Volume 10, Issue 1 - October 2011

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Deborah Schmedemann
12 Cardozo J. Conflict Res. 83 (2010)

In “Navigating the Murky Waters of Untruth in Negotiation: Lessons for Ethical Lawyers,” Deborah Schmedemann addresses an issue that the law has largely seemed to ignore—the role of truthfulness in the negotiation process. According to Schmedemann, the laws underlying the negotiation process condemn affirmative misrepresentations and non-disclosure of information. She further notes that it is unlikely that lawyers want to engage in unethical conduct. The question Schmedemann addresses, then, is why lawyers actually engage in such behavior.

Highlighting the value the law typically places on truthfulness, Schmedemann begins her article by noting that, in the law of contracts, deception in formation of a contract will likely render that contract voidable. She then addresses the process of litigation, which general proscribes deception. To illustrate her point, Schmedemann notes that judgments procured by misrepresentation may be set aside, that witnesses testify under oath to tell the truth, and that Rule 11 of the Federal Rules of Civil Procedure requires pleadings and motions to have “evidentiary support.” Next, Schmedemann moves to the category of negotiation. While the Restatement (Second) of Torts may provide for liability when one makes a misrepresentation for the purpose of inducing another to act or refrain from acting in reliance on it, which may mean that deception in negotiation could amount to the tort of fraud, Schmedemann indicates that this is not an oft occurring circumstance. In fact, such a failure to disclose will only be tortious when the non-discloser has an actual duty to disclose. Naturally, this brings her to the question of when a lawyer has a duty to disclose information.

To answer this question, she looks to the rules of professional responsibility. ABA Model Rule of Professional Conduct 4.1 specifically addresses negotiation and the situation in which a lawyer acts “knowingly” when the situation involves a “material fact.” The notes to the rule indicate that what constitutes a fact depends on the circumstances and that, under generally accepted conventions in negotiation, certain statements are not considered facts—among them, estimates of price of value, intentions to settle, and undisclosure principles. The comments do not address what makes a fact “material.” To the extent a negotiation involves a tribunal, Schmedemann notes that Rule 3.3 would also apply. Rule 3.3 prohibits a lawyer from, among other things, knowingly making false statements of fact, failing to correct previous statements, and offering evidence known to be false.

Schmedemann then discusses to the actual practice of deception in negotiations and cites several empirical studies. In various studies, lawyers have been proven to consider low-level deception as part of the negotiation “game.” Schmedemann herself actually conducted a study involving 300 first-year law students in which those students engaged in a negotiation and had to decide whether or not to disclose certain information to their counterpart. The results showed that the risk of non-settlement was higher when the students decided not to disclosure. The results also illustrate that timing of the disclosure mattered; most successful settlements occurred when the disclosure occurred during the actual negotiation. The students who took part in the study who did not disclose the information rationalized their actions by saying that either: (1) the information was not relevant to the theory of their case, or (2) they planned to reveal the information only if asked. The study also showed that the students who learned of the information during the negotiation found the negotiation to proceed much more smoothly; those who learned of it after felt deceived and felt the other side was being “shady.” The students also indicated wrestling with different types of non-truthfulness, such as withholding the information completely, spinning or fudging the truth, and outright lying. Ironically, most students found that ethical rules such as those provided by the ABA did not give them much guidance in deciding whether or not to disclose; those students who disclosed the information indicated to have done so for various reasons stemming from their own personal beliefs.

Schmedemann theorizes that, while the short-term consequences of deception might be positive for the deceiver, deception has long-term costs, such as hurting the deceiver’s reputation and causing resistance on the part of the deceived in future negotiations. For that reason, she suggests strategies for lawyers in negotiations, such as fostering a positive reputation, setting a tone of honesty and competence, priming themselves to act ethically, and reading your counterpart. Schmedemann ends her article by quoting Sissela Bok, who said that “The role that one assigns to truthfulness will always remain central in considering what kind of person one wants be—how one wishes to treat, not only other people, but oneself.”

The full article is available at the “Issues” tab at www.cojcr.org.
*Summary by Megan Fulcher, Moritz class of 2012

Posted in: Volume 10, Issue 1

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