Dont Call My Bluff The Ethics of Negotiation

Don’t Call My Bluff The Ethics of Negotiation James H. Gilliam Brown. Winick 666 Grand Avenue, Suite 2000 Des Moines, IA 50309 -2510 Telephone: 515 -242 -2446 Facsimile: 515 -323 -8546 E-mail: gilliam@brownwinick. com

Disputes (Generally) Settle • Most prior to commencement of litigation • Many post-litigation settlements occur through private/court-sponsored mediation

Dispute Settlement • Requires a frank assessment of parties’ risk • Risk assessment often requires communication from opposing parties and counsel

Typical Negotiation Topics • • • Damage Valuations Existence/Strength of Evidence Existence/Credibility of Witnesses Existence/Strength of Legal Position Settlement Position Authority

Iowa Rules of Professional Conduct Rule 32: 1: 6 Confidentiality of Information

“Because of confidentiality prohibitions, a lawyer may generally refuse to provide information without breaching any duty. However, once the lawyer undertakes to provide information, that lawyer has a duty to provide the information truthfully. ” Hansen v. Anderson, Wilmarth, 630 N. W. 2 d 818, 825 (Iowa 2001)

IRPC 32: 4: 1 Truthfulness in Statements to Others “In the course of representing a client a lawyer shall not knowingly: (a) Make a false statement of material fact or law to a third person; or (b) Fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 32: 1: 6. ”

IRPC 32: 4: 1 Does Not Limit • False statements made unknowingly • False statements about immaterial matters • False statements not of law or fact

IRPC 32: 4: 1 Comment on “Statements of Fact” Certain expressions are not “statements of fact” for purposes of IRPC 32: 4: 1 - “estimates of price or value placed on the subject of a transaction” and - “party’s intentions as to an acceptable settlement of a claim” IRPC 32: 4: 1 cmt[2]

“Material” Not Defined in Rule/Comment Restatement (Second) of Torts • Reasonable person would “attach importance to the existence or nonexistence in determining a choice of action in the transaction in question; or • Maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it. ”

IRPC 32: 4: 1 and Typical Negotiation Tactics • A party in a negotiation often understates willingness to make concessions to compromise a dispute • A party in a negotiation also might exaggerate or understate the strengths and weaknesses of a factual or legal position

ABA Formal Ethics Opinion 06 -439 • Such understatements or exaggerations, often called “posturing” or “puffing”, are statements on which the other party to the negotiation ordinarily would not be expected justifiably to rely • Puffery is distinguishable from false statements of material fact

Permitted Puffing “If we do not agree on price, we will find an alternate supplier”

Permitted Puffing (cont. ) “My client insists on receiving $100 K to settle these claims”

Prohibited Factual Misstatements “This benefit will cost the company $100/employee” – when lawyer knows cost is $20/employee

Prohibited Factual Misstatements (cont. ) “We have three co-workers of the plaintiff who witnessed her theft of company property” – when no witnesses exist or such existence is unknown

Prohibited Factual Misstatements (cont. ) “My client’s bottom line/my settlement authority is $X”

ABA Formal Ethics Opinion 93 -370 A lawyer may downplay a client’s willingness to compromise, or present a client’s bargaining position without disclosing the client’s “bottom line” position, in an effort to reach a more favorable resolution

When the Judge is the Mediator IRPC 31: 3: 3 Candor toward the Tribunal

“Tribunal” Defined • A court, an arbitrator in a binding arbitration proceeding or a legislative body, administrative agency or other body acting in an adjudicative capacity. • Legislative body in adjudicative capacity as neutral officer rendering judgment. IRPC 1. 0(m) definition

IRPC 32: 3: 3 “Tribunal” Defined More Broadly Includes when the “lawyer is representing a client in an ancillary proceeding conducted pursuant to the tribunal’s adjudicative authority, such as a deposition. ” IRPC 3. 3 cmt[1]

IRPC 32: 3: 3 Governs Court. Supervised Negotiations Rule 3. 3 governs before Tribunals, including court-supervised settlement negotiations. See ABA Opinions 06 -439 and 93 -370 and IRPC 2. 4 cmt [5]

Obligation to Tribunal under IRPC 32: 3: 3 More Extensive than Outside Tribunals Under 32: 4: 1

Duty to Remedy • Must correct a false statement IRPC 32: 3: 3(a)(1) • Disclosure of false evidence required IRPC 32: 3: 3(a)(3) • Remedial measures required IRPC 32: 3: 3(b)

Duty of Candor Overrides Confidentiality IRPC 32: 3: 3 (c)

Practice Tips “In my opinion …”

Practice Tips (cont. ) “We predict …”

Practice Tips (cont. ) “We are confident …”

Practice Tips (cont. ) “Your investigation will reveal …”

Practice Tips (cont. ) Remember: “No” is a complete sentence

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