Mediation: Ethical Limits in Negotiation

June 18, 2024

Negotiation skills are crucial for counsel in a mediation, but often involve a common yet unacknowledged strategy: deception. Although honesty is ideal in mediation sessions, expecting counsel to be completely candid when aiming to secure the best outcome for clients is unrealistic. When does this skill cross the line into fraudulent conduct, necessitating mediator intervention? What distinguishes exaggeration and puffery from fraud?

The ABA Model Rules of Professional Conduct addresses these issues. Model Rule 4.1 states that an attorney shall not knowingly make a “false statement of material fact or law” to another or fail to disclose a material fact when disclosure is necessary to avoid assisting in the completion of a crime or fraud. To read more about Rule 4.1, click here. While Rule 4.1 is broad, it only prohibits an attorney from lying about material facts or law.

Rule 4.1 is not intended to apply to “puffery.” Puffery refers to promotional statements or claims that express subjective rather than objective views, which no “reasonable person” would take literally. For example, a counsel stating, “We are ready to go to trial tomorrow if we cannot settle today,” is a subjective comment and would be permitted under Rule 4.1.

Examples of tactics attorneys might use in negotiations include:

• Concealing Willingness to Settle: By keeping the other party in the dark about the bottom line price that would be accepted, a negotiator maintains an element of doubt and uncertainty in the opponent’s mind.
• Making Inflated Demands: Counsel requests a $30K settlement when they actually want $20K to create room for negotiation and potentially secure a higher price.
• Failing to Volunteer Relevant Facts: While professional ethics rules require disclosing certain information, attorneys often withhold relevant facts if not expressly required to reveal them.

Examples of fraudulent conduct that may violate Rule 4.1 include:

• Deliberately Concealing Evidence: Intentionally withholding or hiding crucial documents or information that are material to the case to mislead the opposing party.
• Misrepresentation of Facts: Making false statements about key facts of the case, such as the value of assets, the existence of liabilities, or the strength of evidence.
• False Statements About Legal Principles: Misleading the other party about relevant legal standards, precedent, or case law to gain an unfair advantage.

To read how CASTAYBERT PLLC can assist you with mediation matters, click here.