Commentary: Litigation tactics in mediation: Are they ethical?

(This article originally ran in Massachusetts Lawyer, Boston, Massachusetts, another Dolan Media publication).

As litigation counsel, have you at some point bluffed your opponent, protected sensitive information, overstated your case or been less than candid?

If so, would you have considered it part of the zealous representation you owe your clients in preparing for trial?

As mediation counsel, your role is very different. Rather than winning through adjudication, in mediation you help your clients work toward resolution by recognizing their interests, addressing case weaknesses and exploring solutions.

In transitioning from litigation to mediation advocacy, lawyers often struggle with how - or whether - to use adversarial litigation tactics in the settlement process.

Here are some issues you may face:

Bluffing about the value of the case

Mediators often explore with each party the best alternative to a negotiated agreement (BATNA). In so doing, the mediator will challenge the lawyers to discuss candidly their case weaknesses and any key concerns.

Lawyers often respond by shrugging the negative evidence, overstating the supporting evidence, or both. The tactic is clear: to bluff the mediator to pressure the other side to make greater concessions. Is this ethical?

The model rules recognize the need for zealous advocacy and specifically permit the lawyer to bluff about the case value in negotiations. The ethical guidelines also state that the prohibition against making false statements of material fact or law covers only representations of fact and not statements of opinion, such as case value.

Is bluffing about the case value therefore recommended? Not if it impacts negatively the mediation. Extreme bluffing could offend the opponent or the mediator, and in particularly egregious cases, jeopardize the client's ability to settle.

Bluffing about settlement authority

Case example: The lawyer representing a corporate defendant tells the mediator that $30,000 is the limit of her settlement authority. She also states that additional authority during the mediation would be impossible because the individuals needed to participate won't be available that day.

In reality, she is authorized to settle for much more and could reach those needed for more authority at any time. Is this ethical?

While the ethical guidelines state that a lawyer's conduct in negotiating a settlement should be characterized by honor and fair- dealing, bluffing about settlement authority generally is considered fair game.

While bluffing can be frustrating to the recipients, experienced mediators deal with it often and will help the parties work through it.

Bluffing about the applicable law

While a good faith argument stretching the applicable law might be tolerated, bluffing about the applicable law is a misrepresentation, which is unethical conduct under both the ethical guidelines and the model rules.

Bluffing about the applicable law in mediation is often a strategic mistake as well. Mediators typically are lawyers or retired judges experienced in the industry and knowledgeable about the law. Misstating the law makes the lawyer appear not credible, unprepared, or both. The consequence will be an erosion of trust with the mediator and the opponent, making settlement less likely and potentially harming the client.

Withholding negative evidence

Lawyers tend to guard evidence that hurts their client's case. Case example: The lawyer representing a terminated employee in a gender-discrimination case fails to mention that his client was disciplined for excessive absences. Is this omission ethical? Is it advisable?

Although lawyers generally are not obligated to make affirmative disclosures of fact when dealing with non-clients, the omission is not advisable. The case example continues with the defendant's lawyer raising the attendance record as a legitimate reason for termination. By omitting this fact, the plaintiff's lawyer allowed the defendant's lawyer to weaken his client's case and negotiating position.

Withholding positive evidence

Occasionally, lawyers know of a fact that would weaken their opponent's case, but rather than share it during mediation, they save it as ammunition for trial if the mediation fails.

For example, the employer in a sexual-harassment retaliation case had several e-mails that documented that the plaintiff was being terminated long before the sexual harassment allegedly took place. Initially, the company's lawyer was unwilling to share the e-mails, thinking they might be powerful evidence to save for trial. Is this advisable?

Lawyers often struggle with the question of whether to lay all of their cards on the table in mediation or save some of them for trial. The questions should be instead: (a) What is the goal of the mediation process, and (b) How is the client better served?

If the goal is trial preparation, then it wouldn't be ethical to proceed with the mediation. Further, since the e-mails would be produced eventually in discovery, withholding them during mediation wouldn't advance toward that goal.

If the goal is settlement, the evidence should be used as negotiating leverage: to help the other side re-value its case. In this example, the defendant's lawyer eventually agreed to share the e- mails with the plaintiff, who drastically reduced her demand and the case settled within minutes.

Misrepresenting facts

Case example: In mediation, the lawyer for the plaintiff demands out-of-pocket damages for the cost of visits to his psychologist for emotional distress, even though the visits were covered by his health insurance. Is this ethical?

Both the model rules and the ethical guidelines make clear that misrepresentations of material fact are unethical in negotiating a settlement. Courts have held that damages are material facts under the model rules.

Misrepresenting insurance coverage

Defendants often are reluctant to disclose the limits or even the existence of insurance coverage. The fear is that the plaintiff will insist on negotiating in a higher range if he knows that deeper pockets are involved.

Courts are split on whether misrepresentations about insurance coverage are actionable, and there is no clear mandate in non- coverage cases.

Conflicts of interest

Mediation tends to expose some of the inherent conflicts between the lawyers' interests and those of their clients. While some lawyers stand to benefit by continued litigation and others by early settlement, they all remain obligated to address their clients' interests in evaluating settlement proposals.

Many conflicts involve fees; for example, when a settlement offer requires the plaintiff to forfeit attorney's fees in exchange for other favorable settlement terms.

The U.S. Supreme Court addressed this issue in Evans v. Jeff, 101 S. Ct 1531 (1986), and held that attorney's fees recovered belong to the plaintiff, not the plaintiff's attorney.

In other cases, the defendant offers to pay a specific sum representing the plaintiff's reasonable attorney's fees, which is less than the plaintiff's lawyer believes is reasonable. The result is a conflict between the plaintiff's lawyer and client over the settlement proposal.

The ethical guidelines admonish lawyers not to interfere with settlement: When an attorney's fee is a subject of settlement negotiations, a lawyer may not subordinate the client's interest in a favorable settlement to the lawyer's interest in the fee. [Section 4.2.2.]

Lack of good faith in negotiating

Occasionally in mediation, a lawyer shows little interest in reaching settlement. He initially may resist advancing a reasonable settlement proposal or may appear more interested in learning more about the case. Is this ethical?

Under the ethical guidelines, lawyers can't use the settlement process in bad faith, such as solely to embarrass, delay or burden another party. It is also bad faith to represent that the client is genuinely interested in pursuing a settlement, when the client actually has no interest in it and is using it instead to delay or secure discovery.

Despite these mandates, the ethical guidelines also provide that it is not bad faith for a party to refuse to engage in settlement discussions or refuse to settle. Thus, the ethical guidelines seem to distinguish between refusing to pursue settlement (ethical) and abusing the mediation process (unethical).

Threats

Under the ethical guidelines, lawyers can't extort or make unlawful threats to induce settlement. However, some threats are permissible, including the threat to file a civil lawsuit if there is a good faith basis in the claim, and the threat to file a criminal lawsuit in certain circumstances.

A threat for negative publicity is more complicated. While it is ethical to point out that a private resolution could avoid public embarrassment, courts tend to disfavor specific threats to contact the press.

Threats are not recommended in mediation in any event. More often than not, the opponent will become defensive and look for ways to fight back. Escalating a conflict with threats will create more issues between the parties and make it more difficult to reach resolution.

Interfering with settlement

Perhaps the most tragic mistake lawyers make in mediation is not recognizing their clients' interests. In an extreme case example, the defendant's lawyer refused to acknowledge his client's desire to pay the modest settlement proposal made by an ex-employee in a wrongful termination case, because he believed his client could ultimately prevail at trial. His client, an ailing, elderly owner of a hairdressing salon, had a strong case but simply wanted the litigation to end.

In other common examples, the defendant's lawyer confirms that paying to settle is the same as admitting wrongdoing, or the plaintiff's lawyer advises that the settlement offer doesn't cover the losses and should be rejected.

These are examples not only of poor counseling, but questionable ethics. The model rules require the lawyer to abide by the client's decision regarding the objectives of representation and consult with the client as to the means by which they are to be pursued.

Since it is the client, not the lawyer, who decides the objectives, the lawyer is obligated to explore the client's interests in mediation.

Client communication

Can a lawyer reject a proposal without discussing it with the client? According to the model rules, yes, but only if the lawyer and the client made the decision in advance. However, it is never advised in mediation.

Since mediation requires full participation throughout the entire process and tends to transform the parties' views of the case, it is impossible for a party to decide its firm bottom line before the conclusion of the mediation.

Bette J. Roth is a mediator and arbitrator, as well as executive director of the Middlesex Multi-Door Courthouse in Cambridge (www.multidoor.org).

Copyright 2005 Dolan Media Newswires
Provided by ProQuest Information and Learning Company. All rights Reserved.