What Makes a Settlement “Bad”? Harvey Weinstein, Jeremy Diamond, and the Limits of Private Resolutions

Slaw.ca Legal Civil Procedure Columm, October 18, 2022

Found online at: https://www.slaw.ca/2022/10/18/what-makes-a-settlement-bad-harvey-weinstein-jeremy-diamond-and-the-limits-of-private-resolutions/

“A bad settlement is better than a good trial.” Every year, I pass along this old lawyer saying to students in my Civil Procedure and Legal Ethics classes. The idea is that pushing on to a hearing is expensive, risky, and time-consuming. Even a far-from-ideal settlement might be better overall.

Thus, lawyers must “advise and encourage” clients to settle their disputes so long as there is a “reasonable basis” to do so, according to the Rules of Professional Conduct. Courts and tribunals strongly encourage settlement with mandatory mediation, cost incentives to settle, and judicial pretrials among other mechanisms.

Of course, I hasten to add in class, bad settlements are not always better than the alternative. What can make a settlement bad enough that lawyers, legislators, and judges should refuse to accept it?

Bad Settlements 101: Abandoning a Party’s Legal Rights

Most commonly, settlements are bad because they give up too much of what someone is entitled to. Lawyers must resolutely advocate for their clients, and not counsel them to roll over when they should stand and fight.

As for courts and tribunals, while trying to promote reasonable settlements they must also try to prevent improvident bad ones. Judges and mediators may forcefully encourage parties to settle, but — especially when working with self-represented litigants — they should also keep an eye on the substantive legal rights of the parties. The inevitable compromises of settlement should not be borne entirely by one of the parties.

Improvident settlements also result from procedural extortion, where someone threatens to start or extend litigation in order to extract legally unjustified concessions in a settlement. For example, strategic lawsuits against public participation (SLAPPs) can be used by corporations to silence community groups who are criticizing them. The prospect of having to defend a defamation suit — even one with no chance of success in court — can lead to a settlement agreement in which defendants forego their constitutionally-protected right to speak freely about matters of public interest. Many jurisdictions now have special rules designed to get “SLAPPs ” thrown out of court quickly, before they can lead to this sort of improvident settlement.

Bad Settlements 201: Harvey Weinstein’s Non-Disclosure Agreements

Harvey Weinstein exploited his position as one of Hollywood’s top producers to harass and assault dozens of women between the 1980s and 2015. Several stepped forward to sue him, but nothing became public or got near a courtroom until 2017. Cases and potential cases against Weinstein were settled, and the deals usually included non-disclosure agreements (NDAs). An NDA forbids one or both parties to discuss the agreement or the events to which it pertains.

Some complainants in harassment or assault cases who sign NDAs don’t have legal counsel, don’t understand what they are signing, or feel they don’t have any choice. However, others have good lawyers, are fully informed, and agree to the NDA term. Doing so may open the door to improved terms in other parts of the settlement agreement that the complainant cares about more, especially if she has no interest in going public. In other words, NDAs are not necessarily improvident from the point of view of the complainant.

Nevertheless, consensus is building that NDAs are also “bad settlements.” This is because the veil of secrecy that they throw over the wrongdoing helps the harasser, or others in positions of power, to victimize others. Harvey Weinstein could have been exposed and stopped much earlier, if complainants had been in a position to go public. There is an important group affected by such settlements — potential future victims — and they do not consent to the NDA terms because they are not in the room when the deals are negotiated.

For this reason several jurisdictions, including Prince Edward Island, have moved to forbid the use of NDAs in settlements of lawsuits involving harassment or discrimination. Even if a settlement is good (or good enough) for the parties who sign it, it can still be “bad” for innocent third parties who could otherwise be protected. In such cases, the law should arguably refuse to enforce the settlement term or even permit it to be signed.

Bad Settlements 301: Jeremy Diamond’s Joint Submission

Jeremy Diamond might be the most recognizable lawyer in Ontario. From highway billboards to bathroom stall display ads, Diamond’s face, his firm (Diamond & Diamond) and his slogan (“Nothing’s tougher than a diamond”) were ubiquitous during the 2010s. Diamond and Diamond is a personal injury firm, but for many years it was in effect a “referral shop” which handled very few cases in-house, sending most out to other firms.

The Law Society of Ontario charged Diamond with misleading advertising, but Diamond thought he had a settlement that would end the case against him. Disciplinary counsel from the Law Society agreed to a “joint submission,” which is similar to a plea bargain. The deal was that Diamond would admit that the ads crossed the line into professional misconduct, and in exchange the Law Society would recommend that he only be reprimanded — not suspended or disbarred.

However, the Law Society’s disciplinary counsel do not have the final word when it comes to penalties for lawyers. The Law Society Tribunal is an independent adjudicative body. Like a court hearing a criminal matter, the Tribunal can reject settlement terms endorsed by the Society and the lawyer facing the discipline. In Diamond’s case, a three-member panel did exactly that, apparently for the first time in the Tribunal’s history.

The Panel noted Diamond’s long-running misleading ads, the number of potential clients who saw them, and the lawyer’s previous run-ins with the LSO for similar behaviour. The test for rejecting joint submissions (or criminal plea bargains) is stringent — the proposed penalty must be “unhinged from the circumstances” of the case and likely to generate public opprobrium — but the panel found that the Law Society’s proposed “slap on the wrist” for Diamond was just such a case. The joint submission on penalty was rejected, and (in a subsequent hearing) Diamond’s request to withdraw his admission of wrongdoing was also denied. The next step will be for the Tribunal to impose a different, presumably stiffer penalty on Jeremy Diamond.

Joint submissions (or plea bargains) rejected by tribunals (or courts) constitute an interesting third category of “bad settlement.” The deal between Diamond and the Law Society was not bad because the legal rights of the parties were being abandoned, as in the garden-variety improvident settlement. Nor was it considered bad because (as with Weinstein’s non-disclosure agreements) there was no one in the settlement negotiation to represent potential future victims. This is precisely to mandate of the Law Society and its disciplinary counsel — to represent such public interests in lawyer discipline cases.

Rejecting a joint submission or plea bargain is more like granting a judicial review undertaken sua sponte (on the tribunal’s own initiative). The tribunal or court scrutinizes the decision to settle made by a public official (disciplinary counsel or Crown counsel), and decides whether it was deficient. Of course, unlike most judicial reviews, in such cases neither of the parties sought to have the settlement overturned. But in principle, all exercises of public power in the justice system should be subject to some form of oversight. The decision of a Law Society lawyer (or Crown attorney) to settle on certain terms will never be appealed by the other party. Thus, arguably the only way for such exercises of public power to be reviewed is if tribunal members (and judges) take it upon themselves to probe them. If there is a tendency to excessive lenience in our justice system with certain types of offenders, then the practice of reviewing joint submissions and plea bargains is a way to detect and correct this.

Legitimate questions have been raised about whether the Law Society Tribunal’s newfound willingness to reject joint submissions on penalty (while holding the lawyer to their admission of professional misconduct) is fair and sustainable. Clearly, if this happens in anything more than the rarest cases, the system of settlement negotiations that resolves most cases will founder. However, it does seem that prosecutors should be somehow accountable for the settlement deals that they make with people accused of serious crimes or professional misconduct. Reviewing joint submissions and plea bargains, and being prepared to reject them in appropriate cases, is one way to provide this accountability.

A “bad settlement” that gives too much away might be much worse than pushing on to adjudication. Across our justice system, we must continue to find ways to secure good settlements quickly and cheaply, while weeding out the bad ones.