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Settlement negotiations can be tricky and knowing what you can and cannot ethically say can mean the difference between a valid and invalid settlement. According to a 2009 survey by Professor Andrea Schneider, director of the Dispute Resolution Program at Marquette University Law School, a sizable minority of litigation attorneys incorrectly answered that they do not need to correctly respond to a direct question about settlement authority. See Art Hinshaw, Peter Reilly & Andrea Kupfer Schneider, Attorneys and Negotiation Ethics: A Material Misunderstanding, 29 Negotiation Journal 265, 269 (2013). According to the survey, 38.14% of the ninety-seven (97) participating litigation attorneys incorrectly responded that they did not have to admit the amount of their settlement authority if directly asked. Id. at 269-270. Pursuant to the American Bar Association’s Rules on Professional Responsibility, an attorney’s valuation of a claim and a party’s settlement intentions are enumerated exceptions to what constitutes a material statement in negotiations. Id. at 268. However, the specific limits of authority that a client has given a lawyer to settle a case is considered a material fact. Id. Therefore, an attorney must truthfully respond when directly asked about his or her settlement authority.
The survey also found that 22.9% of the participants incorrectly responded that you do not need to correct an opponent’s misimpression of a material fact based on an erroneous statement. Id. at 275. According to the RULES OF PROFESSIONAL RESPONSIBILITY, an omission of a material fact can be unethical in certain cases. Id. at 272. Most importantly, the law of fraud for both tort and contract law requires correction of a misimpression. Id. (Citing RESTATEMENT (SECOND) TORTS, §551(2)(e) and comment l 1977; RESTATEMENT (SECOND) CONTRACTS, §161(b) 1981). Although attorneys generally do not have a duty to correct a misunderstanding of the facts by their opposing counsel, they do if it is based on an erroneous statement.
Wondering what other ethical dilemmas you may encounter on the road to resolution? Consider attending the
2014 DRI Women in the Law Seminar, Clients and Counsel: Partnering for Success Seminar, which will be held
February 5-7, 2014, at the FireSky resort in Scottsdale, Arizona. The seminar includes an interactive mediation/negotiation workshop for in-house and outside counsel.
Chrys A. Martin of
Davis Wright Tremaine LLP will explore the ethical issues that need to be foremost in the mind for both in-house and outside counsel from the time negotiations begin until the settlement agreement is fully executed.
Click here to register today.
Settlement negotiations can be tricky and knowing what you can and cannot ethically say can mean the difference between a valid and invalid settlement. According to a 2009 survey by Professor Andrea Schneider, director of the Dispute Resolution Program at Marquette University Law School, a sizable minority of litigation attorneys incorrectly answered that they do not need to correctly respond to a direct question about settlement authority. See Art Hinshaw, Peter Reilly & Andrea Kupfer Schneider, Attorneys and Negotiation Ethics: A Material Misunderstanding, 29 Negotiation Journal 265, 269 (2013). According to the survey, 38.14% of the ninety-seven (97) participating litigation attorneys incorrectly responded that they did not have to admit the amount of their settlement authority if directly asked. Id. at 269-270. Pursuant to the American Bar Association’s Rules on Professional Responsibility, an attorney’s valuation of a claim and a party’s settlement intentions are enumerated exceptions to what constitutes a material statement in negotiations. Id. at 268. However, the specific limits of authority that a client has given a lawyer to settle a case is considered a material fact. Id. Therefore, an attorney must truthfully respond when directly asked about his or her settlement authority.