Law School Case Brief
Tax Auth., Inc. v. Jackson Hewitt, Inc. - 187 N.J. 4, 898 A.2d 512 (2006)
When a lawyer represents more than one client, each client has the right to accept or reject the settlement after the terms are known. N.J. Ct. R. Prof. Conduct 1.8(g) imposes two requirements on lawyers representing multiple clients. The first is that the terms of the settlement must be disclosed to each client. The second is that after the terms of the settlement are known, each client must agree to the settlement. Rule 1.8(g) forbids an attorney from obtaining consent in advance from multiple clients that each will abide by a majority decision in respect of an aggregate settlement. Before a client may be bound by a settlement, he or she must have knowledge of the terms of the settlement and agree to them.
Plaintiffs, 154 franchisees, had asserted that Jackson Hewitt breached a franchise agreement by failing to issue rebates. Because the franchise agreement prohibited plaintiffs from filing a class action lawsuit, plaintiffs collectively retained Karp, their attorney. Plaintiffs entered into identical retainer agreements wherein plaintiffs agreed that the matter was to be pursued on a collective basis, with fees being shared and the matter subject to settlement upon the vote of a weighted majority. All but 18 plaintiffs agreed to a settlement and Karp moved for withdrawal of representation as to those 18. Jackson Hewitt filed a motion to enforce the settlement agreement against all plaintiffs. The trial court had granted defendant's motion but the the Superior Court, Appellate Division reversed that decision upon determining that the attorney-client agreement with a weighted majority provision for settlement was contrary to Rule 1.8(g) and unenforceable.
Does the Rule of Professional Conduct 1.8(g) prohibit an attorney who represents more than one client from entering into an aggregate settlement of the clients' claims without each client's consent to the settlement after its terms are known?
The court held that RPC 1.8(g) forbids an attorney from obtaining consent in advance from multiple clients that each will abide by a majority decision in respect of an aggregate settlement. Before a client may be bound by a settlement, he or she must have knowledge of the terms of the settlement and agree to them. However, the court applied that decision prospectively.
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