Dishonesty in settlement negotiations

This is a topic I’ve spoken about on a number of times over the years as it can make for a pretty decent CLE presentation.  Any such presentation almost always involves use of a hypothetical to explore issues that seem (or at least can sound) academic to a large extent.  The usual jumping off point is the language set out in Comment [2] of Model Rule 4.1 that speaks of “generally accepted conventions in negotiation,” and that indicates that “a party’s intentions as to an acceptable settlement of a claim” is a type of statement “ordinarily not taken as statements of material fact.”  From time-to-time there are real world situations that can be used to demonstrate that lawyers can end up paying a real price for making a known, false statement in connection with settlement negotiations, as opposed to things that are just chalked up as being “puffery.”

In my reading stack for a couple of months now has been a situation though that falls into the category of dishonesty in settlement negotiations, but looks like nothing I’ve quite seen before.

In late February 2016, the ABA Journal online had an article about a Seattle judge imposing $32,000 in sanctions against two lawyers who were representing Pierce County, Washington in the defense of a false arrest lawsuit.  The sanctions were imposed for the lawyers’ role in “misleading settlement negotiations,” and not telling opposing counsel that there client had rejected a proposed settlement dollar amount.  Which, at least sounds bad on its face, of course, but at that same time — given the fluidity of settlement negotiations — doesn’t necessarily sound all that far away from what the rules speak of as a generally-accepted convention of negotiations.

Both the ABA piece, and this more expansive article from The News Tribune , elaborate a bit on the details, but that elaboration only makes it seem a bit more remarkable to me that these lawyers were sanctioned.  And, since it is a Friday and to cut to the chase it is for this reason, yes it does look like the client contact for these lawyers did tell the lawyers that he would not agree to a $250,000 settlement payment, and that the lawyers continued the effort to negotiate other important aspects of the proposed deal for about a week without telling opposing counsel that the client was saying it wouldn’t agree to the monetary component, but an important aspect of the context is left out of the ABA Journal story for example:  The client who had said it wouldn’t do $250,000 had actually previously offered to settle the case for $210,000.  In a vacuum, it does not seem beyond the pale that lawyers, knowing that the gap to surmount was just $40,000, would continue to work on getting some non-monetary concessions in hopes that they might have a client that would change its mind when it saw additional bells and whistles.

So, why the sanctions really?  I can only guess, but my guess is that the rest of the context matters probably even more and you will get a feel for that context if you read the two stories already linked and this earlier July 2015 story in The News Tribune.

The false arrest suit involves a woman who has been arrested for child molestation, and the charges against her dismissed, twice; one of the dismissals was specifically premised on a finding of prosecutorial vindictiveness.  There is also a separate federal lawsuit filed by the same plaintiff over things done since the first lawsuit was filed, and the elected prosecutor for Pierce County who hired the lawyers to defend the false arrest suit because of his office’s conflict of interest is also facing ethics charges and whistleblower complaints over various aspects of the efforts to prosecute this plaintiff and, if that weren’t enough, also a recall petition.

Oh yeah, and like a week after the sanctions ruling, the same prosecutor appeared on Nancy Grace in the middle of a murder trial to talk about the murder trial his office was prosecuting, prompting a motion for a mistrial in that case.

With the popularity of the “Making a Murderer” documentary, I’m not sure what this one would be called — perhaps just “Making a Mess,” but it sounds like it would make a good sequel.

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