Roy Simon calls to my attention a N.J. Supreme Court decision - In re Gormally, N.J. LEXIS 1264 (N.J. Dec. 19, 2012) - sanctioning laweyrs who agreed to a no-sue provision in a settlement agreement. Literally, the agreement violated Rule 5.6(b).
But as Richard Painter and I showed beyond any readonable doubt a few years ago - in FREE THE LAWYERS in the Georgetown Journal of Legal Ethics - Rule 5.6(b) is wrong. From our libertarian perspective, the rule uses state power to prevent the rational economic decisions of those who wish to make an agreement about how they will spend their time. There was a dissent in the N.J.Court but the opinions somehow failed to cite us, perhaps because the lawyers failed to invoke our article. :-)
Some courts have refused categorically to ban agreements limiting practice when a partner withdraws (Rule 5.6(a)) if the agreement is reasonable in light of the economic interests of the firm. So why not permit reasonable restrictions under the circumstances in Rule 5.6(b)?
And oddly enough, as Richard and I show, New York courts, despite the equivalent of Rule 5.6(b) in the state, have disqualified lawyers in order to enfore anti-solicitation and anti-disclsoure provisions in a settlement agreement, which amounts to a no-sue promise in different garb.
So the bottom line is that if you are a New Jersey defendant, you should load up a secret settlement with confidentiality clauses in which the settling plaintiff agrees never to release plaintiffs' counsel from the duty of confidentiality (MR 1.6, 1.8b) and in which it is expressly understood that there will be substantial liquidated damages owed by the plaintiff if plaintiffs' counsel ever brings another lawsuit using any information learned in the course of the first representation. And that generally puts plaintiffs' counsel out of the running for representing any new plaintiffs in the same or a substantially related case.
I have trouble seeing how any of this is in the public interest.
Posted by: Richard Painter | December 22, 2012 at 10:37 PM
Fwiw, the closest I came to this issue directly was when a plaintiff's lawyer explained to me why, and how, the defendant should purchase the lawyer's ability to be adverse to the defendant in the future. He wanted to squeeze a little bit more cash from the defendant (and not cut the plaintiff in on the extra cash).
Posted by: John Steele | December 22, 2012 at 11:01 PM
John,
What you describe touches on a distinct issue. Can the plaintiff's lawyer bargain for himself while bargaining for the plaintiff? That raises the same conflict issues we witnessed in Evans v. Jeff D. in the public interest context. When private lawyers do that without informed consent, they get disciplined, even disbarred. Richard and I discuss this separate issue in FREE THE LAWYERS. In contingency cases, where the no-sue issue often arises, there may be no additional payment to plaintiff's counsel beyond her interest in the recovery. So there is no conflict to worry about because the lawyer may be quite happy, as is the plaintiff, to enter a no-sue agreement in exchange for a large payment of which the lawyer, under an existing agreement with the plaintiff, will get a percentage. In other words, there is no parallel negotiation to buy a piece of the lawyer.
I just don't see why it's any business of the state to tell me I have to be available to (though not of course to accept) future unknown clients. It could not tell me not to retire or not to accept a retainer from the same defendant following settlement, though either choice excludes my availability to future plaintiffs against anyone or against that defendant (on any matter). My time is my capital and in this circumstance I should be allowed to sell or withhold it as I wish.
Posted by: Stephen Gillers | December 23, 2012 at 11:06 AM
Steve, I have always assumed, perhaps incorrectly, that it's an overbroad rule that was designed to prevent a fact pattern that scared plaintiffs lawyers. Does your article discuss the historical cause of the rule?
Posted by: John Steele | December 23, 2012 at 11:33 AM
What do you mean "that scared plaintiffs lawyers?"
Yes, we do discuss the history a bit. As I recall, there was no equivalent rule in the Canons and there was opposition to it in the HOD, where it was proposed late in the process.
I surmise that the proponents of the rule are lawyers who don't want to be put in the position of rejecting a defendant's request for a no-sue pledge as part of a settlement that their clients greatly desire. A categorical ban means none can be requested, but it also denies economic freedom to lawyers who may wish to agree. In other words, I see it has an intra-profession contest with one cohort using the ethics rules to achieve that goal of a rule that has no appreciable "ethical" content. The pre-Bates advertising rules can be seen the same way.
Posted by: Stephen Gillers | December 24, 2012 at 09:55 AM
I had thought that the fact pattern that scared plaintiffs lawyers was a corporate defendant offering a good settlement -- but only if the plaintiff's lawyer agreed to never sue the defendant again or to not bring certain kinds of claims.
Posted by: John Steele | December 24, 2012 at 10:43 AM
I would not say "scared." Where the NJ view holds sway, which is nearly everywhere, I think, the defendants' lawyers cannot include that as part of the offer and the plaintiffs' lawyers cannot accept it.
Posted by: Stephen Gillers | December 26, 2012 at 08:28 PM