Ethical Rules
Applied to
Contract and
Settlement
Negotiations
ACC Houston
November 13, 2012
Charlie Meacham
Samantha Trahan
Bass Wallace, Jr.
ACC Houston 11/13/12
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Let’s Start with Some Rules
Texas
Disciplinary Rules of Professional Conduct
Texas Lawyer’s Creed
ABA’s Model Rules of Professional Conduct
ABA Section of Litigation – Ethical Guidelines for
Settlement Negotiations
International Bar Association Principles
Council of Bars and Law Societies of Europe
(CCBE) Code of Conduct
Texas-Mexico Bar Association International
Lawyer’s Creed
ACC Houston 11/13/12
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It’s not my fault.
During
settlement negotiations, you
offer to settle by paying $650,000.
The mediator returns with a mediation
agreement listing $605,000.
Do you correct the amount?
Mediator mistakenly conveyed $605,000.
Mediator mistyped the form agreement.
ACC Houston 11/13/12
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ABA “practical, user-friendly guide”
During
settlement negotiations and in
concluding a settlement, a lawyer is
the client’s representative and
fiduciary, and should act in the client’s
best interest and in furtherance of the
client’s lawful goals.
A lawyer’s conduct in negotiating a
settlement should be characterized by
honor and fair-dealing.
ABA Section of Litigation – Ethical Guidelines for Settlement Negotiations
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A
lawyer shall treat client interests as
paramount, subject always to there being no
conflict with the lawyer’s duties to the court
and the interests of justice, to observe the law,
and to maintain ethical standards.
A lawyer shall at all times maintain the highest
standards of honesty, integrity and fairness
towards the lawyer’s clients, the court,
colleagues and all those with whom the
lawyer comes into professional contact.
It is also true that there are different standards
expected towards the client, the court or a
professional colleague since the lawyer has
different responsibilities towards each category.
International Bar Association Principles on Conduct for the Legal Profession
ACC Houston 11/13/12
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734 lawyers …
Mr.
tests positive for a deadly STD
Mr. sends a demand letter to Ms.
Ms. suggests their lawyers meet
Mr. confides in his lawyer that his
tests were false-positives.
Mr. requests his lawyer keep quiet.
Art Hinshaw and Jess K. Alberts,
Attorney Negotiation Ethics: An Empirical Assessment
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Do you keep quiet?
62% would not agree to the client’s demand
Personal
integrity
Violation of professional conduct
19% would agree
Protected
attorney-client privilege
Specific client request
No affirmative duty to inform opposing party
ACC Houston 11/13/12
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lawyer shall not assist or counsel a client
to engage in conduct that the lawyer
knows is criminal or fraudulent.
When a lawyer has confidential
information clearly establishing that a
client is likely to commit a criminal or
fraudulent act that is likely to result in
substantial injury to the financial interests
or property of another, the lawyer shall
promptly make reasonable efforts under
the circumstances to dissuade the client
from committing the crime or fraud.
Texas Disciplinary Rules of Professional Conduct
ACC Houston 11/13/12
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ABA 4.1 Truthfulness in
Statements to Others
In
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.
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Materiality … “depends”
False
statement
of law
False statement
of material fact
Know its false
Intend to mislead
Opinion
/
Conjecture
Estimates of prices
or value
Intentions as to an
acceptable
settlement
Identification of the
principal
Texas Disciplinary Rules of Professional Conduct
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If a client directs the lawyer to act, in the context
of settlement negotiations or in concluding a
settlement, in a manner the lawyer reasonably
believes is contrary to the attorney’s ethical
obligations or applicable law, the lawyer should
counsel the client to pursue a different and lawful
course of conduct. If a mutually agreeable and
proper course of action does not arise from the
consultation, the lawyer should determine
whether withdrawal from representing the client is
mandatory or discretionary, and should consider
whether the circumstances activate ethical
obligations in addition to withdrawal, such as
disclosure obligations to a tribunal or to higher
decisionmaking authorities in an organization.
ABA Comment on Rule 4.1
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You snooze you lose...
You
are reducing the terms of a
contract to a written agreement. The
buyer’s attorney sends back the final
agreement with the buyer’s signature.
You notice that a hotly contested
provision reverted by mistake back to
previous contract version – to your
client’s immense benefit.
Do you call opposing counsel?
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Core Principle: the dignity and
honour of the legal profession, and the
integrity and good repute of the individual
lawyer.
TMBA: A lawyer owes to opposing counsel,
in the conduct of legal transactions …
courtesy, candor, cooperation and
scrupulous observance of all agreements
and mutual understandings.
TDRPC: As negotiator, a lawyers seeks a
result advantageous to the client but
consistent with requirements of honest
dealing with others.
CCBE
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I have a secret.
Day
18 of a jury trial.
Counsel negotiates over the lunch hour
and plaintiff’s demand is now down to
$700,000.
Client remained in the courtroom and
overheard the jury agree to a $4,000,000
award.
Client says accept the demand right now
and keep your mouth shut.
Do you accept in silence?
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Loyalty to the client is of the essence of
the lawyer’s role.
TDRP: A lawyer shall not knowingly reveal
confidential information of a client to a person
that the client has instructed is not to receive the
information or anyone else…
ABA: A lawyer shall not reveal information
relating to the representation of a client unless
the client gives informed consent.
IBA: The loyal defence of a client’s case may
never cause advocates to be other than
perfectly candid, subject to any right or privilege
to the contrary which clients choose them to
exercise, or knowingly to go against the law.
CCBE:
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If you don’t, I will.
Your
client has given you pictures of
the opposing party’s CEO.
They are embarrassing.
Client says – “Tell the lawyer I’ll post
them on Facebook unless they
agree to renew our contract.”
Do you issue the Facebook threat?
The
pictures are / are not relevant.
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In representing a client, a lawyer shall
not use means that have no substantial
purpose other than to embarrass, delay,
or burden a third person, or use
methods of obtaining evidence that
violate the legal rights of such a person.
Comment: Although in most cases a lawyer’s
responsibility to the interest of his client is
paramount to the interest of other persons, a
lawyer should avoid the infliction of needless harm.
Texas Disciplinary Rules of Professional Conduct
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If a lawyer finds a client’s proposed
strategy or goal regarding settlement to
be repugnant, but not contrary to
applicable law or rules, or if the lawyer has
a fundamental disagreement with the
client’s strategy or goal, the lawyer may
continue the representation on the
condition that the lawyer will not be
required to perform acts in furtherance of
the repugnant strategy or goal, or may
withdraw from the representation.
ABA Comment on Rule 4.1
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Ethics Opinion 214
Wife
sues husband for divorce.
Husband wants his attorney to notify
the wife's attorney of an affirmative
defense (infidelity), to be used as
"trading matter" to secure a
favorable property settlement.
Can you use the threat of
an affirmative defense?
ACC Houston 11/13/12
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Unanimous opinion
In the absence of other facts
indicating lack of candor to the
court, the attorney may use this
information in an attempt to
favorably influence negotiations for
settlement.
ACC Houston 11/13/12
Texas Lawyer’s Creed
I
am passionately proud of my
profession.
Therefore, “My word is my bond.”
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Bass Wallace, Jr.
Tetra Technologies, Inc.
24955 Interstate 45 North
The Woodlands, TX 77380
(281) 367-1983
bwallace@tetratec.com
Charlie Meacham
Samantha Trahan
Gardere Wynne Sewell
1000 Louisiana Suite 3400
Houston, TX 77002
(713) 276-5500
cmeacham@gardere.com
strahan@gardere.com
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