Is it unethical or an unfair trade practice for the defense bar to use a release that reserves the releasee's own claims while the releasor gives up all claims?

Plain-English summary

An Albuquerque attorney asked the Committee to comment on a release provision used by claims adjustors and the defense bar that reserved to the releasee (and those connected with the releasee) all rights to pursue legal remedies, including claims for contribution, property damage, and personal injury, while the releasor apparently released the releasee from all claims. Because counsel did not provide the full release, the opinion assumed it was one under which the releasor released the releasee from all claims arising out of an incident in exchange for a payment.

The opinion concluded that the provision did not fall within New Mexico's unfair-trade-practices statute, which defined an unfair or deceptive trade practice as a false or misleading representation knowingly made in connection with the sale of goods or services or the like; the Committee was aware of no case law holding otherwise. On the ethics question, the opinion explained that releases are contractual and governed by the substantive contract law of the state where formed, and that New Mexico's public policy favors amicable settlement of claims when fairly secured, without fraud, misrepresentation, or overreaching, and supported by consideration (citing Ratzlaff v. Seven Bar Flying Service).

The opinion concluded that it was aware of no law indicating that a non-mutual release was illegal or unethical, and noted that the person dealing with the releasor on the releasee's behalf might not always have authority to affect the releasee's rights against the releasor. Absent a valid contractual defense, the Committee saw nothing inappropriate in the release provision, while observing that nothing prevented the releasor from bargaining for a mutual release as a condition of any release.

Currency note

This opinion was issued in 1984, when New Mexico lawyers were governed by the former New Mexico Code of Professional Responsibility, which the State Bar later replaced with the Rules of Professional Conduct; it also predates the State Bar of New Mexico's November 3, 2008 revisions to those Rules (the New Mexico adoption of the ABA Ethics 2000 changes). The statutes and authorities it cites may since have changed. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Was a one-sided release an unfair or deceptive trade practice in New Mexico?

A: No. The opinion concluded the release provision did not fall within New Mexico's unfair-trade-practices statute (NMSA 1978, Section 57-12-2) and that the Committee was aware of no case law so holding.

Q: Was it unethical to use a non-mutual release?

A: No. The opinion concluded it was aware of no law indicating that a release which was not mutual was illegal or unethical, and that absent a valid contractual defense there was nothing inappropriate in the provision.

Q: Could the releasor get a mutual release?

A: The opinion noted that nothing prevented the releasor from bargaining for a mutual release provision as a condition of any release.

Background and rules framework

The opinion analyzed a settlement release against New Mexico's Unfair Practices Act (NMSA 1978, Section 57-12-2) and the state's contract-law public policy favoring fairly secured settlements, drawing on Garrison v. Navajo Freight Lines and Ratzlaff v. Seven Bar Flying Service. It identified no provision of the Code of Professional Responsibility barring a non-mutual release.

Citations and references

Statutes:

• NMSA 1978, Section 57-12-2 (Unfair Practices Act; definition of unfair or deceptive trade practice).

Cases:

• Garrison v. Navajo Freight Lines, 74 N.M. 238 (1964).
• Ratzlaff v. Seven Bar Flying Service, Inc., 98 N.M. 159, 646 P.2d 586 (Ct. App.), cert. denied, 98 N.M. 336, 648 P.2d 794 (1982).

See also

• NM Ethics Op. 2017-01: Settlement Indemnity Conflict
• NM Ethics Op. 1983-5: Representation Adverse to a Current or Former Client

Source

• Landing page: https://www.sbnm.org/Leadership/Committees/Ethics-Advisory-Committee/Ethics-Advisory-Opinions
• Original PDF: https://www.sbnm.org/Portals/NMBAR/AboutUs/committees/Ethics/1984/1984-5.pdf

Original opinion text

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

Advisory Opinion 1984-5
An Albuquerque attorney has requested the Advisory Opinions Committee to comment on a release provision currently in use by claims adjustors and the defense bar. The release provision reads:
This release expressly reserves all rights of the person, or persons, on whose behalf the payment is made and the rights of all persons in privity or connected with them, and reserves to them their right to pursue their legal remedies, if any, including but not limited to claims for contributions, property damage and personal injury against the undersigned or those in privity or connected with the undersigned.
A release must be read as a whole and the intent of the parties gathered from the entire instrument and not from separate portions. Garrison v. Navajo Freight Lines, 74 N.M. 238, P.2d 580 (1964). Counsel did not provide us with a copy of the entire release. Consequently, this opinion assumes that the release is one under which the Releasor releases the Releasee from all claims of any kind arising out of a certain incident in exchange for the payment of a certain sum of money.
The release provision in question reserves to the Releasee any claim he may have against the Releasor while apparently the Releasor is releasing the Releasee from all claims. Counsel has raised the question of whether this practice is an unfair and deceptive trade practice along with being a questionable ethical practice.
The New Mexico law pertaining to unfair trade practices defines unfair or deceptive trade practice as "any false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services, in the extension of credit or in the collection of debts by any person in the regular course of his trade or commerce." N.M. Stat. Ann. § 57-12-2 (1978). The Committee does not believe that the release provision falls within the purview of § 57-12-2 and furthermore it is unaware of any case law so holding.
As far as the ethical propriety of the release provision is concerned, the Committee notes that releases are contractual in nature and thus governed by the substantive contract law of the state where the contract was formed, absent conflict of law issues. Ratzlaff v. Seven Bar Flying Service, Inc., 98 N.M. 159, 646 P.2d 586 (Ct. App.) cert. denied, 98 N.M. 336, 648 P.2d 794 (1982). The public policy in New Mexico relative to the law of releases is to favor amicable settlement of claims without litigation when the agreements are fairly secured, are without fraud, misrepresentation or overreaching and when they are supported by consideration. Id. The Committee is unaware of any law that indicates that a release which is not mutual is illegal or unethical. Additionally, the person dealing with the Releasor on behalf of the Releasee may not always have authority to affect the rights of the Releasee against the Releasor. In the absence of a valid contractual defense, the Committee sees nothing inappropriate with the release provision. Nothing prevents the Releasor from bargaining for a mutual release provision as a condition of any release.