Lawyers are officers of the court. Although they have a duty to zealously represent the interests of their clients, they must do so in an ethical manner. The cites in this post are to the American Bar Association Rules of Professional Conduct. Although the ABA rules aren’t binding, every state has adopted either the ABA rules or a substantially similar version making them law in each state.
Before we discuss the impact of lies made in settlement conferences, let’s first look at the ABA rules. Remember, these rules are most likely adopted in identical or very similar wording in your state and are thus law.
Rule 3.3 of the ABA Rules of Professional Conduct says lawyers “shall not knowingly” make false statements to a court or offer evidence that the lawyer knows to be false. The latter means even if the lawyer doesn’t lie, he cannot let his client lie either.
Rule 3.4 says that “a lawyer shall not… falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law…”
Finally, Rule 4.1 says, “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…”
We know from the rules that lawyers shouldn’t lie to the court or allow witnesses to lie. That makes sense. But what happens in a settlement negotiation? Since most cases today are settled and never make it to a jury, what happens when lawyers lie and no judge is present?
Believe it or not, rarely has this issue been addressed by the court. Earlier this year, a federal magistrate judge in Manhattan took on that issue.
The issue arose in the context of a copyright infringement case involving the use of a photograph of President Trump without a license. (The President was not a party to the case; the argument centered on a third party using the property of the photographer without a license.)
The parties disputed whether one of the lawyers lied about a license granting use of the photograph. The issue for our purposes isn’t whether or not one of the lawyers or misrepresented the truth. Instead we are focused on what powers the court has when one of the lawyers are caught lying in a settlement conference.
The professional conduct rules are quite clear about lying to the court but settlement conferences are normally private affairs and no judge is present. The question becomes, what can the court do if a lawyer is caught lying to his opponent?
Judge James Cott ruled that the court has plenty of authority to act.
First, in the federal courts, lawyers have an obligation to participate in conferences ordered by the court in good faith. Lying to one’s opponent is not a sign of good faith.
Next, the court ruled that the courts have the inherent power to police lawyers. A lawyer being untruthful during a settlement conference falls within the court’s regulatory power, however Judge Cott ruled that the court should only act if there is actual bad faith.
Finally, the court found that it also had the power to act under the state rules of Professional Conduct. New York adopted the ABA rule 4.1 which prohibits lawyers from making false statements to a third party which includes opposing counsel. Since the state adopted the ABA rule, the court can enforce it.
Court Identifies Criteria to Impose Sanctions
Clearly the court can take action if a lawyer lies during settlement negotiations but how and when should the court take action?
According to Judge Cott, courts should consider,
(1) “whether the misconduct was the product of intentional bad faith;
(2) whether and to what extent the misconduct prejudiced the other party;
(3) whether there is a pattern of misbehavior;
(4) whether and when the misconduct was corrected; and
(5) whether further misconduct is likely to continue in the future.”
The court ultimately decided not to take action. One of the reasons for the judge’s decision is worth discussing.
Settlement negotiations are considered confidential and can’t used at trial. The idea behind a settlement conference is to allow both sides to freely discuss the strengths and weaknesses of their case without fear that their words will come back at trial. If the case doesn’t settle during a settlement negotiation, anything that was said during those negotiations remains privileged.
The court noted that although settlement negotiations are confidential, the lawyers are not allowed to lie. The problem, however, becomes proving the lie. There are no court reporters present during a settlement conference making any subsequent dispute as to what was said the proverbial, “he said, she said.”
The court also noted that in zealously representing clients, lawyers can posture or “puff” meaning they can put their client’s case in the best light. There is a line, however, between posturing and lying. If a lawyer crosses that line, the court can sanction the lawyer.
And what about those sanctions?
Judge Cott never found sanctionable conduct so we don’t know what action he would have taken. We know from other cases, however, that courts have a wide range of things they can do to police misconduct by lawyers.
Most sanctions involve a fine against the lawyer. Sometimes the court makes the offending lawyer pay the fees and costs of opposing counsel incurred in bringing the misconduct to light. Why should the innocent party pay legal fees if the other side has engaged in misconduct?
More severe sanctions can even include dismissal of the case or entry of a default.
Are You the Victim of Legal Malpractice?
Legal malpractice is the term used when your lawyer does something wrong. The public uses the term more broadly, however, to include any misconduct by a lawyer.
If you believe that opposing counsel has intentionally or knowingly lied during a settlement conference and you suffered harm, you may be entitled to relief. A lawyer lying in a case may be grounds for a fraud upon the court. Although unsuccessful litigants often throw that term around loosely, successful fraud upon the court prosecutions are rare.
First, speak with the lawyer that originally represented you. He or she is most familiar with your case and can give you a legal opinion as to whether opposing counsel’s statements were both untrue and made knowingly. [Every lawyer has been lied to at some point in their career by a client, simply repeating a lie made by their client doesn’t mean the lawyer is intentionally lying.]
If your lawyer believes that sanctionable conduct took place but doesn’t want to take a case against opposing counsel, call us. We may be able to help.
Our practice is limited to cases where there is an actual out-of-pocket loss of $1 million or more.
For more information, contact attorney Brian Mahany at [hidden email] or by phone at 202-800-9791. All inquiries are protected by the attorney client privilege and kept confidential.
Do you think your lawyer committed malpractice? Visit our legal malpractice information page.