Knowledge is Power… or is it?

by Walter Rilkoff and Amir Ghahreman

In the August 2009 issue we discussed the different approaches taken by B.C. and Alberta with respect to professional conduct rules governing negotiation. Alberta’s approach is more heavily codified whereas B.C.’s approach is largely based on general principles.

We now turn to the ethics of negotiation in the context of settlement discussions. While lawyers can’t lie, the art of negotiation is all about trying to make the lawyer opposite and his or her client believe something which may or may not be so. Like poker and seduction, negotiations are all about puffery. So where is the boundary between lying and puffing?

Imagine your client has told you that she will accept anything more than $100,000 to settle her claim. Suppose opposing counsel probes, “Will your client accept $105,000?” In this circumstance, you clearly cannot answer “No,” even though for various reasons, you believe that your opponent will go higher. What to do?

One approach suggested by some commentators is to parry the question¹. You might respond by asking: “Is your client offering $105,000? If he is, I will take it back to my client but I can tell you that he will increase his chances of acceptance by offering something in the $120’s.” However, even a response such as this tip-toes along the ethical boundaries. Is it really true that a settlement is more likely to be reached if the offer was in the $120’s rather than $105,000 given that the client has told you that she will accept anything more than $100,000? It may be unduly technical but, given your instructions, offers of both $105,000 and $120,000 have equal chances of being accepted, even though your client will obviously be more pleased with the higher offer. Having knowledge of your client’s bottom-line figure may interfere with your ability to puff and use your skills to obtain the best possible settlement.

Is there another, ethically safer, way that provides for the full scope of negotiation skills without the restrictive nature of ethical rules? In our view, it is safer to arrive without instructions as to your client’s actual bottom-line. This will allow you greater scope to puff away to obtain the best offer for your client without skating over the fuzzy line between a puff and a lie. You can speculate on what your client will accept, you can wax eloquent on the merits of your client’s position and you will be on the preferred side of the ethical line.

The approach may be trickier where your client has already advised you of her bottom-line; in those situations, consider persuading her to withdraw those instructions. In our view you are still on the preferred ethical side of the line, provided that any instructions as to her bottom-line figure have been unequivocally withdrawn, even if you are left with a good idea where the bottom-line is likely to be.

This approach is even stronger under the Alberta Code, since Chapter 11, Rule 3(b) requires an Alberta lawyer to “... promptly and fully communicate all settlement offers to the client.”

In other words, in Alberta, you would have to consult your client after every settlement offer anyway, even if it was higher than her bottom-line figure.

¹ “Commentary: Ethical Negotiation: misdirection without falsehood,” William Hodes, Lawyers USA, March 16, 2009.

This article was published in the December 2009 issue of BarTalk. © 2009 The Canadian Bar Association. All rights reserved.