Don’t Call My Bluff The Ethics of Negotiation James H. Gilliam BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA Telephone: Facsimile:

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.2d 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 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 $100K 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 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 and 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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