Confidential Settlements for Professional Malpractice

St. John's Law Review Volume 95, 2021, Number 1 Article 3 Confidential Settlements for Professional Malpractice Sande L. Buhai Follow this and additional works at: https://scholarship.law.stjohns.edu/lawreview Part of the Dispute Resolution and Arbitration Commons, and the Legal Ethics and Professional Responsibility Commons This Article is brought to you for free and open access by the Journals at St. John's Law Scholarship Repository. It has been accepted for inclusion in St. John's Law Review by an authorized editor of St. John's Law Scholarship Repository. For more information, please contact . CONFIDENTIAL SETTLEMENTS FOR PROFESSIONAL MALPRACTICE SANDE L. BUHAI† INTRODUCTION A lawyer representing a plaintiff in a professional malpractice case advises her client not to file a complaint with the state regulatory body—the state bar, the medical board, or some other pertinent body—until later. The lawyer explains that she can offer to settle the case more favorably, more quickly, and at lower cost if they promise that, as part of the settlement, defendant’s malfeasance will never be reported to the state regulatory body responsible for ensuring professional competence in the area. This tactic may allow the client to negotiate a larger settlement because the defendant should be willing to pay more to avoid having to defend himself in an administrative, criminal, or disciplinary proceeding. Although the lawyer’s present client may benefit, failing to report professional malfeasance may hurt both future clients and the public at large. Professional regulatory agencies exist to protect the public from substandard professional services. Advising a client to withhold relevant information from such agencies for personal gain—both the client’s and the lawyer’s—raises serious public policy issues. The dangers of confidentiality provisions have been explored in other contexts, particularly in products liability1 and sexual † Sande L. Buhai is a Clinical Professor of Law at Loyola Law School. The author would like to thank Loyola Law School for their support of scholarship. She would also like to thank Professor Ted Seto for his amazing editing and encouragement. 1 See, e.g., Myron Levin, GM’s Exploding Pickup Problem, MOTHER JONES (Apr. 6, 2010), https://www.motherjones.com/environment/2010/04/gm-ck-explodingpickup/ [https://perma.cc/R88U-AXX4]; Rebecca Hersher, Settlement Deal Reached in 2014 West Virginia Chemical Spill, NPR (Oct. 26, 2016, 3:04 PM), https://www.npr.org/sections/thetwo-way/2016/10/26/499307717/settlement-dealreached-in-2014-west-virginia-chemical-spill [https://perma.cc/M5SE-YY4N]. 31 32 ST. JOHN’S LAW REVIEW [Vol. 95:31 harassment cases.2 This Article explores similar problems in the context of professional malpractice. Much of the discussion here will focus on legal malpractice; however, similar concerns and arguments apply to other professionals as well. The American Bar Association (“ABA”) Model Rules do not prohibit parties from agreeing not to report professional misconduct to a state bar or other regulatory agency. In the absence of a provision prohibiting such conduct, lawyers are free to leverage the possibility of promising to refrain from such reporting to gain their clients—and themselves—more money. This frustrates the purposes of the Model Rules and of professional regulation more generally. Attorneys guilty of professional malfeasance face no reprimand from the state bar for their misconduct. Indeed, an attorney who has repeatedly violated the Model Rules may nevertheless be able to maintain a pristine record. And potential clients who consult state bar records may, as a result, end up being misled—by the bar itself— regarding the malfeasance history of the lawyers they are considering retaining. Even the ABA acknowledges that confidentiality in professional malpractice settlement agreements “prevent[s] regulators and government agencies from performing their duty to enforce the law and protect the public.”3 In the case of legal malpractice, California prohibits such conduct. California Rules of Professional Conduct (“CRPC”) 5.6(b) states: “A lawyer shall not participate in offering or making an agreement which precludes the reporting of a violation of these rules.”4 When adopting CRPC 5.6(b), California recognized that the Model Rules did not contain any such provision, but “carried [the provision] forward because it provides important public protection.”5 The California rules also prohibit threatening to report professional misconduct more broadly to gain an advantage in civil settlements. CRPC 3.10(a) states: “A 2 See, e.g., Ann Fromholz & Jeanette Laba, #MeToo Challenges Confidentiality and Nondisclosure Agreements, L.A. LAW., May 2018, at 12. 3 Ronald L. Burdge, Confidentiality in Settlement Agreements Is Bad for Clients, Bad for Lawyers, Bad for Justice, GPSOLO (Nov. 1, 2012), https://www.americanbar.org/groups/gpsolo/publications/gp_solo/2012/november_dec ember2012privacyandconfidentiality/confidentiality_settlement_agreements_is_bad_ clients_lawyers_justice/ [https://perma.cc/52YK-U7LH]. 4 CAL. RULES OF PRO. CONDUCT r. 5.6(b) (2020). 5 CAL. RULES OF PRO. CONDUCT r. 5.6 exec. summary (Proposed Draft 2017), https://www.calbar.ca.gov/portals/0/documents/rules/rrc2014/final_rules/rrc2-5.6_[1500]-all.pdf [https://perma.cc/3ETN-6JRN]. 2021] CONFIDENTIAL SETTLEMENTS 33 lawyer shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.”6 This Article argues that the ABA should adopt rules similar to CRPC 5.6(b) and CRPC 3.10(a) to prohibit: (1) threatening to report professional misconduct to gain an advantage in civil settlements; and (2) agreeing to not report professional misconduct to the relevant professional regulatory body as part of such settlements. This Article does not argue that confidential settlements should be eliminated in all circumstances—for example, in the settlement of certain kinds of employment disputes. The prohibitions for which this Article does argue are specific: that lawyers should be prohibited from threatening to report professional misconduct to gain an advantage in a civil dispute and that they should also be prohibited from agreeing to forego reporting professional misconduct to the relevant professional regulatory body in a settlement agreement. This Article proceeds in four parts. Part I highlights the widespread dangers that arise whenever a plaintiff agrees to withhold information from the relevant professional regulatory body. In the process, it briefly examines two other areas where confidential settlements have been examined and criticized on similar grounds: sexual harassment and products liability. Part II explores how CRPC 5.6(b) prevents the societal harms that result from confidential settlements in the legal malpractice context, though not in other professional malpractice contexts. Part III examines CRPC 3.10, which (...truncated)