Practical and Ethical Limits to Lying in Negotiations: Protecting Your Reputation as a Trustworthy Negotiator May Matter More than You Think


by Paula Young

June 2003

Paula Young Ask most lawyers if it is okay to lie in negotiations and I suspect most of them will concede that a little lying is part of the game. Most ethical codes put limits on lying in negotiations, but they tend to protect puffing and bluffing, especially if the misrepresentation involves estimates of price or value placed on the subject of the negotiation, the party’s intention to settle at a certain number, if at all, or, in certain circumstances, the existence of an undisclosed principle. See comment 2 to Model Rule 4.1. Some argue that the professional codes do no more than prevent fraud in negotiations.

Research Reveals Attributes of Effective Negotiators

Recent research suggests that protecting your reputation and your bargaining effectiveness is reason enough to remain honest and candid in negotiations. Andrea Schneider, in Shattering Negotiation Myths: Empirical Evidence on the Effectiveness of Negotiation Style, 7 Harv. Neg. L. Rev. 143, 185-189 (2002), looked at honesty in negotiations as an attribute of “effective?negotiators. She surveyed 2500 lawyers in Milwaukee and Chicago to learn what type of negotiating style was most effective as perceived by the surveyed lawyers. The survey responses identified two types of effective negotiating styles: “problem-solving?and “adversarial.? Surveyed lawyers identified the following attributes of “effective?problem-solving negotiators: ethical, experienced, personable, rational, trustworthy, realistic, confident, perceptive, communicative, fair-minded, dignified, self-controlled, accommodating, astute about the law, agreeable, sociable, poised, careful and wise. Sixty-four percent of lawyers identified as “effective?possessed these attributes. The remaining thirty-six percent of lawyer-negotiators identified as effective were “adversarial?negotiators who had the following attributes: egotistical, demanding, ambitious, experienced, confident, assertive, forceful, arrogant, headstrong, tough, firm, irritating, stubborn, argumentative, dominant, manipulative, masculine, quarrelsome, suspicious, and a bluffer. In other words, lawyers with the first set of attributes are perceived as being much more effective than lawyers with the second set of attributes.

Schneider’s study also revealed that the goals of the effective problem-solving negotiator included in order of the frequency mentioned: ethical conduct, maximizing settlement, fair settlement, meeting both sides?interests, avoiding litigation, meeting the client’s needs, good relations with opposing counsel and good use of legal skills. Id. at 188. The goals of the adversarial negotiator, again ranked by frequency of mention, were: maximizing settlement, meeting client’s needs, outdoing the opposing counsel, obtaining a profitable fee, and good use of legal skills. Id. The problem-solving negotiator seems to care as much about the negotiating relationship as the outcome of the negotiation. The adversarial negotiator seems to be much more ego-oriented.

Interestingly, attributes involving honesty affect how a negotiator is perceived. In the Schneider study, effective lawyers were ethical, trustworthy, and fair-minded. The adversarial lawyer, who was generally perceived as less effective in negotiations, showed attributes that arguable reflected negatively on his or her honesty: manipulative, suspicious and a bluffer. Schneider’s study suggests that negotiators have good reason to remain truthful in negotiations separate from any ethical limits imposed by codes of professionalism and conduct.

Guidelines Governing Honesty in Negotiations

Ruth Thurman, in Chipping Away at Lawyer Veracity: The ABA’s Turn Toward Situational Ethics in Negotiations, 1990 J. Disp. Resol. 103, 105-110 (1990), surveyed the literature on the limits of lying in negotiations. At one extreme, Gandhi, a lawyer, believed that ?t]ruthfulness is the master-key. Do not lie under any circumstances whatsoever, keep nothing secret.? Geoffrey Peters, a scholar, suggested that negotiators must avoid all deception. He argues that deception diminishes the likelihood of Pareto optimal results, because “deception tends to shift wealth from the risk-averse to the risk-tolerant.? See Peters, The Use of Lies in Negotiation, 48 Oh. St. L.J. 1, 5, 7 (1987). Former Judge Alvin Rubin of the Fifth Circuit asserted that lawyers must “act honestly and in good faith, and the lawyer may not accept a result that is unconscionably unfair to the other party.? Rubin, A Causerie on Lawyers?Ethics in Negotiation, 35 La. L. Rev. 577, 589 (1975). Carrier Menkel-Meadow, a well-known ADR scholar, suggests that negotiators practice the Golden Rule ?providing reciprocal candor in negotiations. Menkel-Meadow, Ethics and Professionalism in Non-Adversarial Lawyering, 21 Fla. St. U. L. Rev. 153, 166-68 (1999).

Thurman, the author of the article surveying opinions about the role of lying in negotiations, asserts a middle ground by adopting the standard found in the Preamble of the Model Rules of Professional Conduct; she expects negotiators to seek “advantageous results…consistent with honest dealings with others.? Scott Dahl, a lawyer, recognizes that the legal culture embodies certain “conventions of untruthfulness.? Dahl, Ethics on the Table: Stretching the Truth in Negotiations, 8 Rev. Litig. 173, 199 (1989). Professor Thomas Guernsey suggests that the profession can create aspirational guidelines for candor in negotiations. In the end, however, lawyers must be suspicious and adopt a “caveat lawyer?approach. Guernsey, Truthfulness in Negotiation, 17 U. Rich. L. Rev. 99, 125-26 (1982). Professor Geoffrey Hazard, Jr., the principle draftsman of the 1983 Model Rules of Professional Conduct, asserts that “legal regulation of trustworthiness [can not] go much further than to proscribe fraud.? Hazard, The Lawyer’s Obligation to be Trustworthy When Dealing with Opposing Parties, 33 S.C.L. Rev. 181, 196 (1981). Finally, at the other extreme, Professor James J. White, a noted critic of Getting to Yes, suggests that misleading the other side is the very “essence of negotiation.? Lying, from his perspective, is simply part of the negotiating game. White, Machiavelli and the Bar: Ethical Limitations on Lying in Negotiation, 4 Am. B. Found. Res. J. 926, 931-35 (1980). Similarly Charles Curtis asserts that “one of the functions of a lawyer is to lie for his client?A lawyer is required to be disingenuous. He is required to make statements as well as arguments which he does not believe in.? Curtis, The Ethics of Advocacy, 4 Stan, L. Rev. 3, 9 (1951).

Model Rules Provide Inconsistent Guidelines The Model Rules provide little and inconsistent guidance on the issue of lying in negotiations. The Preamble to the 2002 Model Rules of Professional Conduct states: “As a negotiator, a lawyer seeks a result advantageous to the client but consistent with the requirements of honest dealings with others.? Despite this more expansive statement of the role of honesty in negotiations, the specific rule on truthfulness is much narrower in its requirements of honesty. Model Rule 4.1, governing “Truthfulness in Statements to Others?provides: 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 1.6 [governing confidentiality of information].

Black’s Law Dictionary, in turn, defines the term “material?as: “Important; more or less necessary; having influence or effect; going to the merits.? Model Rule 8.4 (c) states that ?i]t is professional misconduct for a lawyer to…engage in conduct involving dishonesty, fraud, deceit or misrepresentation.? The comments to the Model Rules suggest that this higher standard of honesty does not apply when lawyers are representing clients. Compare comment 1 of Model Rule 4.1 with comment 2 to Model Rule 8.4 (c). But see Steven H. Resnicoff, Lying and Lawyering: Contrasting American and Jewish Law, 77 Notre Dame L. Rev. 937, 941 (2002)(arguing that Rule 8.4 “unconditionally forbids misrepresentations, even in a lawyer’s non-professional life?and suggesting that Rule 8.4 is intentionally broad to “cover conduct that might otherwise slip through the cracks?; In re Ver Dught, 825 S.W. 2d 847, 850-51 (Mo. 1992)(en banc)(false statement to tribunal need not be “material?to warrant ethical sanctions under Rule 8.4(c) and (d)). If the higher standard does not apply to negotiations on behalf of a client, then Rule 4.1 only seems to limit false statements of material facts or omissions giving rise to criminal or fraudulent conduct.

The comments to the new Model Rule 4.1 remind lawyers that they must be truthful when communicating with others on behalf of their clients. The comments also note, however, that a lawyer “generally has not affirmative duty to inform an opposing party of relevant facts.? See comment 1 to Model Rule 4.1.

Finally, Model Rule 1.3 requires an attorney to act with “reasonable diligence.? Comment 1 to that rule reminds lawyers, however, that they need not “press for every advantage that might be realized for the client.? The rule does not require attorneys to use “offensive tactics?or prevent them from treating people with “courtesy and respect.? See comment 1 to Model Rule 1.3.

Loss of Reputation as Trustworthy Negotiator can Affect Negotiations

In my ADR Survey class, I asked the students to engage in a role-play ?Colonial Confectioners -- whose facts tend to encourage the negotiators to make positive misstatements about material facts or to omit making statements about materials facts. When we de-briefed the exercise, those students who were dishonest asserted that disclosure of the true fact would have prevented the deal they hoped to negotiate. Amazingly, these lawyers-to-be quickly compromised their honesty, credibility and ethos for what was a purely hypothetical deal. Occasionally, a negotiating pair made disclosures of the materials facts and went on to find a creative way to allocate the risk based on the disclosures.

During the next class, I joined the same negotiating pairs in groups of four students to perform an exercise called “win all you can.? It tests two things: the ability of the group members to act cooperatively, which in turn occurs only if they can trust each other. Without over-complicating the description of the exercise, all members of the group “win?if they all show a Y on the index card given to each of them. If one member of the group “defects?and shows the X on the opposite side of his card, all members of the group, except the defector, “lose.? We do this exercise twice to allow students the opportunity to learn the game and choose a more cooperative bargaining style. This year, when the exercise followed the earlier Colonial Confectioners exercise, the students could not act cooperatively. Their past relationships with “opposing counsel?had completely undermined trust. Two years ago, when I conducted the same exercise with Washington University law students before they did the Colonial Confectioners exercise, most learned to cooperate during the repetition of the exercise.

This anecdotal evidence strongly supports Schneider’s survey results. If you want to be perceived as an effective negotiator by your peers and if you want a relationship with opposing counsel that will best allow you to capture the available value in the deal (i.e. maximize the outcome for your client), you better protect your reputation for honesty. Once it is compromised, you may find it exceedingly difficult to negotiate at all with other parties. Even if they are willing to enter negotiations with you, you will spend more time engaged in trust building activities. See Busch & Hantusch, I Don’t Trust You, but Why Don’t You Trust Me?, 55 OCT Disp. Resol. J. 56, 61-64 (2000). Your opposing counsel is less likely to accept factual and legal representations without time-consuming and expensive verification or resort to objective criteria. Craver, Negotiation Ethics: How to be deceptive Without Being Dishonest/How to be assertive Without Being Offensive, 38 S. Tex. L. Rev. 713, 720 (1997).

So Why Do Lawyers Lie?

Mark Perlmutter, a Texas lawyer and frequent lecturer on professionalism, wrote a book in 1998 called Why Lawyers (and the Rest of us) Lie & Engage in Other Repugnant Behavior. He suggests that a lawyer lies for the following reasons: Fear of losing a case or the best deal possible, fear of making a mistake and having it aired in public, fear of losing clients, fear of financial loss, and fear of being ostracized by his or her peers. He asks lawyers to face these fears with greater courage and understanding. He has also established an “integrity feedback loop?in his practice.

It begins with a letter to opposing counsel and his or her client:

Dear ___________ and Counsel:

When this case is over, I hope that all parties and lawyers will be able to say that, “win, lose or settle, we were well served by the justice system.? To that end, I pledge to you that I will do my best to adhere to the Texas Lawyers Creed, and particularly its essence, which is to promote ethical, responsible, and cost-effective representation with civility and integrity.

We will work with you to exchange sufficient information to fairly evaluate the case, to make good-faith efforts to settle, and, if we fail to settle, to afford you a fair opportunity to present the merits of your case. We intend to (1) treat this matter as a problem to be resolved rather than just as a case to be tried, which will save money and time for both sides; and (2) avoid playing “gotcha?and thereby reduce the chances of an arbitrary result based on a “technicality.?

If you would like to evidence your support of these principles, you and your client may sign this letter in the space provided. Our intent is not to enter into a binding agreement. This letter is rather an expression by each party of our serious and good-faith desire to cooperatively achieve solutions to problems and resolution of claims and disputes in a manner that will avoid engaging in unproductive conflict.

Sincerely,

Mark L. Perlmutter

& Client

AGREED:

Attorney & Client

The next step in the integrity feedback loop involves a self-reflective effort on the part of the attorney to compare his or her conduct during the relationship to the standards set out in the letter. Perlmutter’s conduct in one matter plagued him for years, until he had the courage to write a letter of apology to the opposing counsel.

The last step in the loop is a survey that invites opposing counsel and his or her client to comment on Perlmutter’s civility and ethics. It also asks if he unnecessarily increased the cost of representation. It also questions whether he could have been more efficient in handling the matter. Finally, it asks the opposing party to offer any ideas about how he could do a more effective and more professional job on the next matter he handled. Id. at 130-136.

I would guess that Perlmutter’s peers consider him an effective negotiator whom they trust. I would guess that Perlmutter spends less time in trust building activities and secures good settlements for his client, while keeping in mind the needs and interest of the opposing party.

As the empirical evidence gives us a better understanding of the negotiating tactics that attorneys perceive as effective, that knowledge should give us the courage to approach negotiations with more trust and candor. It should make our jobs as attorneys a lot easier and our behavior as professionals more consistent with our personal values and beliefs.



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Biography




Paula M. Young is an associate professor at the Appalachian School of Law located in Virginia teaching negotiation, certified civil mediation, arbitration, and dispute resolution system design.  She received in 2003 a LL.M. in Dispute Resolution from the top ranked program in the U.S.   She has over 1400 hours of alternative dispute resolution training.  Missouri and Virginia have recognized her as a mediator qualified to handle court-referred cases.



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