Beyond Winning

by Robert H Mnookin

  The husband in this case insisted that his lawyer not disclose certain financial information to the other side unless forced to do so through formal discovery. The husband’s lawyer faced a real ethical dilemma. When his colleague proposed that they informally exchange information as they had in the past, what was he to do? He knew that if he disclosed partially but withheld the information in question, it would go against his counterpart’s clear expectation and would ultimately hurt his own reputation as an honest negotiator. At the same time, he was obligated to obey his client’s wishes not to disclose the financial information.

  Ultimately, he chose to refuse to engage in the informal information exchange process with the other attorney. This implicitly signaled, of course, that this divorce was unlike the others they had negotiated together before. Many lawyers have told us that in such situations they are likely to signal to the other side that the normal rules of play are suspended and that the baseline professional ethics rules are all that should be expected. One lawyer told of a case in which he entered the room where the negotiation was to occur, sat down across the table from a long-time colleague, and simply said “On guard.” Both knew immediately that their normal collaborative rules of engagement were temporarily suspended.

  Such signaling raises difficult ethical issues, of course. On the one hand, why should a client be able to gain distributive advantage by hiding behind his lawyer’s reputation? Doesn’t that disserve the attorney’s other clients who rely on his problem-solving abilities? By refusing to engage in the informal discovery process that was based on trust, doesn’t the lawyer merely give his client what the client would get from any other attorney that didn’t have a reputation for honesty? On the other hand, is it ever legitimate for an attorney not to do something that would maximize the distributive benefit for a given client? If a lawyer’s approach conflicts with his client’s, would the best approach be simply to withdraw?

  In our view, withdrawal is one possible solution. In practice, as we’ve discussed, however, lawyers and clients face real financial and logistical constraints that may make withdrawal unattractive. Once an attorney has worked with a client over time, the lawyer has built up a store of knowledge and experience relevant only to that client, and the client has invested time and money in educating his lawyer about the particulars of the case. Under such circumstances, rather than withdraw, it seems reasonable for an attorney to signal to the other side that for this negotiation they should not expect anything beyond what the formal discovery rules require.

  The lesson we draw, however, is that lawyer-client preparation is essential. As a lawyer-client relationship begins, an attorney must be clear with his client about his problem-solving orientation and what that requires. If a lawyer is unambiguous about what he will and won’t do, the client can make an informed choice about which lawyer to retain. Such ethical conflicts are thus much less likely to arise.

  What If the Other Side Asks Me a Question I Don’t Want to Answer?

  Negotiating lawyers are sometimes caught off-guard when asked a question where a truthful answer would disadvantage their client. For example, if you were Ed’s attorney and Mr. Jenks asked you “Does Ed have any other job offers?” what could you do to get out of the situation without violating the rules of professional conduct?

  Attorneys approach such moments in various ways. Many refuse to answer such questions. Some might simply remain silent. Others may say “No comment,” “I’m not at liberty to say,” or “You’d have to ask my client.” A lawyer might indicate that he cannot disclose information because to do so would violate client confidences. Given the exceedingly narrow scope of the Rule 1.6(b) exceptions, Rule 1.6(a)’s broad duty of confidentiality operates as a serious constraint on lawyers. The duty to keep client confidences is one of the central pillars of professional ethics. The attorney-client evidentiary privilege protects the attorney-client relationship from intrusion by most outsiders, and the duty of confidentiality secures the relationship from unauthorized revelation of information by an attorney. These walls around the relationship are meant to ensure that clients can talk openly and truthfully with their lawyers without fear that their secrets will become public knowledge.

  The weakness of using Rule 1.6 as an excuse in a negotiation is that a client can always authorize a lawyer to disclose anything—and if the other side insists that you answer a question, they’ll likely insist that you return to your client for permission to do so. The broader problem is that the other side may interpret your refusal to answer, whether you’ve invoked the rule explicitly or not, as an answer—in this case, that Ed does have other opportunities.

  As a result, many attorneys try evasion in moments like this. They may try to change the subject. Or, rather than not answer, an attorney might answer a different question than the one asked—the politician’s classic interview technique. Or a lawyer might respond by asking a question of his own, either to clarify or to change topics. In Ed’s case, a lawyer might try to deflect the question by asking, “Who’d want to hire him?” Or “the job market is pretty tight right now, isn’t it?” Of course, alert attorneys may expose such sleight of hand under persistent questioning.

  A different sort of problem is posed if the lawyer on the other side asks you the limits of your settlement authority or “What is the least amount Ed is willing to accept as severance pay?” While the Model Rules seem to suggest that an attorney has great leeway to misrepresent such information, it is often far better to refuse to answer and to explain why.

  You can name the inherent problem with such difficult questions: they invite you to lie. “You know, I don’t find questions like that all that helpful, and here’s why. If I asked you that, although I think you’re a decent person, I’d be setting you up to deceive me. It’s just a tough question to answer, and it’s tempting to bend the truth. I’d have very little confidence in your answer, and so I’m not sure that the question itself would serve me very well. My suggestion is that we table that question.” By naming the strategic problem created by such a question, you can sometimes dissuade the other side from pursuing an answer to it. And you show that you understand the strategic landscape and their motivation for asking. This can take the power out of such inquiries.

  The key is to prepare. Before you negotiate, make a list of the nightmare questions the other side might ask. Think of all the inquiries that would make you uncomfortable or tempt you to lie. Then prepare answers that could extricate you from those situations as gracefully as possible. Your answers may not be perfect, but you will be able to react more skillfully than if you simply deceive the other side.

  What If I Think the Other Side Is Lying or Being Misleading?

  In negotiation, often the challenge is the other side’s behavior, not yours. Some negotiators boast that they can see through the other side’s lies and deception. Others fear that they cannot, and they seek advice on how to distinguish truth from falsehoods. Certainly there are sometimes cues when people lie, and it may be possible to become more skillful at identifying deceit.11 But research suggests that most people exaggerate their ability to detect lies. The stubborn fact is that people sometimes will lie to you, and often you won’t know it. Even more often, you’ll be unsure whether to trust the other side. What can you do if you fear that the other side is lying, being misleading, or not telling you material information?

  SMOKE OUT DECEPTION

  One technique is to smoke out unethical behavior. As we’ve seen, the Model Rules do not require attorneys to reveal much information voluntarily. As a result, asking direct questions and probing for information is indispensable to successful lawyering. Of course, if the other side doesn’t want to answer your question, they may evade or refuse, just as you might if they asked you. And they might lie. But only by asking will you truly test their willingness to respond directly. You can’t assume that they will otherwise provide you with material facts. As you probe, you can try to triangulate between the other side’s
statements to discover inconsistencies that demonstrate deception or an attempt to mislead.12

  VERIFY INFORMATION

  Another way to deal with your doubts about the other side is to verify material information whenever possible. This is why due diligence is so important in deal-making and discovery so important in litigation; each side must independently seek to verify material information about the other. Even if the seller says the house you’re purchasing is in good condition, be sure to get an inspection anyway. Even if the other side insists that their company is doing well, have your accountant review their books.

  Of course, verifying information is expensive. A strong, trusting relationship is valuable in part because it reduces this cost of doing business: you may not need to spend as much time and money on verification. Nevertheless, independently verifying critical information is often a central part of a lawyer’s role.

  CRAFT REPRESENTATIONS AND WARRANTIES TO HEDGE RISK

  Deception works only if you rely on the other side’s falsehood. If you doubt the other side, you can structure your negotiated agreement so that you do not rely upon their statements and so that you hedge the risk if it turns out that they have not told the truth.

  Lawyers have a comparative advantage in negotiation because they can use their contracting and drafting skills to seek written representations about material facts. Rather than informally relying on the other side’s verbal assurances, lawyers can build representations and warranties into agreements and condition settlement on the veracity of those representations. If the other side was exaggerating or lying, they may balk at making such a written representation. The request then serves to smoke out unethical behavior by the other side.

  Warranties also can deter, or remedy, lies and nondisclosure. You should always be on the lookout for the lemons problem, for example. In any purchase and sale, the seller has an incentive to withhold information about the condition of the item in question. Seeking representations and warranties can reduce these risks and decrease the damage to you if they lie.

  Contracting is thus the legal negotiator’s most helpful tool in discovering and constraining misleading behavior by the other side. Don’t just take them at their word—have them write their word down and warrant that it is true.

  The danger, of course, is that if you find yourself not trusting the other side, you may be tempted to seek representations and warranties about everything. If the other side has demonstrated that they can’t be trusted, what would in other cases be over-lawyering may be necessary. But you must calibrate your suspicions. Attorneys too easily get carried away and imagine that a written document provides complete protection. As we have indicated in Chapters 5 and 10, representations and warranties are not a perfect cure. A breach of a warranty must be detected and proved, and enforcement is both costly and imperfect.

  GIVE THE OTHER SIDE A WAY TO SAVE FACE

  When you’ve discovered or you suspect that the other side is lying or being misleading, you may want to end the negotiations. We certainly don’t want to defend those who lie or mislead, nor to apologize for them. At the same time, before breaking off the negotiations or rubbing the other side’s nose in their misdeeds, think carefully about what will best serve your client’s overarching interests. If problem-solving is the approach you prefer, it may be more productive to deal with the other side’s impropriety while giving them a way to save face.

  Why? Because being caught lying is embarrassing. The other side may not want to continue negotiating with you if it is clear that you know they were trying to deceive. Moreover, if you acknowledge that you have found them out, you may no longer be able to negotiate with them: to preserve your reputation, you can’t be known as a person who does business with liars.13 For example, imagine that you know your employee has falsified a few expense reports. You don’t want to fire him, but you want him to change his behavior. However, you can’t let him know that you know about the past transgressions, because then you would have to fire him: your company’s policy would require it. In this situation, naming the ethical issue would make it harder to work together in the future, even if he was committed to no longer stealing from the company.

  Often you can find creative ways to signal or hint to the other side that their unethical behavior won’t work or has been found out, while leaving the message ambiguous enough to permit both sides to continue working together.

  How Much Do I Have to Tell My Client?

  As we’ve seen, it can be quite easy for a lawyer to manipulate his client to serve his own interests. For example, many lawyers admit to lowballing their clients in order to set achievable expectations. If the client doesn’t expect much, then whatever settlement or deal the lawyer reaches will seem like a victory. Some lawyers may even lie to their clients to look good. For example, if the other side has made an oral offer of $50,000 to settle a client’s claim, a lawyer might first tell the client that the other side offered $35,000, and then—days later—tell the client that after strenuous negotiations the other side increased the offer to $50,000.14

  Lawyers may also exaggerate in order to delay settlement and run up fees. An attorney might exaggerate negative comments made by the other side and try to excite his client into continuing litigation. Or he may twist his assessment of the value of the client’s claim and argue that an existing settlement offer is insufficient. The lawyer, in short, may manipulate the client’s perceptions for the lawyer’s own ends.

  Finally, lawyers sometimes withhold information for the opposite reason: to make ending a negotiation easier and quicker. This can be done in the name of serving the client’s “real” interests. If a lawyer has spent a great deal of time counseling a stubborn and frustrating client, manipulating information may seem easier than continuing these difficult conversations. But this rationalization also can be merely a pretense for advancing the lawyer’s interests at the client’s expense.

  Obviously a lawyer should not lie to his clients. And saying the other side offered $35,000 when the offer was $50,000 is a lie that most lawyers would consider outrageous. But these situations are often less about lying per se than about shading the truth or not disclosing information. What do the Model Rules say about these issues? Model Rule 1.4 requires lawyers to keep clients “reasonably informed about the status of a matter and promptly comply with reasonable requests for information.” Rule 1.4(b) requires lawyers to explain matters “to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” And Comment 1 to Rule 1.4 says that when a written offer is obtained, the attorney “should promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.”

  Most commentators go further and urge attorneys to apply Rule 1.4 to a verbal offer as well. Although the Rule doesn’t technically apply, the underlying purpose of Rule 1.4 is to keep a client “reasonably” informed about the progress of her legal matter. An attorney’s failure to report back to a client should therefore be considered a violation of professional canons if the lawyer’s actions leave the client so in the dark that the client cannot be said to be able to make an informed decision. In our opinion, this includes a failure to transmit a verbal settlement offer or an attempt to manipulate the client’s impression of a settlement offer through lowballing or other tricks.

  At the same time, it is important to note that the Model Rules leave an attorney a great deal of freedom and flexibility to decide for himself what amount of information-sharing should take place with his client. Even if an attorney must transmit both written and verbal settlement offers, there is information that the attorney may not be required to share. For example, the codes do not require an attorney to discuss what happened at the negotiation table, what was said, what strategy or tactics the attorney used, or how the other side reacted. If an attorney employs very aggressive hard-bargaining tactics, for example, and the other side reacts negatively and refuses to
continue negotiating, is the attorney under a professional obligation to explain what tactics he employed and what the consequences were? Or can the attorney merely advise the client that the other side has refused to continue discussions? The codes seem to suggest that if a client asks for such information, the lawyer must provide it. In the absence of a direct request, however, the lawyer may not have a duty to disclose such information to the client.

  We nevertheless urge attorneys to share such information with their clients, or at least to negotiate explicitly with their clients about the kind of information that the client wants. Being interest-based and client-centered may require a shift in the lawyer’s implicit stance toward the client. But at base, effective lawyering requires that a lawyer see her client as a person with valuable information from which the lawyer can learn, and as a person deserving the opportunity to make an informed choice about his legal affairs. The lawyer’s job is to provide the client with the information he needs to make such choices.

  Aren’t I Supposed to Be a “Zealous Advocate”?

  An attorney is supposed to champion the client’s cause, and as a consequence, many lawyers claim that a duty of “zealous advocacy” requires them to do everything that isn’t clearly forbidden. But this often places lawyers in an uncomfortable position. Because defending a client’s interests is paramount, attorneys may fear that adopting any negotiating strategy other than extreme hard bargaining somehow violates a basic duty to their client.