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Multiple clients may present multiple conflicts

By Diane Karpman

Diane Karpman
Karpman

George W. Bush characterizes himself as the "decider." Being a "decider" is precisely what lawyers in the representation of multiple clients cannot become, or they violate their duty of loyalty. Clients with individual claims against the same party often share the goal of maximization of their claims. It is when they must divide up the recovery, however, that their collective lawyer must decline participation, because he/she cannot be the "decider."

Aggregate representation offers clients access to the nation's top legal talent, reduced litigation costs and the ability to take on corporate giants.

Yet, the aggregate settlement rule (Rule 3-310 (D)), is probably the least defined and least litigated issue in conflicts. This is paradoxical because this is a growth area. Every few years Congress passes restrictive legislation designed to curb the perceived abuse of class actions. Therefore, cases that once would have qualified as class claims are being brought "under the radar" as individualized-yet-collective claims. Plaintiffs' lawyers consolidate the individual claims of multiple clients, developing an inventory of cases. Defendants want to buy peace via a global settlement and will offer a "lump sum."

Conflicts abound in this situation. Clearly, lawyers cannot play favorites within the group, whether it is the "squeaky wheel" client or a friend/family member. Other conflicts could involve a law firm's self-interest. Maybe the firm will obtain a greater recovery from some cases, as opposed to others that require payment of referral fees. 

According to ABA Formal Opinion 06-438 (not binding in California), the lawyer in an aggregate settlement, in which two or more clients jointly settle their claims, must advise each client of the total amount of the settlement; the amount and nature of each client's participation; the total fees and costs to be paid; and how the fees and costs will be apportioned. But first, the lawyer must obtain consent from the clients to disclose their confidential information, and they may not be cooperative.

Victims of group sexual abuse may not want their neighbors to know the painful details. Neighbors with developing diseases may not want to share the details with the community. Sensitive confidential information that clients justifiably want to keep private includes injury details, age, wage loss, exposure, etc. The list is endless.

One possible solution is insisting that defendants make separate offers to each plaintiff. Another possible fix is an advance consent in the fee agreement. (Creation of a sort of parallel universe, with an independent third party neutral as the "decider.")

You may be thinking that an advance consent to a majority rule could work. However, even though we live in a democracy, collective settlement has been rejected in several states. These clients are being denied a majority vote in settling their aggregate claims in these other states. California, however, does not actually have a case denying majority decisions.

Legal ethics expert Diane Karpman can be reached at 310-887-3900.

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