Negotiation: What Statements and Omissions Are Ethical?

You know that it is unethical to make a false statement of material fact when negotiating, but what about a statement about an opinion? And when is your silence unethical? Caveat: Some jurisdictions do not limit rulings on these ethical issues to material facts.

Where’s the Line Between Fact and Opinion?

Statements as to a party’s intentions about an acceptable settlement of a claim are ordinarily not deemed to be statements of fact. (Model Rules of Professional Conduct, Rule 4.1, official comment.) Whether a statement should be characterized as fact or opinion depends on whether it is reasonably apparent that the person to whom the statement is addressed would regard it as one of fact or as merely an expression of the speaker’s state of mind. (Restatement (Third) of the Law Governing Lawyers, Sec. 98, comment c.)

What Factors Apply in Making That Distinction?

Whether a statement should be characterized as fact or opinion depends on the following factors:

• the past relationship among the negotiating persons,
• their apparent sophistication,
• the plausibility of the statement on its face,
• the phrasing of the statement (for example, whether the statement is presented as one of fact),
• related communications,
• the known negotiating practices of the community in which both are negotiating and similar circumstances.

When Is Your Silence Unethical?

Your duty to disclose facts in a negotiation arises in three circumstances:

1. You have previously made a false statement of material fact or a partially true statement that is misleading by reason of omission.
2. You learn of your client’s prior misrepresentation of a material fact.
3. You learn that your services have been used in the commission of a criminal or fraudulent act by your client unless such disclosure is prohibited by the ethical duty of confidentiality.

What If Opposing Counsel Has Made a Material Mistake of Fact?

In the negotiation context, you should not exploit opposing counsel’s mistake of material fact induced by you or your client. In that circumstance, you should disclose information to the extent necessary to prevent the opposing party’s reliance on the mistake of material fact.