Negotiator’s Duties to Client - Model Rule 2.1

Terms:

Model Rule 2.1 – Advisor:

“In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation.”

Arms Length Transaction:
A transaction between two parties whose only relationship is created by their mutual goal to enter into a transaction are considered to be at arms length. For example, a son negotiating to purchase a car from his mother is not engaging in an arms length transaction – each might have motives to offer or accept a price unrelated to the fair market value of the car. Opposing parties to a litigation, however, who have no prior relationship and whose decisions are arrived at freely within a competitive negotiation are considered to be at arms length.

Lawyer-negotiators are doing something more than simply giving legal advice. In a very real sense, they are assisting their clients in an arms length transaction, the outcomes of which have serious financial and non-financial ramifications for the clients.

EXAMPLE: Fred, a plaintiff, retains Attorney Andy to help with ongoing litigation. Fred asks Andy about the possibility of settling with the defendant for a sum of $10,000. Andy responds simply by telling Fred that this would be perfectly permissible by law.

Is that all Fred sought in broaching the topic to Andy? In fact, wasn’t Fred looking for something far more along the lines of advice as to the benefits and drawbacks of entering into such negotiations or of reaching a settlement for the amount Fred has in mind?

EXAMPLE: The suit filed by Fred claimed damages in excess of $1 million. Although Andy thought this was a stretch, he believes that the jury is very likely to find in favor of the plaintiff and award damages somewhere in excess of $100,000. Even after accounting for costs and Andy’s fee (a contingency fee agreement was signed by Fred at the outset) Andy expects Fred to walk away with more than $50,000.

Must Andy point this out to Fred before offering a $10,000 settlement amount to the defendant? Rule 2.1 seems to indicate that Andy must do precisely that. Of course, pointing this out to Fred will be easy for Andy, as it maximizes Andy’s potential fee. Consider now a somewhat different fact pattern:

EXAMPLE: After receiving such excellent advice from Attorney Andy, and after getting paid his substantial jury award, Fred refers Jackie to Andy when Jackie becomes embroiled in a legal battle. Jackie wants to sue his former municipal employer for discrimination; he feels he was fired from his job as a bus driver for being overweight. When Andy refuses to take the case on a contingency basis, Jackie offers to pay out of pocket (he has, after all, saved up a sizeable amount over the years). Jackie is convinced that he has a winning case, but Andy is quite certain that Jackie will not recover monetary damages from the municipality.

Comment 1 to Model Rule 2.1 is instructive here, and reads in part that

“A client is entitled to straightforward advice expressing the lawyer's honest assessment… [and] should not be deterred from giving candid advice by the prospect that the advice will be unpalatable to the client.”

In other words, Andy cannot simply accept the fee without telling Jackie what he thinks about the prospects of winning. Of course, once so advised, if Jackie wants to press forward, Andy may certainly take the case.

In the context of negotiation settlements, lawyers often find themselves in the difficult situation of advising a client to accept a settlement or course of action which the client is disinclined to accept. Obviously, the lawyer need not force the client to take the offer and need not give ultimatums such as “accept this offer or I’ll drop you.” However, if a client’s expectations of the outcome of a case are significantly out of line with reality, Rule 2.1 comes into play.

Rule 2.1 has other ramifications in the context of law suits and, as concerns us here, negotiations for settlement. Comment 2 reads as follows:

Advice couched in narrow legal terms may be of little value to a client, especially where practical considerations, such as cost or effects on other people, are predominant. Purely technical legal advice, therefore, can sometimes be inadequate. It is proper for a lawyer to refer to relevant moral and ethical considerations in giving advice. Although a lawyer is not a moral advisor as such, moral and ethical considerations impinge upon most legal questions and may decisively influence how the law will be applied. (Emphasis added)

What does this mean for an attorney involved in negotiation on her client’s behalf? In 2004, the Supreme Court of Illinois had this to say about it:

"Attorneys cannot blindly follow their clients' directions, even if those directions are particular and express, if doing so would require them to violate their ethical obligations. See 134 Ill. 2d R. 1.1 et seq. (Illinois Rules of Professional Conduct). In representing a client, Rule 2.1 mandates that a lawyer exercise independent professional judgment. 134 Ill. 2d R. 2.1. The rules of legal ethics are aimed at protecting the attorney-client relationship, maintaining public confidence in the legal profession, and ensuring the integrity of judicial proceedings." -Horwitz v. Holabird & Root, 212 Ill. 2d 1 (2004).

Although the facts of the above case do not mirror the scenarios we are currently discussing, the court eloquently laid out the majority interpretation of Rule 2.1. This decision and many more like it from courts across the nation clearly indicate that Rule 2.1 limits an attorney’s options to act on her client’s behalf. If in consulting with a client as per Rule 1.4 the client expresses a desire to engage in some course of action which is legal but might cause the attorney to violate some Rule of legal ethics, the attorney must advise against that strategy and, in fact, must refuse to take that particular course of action.

Model Rule 8.4 contains a “catch-all” which is highly relevant here. Essentially, it prohibits attorneys (and through them their paralegals) from engaging "in conduct involving dishonesty, fraud, deceit or misrepresentation." What effect does this have on an attorney’s ability to maneuver through the negotiation process?

EXAMPLE (1): Attorney Henry, while involved in negotiations on behalf of his personal injury plaintiff, tells the defendant’s lawyer that “my client is in a lot of pain and might have serious, permanent injuries.” The plaintiff has not yet seen a doctor.

EXAMPLE (2): Attorney Jamie, while involved in negotiations on behalf of his personal injury plaintiff, tells the defendant’s lawyer that “my client is in a lot of pain and might have serious, permanent injures.” The plaintiff has in fact told Jamie that she is no longer in any pain and her doctor told her she could expect a full recovery within 2 weeks.

Henry here is well within the limits of Rule 8.4, as he has not lied about any factual matter but has instead simply given his own thoughts. Jamie, however, has blatantly lied about the current state of affairs. Can we find something for Jamie to say, however, that would prevent him from running afoul of Rule 8.4?

EXAMPLE (3): “My client went to her doctor last week, and when I last saw her she was in great pain. I really hope this isn’t something permanently disabling. Do you have a settlement offer for us?”

Remember that Jamie’s job is to advocate zealously on his client’s behalf. He cannot commit fraud in reaching his client’s goals, but he can pick and choose which facts to present to his opponent during these conversations. (Formal discovery is another matter, wherein Jamie cannot withhold certain documents). If Jamie’s client wants him to approach this matter as originally presented, he must advise her that he cannot make the phone call. He can, however, advise her as to what he is permitted to say to the other party in a settlement negotiation.