Revisiting and Rethinking Confidentiality Clauses in Ohio Settlement Agreements

By: Jonathan H. Krol, Esq.

When negotiating a resolution to a civil lawsuit, most defendants seek to make the terms of settlement confidential, and most plaintiffs are willing to consent to at least some level of confidentiality.  To that end, the defendant inevitably includes a rather standard clause in the formal settlement agreement.  The scope of the clause may vary, but the goal is the same: keep the terms (and perhaps even the very existence) of a settlement from disclosure to the public.  This requires attorneys to abide by the confidentiality provision.  After all, historically, a primary function of these clauses was to prevent plaintiff’s counsel from using the settlement to advertise his/her services to the detriment, and perhaps the embarrassment, of the settling defendant.

In June 2018, the Ohio Board of Professional Conduct issued an advisory opinion (Adv. Op. 2018-3) that calls into question the propriety of confidentiality clauses under certain circumstances.  Specifically, the Board decided that a settlement agreement cannot prohibit a lawyer’s disclosure of information otherwise contained in a court record.  Doing so is an impermissible restriction on the lawyer’s right to practice law under Ohio Prof. Cond. R. 5.6(b) (“A lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a claim or controversy.”). 

In so holding, the Board found that it is improper to restrict an attorney from disclosing information about a case that is contained (or will be) in the court record.  Doing so impermissibly interferes with the attorney’s rights to advertise and market services in a manner consistent with the Rules of Professional Conduct. (See Ohio Prof. Cond. R. 7.1-7.3.)  The Board likewise found that the limitation on confidentiality clauses serves to protect the “public’s unfettered ability to choose lawyers who have the requisite background and experience to assist in pursuing their claims.” 

As further bases for its holding, the Board stated that limiting confidentiality clauses in this way will prevent settlement agreements from being used to “buy off” a plaintiff’s counsel through an offer of a higher settlement amount in exchange for the lawyer foregoing future litigation against that defendant.  And, according to the Board, the rule prevents conflicts between current clients and potential future clients.  For these reasons, the Board decided that Ohio Prof. Cond. R. 5.6(b) prohibits a lawyer from offering or accepting a settlement agreement that precludes disclosure of information contained in a court record. 

Of particular importance, the Board did not find that all confidentiality clauses are impermissible in all cases.  A confidentiality clause would seem to pass muster as long as the clause does not seek to prevent an attorney from disseminating information in the court record.  This means, however, that settlements subject to court approval (in settlements involving, for example, minors or wrongful death claims), a confidentiality clause may not be used to prevent an attorney from publicizing the amount of the settlement. 

The Board stated that if a client insists on settling the case with an improper confidentiality clause, the attorney must withdraw from representation to avoid an ethics violation.  This mandate applies equally to defense counsel and plaintiffs’ attorneys. 

Recognizing the ubiquity of these clauses in practice, the Board recommends that this opinion be applied prospectively. The Ohio Supreme Court has indicated that it will be reviewing Adv. Op. 2018-3 and may propose amendments to the Rules of Professional Conduct in response to the opinion.

Whatever the particular facts or circumstances of the underlying case may be, the Board’s decision behooves practitioners to reexamine the confidentiality provision used in their settlement agreements, and to explain to their clients the ethical limitations of the scope of such clauses.    

If you have any questions regarding Adv. Op. 2018-3, or if you wish a copy of this opinion or otherwise have a question regarding confidentiality provisions or the Rules of Professional Conduct, please feel free to call any one of our Legal Professional Liability Practice Group Members.