The Negotiator Magazine

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Negotiation Ethics

By Charles B. Craver

When I teach negotiation courses to attorneys and business people, I often begin by indicating that I have rarely participated in professional negotiations during which both sides did not lie, yet I have encountered very few negotiators I thought were dishonest. How can negotiators lie without being dishonest? They misrepresent matters they are not expected to discuss truthfully.

Two people get together to negotiate. One is authorized to accept any amount over $100,000, while the other is authorized to pay up to $130,000. They thus have a $30,000 settlement range between their respective bottom lines. They initially exchange small talk, then begin to explore the substantive issues of their exchange. The person who hopes to obtain money states that he cannot accept anything below $150,000, while the person willing to pay money indicates that she cannot go a penny over $75,000. They are pleased to have begun their interaction successfully, yet both have begun with bold-faced lies.

Model Rule 4.1, which regulates the ethics of lawyers, provides that an attorney "shall not knowingly make a false statement of material fact or law to a third person." This unequivocally indicates that lawyers may not lie. When is a lie not a lie, when it's by a lawyer! When this rule was being drafted, people who teach negotiation skills pointed out that if all lies were forbidden, when attorneys negotiated most would be subject to discipline because of what is euphemistically characterized as "puffing." As a result, a Reporter's Comment was included with Rule 4.1 indicating that different expectations are involved when attorneys are negotiating.

As a result, if one party offered to pay the other $115,000, the offer recipient could ethically indicate that this sum was unacceptable to his side even though he knew it was perfectly acceptable. If the other side requested a non-admission provision indicating that her side wished to disclaim any admission of legal responsibility for what was being resolved, the first party could vehemently oppose such a provision even though he knows that his client doesn't care about such a provision. He does this in an effort to obtain more money for his client in exchange for the non-admission clause the other side values. Both of these statements are considered "puffing" since they pertain to nonmaterial information.

I have no difficulty with the Reporter's Comment indicating that statements concerning one's actual settlement intentions and the subjective value placed on items being exchanged do not have to be truthful. They pertain to "puffing" and do not involve matters one expects to be discussed with complete candor. On the other hand, I find it odd to state that these matters do not concern "material fact." When we negotiate, the factual, legal, economic, and political issues underlying the instant transaction are really secondary. What parties have to determine through the negotiation process is how the other side values the items being exchanged and how much of each must be offered to induce the other side to enter into an agreement. Nonetheless, I do expect such "puffing" and am not offended by persons who over or under state the value of items for strategic purposes or who are not forthright regarding their true settlement intentions.

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December 2005