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September 30, 2021 Articles

Deception, Dissembling, and Dishonesty in Negotiation: Even If You Can, Should You?

Ethical pitfalls to avoid when engaging in negotiations

By Joan Stearns Johnsen
It may be prudent for you, and better for your client, to decide not to lie and to hone alternative negotiation tactics instead.

It may be prudent for you, and better for your client, to decide not to lie and to hone alternative negotiation tactics instead.

skynesher, iStock

Everyone knows everyone lies in negotiation, true or false? The truth about lying in negotiation is a bit more nuanced. Lying, even in a negotiation, can get you into ethical trouble. And even when you are not technically violating an ethical rule, is lying the best negotiation option?

The ABA Model Rules of Professional Conduct directly proscribe lying to third parties. Model Rule 4.1, Truthfulness in Statements to Others, makes it a violation to make a false statement of material fact to a third person. Rule 4.1 also imposes an affirmative duty to correct a misimpression that you or your client helped create. There is no exception to this prohibition against lying in the Model Rules, and there are no special rules for negotiation. If the negotiations are made during a mediation or settlement conference with a magistrate judge, lying during negotiations could also implicate Model Rule 3.3, Candor Toward the Tribunal, which governs statements to the court. This article focuses on negotiating directly with third parties, conduct governed by Rule 4.1, but litigators should be aware of other rules, such as Rule 3.3, that could be implicated by lying.

The recognition of dissembling as a common negotiation practice can be found solely in the comments to Rule 4.1. If your jurisdiction has not adopted the comments (and New York has not), you have no enunciated exception for lying in a negotiation.

The comments to Rule 4.1, specifically paragraph [2], provide:

Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category. . . .

Notably, this comment to Rule 4.1 does not condone lying; rather, it states only that certain types of statements during negotiation could be considered puffery or something other than a statement of a material fact. Therefore, you still may not lie as to material facts. In some jurisdictions—Florida is an example—the rule is not limited to material facts and there is no exception for materiality. To comply with Rule 4.1, you cannot lie about whether you have competing offers as you negotiate the sale of a business. Also, even if the valuation of the company was accurate when you provided it to the prospective buyer, if you discover errors in your initial analysis, you have an affirmative duty to correct the misimpression you created.

Lying in a negotiation is not limited to opinions of value or price or your “bottom line.” You may say no in response to the question “Would your client accept $8 million to settle?” You may say no even if your client would happily accept 8 million. Maybe you choose to respond this way because the other side posed this question at an exploratory phase of the negotiation? Maybe your objective is to explore an even better result?

Although these lies are technically permissible, they present potential risks to you and your client. If you lie and say, “My client would never take 8 million,” you may at some point lose credibility when you ultimately do settle for $8 million or possibly even less. Going back on your bluff will broadcast that your word cannot be trusted. This will damage your credibility and have an impact on your reputation in future negotiations, with opposing counsel, the opposing party, and the mediator.

An even greater risk involved with lying about opinions of value or bottom lines is that you might be believed. If you say, “My client would never settle this lawsuit for 8 million,” although you know he would, and the other party believes you, the other party may walk away from negotiations and your client may lose the opportunity for a deal it would have found acceptable. The possibility exists that the other side will not engage with you when it otherwise might have. If you lose the deal at 8 million, you may not run afoul of Rule 4.1, but you may be in violation of Rule 1.2, Scope of Representation and Allocation of Authority Between Client and Lawyer.

An alternative and better approach than lying is to practice blocking or framing techniques. A blocking technique is to sidestep the question. Instead of answering the question directly, you might pose another question and refocus the discussion. When done deftly, this technique shifts the conversation without your adversary even realizing it. Another approach is to frame your answer in a way that, though not untrue, allows you to protect your bottom line while leaving the door open as the negotiation progresses. For example, instead of saying that your client will not accept 8 million, you might say, “My client would not accept 8 million at this time” or “I could not advise my client to take 8 million,” or you might say, “You know this lawsuit is worth more than 8 million.” Although subtle, the differences are significant. They protect not only your bargaining position; they also protect your reputation.

Therefore, from a negotiation skills standpoint, although it may be permissible to lie, it may be prudent for you, and better for your client, to decide not to lie and to hone alternative negotiation tactics instead.

Joan Stearns Johnsen

Joan Stearns Johnsen is an arbitrator and mediator with JSJ-ADR in West Newton, Massachusetts. She is a former chair of the ABA Section of Dispute Resolution.

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