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Machiavelli and the Bar: Ethical Limitations on Lying in Negotiation

Published online by Cambridge University Press:  20 November 2018

James J. White
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Extract

Upon the enactment of the Model Rules of Professional Conduct, published ethical norms will for the first time give explicit consideration to the lawyer's behavior in the process of negotiation. Rules 4.1, 4.2, and 4.3 deal with negotiation. Although the Canons, the interpretations of the Canons, and the Disciplinary Rules and Ethical Considerations gave tangential consideration to negotiating, none of the Disciplinary Rules or Ethical Considerations explicitly considered negotiation apart from the process of litigation or counseling. The mere recognition of negotiation as a separate process worthy of unique rules is a large step. The purpose of this paper is to address the general question of truthfulness as that question is faced in Rule 4.2.

Type
Review Symposium: Model Rules of Professional Conduct
Information
American Bar Foundation Research Journal , Volume 5 , Issue 4 , Fall 1980 , pp. 926 - 938
Copyright
Copyright © American Bar Foundation, 1980 

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References

1 See, e.g., ABA Code of Professional Responsibility DR 7–102(A) and DR 1–102(A) (“A lawyer shall not: … (4) [elngage in conduct involving dishonesty, fraud, deceit, or misrepresentation.”). American Bar Association, Committee on Ethics and Professional Responsibility, Model Code of Professional Responsibility and Code of Judicial Conduct (Chicago: American Bar Association, 1979).Google Scholar

2 I note in passing one objectionable aspect of the proposed Rules that is unrelated to truthfulness. That is their gratuitous direction, in the Introduction and Comments, about how to behave in negotiation. For example, the Introduction has extensive discussion on what I would regard not as an ethical matter but as the substance of negotiating. It contains statements about the appropriate consideration of long-run as well as short-run interests, about whether one should behave in a “tough” or “hypertechnical” manner, and about other things that are matters of style, not of ethics. In my judgment, these are substantive negotiating questions that should be left to the judgment of the negotiator. They are no part of the responsibility of those making model rules for behavior in negotiation. One who is naturally a curmudgeon should not be thought less ethical than a person who is pleasant to deal with. One who is hypertechnical is not necessarily less ethical than a person who is willing to leave things to a handshake. Such discussion of style and substance of negotiation as opposed to the ethical behavior in negotiation seems gratuitous and inappropriate in the Model Rules and in the Comments to the Model Rules.Google Scholar

3 For a discussion of the circumstances that might justify a lie, even for one with an extraordinary commitment to truthfulness, see Sissela Bok, ch. 8, Lies in a Crisis in Lying: Moral Choice in Public and Private Life 107–22 (New York: Pantheon Books, 1978).Google Scholar

4 Karrass states flatly that “bluffing is part of negotiating.” Moreover, he instructs one to make offers that the opponent must refuse in order to make later offers look good by comparison. Chester Louis Karrass, Give and Take: The Complete Guide to Negotiating Strategies and Tactics 23, 107 (New York: Thomas Y. Crowell Co., 1974), and id., The Negotiating Game: How to Get What You Want 187 (New York: Thomas Y. Crowell Co., 1970).Google Scholar

5 It is obvious that threats are important parts of much negotiation–-the threat to go to trial, the threat to go to war, the threat to do a variety of other acts. In itself an implicit or explicit threat is often neither unethical nor illegal. But it is easy to think of threats that are either unethical or illegal, or both. For example, a threat of criminal prosecution in return for the settlement of civil litigation is normally thought to be both unethical and in violation of the criminal law. It would be useful to have someone outline the appropriate bounds of negotiating behavior here. For a consideration of some of the problems, see Joseph M. Livermore, Lawyer Extortion, 20 Ariz. L. Rev. 403 (1978).Google Scholar

6 See generally Harry T. Edwards & James J. White, Problems, Readings and Materials on the Lawyer as a Negotiator 416–19 (St. Paul, Minn.: West Publishing Co., 1977). There we consider a variety of problems that deal with the questions what favors are appropriate and what factors extraneous to the negotiation may properly be used. The favors one might offer to an opposing negotiator range all the way from a martini through a golf outing to some other form of entertainment that involves considerable expense. Of course, the ethical problem here is not unique to negotiation, but it is important for negotiators.Google Scholar

7 Lawyer writings on negotiation are full of instructions to time one's settlement offer to coincide with the opposing lawyer's need for money to pay his taxes or for the use of other factors extraneous to the negotiation itself. Obviously, many factors other than the objective merit of the opponent's case will be factors in the negotiation. An obvious example, unrelated to the merits of the case of the opposing party but one highly important in the negotiation, is the skill of the lawyer that the opposing client has hired. If he is the best trial lawyer in the city, the settlement value of his case will go up. If he is a lawyer known to be afraid of the courthouse, the settlement value will go down. Surely every lawyer would be expected to use that in negotiating a settlement, but if one takes a step or two beyond that simple calculation based on lawyer skill one finds himself on uncertain ground. See also Edwards & White, supra note 6, at 416–19.Google Scholar

8 See, e.g.,:Google Scholar

A party is permitted to suggest advantages to an opposing party that may be insubstantial from an objective point of view. The precise contours of the legal duties concerning disclosure, representation, puffery, overreaching, and other aspects of honesty in negotiations cannot be concisely stated. … It is a lawyer's responsibility to see that negotiations conducted by the lawyer conform to applicable legal standards, whatever they may be.

From Comment to Rule 4.2, American Bar Association, Commission on Evaluation of Professional Standards, Model Rules of Professional Conduct 89–90 (Discussion Draft, Chicago: American Bar Association, Jan. 30, 1980).Google Scholar

9 See, e.g., Canon 22 of the Canons of Professional Ethics, in American Bar Association, Opinions of the Committee on Professional Ethics with the Canons of Professional Ethics Annotated and Canons of Judicial Ethics Annotated (Chicago: American Bar Foundation. 1967). “The conduct of the lawyer before the Court and with other lawyers should be characterized by candor and fairness.” See also L. Ray Patterson & Elliott E. Cheatham, The Profession of Law 123 (Mineola, N.Y.: Foundation Press, 1971).Google Scholar

10 Rubin states his position as follows:Google Scholar

The lawyer must act honestly and in good faith. Another lawyer, or a layman, who deals with a lawyer should not need to exercise the same degree of caution that he would if trading for reputedly antique copper jugs in an oriental bazaar. It is inherent in the concept of an ethic, as a principle of good conduct, that it is morally binding on the conscience of the professional, and not merely a rule of the game adopted because other players observe (or fail to adopt) the same rule.

Rubin, Alvin B., A Causerie on Lawyers' Ethics in Negotiation, 35 La. L. Rev. 577, 589 (1975).Google Scholar

11 See, e.g., Bok, supra note 3, at 138.Google Scholar

12 Rubin writes:Google Scholar

The esteem of a lawyer for his own profession must be scant if he can rationalize the subclassifications this distinction implies. …Google Scholar

Lawyers from Wall Street firms say that they and their counterparts observe scrupulous standards, but they attribute less morality to the personal injury lawyer, and he, in turn, will frequently point out the inferiority of the standards of those who spend much time in criminal Litigation. The gradation of the ethics of the profession by the area of law becomes curiouser and curiouser the more it is examined, if one may purloin the words of another venturer in wonderland.Google Scholar

Rubin, supra note 10, at 583–84.Google Scholar

13 Consider our hypothetical concerning distortion of the value of a piece of property in a negotiation with a lawyer who is presumed to know his business or, alternatively, with an aged and ignorant owner. The students in my negotiation seminar routinely will find exaggeration and distortion to be inappropriate when one is dealing with the layman, but to be at least ethical if not wise behavior when dealing with an opposing lawyer. See generally Edwards & White, supra note 6, at 418–19.Google Scholar

14 For a consideration of some of the deviations in negotiating behavior arising out of cultural differences, consider the following excerpt from Hall & Whyte, Intercultural Communication: A Guide to Men of Action, 19 Human Organization 5–12 (1960):CrossRefGoogle Scholar

In Latin America, you should expect to spend hours waiting in outer offices. If you bring your American interpretation of what constitutes punctuality to a Latin-American office, you will fray your temper and elevate your blood pressure. For a forty-five-minute wait is not unusual-no more unusual than a five minute wait would be in the United States. No insult is intended. … [t]he time pie is differently cut, that's all. In America, we show good faith by ignoring the details. “Let's agree on the main points. The details will take care of themselves.” Not so the Greek. He signifies good will and good faith by what may seem to you an interminable discussion which includes every conceivable detail. Otherwise, you see, he cannot help but feel that the other man might be trying to pull the wool over his eyes. Our habit, in what we feel to be our relaxed and friendly way, of postponing details until later smacks the Greek between the eyes as a maneuver to flank him.

… The American desire to get down to business … works to our disadvantage in other parts of the world. … The head of a large, successful Japanese firm commented: “You Americans have a terrible weakness. We Japanese know about it and exploit it every chance we get. You are impatient. We have learned that if we just make you wait long enough, you'll agree to anything.”

… Not only is our idea of time schedules no pan of Arab life but the mere mention of a deadline to an Arab is like waving a red flag in front of a bull. In his culture, your emphasis on a deadline has the emotional effect on him that his backing you into a comer and threatening you with a club would have on you.

15 “The precise contours of the legal duties concerning disclosure, representation, puffery, overreaching, and other aspects of honesty in negotiations cannot be concisely stated.” Comment to Rule 4.2, Model Rules, supra note 8.Google Scholar

16 Id. Google Scholar

17 Section 2–313(2) of the Uniform Commercial Code reads in part as follows: “It is not necessary to the creation of an express warranty that the seller use formal words … but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation … does not create a warranty.” Put another way, puffing is permitted.Google Scholar

18 Compare Wat Henry Pontiac Co. v. Bradley, 202 Okla. 82, 210 P.2d 348 (1949) (statement about a used car to a woman who was to drive with her young child to visit her husband in the service held an express warranty) with Frederickson v. Hackney, 159 Minn. 234, 198 N.W. 806 (1924) (extravagant statement to wary farmer about the quality of a young bull held not a warranty).Google Scholar

19 “A typical strategy used by most unions at one time or another is to bury two or three serious fringe objectives in a veritable mountain of fringe demands-as many as twenty-five, thirty, and more.” Edward Peters, Strategy and Tactics in Labor Negotiations 165 (New London, Conn.: Foremen's Institute, 1955).Google Scholar

20 Mr. Curtis might have authorized a lie in this case and may well have justified it on the basis suggested:Google Scholar

It may be that it all depends on whether you are asked the question by someone who has a right to ask it. If he has no right to ask and if simple silence would, or even might, lead him to the truth, then, I believe your lawyer is in duty bound to lie. For the truth is not his, but yours. It belongs to you and he is bound to keep it for you, even more vigorously than if it were only his own.

Curtis, Charles P., The Ethics of Advocacy, 4 Stanford L. Rev. 3, 8 (1951). Bok waffles on these issues but would appear not to support a lie in such circumstances. Compare Bok, supra note 3, at 160 with her discussion at 167 and 171–73.Google Scholar

21 Consider a variation on the last case. Assume that the defense lawyer did not say explicitly that the two would plead only if the third were allowed to go free but simply said, “If you drop the charges against one, the other two will plead guilty.” In that case the lie is not explicit but surely the inference which the defense lawyer wishes the prosecutor to draw is the same. Should that change the outcome?Google Scholar

22 See, e.g., Rule 4.2(b)(2) and Rule 3.l(f), Model Rules, supra note 8.Google Scholar

23 Rule 1.7(b) provides: “A lawyer shall disclose information about a client … to the extent required by law or the Rules of Professional Conduct.” The Comments refer explicitly to Rule 4.2, and the quoted language is apparently intended to resolve the conflict in favor of disclosure when the lawyer Learns that his client has lied or otherwise misrepresented facts to the opposing side. See Comment on mandatory disclosure, Model Rules, supra note 6, at 26.Google Scholar

24 In this context Rule 4.2 asks the lawyer to do no more than Rule 26(e) of the Federal Rules of Civil Procedure would require. Although that rule requires supplementation of a party's deposition when he “obtains information” that leads him to “know” that the earlier response was incorrect, it undoubtedly also includes cases in which the party lied in the first instance and thus “knew” all along that his response was incorrect. Rule 26(e) reads as follows:Google Scholar

A party who has responded to a request for discovery with a response that was complete when made is under no duty to supplement his response to include information thereafter acquired, except as follows: (2) A party is under a duty seasonably to amend a prior response if he obtains information upon the basis of which (A) he knows that the response was incorrect when made, or (B) he knows that the response though correct when made is no longer true and the circumstances are such that a failure to amend the response is in substance a knowing concealment.

See also Charles Alan Wright & Arthur R. Miller, 8 Federal Practice and Procedure § 2049 (St. Paul, Minn.: West Publishing Co., 1970).Google Scholar

25 One might argue that a representation about a case does not produce “a manifest misapprehension of … law resulting from a previous representation.” A misapprehension, so the argument goes, results from the failure of the opposing lawyer to Shepardize the cases and to determine that the one relied on was subsequently overruled. I think that reads the rule too narrowly and that at least in cases in which there is a central case that one party has cited in the negotiations and has relied on, that party has an obligation upon its overruling on appeal to correct his opponent's understanding.Google Scholar

26 One rarely hears of a lawyer revealing a client's lie despite the current DR 7–102(B), which reads as follows:Google Scholar

A lawyer who receives information clearly establishing that: (1) His client has, in the course of the representation, perpetrated a fraud upon a person or tribunal shall promptly call upon his client to rectify the same, and if his client refuses or is unable to do so, he shall reveal the fraud to the affected person or tribunal, except when the information is protected as a privileged communication.

ABA Code of Professional Responsibility, supra note 1.Google Scholar

Presumably the failure to come forward in this case would be justified by a lawyer's argument either that the information did not “clearly” establish that fraud had been perpetrated or that the information was privileged and thus could not be revealed. The rule is not clear because of the confusing cross-reference to DR 4–101 which authorizes a lawyer to reveal confidences or secrets “when permitted under Disciplinary Rules or required by law or court order.”Google Scholar

Even if the lawyer concludes that he is not free to reveal his client's confidence because DR 4–101 limits DR 7–102(B), he should conclude that he could not use the lie affirmatively because to do so would violate DR 7–102(A)(2), (4), (9, and possibly other subsections.Google Scholar

Note in the hypothetical case I have assumed that the employee of an insured is nevertheless the “client” of the lawyer whose fee will in fact be paid by an insurance company.Google Scholar