Can a defense lawyer offer to settle a class action on the condition that the plaintiffs waive their statutory attorney fees?

Plain-English summary

The Committee considered whether, to compromise a class action, defense counsel may make a settlement offer conditioned on the plaintiffs' waiver of attorney fees. It answered "Qualified yes." It noted that bar associations had split on the question and that the U.S. Supreme Court addressed it in Evans v. Jeff D., holding as a matter of substantive law that the Civil Rights Attorney Fee Act (42 U.S.C. § 1988) permits class-action settlements conditioned on fee waivers, and that approving such a settlement was not an abuse of discretion where the relief exceeded what the class could expect at trial and there was no pattern of seeking waivers to deter civil rights counsel. The Court did not purport to set ethical standards, but suggested its reading of the federal policy might undermine bar opinions that condemned conditional offers on policy grounds.

The opinion described the two grounds influential bar opinions had used to condemn such offers: that they violate public policy derived from the fee-award statute, and that they are unethical per se because they drive a wedge between the plaintiff class and class counsel by creating a conflict between counsel's personal interest and the class's interest. On the first ground, the Committee concluded the Supreme Court had answered the substantive-law question in a way that conflicts with those opinions. On the second, the Committee found it difficult to locate authority in the Code requiring defense counsel to sacrifice the client's legitimate interests, and render less than adequate representation, so that class counsel need not face a conflict.

The opinion concluded that conditional offers, if made in good faith, are not per se unethical, calling the contrary view an overstatement. Whether a particular offer was made for an improper purpose (a question of fact) or violates a fee-award statute's policy (a question of law) is, the opinion said, more properly committed to the supervising court.

Currency note

This opinion was issued in 1988 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a defense lawyer condition a class-action settlement on the plaintiffs giving up their attorney fees?

A: Qualified yes. The opinion concluded that, after Evans v. Jeff D., a good-faith conditional offer is not per se unethical under the Code.

Q: Doesn't a fee-waiver offer create a conflict for class counsel?

A: The opinion acknowledged that concern but found no Code authority requiring defense counsel to sacrifice the client's legitimate interests so that class counsel avoids a conflict.

Q: Who decides whether a particular fee-waiver offer is improper?

A: The opinion said whether an offer was made for an improper purpose, or violates a fee-award statute's policy, is more properly committed to the supervising court rather than resolved as a per se ethics rule.

Background and rules framework

The opinion analyzes the conflict and zealous-representation provisions of the former Code (including DR 7-101 on representing a client zealously) against the backdrop of Evans v. Jeff D. and 42 U.S.C. § 1988. The modern analogs are Model Rule 1.7 (concurrent conflicts) and Model Rule 1.8 (specific conflict rules). The analysis turns on the distinction between a per se ethics bar and case-specific questions of fact and law for the court.

Citations and references

Rules of Professional Conduct:

• DR 7-101 (former Code; zealous representation)
• MR 1.7 (conflicts of interest); MR 1.8 (specific conflict rules)

Statutes:

• Civil Rights Attorney's Fees Awards Act, 42 U.S.C. § 1988

Cases:

• Evans v. Jeff D., 106 S. Ct. 1531 (1986), settlements conditioned on fee waivers

Other opinions cited:

• D.C. Op. 147 (1985); N.Y.C. Ops. 80-94, 82-80; Va. Op. 536 (1983); N.M. Op. 1985-3 (1985); Ga. Op. 39 (1984); Tenn. Op. 85-F-96 (1985)

See also

• KBA Ethics Op. E-333: Civil Rights Contingent Fees

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-330.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-330
Issued: April 1988

This opinion was decided under the Code of Professional Responsibility,
which was in effect from 1971 to 1990. Lawyers should consult the current
version of the Rules of Professional Conduct and Comments, SCR 3.130
(available at http://www.kybar.org), before relying on this opinion.

Question:

In an effort to compromise a class action, may the defense attorney make an
offer of settlement conditioned on the plaintiffs' waiver of attorney fees?

Answer:

Qualified yes.

References:

Evans v. Jeff D., 106 S.Ct. 1531 (1986); N.Y.C. Ops. 80-94, 82-80; D.C.
Op. 147 (1985); Va. Op. 536 (1983); N.M. Op. 1985-3 (1985); Ga. Op. 39
(1984).
OPINION

Several Bar Associations have addressed this issue, and have reached different
conclusions. In addition, the United States Supreme Court recently addressed the issue in
Evans v. Jeff D., 106 S.Ct. 1531 (1986). In that case, the Supreme Court held as a matter
of substantive law that the Civil Rights Attorney Fee Act (42 U.S.C. sec. 1988) permits
settlements of class actions conditioned on waiver of attorney fees, and that it was not an
abuse of discretion for the District Judge to approve the settlement of a class action
conditioned on a waiver of attorney fees when the settlement provided for broader relief
than the class could reasonably have expected to achieve at trial and when there was no
indication that the defendant was following some pattern or practice of seeking such
waivers or was doing so to deter attorneys from representing civil rights plaintiffs. In
reaching this conclusion, the Court did not purport to set ethical standards of practice for
the profession. On the other hand, the Court suggested that its ruling on the policies of the
federal law in question might undermine the rationale of those Bar opinions that
condemned such conditional offers based on policies derived from the federal act.
Several influential Bar opinions have taken the position that settlement offers
conditioned on fee waivers (1) violate public policy derived from the fee award statute, and
(2) are unethical per se because they drive a wedge between the plaintiff class and the class
counsel (by creating a conflict of interest between class counsel's personal interests and
those of the class that will impair class counsel's ability to adequately represent the class).
It is reasoned that the defense lawyer may not ethically present class counsel with such a
conflict. See, e.g., D.C. Op 147 (1985); N.Y.C. Ops. 80-94 and 82-80. With respect to the
first point, the Supreme Court seems to have answered the question of substantive law

rather definitively, and in a way that conflicts with these opinions. With respect to the latter
point, it is difficult to find any authority in the Code to support the view that defense
counsel must sacrifice the legitimate interests of his or her client (and therefore render less
than adequate representation) so that class counsel will not have to deal with a conflict.
Compare Va. Op. 536 (1983); N.M. Op. 1985-3 (1985); Ga. Op. 39 (1984).
Suppose, for example, that the defendant (private or government entity) has made
the determination that a suit against it is unlikely to succeed. Nevertheless, it may be in
the best interests of the defendant to settle the matter. The defendant may, it seems to us,
disagree about the worth of the inevitable claims for attorney fees. The proposition that a
conditional offer, if made in good faith, always presents an irreconcilable conflict for
plaintiff's counsel, and should be presumed to have been made for an improper purpose,
strikes the members of the Committee as an overstatement. See e.g., Tenn. Op. 85-F-96
(1985). We believe in cases of this type that such conditional offers may be made, and are
not per se unethical. Whether or not a particular offer has been made for some improper
purpose (a question of fact), or whether it violates some public policy inherent in a
particular fee award statute (a question of law), are matters more properly committed to
the supervising Court pursuant to Federal Rule 3(e).

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the
Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530
(or its predecessor rule). The Rule provides that formal opinions are advisory only.