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Settlement agreements may not bar an attorney from using in future lawsuits any information gleaned during litigation about the “business or operation” of the adversary, the New York State Bar Association’s Committee on Professional Ethics has concluded. The breadth of a lawyer’s promise not to use information gained in one litigation for any other client in a future lawsuit was found to be so sweeping as to violate the Code of Professional Responsibility, which bars any settlement provision that “restricts the right of a lawyer to practice law,” the committee wrote in an opinion issued July 27. Limiting an attorney’s future use of information concerning the “business or operation” of a company was one of two settlement conditions that the committee found problematic in its response to an inquiry from an attorney who had pressed a job discrimination claim against a corporate defendant. Neither the attorney nor the employer was identified in the opinion. The other condition in the settlement would have required the attorney not to disclose “any matters relating directly or indirectly to the settlement agreement or its terms.” Professor Roy M. Simon, who teaches ethics at Hofstra University School of Law in New York, said the opinion was important for its broad reading of the Code’s ban on settlement conditions restricting a lawyer’s right to practice. “The opinion bars restrictions that indirectly accomplish what the rule forbids corporate defendants from accomplishing directly,” he said. An attorney who agrees to an overbroad restriction on his right to practice may still run into problems because the Appellate Division, First Department, has ruled that an agreement which could violate rules barring restrictions on an attorney’s right to practice may nevertheless be enforceable under contract law. In Feldman v. Minars, 658 NYS2d 614 (1997), a First Department panel called the rule, DR 2-108(B), “an anachronism, illogical and bad policy.” The State Bar Ethics Committee noted, however, that when the four departments of the Appellate Division issued a joint order in 1999 amending the Code of Professional Responsibility — two years after the Feldman decision — the rule on restricting an attorney’s right to practice was left unchanged. Explaining what it considered the overbreadth of the proposed settlement terms, the committee said the conditions would cover information the lawyer would not otherwise be prohibited from using because it included a client confidence or secret. For instance, the committee noted, information about a company’s “business or operations” may be available from public sources. In addition, the committee observed, such information could be obtained in “future representations” — presumably through investigation or discovery — without relying on the secrets or confidences of a current client. “A settlement proposal that calls on the lawyer to agree to keep confidential, for the opposing party’s benefit, information that the lawyer ordinarily has no duty to protect, creates a conflict between the present client’s interests and those of the lawyer and future clients — precisely the problem at which DR 2-108(B) is aimed.” In contrast to the broad restrictions involved in the present inquiry, the committee pointed out that the terms of a settlement may be made confidential without violating the rule against restrictions on future practice. The reason for the distinction, the committee explained, is that the terms of a settlement are considered within the ambit of the Code provision barring use of a client’s “confidences” or “secrets” for the benefit of an attorney or a third party, DR 4-101.

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