Settlement Negotiation Ethics for Attorney-advocates Under California's New (2018) Rules of Professional Conduct: Part Two

• Publication year: 2019
• Author: Phillip Neiman, Esq., JAMS

Settlement Negotiation Ethics for Attorney-Advocates under California's New (2018) Rules of Professional Conduct: Part Two

Phillip Neiman, Esq., JAMS

Phillip Neiman is a mediator and arbitrator with JAMS. He devotes much of his practice to commercial cases, employment, real property, trust/estate, consumer, and insurance matters, and disputes involving privacy torts and significant personal injuries. Mr. Neiman was previously CEO and General Counsel of a FINRA-registered broker-dealer.

Introduction

Formally, California defines ethical conduct for lawyers in the context of rule-compliance. The supreme court made this clear in 2014 in its letter to the State Bar establishing a second new commission to rewrite the Rules of Professional Conduct.¹ The court instructed the Bar to "avoid incorporating the purely aspirational or ethical considerations that are present in the [ABA] Model Rules and Comments."

The new Rules of Professional Conduct, which went into effect on November 1, 2018,² reflect this mandate in the opening sentence: "The following rules are intended to regulate professional conduct of lawyers through discipline."³ The word "ethical" appears just four times in the new rules.⁴

Part One of this article discussed settlement negotiation ethics in the context of rules. California attorneys practice under a regulatory framework that includes the California Rules of Professional Conduct ("CRPC"), the State Bar Act (Bus. & Prof. Code sections 6000 et seq.), case law, rules of court, and a range of other authorities. This Part Two addresses whether the CRPC can be expected to actually increase ethical conduct on the part of attorneys engaged in settlement negotiations.

From Rules to Ethics

The new CRPC are voluminous, ushering in a host of new rules for attorneys in the state. Compliance activities will now consume more attorney time, which translates into fewer hours available for revenue-generating activities or leisure. Either way, one byproduct of the new CRPC will be a reallocation of attorney resources, away from pursuits that enhanced quality of life (making money, taking vacations, etc.). The profession was already overburdened. Adding to lawyers' regulatory burden will not promote good conduct.

In this author's opinion, California's rules-based system does little to encourage ethical lawyering in the broader sense. When acceptable conduct is defined as complying with regulations, the natural tendency is to comply with those regulations—and stop there. The other elements of ethical behavior fall by the wayside. The supreme court's goals of consumer protection and restoring faith in the legal profession are worthy. Arguably, its decision to accomplish that by taking the "ethics" out of the ethical rules comes at a price.

A Working Definition of Ethics

Looking for a universal definition of ethics, I turned to Google. The search results⁵ forced me to homebrew a working definition for this article. In doing so, it seemed important to acknowledge a role for each lawyer's personal values and standards, since the attorney-client relationship is at the heart of the system. I also wanted to understand why the regulators appear to have concluded, like the dissatisfied consumers of legal services in New York canvassed by Caprice A. Alves for purposes of a doctoral thesis addressing the consumers' perceptions of their experiences, that many members of the legal profession are morally bankrupt,⁶ so that the only way to prevent an implosion is a rules-based disciplinary system.⁷

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For assistance, I turned to Sue Mialon, an economics professor at Emory University, who argues that moral degradation across society is part of the normal order of things, and that government must step in with behavioral rules and sanctions to stop the decline.⁸

In summary, her argument goes like this:

1. Moral values—meaning a person's sense of right and wrong—are unique to each individual, are subjective, and by definition can not be communicated in words (people can try, but no one reads minds, and getting an accurate sense of what "guilt" feels like to another person would be impossible);
2. The only way to obtain information about moral standards—i.e., acceptable and unacceptable norms of behavior—is by observing how other people conduct themselves;
3. People's actions, however, do not accurately reflect their moral values, because they inadvertently provide misinformation about their sense of right and wrong (this may happen by not acting in the face of injustice or, in the case of the authorities, by not enforcing certain laws, like DUIs and shoplifting);
4. Since everyone is watching everyone else for cues about morality, those misrepresentations send false messages, namely, that certain behavior is acceptable when it is really not;
5. In the end, the group has flawed information about virtue and evil;
6. Because the social standard is based on people watching other people behave, moral standards are dynamic and ever-changing;
7. If society does nothing about bad conduct, over time people will conclude that the conduct is no longer "bad," at which point it becomes acceptable;
8. As a result, behavior that was previously viewed as reprehensible suddenly becomes the new normal and everyone engages in it;
9. Bad acts beget more bad acts;
10. This causes society's moral standards to decline;
11. The group is powerless to stop the decline, because, watching itself, nothing appears objectionable;
12. It is now impossible for the collective to regulate its own behavior;
13. Government intervention is needed to halt the downward slide of moral principles and prevent further decay and harm to the innocent;
14. Regulators achieve this by creating rules and regulations and punishing those who transgress.

This explains why the CRPC does not resemble the ABA's 1908 Canons of Ethics ("Canons").⁹ Imploring lawyers to act morally may, arguably, have worked ninety years ago as a way to get them to do the right thing, but today, those quaint expressions of aspirational norms fall short. Perhaps the pressures are too great or temptation is too high or—as Professor Mialon concludes—everyone is watching everyone else misbehave and follows suit. Accordingly, rules and regulations are needed: They set an objective lower bound for behavior because the price of noncompliance is punishment.

When considered in this light, a system of disciplinary rules makes sense. Rather than appearing random, overreaching, and punitive to the membership, it displays an internal logic. The bad apples, who act out of self-interest anyway, will start to behave better to avoid sanctions, and thereby do less harm to the meek and vulnerable.

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The supreme court sought to accomplish this by purging aspirational goals and references to ethics from the final product, the CRPC. I do not believe, however, that its intent in so doing was to denigrate ethical conduct. Announcing the demise of aspirational norms was another way of saying that attorneys need to step up their game in terms of elevating client needs above their own, and was a plea for lawyers to return to the core values and ideals that brought many to the practice of law in the first place.

So while the supreme court unveils its new rules, which are intended to regulate professional conduct of lawyers through discipline, seemingly eschewing moral principles and ethics in the process, in this author's view, the better approach would have been to have a system based on ethics, driven by the moral principles of each attorney and backstopped by a regulatory and disciplinary machine to address those instances in which conduct drops below that which is acceptable. Such a concept of ethics would recognize that the attorney-client relationship, by its very nature, is intensely personal and private; it would acknowledge the central role played by the attorney's sound judgment and counsel; it would encourage the attorney to rely on her conscience and sense of right and wrong in making decisions; and it would provide a safety net to protect clients in those rare instances when things go sideways

A rules-based system tells attorneys that meeting bare minimum standards is all that is required of them. A rules-based system, without a moral foundation, provides a lawyer with no basis for making sound decisions when the rules fail to address the particulars of a situation. On the other hand, an ethics-based system, based on moral standards, acknowledges that values, principles, and ideals have an important role to play in the advocacy process. An ethics-based system would provide set behavioral standards, based on moral principles, that define acceptable conduct for attorneys. The standards would be either suggestive, in which case noncompliance would carry no penalty, or mandatory, in which case non-compliance would result in punishment. The latter could be triggered if the former were to fail.

This is not an invitation to ignore the rules of professional conduct or other applicable attorney regulations. Rather, it is an invitation to look beyond the rules and regulations for guidance on ethical behavior.

The Role of Civility

As a mediator, I spend a lot of time observing people on opposite sides of a conflict interact with one other, usually in close quarters and under pressure, as they decide whether to end a dispute. Emotions can run high, and there is sometimes a correlation between the age of a lawsuit and the animosity between counsel. Litigation, as everyone knows, is an inherently adversarial process, with a winner and a loser when a matter is adjudicated.

For attorneys who are competitive by nature, the process can seem intensely personal. The lawsuit may not stay just between the parties, but can grow into a conflict between the attorneys...