Attorney Miller is representing a startup company in a contentious negotiation for a major investment. During a break, Miller makes a statement to the opposing counsel, "My client is prepared to walk away from this deal entirely if your terms don't improve by 20%." Miller knows this statement is false and that her client desperately needs the investment and would accept much less favorable terms. Has Miller violated the Model Rules of Professional Conduct?
- ANo, because this is a permissible puffery or negotiation tactic that does not constitute a false statement of material fact.
- BYes, but only if the opposing counsel relied on the statement to their detriment.
- CNo, because the statement was made to opposing counsel, who is expected to discern such tactics.
- DYes, because a lawyer must not knowingly make a false statement of material fact or law to a third person.
Show answer & explanationAnswer & explanation
Correct answer: D. Yes, because a lawyer must not knowingly make a false statement of material fact or law to a third person.
Model Rule 4.1(a) states that a lawyer shall not knowingly make a false statement of material fact or law to a third person. While certain statements during negotiation, such as estimates of price or value, or a party's intentions as to an acceptable settlement, are ordinarily not considered statements of material fact, a lawyer's statement about a client's willingness to accept certain terms or walk away, when known to be untrue and intended to mislead, can cross the line into a false statement of material fact.
Why the other options are wrong
- A. While puffery is allowed, misrepresenting a client's actual intention or position when it's a known falsehood goes beyond mere puffery and constitutes a false statement of material fact.
- B. The violation occurs when the false statement is knowingly made; reliance or detriment to the opposing party is not a prerequisite for a violation of Rule 4.1(a).
- C. The recipient's sophistication does not excuse a lawyer from the ethical duty of truthfulness under Rule 4.1.
Truthfulness in Statements to Others
A lawyer shall not knowingly make a false statement of material fact or law to a third person, nor fail to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.
- No false statements of material fact/law.
- Puffery in negotiation is generally allowed.
- Disclosure required to avoid assisting client crime/fraud.
Memory trick: Be 'Honest' of 'Fact', or 'Assist' no 'Fraudulent Act'.