Virginia lawyer Francis brought a federal Fair Debt Collection Practices Act suit against two lawyers that represented a creditor of his client. When a settlement offer from the defendants did not include attorney’s fees, Francis decided not to communicate it to his client. If he had, the settlement would have been accepted and concluded the case. The court found that the Francis’ failure to consult with his client, and other unreasonable behavior, amounted to conduct that multiplied the proceedings “unreasonably and vexatiously” in violation of 28 U.S.C. § 1927. This was sufficient to warrant sanctions and award of attorney’s fees and cost to the defendants of $84,752 [Blowers v. Lerner, Case No. 1:15-cv-889-GBL-MSN [E.D. Va. Aug. 31, 2016]]. This case gives us the opportunity to stress how important it is to promptly communicate settlement offers to a client. The Kentucky Supreme Court in Clark v. Burden, 917 S.W.2d 574 , wrote:
With respect to compromise or settlement of a claim, final decision-making authority rests with the client. Kentucky Rules of Professional Conduct provide that “[a] lawyer shall abide by a client’s decision whether to accept an offer of settlement of a matter” [SCR 3.130-1.2[a]] and the rules require a lawyer to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation” [SCR 3.130-1.4[b]].
Additionally, Comment 2 to Rule 1.4 provides:
For example, a lawyer who receives from opposing counsel an offer of settlement in a civil controversy or a proffered plea bargain in a criminal case must promptly inform the client of its substance unless the client has previously communicated to the lawyer that the proposal will be acceptable or unacceptable or has authorized the lawyer to accept or to reject the offer.
Our long-standing risk management advice for settlements is:
If you are interested in more analysis of risk managing settlements go to lmick.com, click on Resources, click on Subject Index, go to Negotiation and Settlement, and select the article “Unsettling Settlements.”