Negotiation Ethics for Real World Interactions (Part II)

In my earlier post about Charles Craver’s most recent article, I find myself in agreement with most of what he says including his description of WIN-win negotiators. But there must be something that I disagree with him about, and that is true.  Craver claims that comment 2 to Rule 4.1 “unequivocally acknowledges” that settlement intentions are not considered material facts under Rule 4.1 (see 25 Ohio St. J. Disp. Res. 299, 306-07 and footnote 82 on p.323).  I disagree.

Rule 4.1 says that lawyers may not overly lie about material facts in a negotiation, and that lawyers must not lie by omission about material facts to the negotiation when doing so is the equivalent of making a false statement.  Comment 2 states:

Under generally accepted conventions of negotiation, certain statements ordinarily are not taken as statements of material fact.  Estimates of price or value placed on the subject of a transaction and a party’s intentions to a settlement of a claim are in this category. . . . (emphasis added) 

Note, facts in this category ordinarily are not material facts to a negotiation, which means there are instances that fall outside of the ordinary rule.  In two opinions (93-370 and 06-439) the ABA Ethics Committee has unequivocally concluded that both a lawyer’s settlement authority, including a party’s actual bottom-line, are material to a negotiation.  In fact, in opinion 06-439, the Committee has warned that:

[C]are must be taken by the lawyer to ensure that communications regarding the client’s position, which otherwise would not be considered statements “of fact,” are not conveyed in language that converts them, even inadvertently, into false factual representations.

 The committee also gives the following example to make its point.

For example, even though a client’s Board of Directors has authorized a higher settlement figure, a lawyer may state in a negotiation that the client does not wish to settle for more than $50. However, it would not be permissible for the lawyer to state that the Board of Directors had formally disapproved any settlement in excess of $50, when authority had in fact been granted to settle for a larger sum.

Thus under Rule 4.1, lawyers should be able to reasonably rely on declarations about settlement authority and a party’s negotiation bottom line.   This point is worth clarifying as it seems to be contrary to many lawyers’ and law professors’ understanding.

2 thoughts on “Negotiation Ethics for Real World Interactions (Part II)”

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.