To Lie or Not to Lie: That Is the Question

By Leigh Wilco

 

In a recent mediation, it became clear to me that one of the lawyers was not being forthright with the facts. He kept claiming that he had information that would have a major negative impact on the other side’s case. However, when pressed, he was very vague about it and refused to show the document that was the source of this bombshell information, even though he claimed to have it. Not surprisingly, the other side completely discounted the impact of this information since he would not provide the proof. I don’t want to say that he was fabricating this “evidence” but his credibly was damaged.

 

It got me thinking about honesty in the mediation setting. Most of us learn early in life that we should not lie. But we also learn that little fibs and “shading the truth” happen all the time. But what about in mediation. Is it OK to fib or even outright lie?

 

What You Can Say—and What You Can’t You Say—at Mediation

 

In a mediation, is it OK to say “that is all the authority I have” or “we cannot and will not go any lower” if you know that is not true? I think most lawyers would say that is okay to do so; in fact, these kinds of statements are used regularly when trying to get the best result for your client. Arguably it could be malpractice to be required to say otherwise, such as “this is our final offer, but really we can go higher/lower if you insist.”

 

So how do we reconcile that with ABA Model Rule 4.1, which states that: In the course of representing a client a lawyer shall not knowingly:

 

(a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6. (emphasis added).

 

How do we square Rule 4.1 with making these kinds of statements at mediation? Fortunately, Formal Opinion 06-439 recognizes that there are times when “puffery” or posturing is allowed to exaggerate a strength or weakness. It applies in situations in which the third person would not be expected to rely on the truthfulness of your statement. That would certainly seem to apply to an arms-length negotiation situation, such as mediation.

 

But how far does that go? Can you lie about the facts of the case? Do you have an obligation to inform the other side if they are mistaken about the facts or the law? As with so many things in the legal world, it depends.

 

When You Needn’t Disclose Facts or Law

 

Based on Model Rule 4.1, in most cases you do not have an affirmative duty to tell your opponent if he or she is mistaken about the law or the facts. [Comment (1) to Rule 4.1.] Under this rule, a party has no obligation to correct his or her opponent about the statute of limitations or caselaw. See Formal Opinion 95-387. For example, if in a pre-litigation mediation the other side states that the statute of limitations will not expire for another six months and you know that it will expire in 10 days, you do not have a legal obligation to correct that statement. (Whether you should as a matter of ethics or professionalism is another question.)

 

Similarly, if the other side concedes that the case law bars a claim when you know that the case he or she is relying on has been reversed, you do not have a duty to correct the other party on the law.

 

Conversely, as opposed to staying silent, you cannot affirmatively state that the statute of limitations will not expire for another six months when you know that is not true. Nor can you argue that a specific case bars the other side’s claims when you know that case has been reversed.

 

The difference is that you have no obligation to correct a legal misstatement made by your opponent, but you cannot knowingly misstate the law to your advantage.

 

When You Must Disclose Facts or Law

 

There are, however, times that you have an obligation to inform the other side of the correct facts. For instance, you have an obligation to inform the defense that the plaintiff has died in a bodily injury case. [Formal Opinion 95-397.] This is an instance in which it is not permissibly to keep silent when the other side is mistaken.

 

Likewise, the courts have made it clear that you cannot affirmatively misstate or fail to disclose the proper amount of insurance coverage available. Attorneys have been disciplined for misrepresenting the amount of insurance coverage and such a misrepresentation, presumably including the failure to correct a known mistaken belief by the other side, can also result in having the settlement set aside. While it could be argued that failing to correct a misstatement is not the same as affirmatively misstating the amount of coverage, a stronger argument can be made that by failing to speak up when you know that the other side is mistaken is the same as intentionally misleading your opponent. It is certainly a risk that you should not take.

 

It is not as clear if one party believes a witness, rather than a party, is available and you know that the witness has died. Or when the other side believes that he or she has the complete contract, but you know that there was an addendum signed that helps the other side’s case. As previously stated, there is a difference between keeping silent and not correcting a misconception as opposed to affirmatively stating a fact that you know is not true.

 

Keep in mind, that not speaking up can have other consequences. In addition to the professionalism and ethical considerations, if an opposing lawyer discovers that you knew s/he was mistaken and you stayed silent and let the lawyer act on that misconception, it will no doubt have an impact on how you are viewed in the profession and for future interactions.

 

So “lie” is too strong a word to use to describe what is permissible. We are allowed to fudge, engage in puffery, and poster in the zealous representation of our clients. But for ethical, moral, and practical reasons, it is best not to push the envelope too far. Make sure you know what you can and can’t say at mediation and when you should correct a misconception. Going past the acceptable bounds can cost you your credibility, the settlement and potentially your law license.

 

 

About Leigh Wilco

Leigh Wilco has been mediating cases for more than 10 years, settling more than 80 percent of them. He also arbitrates real estate and commercial disputes and has been appointed by the courts as a special master and as a receiver. Leigh has been practicing law in Atlanta for over 40 years, representing plaintiffs and defendants in a variety of matters.