'Caucused Mediation,' a Wolf in Sheep's Clothing

Having graduated law school in 1960, I was not exposed to any formal course on negotiation. That is something that has come into vogue only in later years. So I came from the point of view that "anything goes" when it comes to negotiation. The goal was to do whatever had to be accomplished in order to win for the client. Well, in case you haven't noticed, things have changed since 1960.

Law schools have entered the arena of "hard knocks" bargaining and have attempted to establish a more civil and collaborative approach. Nonetheless, an appreciably high proportion of the legal profession still feel obligated to pursue the approach that zealously representing one's client requires that everything be done to achieve a win.

I make several MCLE presentations each year concerning ethical considerations when representing clients in mediation. It never ceases to amaze me at the resistance that lawyers exhibit when receiving this information. They appear to rise up en masse expressing resentment when challenged concerning their practice of doing whatever they feel necessary to see to it that their clients prevail. Their defense is based on the ground that their professional obligation as lawyers is to be zealous advocates for their clients.

While current rules of professional ethics appear to permit strategic behavior and deception unless specifically prohibited, the common law does provide a cause of action for fraudulent misrepresentation where the reliance thereon was justifiable. While the duty of truthfulness does not require providing an opponent with relevant facts, except where nondisclosure would constitute fraud, the obligation to be truthful would include avoidance of material deliberate lies as well as uncorrected mistakes and omissions.

Where the parties are equal in bargaining power there is a certain amount of "puffing and bluffing" that is permitted. But making misleading partial disclosures, hiding fiduciary relationships, possessing vital information not accessible to the other side, and violating special codified duties of disclosure set the stage for affirmative duty of disclosure. The key element requiring disclosure is whether the truth is expected because the statements or omissions are "material."

ABA Formal Opinion 06-439 considers ABA Model Rule of Professional Conduct 4.1 and attempts to deal with this in the context of mediation. MR 4.1 prohibits a lawyer "from knowingly making 'a false statement of material fact or law to a third person.'" The opinion provides that, "in the context of a negotiation, including a caucused mediation, a lawyer representing a client may not make a false statement of material fact to a third person. However, statements regarding a party's negotiating goals or its willingness to compromise, as well as statements that can fairly by characterized as negotiation 'puffing,' ordinarily are not considered 'false statements of material fact' within the meaning of the Model Rules." Examples given are understatement of a willingness to resolve the dispute by making concessions, maximizing strengths or minimizing facts or legal standing, as well as other negotiation tactics where there would be no reasonable reliance and thus distinguishable from "a false statement of material fact" justifying reliance.

The purpose of Formal Opinion 06-439 was "to consider whether a different standard should apply to a lawyer representing a client in caucused mediation." It was determined that there is no distinction as to the requirement of truthfulness (whether higher or lower standard) between a caucused mediation and other types of negotiation because the Model Rules do not distinguish between the two. Therefore, the opinion concluded "the same standards that apply to lawyers engaged in negotiation must apply to them in the context of caucused mediation." The exceptions cited were those occurring when a lawyer appears before a "tribunal" or where a lawyer's obligation to provide competent representation would require that the lawyer be completely candid with the mediator and the other side in order to achieve the goals of his or her client.

Mediation ethics scholar Kimberlee K. Kovach has raised opposition to Formal Opinion 06-439. She asserts that the opinion "has dealt a setback to the progress of mediation as a genuine constructive and collaborative process...allowing deceit under the characterization of 'puffery' in negotiation." She is concerned that the opinion permits attorneys not only to misrepresent to each other but also to the mediator, and interferes with the duty of the mediator to encourage candor in the process. This prevents the full potential of mediation being achieved and reverses the gains accomplished in changing the mindset of lawyers from "adversarial, win-lose conduct" to "a more problem solving, integrative approach" that normally rejects the former.

The aspect of my ethics presentation that seems to cause the most consternation to the attending lawyers occurs as they consider what should be their response to the mediator when asked separately in caucus in confidence what their client's bottom line is so the mediator can assist them in strategizing to achieve a satisfactory result. Most of the time the response is either that they won't say or will give some fictitious figure. They don't seem to accept that withholding that information as confidential is permitted but giving a fictitious figure is not. This is especially true in a court-connected mediation where (as in the case of the California Court of Appeal for the 2nd Appellate District) the lawyers must be candid with the mediator because, "the court-appointed mediator shall be deemed for all purposes to be a 'person presiding at [a] judicial or quasi-judicial proceeding'."

Thus lying to the court-appointed appellate mediator would be a violation of California Rules of Professional Conduct, Rule 5-200 (A) and (B). Those subsections require that in presenting before a tribunal, the lawyer must "employ...such means only as are consistent with the truth...[and] not seek to mislead the judge, judicial officer, or jury by an artifice of false statement of fact or law."

The ethical cloud hanging over the lawyer who adamantly insists on reverting to or continuing the practice of ignoring the problem solving, integrative approach to negotiating in favor of pursuing an adversarial, win-lose posture in mediation is indeed heavy.