ETH 2015-194
Formal Opinion No. 2015-194
California Ethics Opinions
State Bar of California Standing Committee on Professional Responsibility and Conduct
2015
ISSUE: When an attorney is engaged in negotiations on behalf of a client, are there ethical limitations on the statements the attorney may make to third parties, including statements that may be considered “puffing” or posturing?
DIGEST: Statements made by counsel during negotiations are subject to those rules prohibiting an attorney from engaging in dishonesty, deceit or collusion. Thus, it is improper for an attorney to make false statements of fact or implicit misrepresentations of material fact during negotiations. However, puffery and posturing, such as statements about a party’s negotiating goals or willingness to compromise, are generally permissible because they are not considered statements of fact.
AUTHORITIES INTERPRETED: Rule 3-700(B)(2) of the Rules of Professional Conduct of the State Bar of California.[1]
Business and Professions Code section 6068, subdivisions (b), (c), and (d).
Business and Professions Code section 6106.
Business and Professions Code section 6128(a).
STATEMENT OF FACTS
Plaintiff is injured in an automobile accident and retains Attorney to sue the other driver (Defendant). As a result of the accident, Plaintiff incurs $50, 000 in medical expenses and Plaintiff tells Attorney she is no longer able to work. Prior to the accident Plaintiff was earning $50, 000 per year.
Attorney files a lawsuit on Plaintiff’s behalf. Prior to any discovery, the parties agree to participate in a court-sponsored settlement conference that will be presided over by a local attorney volunteer. Leading up to and during the settlement conference, the following occurs:
1. In the settlement conference brief submitted on Plaintiff’s behalf, Attorney asserts that he will have no difficulty proving that Defendant was texting while driving immediately prior to the accident. In that brief, Attorney references the existence of an eyewitness to the accident, asserts that the eyewitness’s account is undisputed, asserts that the eyewitness specifically saw Defendant texting while driving immediately prior the accident, and asserts that the eyewitness’s credibility is excellent. In fact, Attorney has been unable to locate any eyewitness to the accident.
2. While the settlement officer is talking privately with Attorney and Plaintiff, he asks Attorney and Plaintiff about Plaintiff’s wage loss claim. Attorney tells the settlement officer that Plaintiff was earning $75, 000 per year, which is $25, 000 more than Client was actually earning; Attorney is aware that the settlement officer will convey this figure to Defendant, which he does.
3. While talking privately outside the presence of the settlement officer, Attorney and Plaintiff discuss Plaintiff’s “bottom line” settlement number. Plaintiff advises Attorney that Plaintiff’s “bottom line” settlement number is $175, 000. When the settlement officer asks Attorney for Plaintiff’s demand, Attorney says, “Plaintiff needs $375, 000 if you want to settle this case.”
4. In response to Plaintiff’s settlement demand, Defendant’s lawyer informs the settlement officer that Defendant’s insurance policy limit is $50, 000. In fact, Defendant has a $500, 000 insurance policy.
5. Defendant’s lawyer also states that Defendant intends to file for bankruptcy if Defendant does not get a defense verdict. In fact, two weeks prior to the mediation, Defendant consulted with a bankruptcy lawyer and was advised that Defendant does not qualify for bankruptcy protection and could not receive a discharge of any judgment entered against him. Defendant has informed his lawyer of the results of his consultation with bankruptcy counsel and that Defendant does not intend to file for bankruptcy.
6. The matter does not resolve at the settlement conference, but the parties agree to participate in a follow-up settlement conference one month later, pending the exchange of additional information regarding Plaintiff’s medical expenses and future earnings claim. In particular, Attorney agrees to provide additional information showing Plaintiff’s efforts to obtain other employment in mitigation of her damages and the results of those efforts. During that month, Attorney learns that Plaintiff has accepted an offer of employment and that Plaintiff’s starting salary will be $75, 000. Recognizing that accepting this position may negatively impact her future earnings claim, Plaintiff instructs Attorney not to mention Plaintiff’s new employment at the upcoming settlement conference and not to include any information concerning her efforts to obtain employment with this employer in the exchange of additional documents with Defendant. At the settlement conference, Attorney makes a settlement demand that lists lost future earnings as a component of Plaintiff’s damages and attributes a specific dollar amount to that component.
DISCUSSION
Although attorneys must advocate zealously for their clients (see Davis v. State Bar (1983) 33 Cal.3d 231, 238 [188 Cal.Rptr. 441]), there are limits to an attorney’s conduct, as set forth in the Rules of Professional Conduct and the Business and Professions Code. (See Hawk v. Superior Court (1974) 42 Cal.App.3d 108, 126 [116 Cal.Rptr. 713] [“The duty of a lawyer, both to his client and to the legal system, is to represent his client zealously within the bounds of the law . . .”].) Business and Professions Code section 6068 requires, among other things, that an attorney “employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth.” (Business and Professions Code section 6068(d).)[2]
Under Business and Professions Code section 6106, an attorney who commits any act of moral turpitude or dishonesty, whether or not in the course of the attorney’s conduct as an attorney, is subject to disbarment or suspension. (Business and Professions Code section 6106.)[3]
Furthermore, Business and Professions...
