I’m furiously working on an article and thought I’d seek some input on my line of reasoning about one’s “bottom-line” in negotiations. The ABA’s standing ethics committee has two opinions stating that the “bottom line” is a material fact under Rule 4.1, and as a result, you cannot lie about what your bottom line (and presumably “top dollar”) is. However, neither explain why. My theory on why is below. Any thoughts?
Even novice negotiators know that a negotiator’s “bottom line” (or “top dollar) is the maximum price a buyer will pay or a seller will accept, which is an estimation of the price or value of the subject of a transaction.[1] This number tends to be dynamic, as estimations in price or value shift based on newly discovered or disclosed information during a negotiation session. This makes one’s “bottom-line” or reservation price a matter of opinion and difficult to verify, which should result in its exemption from being a material fact under the Rule. When a lawyer (agent) is negotiating on behalf of a client (principal), however, the question of one’s “bottom line” is different than asking the same question of the principal. It is better understood to be a question of authority – how high (or low) has the client authorized you to bid on the subject of the transaction? This is a question of fact, not a question of opinion or price, and is verifiable.
The question then becomes, is it reasonable to rely on an attorney’s statement of negotiation authority from the client? Naturally when such information is requested, lawyers are not required to disclose that information and can refuse to do so for a number of important and legitimate reasons.[2] However, simply because a third party is not entitled to this information does not mean that it is acceptable to lie in response to the question.[3] Negotiations are built on trust – without it all negotiations would fail. And the purpose, or one of many purposes, for any answer appearing to disclose the degree of the attorney’s authority is to appear trustworthy so that the answer is relied upon in order to influence the course of the negotiation. Since the Rules clearly indicate that it constitutes professional misconduct for lawyers to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation,[4] third parties should be able to trust that such statements indeed are true, absent extraordinary circumstances.[5]
[1] Russell Korobkin, A Positive Theory of Legal Negotiation, 88 Geo. L.J. 1789, 1793 (2000) (stating that “[k]nowledge of the parameters of the bargaining zone, which is created by the two parties’ reservation points, is the most critical information for the negotiator to possess.”).
[2] See e.g. Douglas R. Richmond, Lawyers’ Professional Responsibilities and Liabilities in Negotiations, 22 Geo. J. Leg. Ethics 249, 277 (2009) (noting correctly that lawyers have no duty to inform an opposing party about one’s “top dollar” or “bottom-line”).
[3] Bok, supra note __ at 150 (suggesting that responding with silence or turning down the request is appropriate); Hazard & Hodes, supra note __ at ___.
[4] See Rule 8.4(c) (prohibiting conduct involving dishonesty, fraud, deceit, or misrepresentation). [agency restatement – authority and apparent authority]
[5] This is the view of noted legal ethicists Geofferey Hazard, author of the Model Rules, and David Luban. See Lempert, supra note __ at 16. Noted negotiation scholar Charles Craver disagrees on the basis that “the other side has no right to this information.” Id. This reasoning has been criticized. See supra note __ and accompanying text.
Can you give me the citation to the ABA Opinions, or a way I can read the opinions? Thanks.
I agree with the reasoning: “bottom line” as described really tends to connote one’s stated settlement authority. But I wonder if this is a bit of a straw man, because how many times (in real life, not in textbooks) is a true, ultimate “bottom line” set in stone? In mediation, I always take statements about “the bottom line” to mean “…at this stage in the mediation.” Nonetheless, if this really turns out to be the ABA’s stance, lawyers/negotiators will simply compensate by eliciting offers from clients on a stage-by-stage basis, specifically instructing them not to reveal their “ultimate bottom line,” to the extent there is one. Inefficient? A little — but then again, billables are down so much that you may not hear a complaint. 🙂
Very interesting premise! I look forward to reading the finished piece.
The ABA’s analysis is weak and when push comes to shove may not hold up. Are they any cases of an attorney ever being subjected to professional discipline for lying about a bottom line?
“Authority” and “bottom line” are in any case different concepts. “Authority” is what I am permitted to agree to now before talking to a client, and is almost by definition not necessarily a bottom line. “Bottom line” is what I am willing to agree to now, typically with an emphasis on the now part. Both are items beyond confirmation by third parties as a matter of law (much like the black box of jury deliberations), and as you note, dynamic.
Mediation ethics, settlement agreement law, and rules like the parole evidence rule, in addition to the attorney-client privilege, are all designed to discourage this kind of inquiry, and black letter substantive fraud law specifically singles out bottom line lies as not subject to fraud liability.
I also disagree with Samis on the nature of prices. There is the minimum I am willing to sell for and the maximum you are willing to pay. Usually, there is a range of prices in between, none of which are economically problematic. Negotiation is about finding a spot in this range if one exists. Who gets what within this range is the joy of negotiation, and is fundamentally an amoral exercise that is a product of negotiating skill and one’s ability to manipulate the circumstances of the negotiation.
Another consideration might be economic benefit: who ever benefits from being deceived into paying too much or accepting too little? No one. Those who pay too much are relatively poorer after the transaction and might not be able to maximize their utilization of what they paid for. Those who sell for too little are also relatively impoverished and cannot achieve their maximum benefit from what they sold. That these losses occurred because of deceit does not minimize their effect: buyers are hesitant to buy if they think they will pay too much, sellers are hesitant to sell if they think they will get too little because if that does happen, they will not realize the full economic benefit of their transactions.
So from a merely economic basis, deceits should be discouraged so that economic activity is encouraged.
I recognize that on the other hand, those who, through deceit pay less or sell for more make equivalent economic gains, but these transfers of wealth are unrelated to productivity but merely to bargaining ability. Bargaining supports economic activity, not vice versa. Deceit in bargaining discourages beneficial economic activity. Penalizing deceitful bargaining is unlikely to discourage honest bargaining and is even less likely to discourage economic activity.
Well, I’ve conducted mediations with a lot of violators!
Art: I am no expert on negotiation ethics but I am frankly shocked if it is indeed true that the rules require lawyers not to lie — or even mislead — about reservation prices. At the outset of a mediation, for example, attorneys routinely declare certain offers/proposals to be “non starters.” I don’t think anyone can reasonably or justifiably rely on such statements as being empirically true (or even, under your dynamic conception of bottom lines, true at that particular moment).
I’d be curious to see the opinions to which you refer. Do they say that reservation prices are “material facts,” or do they go on to conclude that one cannot misrepresent about such prices? If the former, my thought would be that it is simply not reasonable to rely on such statements.
I also wonder how much you want (or need) to say that “negotiations are built on trust. ” Trust in negotiation is surely important, especially if your goal is to create value. But so is bluffing, jockeying for advantage, and threatening to walk out. Without these things — which, by the way, many of us teach our students — there would seem to be no “there” in negotiation (or at least not enough to keep us in business!). To me, it’s the “tension” between trust and mistrust — not unqualified trust — that seems to be the common thread in negotiations (if, indeed, there is such a thing).
So I think I agree with everything you say up to footnote 3. But I’m having trouble with the part afterwards. Does that help?