At its annual meeting in May, the American Law Institute approved the final draft of Principles of the Law of Aggregate Litigation. The biggest fight concerned a tweak to the "aggregate-settlement" rule, which now applies in some form across the United States and the District of Columbia.
The current rule provides that "a claimant may not challenge a [non-class aggregate] settlement if, after disclosure of all pertinent information, the claimant agrees in writing to be bound." Principles 3.17, comment a. It thus gives each client of a lawyer who represents two or more clients with similar claims a veto on an aggregate deal that settles his, her, or its claim.
Section 3.17(b) offers a way for clients to waive their veto under the aggregate-settlement rule. It says:
(b) In lieu of the requirements set forth in subsection (a), individual claimants may, prior to the receipt of a proposed settlement offer, enter into an agreement through shared counsel allowing each participating claimant to be bound by a substantial majority vote of all claimants concerning an aggregate-settlement proposal (or, if the settlement significantly distinguishes among different categories of claimants, a separate substantial majority vote of each category of claimants). An agreement under this subsection must meet each of the following requirements:
(1) The power to approve a settlement offer must at all times rest with the claimants collectively and may under no circumstances be assigned to claimants' counsel.
(2) The agreement among the claimants may occur at the time the lawyer-client relatiohnship is formed or thereafter, but only if all participating claimants give informed consent. Informed consent requires that the claimants' lawyer provide information to the claimants to the extent necessary to facilitate informed decisionmaking.
(3) The agreement must specify the procedures by which all participating claimants are to approve a settlement offer. The agreement may also specify the manner of allocating the proceeds of a settlement among the claimants or may provide for future development of an appropriate allocation mechanism.
(4) Before claimants enter into the agreement, their lawyer or group of lawyers must explain to all claimants that the mechanism under subsection (a) is available as an alternative means of settling an aggregate lawsuit under this Section. A lawyer or group of lawyers may not refuse to represent a claimant or terminate an existing relationship because the claimant opts to pursue an approach under subsection (a) instead of an approach under subsection (b), and the lawyer must so inform the client.
Blawgletter applauds new section 3.17(b). We believe it will aid clients in hiring joint counsel. It will do so by cutting the risk, to the lawyer and other clients, that a single client will torpedo a good aggregate settlement.
But sub-subsection (4) looks odd. It says a lawyer must give "a claimant" the option to go under the old aggregate-settlement rule in section 3.17(a) and "may not refuse to represent a claimant or terminate an existing relationship because the claimant opts to pursue an approach under subsection (a)".
Probably ALI doesn't mean that a lawyer must take on a group representation regardless of whether some of the joint clients choose option (a) instead of option (b). Section 3.17(b)(4) instead means that a lawyer who chooses to take on a group representation may not exclude an individual claimant from the group solely because that claimant prefers the old aggregate-settlement rule. The lawyer still may decline to represent a group if some members opt to keep the veto.