Opinion Clarifies Limits of Negotiation ‘Puffery'

By Samson Habte

Jan. 20 — Ethics rules allow an attorney negotiating for a client to engage in some forms of “exaggeration, posturing or ‘puffing,'” such as overstating the client's “bottom line” settlement number, the California bar's ethics committee declared in a recent opinion.

The opinion—which uses hypothetical settlement talks between lawyers in a personal injury case to illustrate the line between permissible and prohibited negotiation tactics—offers guidance that generally tracks the advice in an interim opinion the committee released for public comment in 2014. See 30 Law. Man. Prof. Conduct 171.

The committee said lawyers must differentiate between “two types of representations” when assessing the ethical propriety of statements made in negotiation settings: “(1) statements that constitute impermissible misrepresentations of material fact upon which the opposing party is intended to rely; and (2) statements that constitute acceptable exaggeration, posturing or ‘puffing' in negotiations.”

Following ABA

The committee generally embraced the analysis the ABA ethics committee used in its opinion on the subject, ABA Formal Ethics Op. 06-439, 22 Law. Man. Prof. Conduct 235 (2006).

The ABA opinion said lawyers who exaggerate a client's negotiation goals or downplay a client's willingness to compromise don't violate Model Rule 4.1, which addresses lawyers' duty to be truthful in statements to third parties in the course of a representation.

California doesn't follow the Model Rules. However, the state's Business and Professions Code provides that lawyers must employ means “consistent with truth.” It also states that “deceit or collusion” by a lawyer is a misdemeanor, and that acts of “moral turpitude or dishonesty” may lead to suspension or disbarment.

“False statements of material fact, in addition to ‘implicit misrepresentations created by a lawyer's failure to make truthful statements,' may result in ethical violations,” the committee said, quoting the ABA opinion.

“On the other hand, the ABA has recognized that ‘puffing' or posturing may be permissible based on the generally understood norms of negotiation,” the committee said. It cited the ABA's definition of “puffing” as “statements upon which parties to a negotiation ordinarily would not be expected justifiably to rely.”

Permissible ‘Puffery.'

The opinion analyzes six statements from lawyers negotiating the settlement of a hypothetical personal injury case stemming from a vehicular accident.

The committee determined that one statement—an inaccurate representation from the plaintiff's lawyer regarding his client's “bottom line” settlement number—was clearly permissible.

“Statements regarding a party's negotiating goals or willingness to compromise, as well as statements that constitute mere posturing or ‘puffery,' are among those that are not considered verifiable statements of fact,” the committee said. “A party negotiating at arm's length should realistically expect that an adversary will not reveal its true negotiating goals or willingness to compromise.”

Impermissible Lies

The panel deemed four other statements “impermissible misrepresentations of material fact upon which the opposing party is intended to rely.” They include:

• an assertion by plaintiff's counsel—who failed to locate any eyewitnesses—that “he will have no difficulty proving that Defendant was texting while driving” because an eyewitness with “excellent” credibility would provide “undisputed” testimony on the subject;
• an attempt by plaintiff's counsel to inflate the value of the client's wage loss claim by asserting that his client's salary was $25,000 more than it actually was;
• defense counsel's false assertion that his client's insurance coverage topped out at $50,000 when the policy limit was actually $500,000; and
• defense counsel's statement that his client will file for bankruptcy if he loses at trial—a false representation because the lawyer knows the client “is not legally eligible to file for bankruptcy.” 
When to Pull Out

A sixth scenario drew more nuanced analysis. It involved whether the plaintiff's lawyer could heed his client's instruction not to reveal information that could negatively impact her future lost earnings claim: that she had accepted a new job where she'd earn $25,000 more than her current salary.

The committee said that if counsel heeded that instruction he would be making “an implicit misrepresentation that Plaintiff has not yet found a job.”

“While an attorney is generally required to follow his client's instructions, [California Rule of Professional Conduct] 3-700(B)(2) requires withdrawal if an attorney's representation would result in a violation of the ethical rules, of which a false representation of fact or implicit misrepresentation of a material fact would be,” the committee said.

Accordingly, the lawyer “should first counsel his client against the misrepresentation,” the committee said. If the client won't comply, the lawyer “must withdraw under Rule 3-700(B)(2), as [he] may neither make the disclosure absent client consent, nor may [he] take part in the misrepresentation and/or suppression,” it added.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: Kirk Swanson at kswanson@bna.com

For More Information 

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.


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