ABA Model Rule 4.1 makes it a violation to “knowingly (a) make a false statement of material fact or law to a third person or to (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. Comment 2 to Rule 4.1 reminds us that in negotiation, “certain types of statements ordinarily are not taken as statements of material fact” but cautions that what is regarded as “fact” depends on the circumstances and so lawyers should exercise caution to avoid criminal or tortious misrepresentation during negotiations.
A mediator who is also a lawyer has duties as well under ABA Model Rule 8.3. Questions about whether the mediator has a duty to report lawyer misconduct under this rule could arise if the mediator believes that the lawyer for one of the parties is making false statements that fall outside the ordinary conventions of negotiation. For a discussion of acceptable hyperbole or posturing in negotiation, see ABA Formal Ethics Opinion 06-439.
ABA Model Rule 3.3, which prohibits lawyers from knowingly making untrue statements of fact to a tribunal, is generally inapplicable to mediation, but does apply when the tribunal itself is participating in settlement negotiations. This would include court-sponsored mediation in which a judge participates. For more information on duties during court-sponsored mediation, see ABA Formal Opinion 93-370.
Talk to Your Client about Honest Disclosure
While lawyers are bound by the ethics rules regarding honesty, clients have no such guardrails to guide them. Consider including a provision in your fee agreement that warns the client of the possible consequences of knowingly misrepresenting, falsifying or withholding material facts in discovery. Once the client learns that honest dealings are not just about their lawyer’s professional responsibility but that the client may suffer consequences such as sanctions, loss of their claims, a desirable settlement, or withdrawal of their lawyer if the client knowingly withholds material facts, even the most reluctant client may be convinced of the importance of full disclosure to their lawyer.
Including a paragraph about the duties and responsibilities regarding honesty and good faith in the fee agreement also makes it difficult for clients to later claim they did not know they could not lie about the facts or that there could be negative consequences if they did.
Mediate with Confidence and Honesty
It may be tempting to hold back discoverable information during mediation in the hopes of gaining an advantage. However, depending on the circumstances, by doing so, you risk violating the ethics rules regarding honesty and misrepresentation and may even put the client’s settlement agreement in jeopardy. Knowing and adhering to the ethics rules and opinions regarding honest dealings with others is the best way to confidently—and ethically—represent the client’s best interests in mediation.