Friday, May 27, 2016

Illinois Appelate court on whether there is a duty to disclose death of client during settlement negotiations -- UPDATED, again

Back in February, 2015 I posted a story about an Illinois appellate court's opinion on whether an attorney has a duty to disclose the death of a client when the attorney is negotiating a settlement in litigation. The case is called Robison v. Orthotic & Prosthetic Lab, Inc and it is available here.  I later updated the story with the news that a disciplinary action had been filed against the attorney.  Today I am updating the story again to report that the Illinois Supreme Court has censured the lawyer. Go to the bottom of the post for the most recent update.

Original Story (February 2015)

About ten days ago, the Illinois appellate court issued a good opinion that deals with several issues we cover in class. The first one is whether an attorney has a duty to disclose the death of his client when the attorney is negotiating a settlement in litigation. The case is called Robison v. Orthotic & Prosthetic Lab, Inc and it is available here.

In this case, the plaintiff, Randy Robison, filed a product liability action against the defendant, Orthotic & Prosthetic Lab, Inc. in 2008.   In January, 2013, while the case was still ongoing, the plaintiff died but the plaintiff’s lawyers did not alert the court or the attorneys for the defendant.

In September 2013, the attorneys for both sides began settlement negotiations and reached an agreement on September 24. To finalize it, the attorney for the plaintiff sent an e-mail to the attorney for the defendant in which he stated “My client has instructed me to accept . . . in full and final settlement of this matter. Please provide an appropriate release and I will present it to my client for review and approval.”

The plaintiff's lawyer did not notify the defendant's lawyer of the plaintiff's death until after the defendant had submitted the settlement agreement, and he did so when he sent an amended version of the proposed release in which he asked the defendant's lawyer to agree to substituting the plaintiff's son as plaintiff in the case.  The defendant's lawyer refused and asked how come he had not been informed of the plaintiff's death, to which the plaintiff's lawyer replied that he had researched the issue and determined that he had no affirmative duty to disclose the information because it was against his clients' interests and he had a duty to protect his clients' interests within the bounds of the rules of professional responsibility.

The defendant refused to follow through on the settlement agreement claiming it was not valid, and the plaintiff moved to enforce the settlement.  Eventually, the lower court granted the motion and the defendant appealed.

In a short and well written opinion, the Court of Appeals reversed holding that the agreement was not valid and suggesting that the conduct of the attorney for the plaintiff in not disclosing the death of the client was unethical.  Interestingly, it also suggested that the conduct of the defendant's lawyer was unethical in not reporting the conduct of the plaintiff's lawyer.  Here are the most important paragraphs of the opinion:
... The defendant further argued that the settlement was invalid because the death of the plaintiff was a material fact that had been concealed from the defendant prior to and during settlement negotiations. ...


Settlement negotiations commenced in September 2013, and an agreement was ostensibly reached on September 24, 2013. The defendant, however, had no knowledge about the plaintiff's death or the appointment of a personal representative throughout the period of settlement negotiations. [These facts were not disclosed until] weeks after the settlement was reached and months after the plaintiff's death. [The plaintiff's lawyer acknowledged that] the disclosure of the plaintiff's death would have adversely impacted the settlement value of the case. He stated that he believed that the decision to withhold the information was in his clients' best interest and was in keeping with the rules of professional responsibility. We strongly disagree. We find that the arguments expressed by [the plaintiff's lawyer] are specious and incredible, and we are concerned about his professional judgment in this case. In failing to disclose the fact of the plaintiff's death, [the plaintiffs lawyer] intentionally concealed a material fact that would have reduced the overall value of the claim for damages. In addition, and equally troubling, [he] led the defendant to believe that he had authority to negotiate a settlement of the litigation on behalf of the party plaintiff, when the action was without a plaintiff as the plaintiff had died and a representative had not been substituted. Given [these] intentional misrepresentations and material omissions prior to and during the settlement negotiations, we conclude that the settlement agreement is invalid and unenforceable, and that the trial court erred in granting the motion to enforce it. 
In my opinion, this is the correct approach to the issue, but it needs to be explained a bit further.  Although it is well known that a lawyer does not have a general duty to volunteer adverse facts to an opponent in litigation,  Rule 4.1 has been interpreted to imply an exception which requires the disclosure of a client's death.  The most cited case holding this proposition is Virzi v. Grand Trunk, 571 F. Supp. 507 (E.D. Mich. 1983), which approaches the issue from the perspective of a duty to the court because in that case the attorney did not disclose the death of the client until after the court had entered an order. However, the court does go on to say that just as the lawyer owes a duty to the court, he or she also owes the same duty to opposing counsel.  Based on this view, at least two courts (one in Ohio and one in Kentucky) have imposed sanctions on attorneys for failing to disclose their client's death. In Robison, the court did not discuss rule 4.1 but emphasized the attorney's general duty of honesty under rule 8.4, which is presumably owed to everyone.

Interestingly, the court did not stop there and also took up the fact that counsel for the defendant did not report the misconduct under rule 8.3:
Finally, we believe that we have a profound responsibility to comment on the conduct of the attorneys in this case.  ... Rule 8.4(c) of the RPC states that it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. ...   Rule 8.3 requires a lawyer to report unprivileged knowledge of misconduct involving fraud, dishonesty, or deceit, or misrepresentation by another lawyer to the Illinois Attorney Registration and Disciplinary Commission (ARDC). ...

In this case, we believe that the material omissions and misrepresentations ... constitute serious violations of Rule 8.4. We also believe that defense counsel possessed sufficient knowledge to trigger a duty to report [the plaintiff's lawyer's] misconduct to the ARDC, and that the failure to report the misconduct constitutes a potential violation of Rule 8.3.

UPDATE 10/26/15:  About ten days ago, a formal disciplinary complaint was filed against the lawyer who did not report the death of the client.  You can read the complaint here.  (Thanks to the Legal Profession blog for the update.)  It remains to be seen if there will be a complaint against the lawyer who did not report the misconduct.  Given the language in the opinion, it seems to me it would be inconsistent, to say the least, if the administrator did not do so.

UPDATE 12/14/15:  The attorney has now filed an answer to the disciplinary complaint (available here) in which he argues that he researched the issue and discussed the matter with his partners and concluded that the death of his client was confidential information which he had a duty not to disclose under Rule 1.6(a). 

UPDATE 5/27/16:   The Illinois Supreme Court has imposed a censure on the lawyer for settling the case without informing court or opposing counsel of the client’s death.  The case is In the Matter of: Anthony Patrick Gilbreth, No. 6289576, Commission No. 2015PR00100 (Ill. SC May 18, 2016).   Lawyer Ethics Alert Blog has more information here.

1 comment:

  1. Professor Ronald Rotunda sent me the following message:

    Two comments:

    First, the reason that the lawyer must disclose that his client died is that, upon death, the lawyer no longer represents him. He would represent the estate of the client. The lawyer must tell the other side that he is no longer representing the deceased.

    Second, if the appellate court is really serious that the opposing lawyer must report the lawyer who did not disclose that he no longer represents the client because the client has died, should not the appellate could make the same argument about the trial judge — the trial just must disclose that the lawyer improperly hid the name of his client and that trial judge would be subject to discipline for not reporting the lawyer.

    The appellate court should not be throwing stones when it lives in a glass house.