[Drug and Device Law] The Death of a Client is a Material Fact That Must Be Disclosed in Settlement Negotiations
Today’s case under discussion, Robison v. Orthotic & Prosthetic Lab, Inc., 2015 Ill. App. LEXIS 68 (Ill. App. Ct. Feb. 4, 2015), makes us think of Jim Carrey, George Costanza, and Bruce Willis. You might already have heard of the Robison case. Only a week old, this product liability case, involving a claim that a prosthesis failed, has quickly garnered notoriety. The Illinois appellate court threw out a settlement because the plaintiff attorney extracted that settlement without bothering to disclose that his client had died.
Why do we think of those three particular cultural icons? To begin, let’s lay out the procedural posture of the Robison case. The defendant appealed from an order enforcing a settlement agreement in the product liability action. The defendant argued that the settlement agreement was invalid because the attorneys who purportedly represented the plaintiff during settlement negotiations lacked the authority to negotiate a settlement inasmuch as the plaintiff had died and a proper representative of the estate had not been substituted as the party plaintiff. (The substitution process begins with the quaintly named “suggestion of death” that many jurisdictions, including our home jurisdiction here in the Commonwealth of Pennsylvania, require.) The defendant also contended that the settlement agreement was invalid because the attorneys who purportedly represented the plaintiff during settlement negotiations failed to disclose the material fact that the plaintiff had died eight months prior to the commencement of the negotiations. Got it?
As a further aid to the uninitiated, think of this time-line:
n The complaint was filed on November 24, 2008.
n In March 2013, the trial court noted that there had been “little activity in the case between December 2012 and March 2013.”
n Care to guess why things had been so quiet? Maybe it had something to do with the fact that the plaintiff had died on January 20, 2013.
n Not knowing about the plaintiff’s death, the court scheduled a status conference for April 29, 2013, which was continued to July 1, 2013, at which point the court scheduled the case for a trial in October 2013.
n As we all know, nothing inspires settlement discussions like a trial date. In September 2013, the defendant made a settlement offer. In an email dated September 24, 2013, the plaintiff attorney responded: “My client has instructed me to accept [amount redacted] in full and final settlement of this matter.” How was that instruction delivered? Through a séance?
n It was not until November 15, 2013 that the defendant and its attorneys learned that the plaintiff had died and that the plaintiff’s son had been appointed as the personal representative of his estate.
n The motion to substitute plaintiff was filed on December 30, 2013, and the order authorizing the substitution of the personal representative as the party plaintiff was entered on January 21, 2014.
Not surprisingly, the defendant cried foul and sought to undo the settlement. What is surprising, at least to our somewhat cynical eyes and ears, is that the plaintiff 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. The lower court enforced the settlement, but the appellate court overturned that ruling. It “strongly” disagreed with the plaintiff attorney’s view of the rules of professional responsibility.
We thought of Jim Carrey because we thought of his movie, Liar, Liar. The premise of that movie seems to be that lawyers have difficulty functioning unless they lie. That is a canard, albeit one not without its amusements. The rules of professional responsibility are replete with admonitions that lying is, you know, bad. See, e.g., Rule 3.3 (don’t lie to tribunals or submit false evidence), 4.1 (don’t make false statements of fact to third persons), 8.4 (frowning on “dishonesty, fraud, deceit or misrepresentation”).
We thought of George Costanza because of that scene in Seinfeld where he was confronted with evidence of some perfidy (as we recall, it involved carnal relations on the desk in his office with the cleaning lady) and responded: “Was that wrong? Should I not have done that? I tell ya, I've got to plead ignorance here...." The humor comes from the feigned surprise that something obviously wrong was wrong. Here, it is true enough that there is some tension between absolute forthrightness and the settlement process. If one truthfully disclosed one’s bottom line, or volunteered the existence of weakness either in terms of merits or resolve, one might run afoul of other ethical proscriptions, such as the duty to represent a client zealously and competently. But it is still clear that there is no license to lie during the settlement process. ABA Formal Ethics Opinion 06-439 resolved the possible tension by recognizing that “statements regarding a party’s negotiating goals or its willingness to compromise, as well as statements that can fairly be characterized as negotiation ‘puffing’ are not considered ‘false statements of material fact’ within the meaning of the Model Rules.”
In Robison, the nondisclosure of the client’s death was not mere puffery; it was misleading with respect to a material fact. How do we know this? Well, its seems fairly obvious that the death of a client is material fact. It goes to the ability to prove up a case, as well as the extent of damages. More to the point, the plaintiff attorney in Robison admitted materiality when he acknowledged that disclosure of death would likely have reduced the settlement value of the case. Any George Costanza-like expression of surprise would have been utterly unconvincing. Certainly the court was not convinced, finding the plaintiff lawyer’s arguments “specious and incredible.” The court was also concerned about how the plaintiff lawyer “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.” So troubled was the court by the apparent violation of Rule 8.4 that referred the matter to the Illinois Attorney Registration and Disciplinary Commission (ARDC). But that’s not all. The court also cited Rule 8.3, which requires a lawyer to report unprivileged knowledge of misconduct involving fraud, dishonesty, or deceit, or misrepresentation by another lawyer. The court believed that after the defense learned that the plaintiff had died long before settlement, the defense lawyer’s failure to report the misconduct constitutes a potential violation of Rule 8.3. Ouch.
Why did we think of Bruce Willis? It’s not because his career Died Hard in the last movie of that tired franchise. It’s because of a little movie called The Sixth Sense (set in Philly, by the way) involving [spoiler alert!] a surprisingly dead person. That death, too, was a material fact.
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Posted By Steve McConnell to Drug and Device Law at 2/11/2015 07:30:00 AM --
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