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Proposed California Ethics Opinion concludes that a lawyer’s statements about a party’s negotiating goals or willingness to compromise may include “puffery” if they are not false

Hello and welcome to this Ethics Alert blog which will discuss the recent proposed California Bar Ethics Opinion which states statements about a party’s negotiating goals or willingness to compromise may include allowable “puffery” provided the statements do not contain false statements of material fact. The proposed opinion is Cal. State Bar Standing Comm. on Prof’l Responsibility & Conduct, Proposed Formal Op. 12-0007 (1/24/14) and the proposed opinion is here: 2014 Proposed Cal Bar opinion on puffery

The proposed opinion considers what conduct may be permissible puffing in settlement negotiations as opposed to unethical false statements of material fact. The opinion states that Sections 6068(d) and 6128(a) of the California Business and Professions Code prohibit attorneys from engaging in deceit or collusion, California lawyers have been disciplined for deceiving opposing counsel, and California Bar rules provide that disbarment or suspension is appropriate for dishonesty.

The opinion also refers to California’s Attorney Guidelines of Civility and Professionalism Section 18 which discusses a lawyer’s conduct when negotiating a written agreement on behalf of a client. The guidelines are nonbinding and cannot be used as a basis for disciplinary charges and, since there are no direct California Bar rules on ethics in negotiations, the proposed opinion adopted the guidance provided in ABA Formal Ethics Op. 06-439 (2006). Referring to that ABA opinion, the proposed opinion states that, although it is improper for an attorney to make false statements of material fact during the course of a negotiation, statements about a client’s negotiating goals or willingness to compromise may include allowable “puffery” if the statements do not contain false statements of material fact.

According to the proposed opinion, although the California Rules of Professional Conduct do not have a rule similar to ABA Model Rule 4.1, the ABA rule is consistent with judicial opinions in California cases involving tort claims alleging fraud by attorneys. The proposed opinion also discusses several statements in hypothetical negotiations to settle a personal injury claim arising from an automobile accident and provides guidance.

Plaintiff’s lawyer tells defense counsel that an eyewitness saw the defendant texting at the time of the accident, when actually no eyewitness has been located. This assertion is an improper false statement of fact, intended to mislead the defendant and his lawyer and is not an expression of opinion but a material statement that a reasonable person would consider important in making settlement decisions.

Plaintiff’s counsel informs the mediator that the plaintiff was making $75,000 per year when he was actually earning $50,000. This is not an expression of opinion but an intentional misstatement of a verifiable fact that is material to the negotiations.

 Plaintiff’s lawyer overstates the client’s “bottom line” settlement number. This is allowable “puffery” that is not deceitful or fraudulent. A negotiating party should expect that its adversary will not reveal its true negotiating goals or willingness to compromise. An attorney could violate the statutory duty of confidentiality in Business and Professions Code Section 6068(e) by revealing the client’s actual bottom line.

Plaintiff instructs his or he lawyer not to reveal his new, better-paying job to the other side even though the parties have agreed to exchange additional information about the plaintiff’s wage loss claim. Failure to disclose the plaintiff’s new job would suppress a material fact and amount to a material misrepresentation and even though a lawyer is generally required to follow a client’s instructions, the lawyer must counsel the client that he or she may not misrepresent or suppress evidence.

Defense counsel states that the defendant’s insurance policy is $50,000 when it is really $500,000. This statement is improper because it is an intentional misrepresentation of a material fact intended to mislead the plaintiff and his counsel.

 Defense lawyer insists that the defendant will file for bankruptcy if the plaintiff wins at trial. If defense counsel knows that the defendant does not qualify for bankruptcy protection, this statement is improper because it is an intentional misrepresentation aimed at misleading the opponent about the defendant’s ability to pay; however, if defense counsel believes that bankruptcy is an available option, even if unlikely, a statement that the defendant could or might consider filing for bankruptcy would probably be a permissible negotiating tactic. 

The proposed opinion refers to the following additional authorities on ethics in negotiations: ABA Formal Ethics Op. 06-439, (2006), Comment (2) to Model Rule 4.1 the ABA Litigation Section’s Ethical Guidelines for Settlement which is here:, Comment c to Section 98 of the Restatement (Third) of the Law Governing Lawyers (2000), and Ethics Rule Prohibits Lies, but Recognizes Room for Negotiating Tactics,” 29 Law. Man. Prof. Conduct 136.

The proposed opinion concludes that lawyers who are negotiating on behalf of a client do not necessarily act unethically by overstating the client’s settlement goals or downplaying the client’s willingness to compromise and these inaccurate statements may qualify as allowable “puffery” rather than false statements of material fact, however, lawyers cannot misrepresent or make false statements about major relevant facts such as a falsely claiming to have a favorable eyewitness, inflating a personal injury client’s past earnings, or understating the amount of available insurance coverage.

Bottom line: This proposed California ethics opinion is not final and is currently in the comments stage. As I always say, lawyers cannot lie, cheat, or steal (among other things); however, according to this proposed ethics opinion (and ABA Formal Ethics Op. 06-439), a little “puffery” is apparently okay.

Be careful out there!

Disclaimer: this blog is not an advertisement nor does it contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670
[email protected]

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