The Duty of Candor in Mediation

Mon, Oct 17th, 2016 | by Miles Mediation and Arbitration | Mediation Events | Social Share

by Burke B. Johnson, Esq.

Much has been written about the extent to which candor during mediation is required.  Some authors argue that deception is part of the “game” of negotiation and is fully expected to occur, whereas others argue that legitimate negotiation requires complete honesty.  This article addresses the issue not from the perspective of scholarly debate, but based upon application of the Georgia Rules of Professional Conduct and the Professionalism Principles adopted by the Chief Justice’s Commission on Professionalism.

Comment 5 to Rule 2.4 provides “[l]awyers who represent clients in alternative dispute-resolution processes are governed by the Rules of Professional Conduct. When the dispute-resolution process takes place before a tribunal, as in binding arbitration (see Rule 1.0(r)), the lawyer’s duty of candor is governed by Rule 3.3. Otherwise, the lawyer’s duty of candor toward both the third-party neutral and other parties is governed by Rule 4.1.”  Because mediation typically occurs outside the context of a “tribunal” as defined by Rule 1.0, this article will focus on Rule 4.1.

Rule 4.1 provides that “[i]n 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.”

Comment 1 to this Rule provides “[a] lawyer is required to be truthful when dealing with others on a client’s behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false. Misrepresentations can also occur by failure to act.”

Comment 2 to the Rule provides “under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact.  Comments which fall under the general category of ‘puffing’ do not violate this rule.  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 in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud.”

Comment 3 provides that “[p]aragraph (b) recognizes that substantive law may require a lawyer to disclose certain information to avoid being deemed to have assisted the client’s crime or fraud. The requirement of disclosure created by this paragraph is, however, subject to the obligations created by Rule 1.6: Confidentiality of Information.

The penalty for violation of Rule 4.1 is severe.  In re Ballard, 280 Ga. 504, 629 S.E.2d 809 (2006), the Supreme Court ordered disbarment of an attorney based upon violations of Rule 4.1.

In addition to the applicable Rules of Professional Conduct, Georgia lawyers should also be mindful of and apply the Principles of Professionalism adopted by the Chief Justice’s Commission on Professionalism when negotiating at mediation.  As part of the “Lawyer’s Creed,” Georgia lawyers are encouraged  to offer fairness, integrity, and civility to the opposing parties and their counsel.  The “Aspirational Statement On Professionalism” further provides that Georgia lawyers should “act with complete honesty.”

The American Bar Association addressed the application of Model Rule 4.1 (upon which Georgia Rule 4.1 is based) to mediation in Formal Opinion No. 06-439.  There, the ABA concluded “[u]nder Model Rule 4.1, in the context of a negotiation, including a caucused mediation, a lawyer representing a party 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 be fairly characterized as negotiation puffing are ordinarily not considered false statements of material fact within the meaning of the Model Rules.”

Thus, the opinion notes, “a lawyer may downplay a client’s willingness to compromise, or present a client’s bargaining position without disclosing the client’s ‘bottom line’ position, in an effort to reach a more favorable resolution. Of the same nature are overstatements or understatements of the strengths or weaknesses of a client’s position in litigation or otherwise, or expressions of opinion as to the value or worth of the subject matter of the negotiation. Such statements generally are not considered material facts subject to Rule 4.1.”

However, a party’s actual bottom line or the settlement authority given to the lawyer is a material fact.  Near the conclusion of the opinion, it is noted “care must be taken by the lawyer to ensure that communications regarding the client’s position, which otherwise would not be considered statements ‘of fact,’ are not conveyed in language that converts them, even inadvertently, into false factual representations. For example, even though a client’s Board of Directors has authorized a higher settlement figure, a lawyer may state in a negotiation that the client does not wish to settle for more than $50. However, it would not be permissible for the lawyer to state that the Board of Directors had formally disapproved any settlement in excess of $50, when authority had in fact been granted to settle for a higher sum.”

Lawyers should always remember that their colleagues will judge them by their conduct.  Despite the overall number of lawyers practicing in Georgia, most actually practice in a small “community,” (whether truly geographic, as in a small town, or by practice area) and thus, are likely to encounter each other on a routine basis.  A lawyer’s reputation for honesty or the lack thereof spreads quickly, and the deceitful lawyer will soon lose the trust and respect of professional colleagues.

Burke Johnson, Esq. is a mediator with Miles Mediation in Atlanta.  He has over 30 years of experience handling cases of all complexities and sizes, including  automobile, motorcycle and trucking wrecks; premises liability actions (including cases involving claims of negligent security); product liability claims; construction defect claims; commercial general liability claims; professional liability claims; insurance coverage matters; life, health and disability insurance claims; ERISA benefit claims; business and commercial disputes; elder care and adult guardianships; probate and estate litigation; and family law matters. 

To learn more about Burke or to schedule a mediation, please call 678-320-9118 or visit his online calendar.