Truthfulness Without Candor

The Lawyer as Negotiator

Truthfulness Without Candor

Rule 4.1 opens with a lead-in that governs every prohibition beneath it: "In the course of representing a client a lawyer shall not knowingly:"¹ Paragraph (a) supplies the first prohibition, a bar on false statements of material fact or law to a third person.² The rule does not ask a negotiator to stop being a partisan. She is retained to advance one side's interests against someone whose interests run the other way, and Rule 4.1 draws only an outer boundary around that role, fixed by what she owes to people who are not her clients. That boundary is narrower than it first sounds, and two ideas that are easy to run together show where it falls.

Truthfulness means not lying: a lawyer who chooses to speak may not assert what she knows to be false. Candor means volunteering what is relevant so that the listener sees the whole picture. Toward the other side, Rule 4.1 demands the first and generally not the second. A lawyer ordinarily need not volunteer information to a third person, but when she does speak, she may not lie.³ Green captures the asymmetry: "[w]hile truthfulness is the rule for lawyers, candor is the exception."⁴

The line falls at affirmative deception, not at silence, because of how adversarial negotiation works. The adversarial negotiator tries to deprive her counterpart of information: she resists discovery requests, advises her client on ways to avoid inadvertently revealing facts, and keeps her cards hidden until it is time to play them.⁵ A duty to volunteer would defeat that strategy outright. A ban on lies leaves the strategy in place while protecting the reliance each side must place in what the other asserts.

The difference between the two versions lies in the act of asserting. Lacking an eyewitness violates nothing; claiming to have one does. A negotiator who is weak on the facts may stay quiet about the weakness and press the strengths she does have, but she may not state a false fact to win the point.

Two phrases in the lead-in fix the rule's reach. "In the course of representing a client" confines it to what the lawyer says while acting as a lawyer, and "third person" covers anyone other than her client, including another lawyer. In Hansen, the Iowa court held that the lawyer for the defrauded buyers could obtain indemnification from the opposing lawyer who had perpetrated the fraud. In doing so it approved the proposition "that a lawyer who makes fraudulent misrepresentations to a nonclient, including a lawyer representing another client, is subject to liability when the other elements of that tort are satisfied."⁶ The rule follows the lawyer from drafting into bargaining, since lawyers are often called on not only to draft contracts but also to negotiate their terms with the other contracting party, and a false statement of material fact or law is unethical in either role.⁷ The line between a misrepresentation of fact and an opinion about value, mere "puffing," is not always clear, and a later section takes it up. The word "knowingly" confines the prohibition to deliberate falsehood, and another section examines what that requires.

Outside the ethics rules, the same structure appears in securities-fraud litigation. One federal opinion reasoned that an attorney for an issuer could initially have remained silent with no affirmative duty to disclose, but that once he chose to speak on the issuer's behalf he had a duty to be accurate and complete about material matters and could not hide behind the attorney-client privilege. In the court's words, "while an attorney representing the seller in a securities transaction may not always be under an independent duty to volunteer information about the financial condition of his client, he assumes a duty to provide complete and nonmisleading information with respect to the subjects on which he undertakes to speak."⁸ The setting differs from a Rule 4.1 negotiation, but the shape is the same: no duty to begin talking, and a duty of truth once talking begins.

Rule 4.1 is also only one of several restraints on deception at the bargaining table. Conscience restrains the lawyer, and so does reputation. The civil law adds a third check, because a fraudulent or material misrepresentation that induces the other party to settle makes the settlement voidable at that party's option, and a misrepresentation may also lead to liability in tort.⁹ Discipline under the Model Rules sits alongside these. The sections below take them up in turn, beginning with what counts as a false statement of fact.