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  • December 22, 2021

    Ethical Awareness When Negotiating

    It is important to maintain an ethical awareness when in the midst of mediation or legal negotiations, says James Mathie. He discusses ethics surveys of lawyers that have some surprising results, and provides several strategies to maintain your ethical awareness.

    James J. Mathie

    Late December has to be the most ethical time of the year. It’s when at least half the attorneys think about EPR credits. This article won’t provide ethics credit, but the results of these studies will get you thinking.

    In 2009, Art Hinshaw and Jess K. Alberts examined how likely it was that attorneys would agree to withhold new information in a mediation. They sent out survey questions with this factual situation:

    In a pre-litigation negotiation, you represent a would-be plaintiff who thinks he has contracted the deadly DONS (Deficiency of the Nervous System) virus from his former girlfriend. The DONS virus is a hypothetical sexually transmitted disease for which there is no cure, and which will result in death sometime in the next five years. Upon receiving a letter from his former girlfriend telling him that she was DONS positive for the duration of their relationship and suggesting that he get tested for the disease.
    The client took two DONS home tests, both of which indicated he had the disease. In an angry letter he informed his former girlfriend of his test results and threatened to sue her as a result. In response, she suggested having their respective attorneys meet to work out a financial settlement because her liability is clear. The only apparent issue for the negotiation is the amount of damages to be paid.
    The settlement negotiations are about to begin. Your client reveals to you that the results of his two earlier DONS tests turned out to be false positives, and he does not have the disease after all. While this is a relief, he is still angry with his former girlfriend and wants to punish her for her reckless behavior which caused him the agony of believing the DONS virus was going to kill him. Thinking he was going to die from DONS, he quit his job as a teacher, sold most of his possessions, and sought professional counseling. As a result, he asks you to refrain from revealing the fact that he does not have the disease during the negotiation.1

    Hinshaw and Alberts found that while 62% of respondents would refuse this request, 19% would agree to it and 19% weren’t sure either way.

    They followed up with an additional question for the refusers and “not-sures”: Would you agree to only reveal the DONS status if directly asked? 64% indicated that they would refuse; 13% said they would agree; and 23% weren’t sure.

    The problem is that the only ethically correct answer to either request is to refuse. How were so many attorneys getting this wrong?

    Rule 4.1 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 in a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

    Hinshaw and Alberts suspected that there could be some confusion about the definition of “material fact,” a critical but undefined part of Rule 4.1.

    According to case law interpreting the rule, a fact is material to a negotiation if it reasonably may be viewed as important to a fair understanding of what is being given up and, in return gained by the [deal].2

    James J. Mathie James J. Mathie, Marquette 1986, is the owner of Mathie Mediation Services, LLC, where he mediates cases statewide from offices in downtown Milwaukee.

    Comment 2 to the rule indicates that "certain types of statements ordinarily are not taken as statements of material fact" including estimates of price or value, a party's intentions as to an acceptable settlement of a claim, and the existence of an undisclosed principal.

    There was definitely some confusion about what is a “material fact.” When Hinshaw and Alberts asked whether the client’s DONS status was material (it is), 84% said it was. But when they asked whether the girlfriend’s desire to settle was material (it’s not), 67% said that was material as well.

    Hinshaw and Alberts also correctly surmised that attorneys did not understand misrepresentation law – the foundation for Rule 4.1. Over a quarter (26%) of attorneys said that withholding the DONS status was not a misrepresentation and 13% didn’t know.

    The most significant reasons that attorneys gave for agreeing to withhold the information were client confidentiality, and the attorney-client privilege. But neither of these reasons trump Rule 4.1. Both Rule 1.6 and the attorney-client privilege doctrine have exceptions for fraud. And inducing a settlement by a misrepresentation, whether by commission or omission is just that.

    An earlier study by Stephen Pepe had similar results.3 But Pepe went a step further. He conducted mock mediations with his hypothetical. A staggering 98% of attorneys tried to settle the case without disclosing the fact that their client’s testimony was false. In only three of the 124 role plays did the attorney acknowledge that the deposition testimony was incorrect. Seventy percent of the time, counsel made affirmative or general assertions about the known false deposition testimony.

    It’s fair to say that applying Rule 4.1 on the fly in the course of a mediation can be dramatically difficult. The real danger is failing to be aware of how this applies in an actual mediation. What to do?

    Jennifer Robbennolt and Jean Sternlight, in “Drawing on Psychology to Negotiate Ethically,”4 suggest that becoming well-versed in the psychology of ethics is important. Realize, for example, that factors like whether losses loom large, you are tired or pressured, whether you believe your adversary is ethical, and the fact that you are acting on behalf of someone else may make it easier to slide into possible unethical conduct.

    There are ways to make ethics more salient:

    • Use reminders, even visual ones, to put a greater emphasis on ethical aspects of your decisions.

    • Anticipate ethical issues before the negotiation that may arise and plan how they will be handled appropriately, including diplomatically addressing ethical blunders by colleagues or principals.

    • Prepare for your mediations by examining the state of the evidence to determine whether anything has changed or needs supplementation.

    • Know your case before mediation as well as you would know it before trial. This makes it less likely that you will accidentally misrepresent facts or fall prey to a suggestion from a client to act unethically.

    • Pause as soon as you feel the slightest doubt how to respond to a question.

    • Take a break if needed to critically examine your rationalizations and explanations.

    • Be humble in recognizing the limits of ethical self-assessment, and consult others who may provide valuable insight.

    See you at mediation.

    This article was originally published on the State Bar of Wisconsin’s Dispute Resolution Blog. Visit the State Bar sections or the Dispute Resolution Section webpages to learn more about the benefits of section membership.


    1 Art Hinshaw and Jess K. Alberts, “Doing the Right Thing: An Empirical Study of Attorney Negotiation Ethics,” Harvard Negotiation Law Review 2011.

    2 Ausherman v. Bank of America Corp., 2002; Restatement (Second) Torts §538.

    3 Steven D. Pepe, Standards of Legal Negotiations: Survey Instrument 4 (1983)(unpublished).

    4 Jennifer Robbennolt and Jean Sternlight, “Drawing on Psychology to Negotiate Ethically,” The Negotiator’s Desk Reference, DRI Press, 2017.

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