Defendants in repetitive litigation like product liability suits brought by the same lawyer or lawyers may think it makes perfect sense to include opposing counsel as a party to the settlement agreement, particularly one with a non-disparagement clause. Tennessee became the latest state to throw cold water on that idea.
The Board of Professional Responsibility of the Supreme Court of Tennessee (the “Board”) recently opined on the ethical propriety of a lawyer agreeing (as a party to a client’s settlement agreement) to use language that would prohibit the lawyer from “taking any action or making any statements, verbal or written, to any third party that disparage or defame” the opposing party as a condition of settlement by the opposing party. The Board, in Formal Ethics Opinion 2025-F-171, advised that it would be ethically improper for a lawyer to accept or propose conditions of that nature.
The Board first noted that the requirement that the plaintiff’s lawyer become a party to a release might trigger a conflict between the plaintiff (who wants to settle the case and get paid) pursuant to Rule 1.7). Though it did not explain the conflict, it referenced several earlier Tennessee opinions addressing lawyers becoming obligated in a client’s settlement (Tennessee FEO 2010-F-154 and FEO 98-F-141). The opinion noted that prior opinions had concluded that attorneys might avoid such a conflict by waiving any claims for attorneys’ fees. (Though it is not clear how such a release would address the other ethical concerns over making such an agreement).
The Board also concluded that non-disparagement clauses are improper in a products liability case under Rule 5.6(b), which forbids lawyers from offering or making settlement agreements that include restrictions on the lawyers right to practice. Pointing to ABA Opinion 00-417, the Board reminds lawyers that public policy favors the public’s unconstrained choice of counsel and that non-disparagement clauses can limit that choice by effectively removing some counsel from the options available to the public. Such clauses are seen as masked attempts to “buy off” the plaintiff’s lawyer and can also produce potential conflicts for lawyers between the interests of current clients versus prospective clients. ABA Opinion 93-371 notes these same public policy concerns. Although they are indirect restrictions, non-disparagement clauses that require firm lawyers to become parties to the settlement agreements have the effect of restricting the plaintiff’s firm from “using or discussing any information learned during the case that sheds a negative light on the Defendants,” thus prohibiting plaintiff’s lawyers from advising future clients of their knowledge, understanding, and involvement, which impedes potential clients in being able to find the most suitable lawyers. Specific to products liability cases, disparagement clauses in settlement agreements would serve to block the public from having any accessibility to such data.
Other States
There is no shortage of ethics opinions analyzing Rule 5.6(b) issues. Ohio generally prohibits attorneys from making settlement agreements that restrict lawyers from disclosing publicly accessible information found in a government record. Ohio lawyers are instructed to withdraw from any representation where the settlement is contingent upon the restriction to practice law as Ohio lawyers may not participate in settlement agreements where they must affirm that they do not represent others with similar claims against the defendant. North Carolina lawyers cannot make settlement agreements prohibiting another lawyer from disclosing and/or using information that is available to the public regarding the representation. South Carolina lawyers would violate Rule 5.6(b) by including terms in a settlement agreement that would prohibit them from identifying or using the defendant’s name for “commercial or commercially-related publicity purposes.” Colorado’s prohibition extends to settlement agreements that would restrict the attorney “representing the settling claimant from representing other claimants against the party defending the claim.” Texas lawyers would violate Rule 5.6(b) by including settlement agreement terms that prohibited them from sharing fees with anyone in future lawsuits or claims brought against opposing party.
Duty of Confidentiality
Connecticut declined to find an ethics violation of Rule 5.6(b) when lawyers enter into confidentiality agreements that prohibit the parties’ lawyers from disclosing publicly available information accessible through court files. The basis for finding no ethics violation was that confidentiality agreements that are only restricting disclosure (not use) merely serve to affirm a lawyer’s preexisting obligation to keep their client’s information confidential under Rule 1.6. The rationale is that Rule 1.6 obligates lawyers to refrain from revealing information related to the representation absent client consent, or other applicable exception. Confidentiality agreements that restrict lawyers from disclosing publicly available information would have the same effect as when clients do not provide consent under Rule 1.6 for their lawyers to disclose information about their case.