Yeah, the title is a bit self-serving, but check out the case before you cast stones.
The parties in Betz v. Diamond Jim’s Auto Sales (October 16, 2012) were anxious to reach a settlement. So anxious, in fact, that they negotiated an agreement without including their lawyers until the actual settlement document was signed. The problem, at least from the plaintiff’s lawyer’s point of view, was that Betz had agreed that his lawyer, in exchange for taking the case, would either recover a portion of the settlement value, or attorney’s fees recovered under one of the consumer-protectoin statutes cited in the complaint. Betz’s settlement didn’t account for either.
Betz’s lawyers sought a variety of relief, including setting aside the contract and adding to the settlement value the attorney’s fees, but the trial court found the settlement agreement was enforceable. The court of appeals disagreed, citing the reasons for fee-shifting statutes and the policy reasons for making sure that there’s an incentive for lawyers to take small-dollar consumer-type cases:
The law in Wisconsin and elsewhere is clear: Although, generally, nothing forbids a party from settling with a represented party without the presence or consent of the represented party’s lawyer, such settlements, like all contracts, are scrutinized in light of public-policy interests. The public-policy considerations here are obvious; as we have seen, the legislature created fee-shifting statutes to help persons who might not otherwise get legal redress. To permit one side to go behind the backs of the other side’s lawyers in order to get a settlement that removed the fee-shifting incentives that prompted the lawyers to take the case, would nullify the legislative fee-shifting scheme.
It is true, of course, that the client retains the right to settle or not settle, on terms that he or she deems appropriate. SCR 20:1.2 (“A lawyer shall abide by a client’s decision whether to settle a matter.”). But to sustain the settlement here, where, as we have seen, Betz assigned to Megna Betz’s rights to collect attorneys fees, violates the public-policy considerations inherent in the legislature’s creation of the fee-shifting statutes.
Sometimes, settlements are better worked out without lawyers present — I’ve had clients settle their own disputes, in fact. But based on this case, Wisconsin attorneys should take care in talking with their clients about the possibility of a negotiated settlement without the lawyers present. Caution should especially be taken in cases that involve fee-shifting statutes. This case indicates that the appellate courts will rigorously scrutinize non-lawyer settlement agreements that don’t account for the statutory attorney’s fees.