Instructions and Tactics
• Your client’s business reputation was seriously damaged by the defendant, a
business competitor. Opposing counsel obtains settlement authority to offer a
monetary amount. You go back to your client with a recommendation to
accept. However, your client is angry and refuses. She wants the defendant
to be publicly shamed by taking out a full page ad in the local newspaper
admitting they deliberately lied about her.
• Your client also wants the defendant to share the list of all persons they have
contacted to maligned her.
• Your client finally states that unless this is done, she settle under any term and
proceed to trial for the purposes of “getting even” and making sure the
defendant “goes bankrupt.”

15. As RPC 4.4(a) provides, there is an ethical duty to respect the rights of third
person
“In representing a client, a lawyer shall not use means that have no
substantial purpose other than to embarrass, delay, or burden a third
person, or use methods of obtaining evidence that violate the legal rights
of such a person.”

16. As comment 1 to RPC 4.4 explains:
“Responsibility to a client requires a lawyer to subordinate the interests of
others to those of the client, but that responsibility does not imply that a
lawyer may disregard the rights of third persons. It is impractical to
catalogue all such rights, but they include legal restrictions on methods of
obtaining evidence from third persons and unwarranted intrusions into
privileged relationships, such as the client-lawyer relationship.”

17. Comment 1 to RPC 1.33:
“A lawyer should pursue a matter on behalf of a client despite opposition,
obstruction or personal inconvenience to the lawyer, and take whatever
lawful and ethical measures are required to vindicate a client's cause or
endeavor. A lawyer must also act with commitment and dedication to the
interests of the client and with diligence in advocacy upon the client's behalf. A
lawyer is not bound, however, to press for every advantage that might be
realized for a client. For example, a lawyer may have authority to exercise
professional discretion in determining the means by which a matter should be
pursued. See Rule 1.2. The lawyer's duty to act with reasonable diligence
does not require the use of offensive tactics or preclude the treating of all
persons involved in the legal process with courtesy and respect.”

18. HYPOTHETICAL #5 – Inadvertent Disclosure During Settlement Negotiations
• You have been negotiating with opposing counsel on a case. Your
opponent offers you $40,000. However, her secretary inadvertently emails
you a letter the insurance company wrote to the defense attorney
authorizing him/her $60,000 to settle the case. The defense comes back
and offer you $50,000.
• Are you allowed to use the inadvertently sent email to your benefit?
• Do you have any duty to notify the other side that you received their
inadvertently sent email?

19. RPC 4.4(b):
“A lawyer who receives a document or electronically stored information
relating to the representation of the lawyer's client and knows or
reasonably should know that the document or electronically stored
information was inadvertently sent shall promptly notify the sender.”

20. Comment 2 to RPC 4.4 (b) leaves the decision of returning the document to the
professional judgment of the lawyer.
“Some lawyers may choose to return a document or delete electronically stored
information unread, for example, when the lawyer learns before receiving it
that it was inadvertently sent. Where a lawyer is not required by applicable law
to do so, the decision to voluntarily return such a document or delete
electronically stored information is a matter of professional judgment
ordinarily reserved to the lawyer.”

21. HYPOTHETICAL #6 - Aggregate Settlement Offers
Where Multiple Clients Are Involved
• There are four persons sitting in the same car that collides with a commercial
truck. The injuries of each person are different but each, by themselves, are
serious. Because the trucking company wants to limit their financial
exposure, it makes a lump sum settlement offer to all of the clients without
specifying the amount to be paid to each client.
• What does an attorney do when he/she is presented with this scenario?

22. RPC Rule 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, or in
a criminal case an aggregated agreement as to guilty or nolo contendere pleas,
unless each client gives informed consent, confirmed in writing. The lawyer's
disclosure shall include the existence and nature of all the claims or pleas
involved and the participation of each person in the settlement.”

23. ABA Model Rule 1.8(g) suggestion:
The “best practice would be to obtain this consent at the outset of
representation if possible, or at least to alert the clients that disclosure of
confidential information might be necessary in order to effectuate an aggregate
settlement or aggregated agreement.”

24. HYPOTHETICAL #7 - Settlement Terms Requiring the Attorney to Work for
Opposing Side in the Future
• You represent a client who sues a drug company. The litigation has been
pending for years and you have uncover vital information showing the drug
manufacturer withheld hidden danger from the public. The drug company is
willing to pay your client a substantial amount of money with the proviso that
you, as the attorney, will work for them as their attorney in the future.
• The company also wants to ensure that all documents that you uncovered is kept
confidential. Your client wants to accept the settlement.

25. RPC 5.6(b):
"A lawyer shall not participate in offering or making: . . . (b) an
agreement in which a restriction on the lawyer’s right to
practice is part of the settlement of a controversy between
private parties."

26. Washington Ethics Advisory Opinion 1850
“Restriction on the practice of an attorney in negotiated settlements
between private parties are strictly prohibited by RPC 5.6(b).
Consequently, a requirement in a settlement agreement that requires
plaintiff’s attorney to represent the defendant following settlement
would be in violation of the rule. Consequently the defendant’s lawyer
would be prohibited from suggesting or conditioning settlement on the
plaintiff’s lawyer acceptance of future representation of the defendant.

27. Washington Ethics Advisory Opinion 1850 – There is a Duty to Advise
the Client of the Settlement Offer
“Based upon the foregoing, it is the Committee’s position that plaintiff,
when faced with a settlement offer that violates RPC 5.6 must present
the settlement offer to the client, advise the client that restrictions on the
attorney’s ability to practice would be unenforceable and not binding
upon the attorney. Further, the plaintiff’s attorney should call the matter to
the attention of defense counsel and advise that the provision will not be
enforceable against the plaintiff or plaintiff’s counsel.”

28. HYPOTHETICAL #8 - Settlement Agreements That Limits a Plaintiff Attorney
from Suing a Defendant Again Through another Client
Same scenario. You represent a client who sues a drug company. The drug
company is willing to pay your client a substantial amount of money with the
proviso that you, as the attorney, will not file any other lawsuit against them.

29. WSBA Ethics Opinion 2125:
“It does constitute a violation of Washington State RPC 5.6 (b) for
plaintiff’s attorney to enter into a settlement agreement which restricts
or prevents that attorney from filing additional unrelated suits on
behalf of currently unidentified plaintiffs against the same defendant.
The Committee is of the opinion that neither plaintiff nor defendant should
enter into such a settlement agreement based on RPC 5.6 (b) and informal
opinion 1850.”

30. WSBA Formal Ethics Opinion 988
“….there would be nothing in the Rules of Professional Conduct to prohibit
such an agreement, whether by way of the lawyer being retained by the party
or some other agreement.”

31. HYPOTHETICAL #9 - Silence about Errors in the Settlement Agreement or Check
• You authorize the mediator to tell the opposing party that you are willing to
settle for $705,000 and the mediator returns with a CR 2A memorandum
agreement which states that you have both settle the case for $750,000. After
talking to the mediator, you realized that he/she mistakenly relayed that your
offer to settle is $750,000, rather than $705,000. Do you share with the
mediator and the third party that there is mistake on what your actual offer is?
• What if there was no mediator involve and you made the same offer but the
opposing side made a mistake and list $750,000 on the settlement agreement.
Do you share with your adversary the oversight?

32. ABA informal ethics opinion 86-1518:
• “The omission of the provision from a document is a 'material fact'
which . . . must be disclosed to [the other side's] lawyer."
• The Guidelines explain that "[i]t would be unprofessional, if not
unethical, knowingly to exploit a drafting error or similar error
concerning the contents of the settlement agreement."

33. Washington Ethics Advisory Opinion 1286
• There, the attorney received a settlement release and a check in the amount
of $5000.00, when the agreed settlement was $4,000.00. Opinion 1286
holds that
• The attorney had an obligation to clarify with the adjuster whether the
adjuster intended the case to be settled for $4,000.00 or $5,000.00. If the
$5,000.00 payment was made in error, then it was the ethical duty of the
attorney to return the extra $1,000.00 and to amend the agreement to reflect
the actual settlement.

34. HYPOTHETICAL #10 -Advancing Money to Clients Before and After Settlement
• You are in the midst of settlement negotiations with the insurance company.
You estimate that there is a good likelihood of settlement for the liability limits
of $100,000. You advise your client and he/she client asks for a loan of
$10,000.
• Do you proceed to help him/her with a loan?
• What if the case actually did settle for $100,000 and you are waiting for the
settlement documents to be finalized. Your client now asks for the “loan.”
Are you able to financially help now?

35. RPC 1.8(e) which states as follows:
“A lawyer shall not, while representing a client in connection with
contemplated or pending litigation, advance or guarantee financial
assistance to a client, except that:
(1) a lawyer may advance or guarantee the expenses of litigation,
including court costs, expenses of investigation, expenses of medical
examination, and costs of obtaining and presenting evidence, provided the
client remains ultimately liable for such expenses

36. WSBA Ethics Opinion 1162
“The Committee was of the opinion, that based upon the facts in your
memorandum, a lawyer could advance funds to a client after a
settlement of lawsuit but before the funds due the client had been
received, based upon the assumption that the amount of the
settlement or recovery is known and not subject to further proceedings
and the only event which needs to occur so that the client receives the
money is the actual transmittal of the funds. The Committee based this
opinion on its conclusion that, as presented, there was no contemplated or
pending litigation and therefore such an advance would not be prohibited
by RPC 1.8(e).”

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