Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.


It’s Not Just “Liar’s Poker?”

We just witnessed the conclusion of two protracted negotiations. Greece reached a deal with its European creditors. Iran and the United States and other major powers completed a nuclear accord. News accounts tell us that both negotiations were difficult, acrimonious at times to the point of name-calling.

What could those negotiators have learned from our ethics guidance on negotiation? What can we learn from those negotiations?

In February 2014, the State Bar Standing Committee on Professional Responsibility and Conduct (COPRAC) issued the latest version of interim opinion 12-0007: when can a lawyer ethically bluff, puff, even lie in negotiation to advance a client’s goals?

States adopting some form of the ABA Model Rules—i.e., the other 49 and the District of Columbia—have Model Rule 4.1 for guidance: no false statement of material fact; no failure to disclose a material fact necessary to avoid assisting a client’s criminal or fraudulent act, unless the confidentiality rule prohibits disclosure. But California has no Rule 4.1 counterpart. So COPRAC’s guidance helps; it even provides examples of permissible and unethical conduct.

Bottom line: no false statement of material fact, no matter how lofty the goal. I can’t claim I have a piece of evidence, to mislead the other side, when I know I don’t. Easy case. I can’t say my client’s earning $150,000 a year, when she’s been unemployed, now has a part-time job and earns $27,000. Another easy case.

But what about “bottom lines”—that aren’t? “My client won’t settle for less than $640,000,” when I know my client will take half that amount to be done with the case? The mediator will use my information to convey my $750,000 demand to the other side. May I? Yes. Permissible puffery, according to COPRAC.

Looking to ABA Formal Opinion No. 06-439, COPRAC concludes that statements about negotiation goals or willingness to compromise, as well as mere “puffery,” are not false statements of material fact. The underlying rationale is that each side expects a certain amount of posturing. Can I use the “B” word, bankruptcy? Yes, even if unlikely, so long as the lawyer honestly believes it’s an available option.  

What happens, however, when a client tells the lawyer not to disclose a material fact? The client testifies at his deposition that his full-time job pays $175,000 a year with benefits. Then he’s fired. He tells his lawyer not to disclose his changed employment situation during mediation. “It was true when I testified. Let ‘em think what they want.” His salary is critical to his damages claim. What’s a California lawyer do?

Model Rule 4.1 is no help here. We have the strictest confidentiality provision of the 51 jurisdictions: “ to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” (Bus. & Prof. Code section 6068(e)(1).) ABA Model Rule 1.6 is much less restrictive and likely would permit disclosure of the true facts, notwithstanding the client’s instruction. (Rule 1.6(b)(2).)

Suppression of this fact is the equivalent of a material misrepresentation—ethically improper. But it’s also a client confidence or secret that a California lawyer is bound to protect. If the lawyer can’t get the client to change his mind, the lawyer likely has to withdraw. (See Rule of Professional Conduct 3-700(B)(2) (mandatory withdrawal); see also State Bar Formal Opinion 2013-189 for a full discussion of a lawyer’s ethical obligations when a client tells the lawyer to conceal material facts.)

What about those Greek and Iranian negotiations? Material misstatements are not only unethical; they’re self-defeating; they destroy credibility. Puffery may be ethical, but, after a point, trust evaporates. Lack of credibility and trust almost cratered the Greek talks. It took 22 months of arduous conversation to build sufficient trust to produce the Iran nuclear accord. Clients should understand that our negotiation ethics guidelines advance their goals better than clever tactics. At their core, they are designed to insure credibility and promote trust—key ingredients to successful negotiation.

-- Edward McIntyre

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**