Those Who Worry About the Ethics of Negotiation Should Never Be Viewed as Just Another Set of Service Providers - Lawrence J. Fox

• Citation: Vol. 52 No. 3
• Publication year: 2001

A SYMPOSIUM: Ethical Issues in Settlement Negotiations

Those Who Worry About the Ethics of Negotiation Should Never be Viewed as Just Another Set of Service Providersby Lawrence J. Fox

It is an honor to address this distinguished group of lawyers and law students this evening as part of the very first Symposium funded by the duPont Company's generosity by way of Judge Lawson. The issues raised by the topic of ethics in negotiation mirror some of the most important themes in the bigger professional responsibility arena, and examining them with this level of care can inform the profession more widely.

It is ironic then that when Professor Pat Longan invited me to give the keynote address, he himself negotiated my appearance in a highly questionable manner. "Would I like to be the keynote speaker at this upcoming Symposium?" Would I? Of course, being so self-absorbed that I never turn down a chance to preach. "Yes," I shot back. "Love to."

But now I am here and I learn that this keynote address is being given, not at the beginning of the Symposium, but when the Symposium is half-way completed, that I am speaking after a delicious dinner, complete with ample quantities of wine, that my speech follows an eloquent address from Frank Cater Jones, the legendary Macon native, Mercer Law School graduate, King & Spalding partner, and former President of the American College of Trial Lawyers, and that this weekend features the ACC basketball tournament, which means many in this audience cannot wait to get back to their televisions. The thought did cross my mind that perhaps Pat omitted a few key facts when we "negotiated" my appearance here at Mercer.

I am particularly pleased to be invited to participate in this event in Georgia. I have had a splendid affinity with this state for a long time. Perhaps it is because of the outstanding Commission on Professionalism that the Georgia Supreme Court established years ago. Perhaps it is because I am currently handling a death penalty case on behalf of Tommy Lee Waldrip¹ who is incarcerated in a prison in Jackson just up Route 75. Perhaps it is because of my many friends in the Georgia bar or because I was lucky enough to steal my wife away from Georgia Legal Aid.

I. Ethics of Settlement Negotiations

A. Client Autonomy

There are three themes in the Symposium that I find particularly fascinating and worthy of highlighting. First, the whole question of client autonomy is one the profession must revisit in the negotiation context. Too often lawyers take control of the client's matters in a way that conflicts with the prerogatives of the client, particularly in the negotiation process. While lawyers may well have a better view of the best interests of the client, or at least think they do, the role of the lawyer as an agent of the client does not permit the lawyer to usurp the authority of the lawyer's principle. Permit me to review seven areas of client autonomy worth serious discussion.

First, as a general matter the client must authorize the initiation of settlement discussions. Totally legitimate reasons exist why clients would not want to discuss settlement. Regardless of what judges or lawyers might think, a client can view, quite properly, the initiation of settlement discussions as a sign of weakness. Corporate clients that face multiple claims of the same type can adopt a policy that no cases of this kind will ever be settled. Clients are entitled to have their cases tried by judge and jury. Thus, absent some court-imposed requirement that the parties engage in settlement, the lawyer needs the client's authority to commence negotiations.

What about "off the record" negotiations? Can the lawyer who has not discussed the possibility of negotiations or who has been told in no uncertain terms not to commence them, tell the other side, "I have no authority to discuss this topic, but I wouldn't be surprised if $300,000 would settle this case?" The statement is truthful as to the third party, but the initiation has hardly been authorized by the client. These discussions happen all the time, but whether they should is the kind of question this Symposium must address. In my view those who would argue that these settlement negotiations are impliedly authorized have a very heavy burden in light of the client's authority over "the objectives of the representation."²

Second, the client should be consulted about the means to be employed as to how the negotiations are to proceed. If the client wants to settle for $100,000, should the opening offer be $500,000? Should you wait until the eve of trial to make an offer? Until the other side raises settlement first? Until a key deposition has been taken? While the rules say that the "lawyer shall consult with the client as to the means by which [the client's ends] are to be pursued,"³ it is in rare cases that the lawyer will spend much time on this sort of consultation. Even when a discussion does take place, lawyers generally view the consultation as "reporting in" rather than as a collaborative process. Is that, however, the right result? It is true there is a lawyer component to how best to proceed with negotiations. (Is this the juncture in the case at which the client's case is strongest?) Negotiations, however, present a business decision as to which the client may have even more expertise than the lawyer, and in any event, the client has a stake in how the negotiations are conducted as to both the amount of any offers and their timing.⁴

Third, it is critical that the client's confidences be kept, even in the course of negotiations. At least in two ways this obligation is breached on a fairly regular basis. First, lawyers often forget that their client's "bottom line" is itself confidential information. Judges should not ask for that information, but they regularly do so.⁵ The opposing party is always in search of that number. But if a lawyer fails to obtain consent from the client before negotiations begin, then this key fact remains one that should not be shared with anyone. Lawyers, of course, can avoid the problem by responding with the answer to a different question. ("My client needs at least $2,000,000," or "less than $2,000,000 is an insult.") But if finesse is not an option, the answer is no disclosure.

Equally problematic is the common practice of lawyers sharing with judges, mediators, or the other side their difficulty with getting the client to be realistic about settlement. Sometimes that disclosure is simply a ploy to take the blame off of the lawyer and, therefore, is itself a questionable representation; but if it reflects the truth, it clearly is the disclosure of confidential information, an indication that the negotiations between lawyer and client have failed, and a disparagement of the client that is impermissible under the rules of professional conduct.

Fourth, no matter how insulting, all settlement offers should be communicated to the client. Rule 1.4's requirements, as unhelpful as its key word "status" may be, surely include this information within the mandatory client reporting obligations.⁶ And well it should. While it is great bluster to tell the other side how inadequate the offered pittance is in this case, the client's learning of the settlement offer may sober the client or, at a minimum, trigger a desire by the client, despite the lawyer's advice not to dignify the offer with a counter, to respond with some counter proposal.

Fifth, the unambiguous principle—not subject to debate but well worth emphasizing—is that the client's interests must come first. If the lawyer has put in tens of thousands of dollars in time and the offer will give the lawyer a "loss," the lawyer nonetheless must accept the client's decision to settle once that decision is reached. Similarly, if the settlement offer is generous and the lawyer would be handsomely rewarded but the client wishes to press forward to trial, that decision too is solely the client's and must be honored by the lawyer, no matter how much the lawyer is convinced that trial could yield a goose egg.

Similar conflicts arise for defense counsel who may be enjoying the lucrative benefits of defending a "bet the company case" but whose client has decided to settle, perhaps for far too much in the lawyer's view, but with an eye to putting the matter behind it. Any conflict between lawyer and client must be reviewed carefully under Rule 1.7(b)'s requirement that any material limitation on the representation created by the conflicting interest of the lawyer be addressed.⁷ The negotiation conflict between lawyer and client is a classic example of this.

Sixth, the lawyer must avoid entering into any agreements with the client that compromise any of these principles. If the client grants the lawyer the authority to conduct the negotiations on the client's behalf, that authority must be revocable at will.⁸ The lawyer may not seek agreement from the client that the lawyer...