ethics opinion authorizes attorneys' mediation ‘puffing’

AlternativesTO THE HIGH COST OF LITIGATION

INTERNATIONAL INSTITUTE FOR CONFLICT PREVENTION & RESOLUTION VOL. 24 NO. 7 JULY/AUGUST 2006

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TO THE HIGH COST OF LITIGATION

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Published online in Wiley InterScience (www.interscience.wiley.com).Alternatives DOI: 10.1002/alt

VOL. 24 NO. 7 JULY/AUGUST 2006124 ALTERNATIVES

ADR BRIEF • ADR BRIEF • ADR BRIEFETHICS OPINION AUTHORIZES ATTORNEYS’ MEDIATION ‘PUFFING’

The American Bar Association’s StandingCommittee on Ethics and Professional Re-sponsibility for the first time has taken onthe subject of mediation conduct.

The result: attorneys’ duties of candorin negotiations don’t change because of thealternative dispute resolution setting.

But the fact that nothing has changeddoesn’t really mean that nothing haschanged.

Simply by examining the area, thecommittee will stir up some mediationpractitioners. The opinion highlights a po-tential, probably inevitable, clash betweenthe ethical duties of legal practice andholding a law license versus participants’actions in a confidential mediation. It willraise questions about whether lawyer ethi-cal regulations overreach and damage me-diation’s effectiveness.

And it deliberately leaves open a specif-ically disclaimed, difficult area: Canlawyers acting as neutrals use customarytechniques that may flaunt lawyers’ ethicsrules in order to help settle cases? Or willlawyers be forced to act differently whenthey are working as neutrals?

For now, the traditional view thatlawyer-advocates need to be truthful whenmaking negotiation statements holds truein mediation, under the committee’s For-mal Opinion 06-439, Lawyer’s Obligationof Truthfulness When Representing aClient in Negotiation: Application toCaucused Mediation.

“One thing that we’re concerned withis, ‘Where do we come out on the abilityof a lawyer in the process of lawyering tomislead in statements?’” says ethics com-mittee chairman William B. Dunn, “andthe opinion, I think, takes a properly con-servative view.”

The April 11 opinion, which was re-leased publically in mid-May, focuses onprevious committee opinions that drew adistinction between a “statement of mate-rial fact,” and “negotiation ‘puffing.’” Thelatter isn’t forbidden, because, under For-mal Opinion 93-370—regarding judges’

participation in pretrial settlement negoti-ations—it doesn’t constitute a statement ofmaterial fact.

Specifically, the new ethics opinion ap-provingly quotes the committee’s 1993predecessor, which notes that

[w]hile . . . a certain amount of pos-turing or puffery in settlement nego-tiations may be an acceptable con-vention between opposing counsel, aparty’s actual bottom line or settle-ment authority given to a lawyer is amaterial fact.

In the earlier opinion, the ABA com-mittee said that Model Rule of Profession-al Conduct 4.1 would prohibit a deliberatemisrepresentation or a lie to a judge in pre-trial negotiations. Rule 4.1, titled “Truth-fulness in Statements to Others,” says thatin the course of representing a client, “alawyer shall not knowingly . . . make afalse statement of material fact or law to athird person. . . .” A comment to the rulesays that “[u]nder generally accepted con-ventions in negotiation, certain types ofstatements ordinarily are not taken asstatements of material fact. Estimates ofprice or value placed on the subject of atransaction and a party’s intentions as toan acceptable settlement of a claim are or-dinarily in this category. . . .”

In the new opinion, the committee al-so analyzed its other Rule 4.1 opinions toextend the rule to caucused mediation ne-gotiations. It discussed:

• Formal Opinion 94-387, which foundthat a lawyer has no obligation to theother party to announce that thestatute of limitations has run on theclient’s claim, “but cannot make anyaffirmative misrepresentations aboutthe facts.”

• Formal Opinion 94-397, which dealtwith a Kentucky lawyer sanctionedunder Rule 4.1 for settling a personalinjury case without disclosing that theclient had died.

Affirmative representations of materialfacts, according to the nine-member com-

mittee, stand in contrast to “statements re-garding negotiating goals or willingness tocompromise, whether in civil or criminalcontext. . . .”

The committee concluded that ModelRule 4.1 would include caucused media-tions as a negotiation context in which at-torney-representatives may not make a falsestatement of material fact to a third person.

“However,” the opinion notes in clos-ing, “statements regarding a party’s negoti-ating goals or its willingness to compro-mise, as well as statements that can fairlybe characterized as negotiation ‘puffing,’are ordinarily not considered ‘false state-ments of material fact’ within the meaningof the Model Rules.”

The part of the eight-page, 22-foot-note opinion that will be of most interestto mediation practitioners is the six para-graphs in which the committee disclaims aheightened standard of truthfulness forcaucusing. [Information on the committeeand the ABA ethics opinions can be foundat www.abanet.org/cpr/ethicopinions.html.] At the same time, the committee al-so discounts a lower mediation standard.

The section dissecting mediationcaucuses begins with the opinion’sbiggest disclaimer, relegated to a foot-note. The opinion limits the analysis tolawyers representing clients in mediationcaucuses. The footnote says that lawyer-mediators aren’t subject to Rule 4.1 sincethey aren’t representing anyone. It addsimmediately that attorneys-neutrals maybe subject to Rule 8.4, a broad rule ad-dressing the legal profession’s integritythat bans, in subsection (c), “conduct in-volving dishonesty, fraud, deceit or mis-representation.”

In the footnote, the committee notesthat 8.4(c) “should not impose a more de-manding standard of truthfulness for alawyer when acting as a mediator thanwhen representing a client.” It continues:

We note, in this regard, that many me-diators are nonlawyers who are not sub-ject to lawyer ethics rules. We need notaddress whether a lawyer should be heldto a different standard of behavior thanother persons serving as mediator.

VOL. 24 NO. 7 JULY/AUGUST 2006 ALTERNATIVES 125


ADR BRIEF • ADR BRIEF • ADR BRIEFHaving set a quasi-jurisdictional limit,

the committee then describes its view ofmediation processes, and the competingarguments for standards. It notes thatsome believe lawyers in a caucused media-tion “should be held to a more exactingstandard of truthfulness because a neutralis involved.” Likening the process to thetelephone game in which successive com-munications see a dropoff in accuracy, thecommittee notes that proponents see aneed for a heightened mediation standardto address the effect. The opinion statesthat proponents call for greater accuracy incounsel and party statements than in face-to-face negotiations.

Conversely, the committee also notesthat, because “consensual deception is in-trinsic to the process,” some people assertthat less attention needs to be paid to theaccuracy of mediation communications.

Both views are addressed at once bythe opinion: “Whatever the validity maybe of these competing viewpoints, the eth-ical principles governing lawyer truthful-ness do not permit a distinction to bedrawn between the caucused mediationcontext and other negotiation settings.”

The conclusion is that, almost regard-less of negotiation setting—the opinionbriefly notes that a higher standard appliesbefore a “tribunal,” including when ajudge is involved in mediating a settle-ment—“the ethical prohibitions againstlawyer misrepresentations apply equally inall environments.”

“This opinion suggests that a negotia-tion is a negotiation no matter what it iscalled,” notes Washington, D.C., ethicistCarrie Menkel-Meadow, who advocatescalibrating standards to “the different un-derlying purposes of different forms of dis-pute resolution.”

The opinion “resolves the debate of ahigher or lower standard in a caucused me-diation,” says committee member StevenC. Krane, a partner in New York’sProskauer Rose LLP.

Michael Moffitt, an associate professorat Eugene, Ore.’s, University of OregonSchool of Law, says that the opinion“seems to close the door on the question ofcustomizing ethical parameters,” which he

adds had been a developing issue for medi-ation practice.

Menkel-Meadow, who is GeorgetownUniversity School of Law’s A.B. Chettle Jr.Professor of Dispute Resolution and CivilProcedure, notes that she has urged thatthe ABA reconsider “false distinctions,”and instead require more candor generallyin both mediation and negotiation set-tings. But she says in an E-mail to Alterna-tives that “the ABA [e]thics committeeshave consistently rejected efforts to requirecandor in the settlement setting.” She addsthat the opinion perpetuates old distinc-tions, like referring to a tribunal for pur-poses of arbitration and adjudication, butnot consensual mediation, when dis-cussing attorneys’ candor obligations.

Still, “at least it recognizes that media-tion exists,” states Menkel-Meadow, whosework the opinion cites. Moreover, shenotes that the opinion also indicates that“in some circumstances, good mediationpractice and representation might requirea bit more of the participants, suggestingthat good mediation practice might re-quire more candor about facts, needs andinterests to achieve a good and ‘competent’resolution.” Menkel-Meadow chaired theCPR-Georgetown Commission on Ethics

and Standards in ADR, which produced amodel rule on lawyers acting as third-par-ty neutrals. See www.cpradr.org/pdfs/-CPRGeorge-ModelRule.pdf; CPR co-publishes this newsletter with Jossey-Bass,a unit of John Wiley & Sons, Inc.

The ethics committee cautions againstmaking caucus communications soundlike they are facts, converting them intofalse representations. It gives as an examplea situation where a lawyer says a clientdoesn’t wish to settle for more than $50,even though the client’s board of directorshas authorized a higher settlement. Theopinion warns that the lawyer cannot statethat the board had formally disapproved ofsettlements in excess of $50.

Krane says that the opinion’s emphasison lawyers’ language is an important prac-tice point. “It’s something every lawyershould focus on: the nuances of the way inwhich these matters are expressed can becritically important,” he says.

ABA Ethics Committee ChairmanDunn says the committee decided to tack-le duties in caucused mediation sessionson its own, because it was an issue that wasof interest to the committee. Limiting the

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“My hour is four hundred dollars. My finest hour is six hundred.”

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VOL. 24 NO. 7 JULY/AUGUST 2006126 ALTERNATIVES


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inquiry to caucus negotiation, and exclud-ing mediators’ actions, was a measuredmove, he explains. The committee, saysDunn, wanted to “take one step at a timewithout leaping across the chasm,”adding, “it wouldn’t surprise me if that thesubject might be addressed at some point.”

Michael Moffitt, who also is associatedirector of the Appropriate Dispute Reso-lution Center at the Oregon law school,says that the Rule 8.4 analysis—the gener-al standard on lawyer conduct—is inter-esting, in that the opinion indicates thatRule 4.1, the negotiation rule, seems totrump it. “The only possibility they leaveopen for [Rule 8.4] meaning anything atall,” says Moffitt, “is that it works on

lawyers in a nonrepresentative capacity.”That, Moffitt predicts, will be interpretedto mean lawyers acting as neutrals to somein the mediation community. By exten-sion, he says, it would result in lawyers be-ing subject to a different standard thanother mediators.

Moffitt explains that under the opin-ion, Rule 8.4 might prevent attorney-me-diators from acting with deceit. “If so,then attorneys out there are violating theirprofessional ethics codes,” he says. “We’renot talking out of school here. Some me-diators act with deception.”

William Dunn counters that “the factthat you’re involved in mediation isn’t a li-cense to mislead or misrepresent in any fash-ion more than you can in normal puffing-type statements in any negotiation,” which

he says are effectively limited by Rule 4.1.Ultimately, while the opinion “doesn’t

change much,” Michael Moffitt says, “ I’mnot sure it is as straightforward as it lookson its face.”

* * *

For more, see the cover story in thismonth’s issue, “Back to Deception:'Winning' Mediation Cases by Un-derstanding Body Language.” In apage 122 sidebar, authors JeffreyKrivis and Mariam Zadeh discuss thenew Formal Opinion 06-439.

QDOI 10.1002/alt.20138

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ethics opinion authorizes attorneys' mediation ‘puffing’

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