The Power of Understanding - Ethically Preparing Clients for Mediation

THE POWER OF
UNDERSTANDING -
PREPARING CLIENTS FOR
MEDIATION
Burns Logan
Corporate Counsel: Jacobs
Private Mediation: www.burnslogan.com
© 2018 Burns Logan (www.burnslogan.com)

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Burns Logan
• Claims & Litigation Group – Jacobs
• Trial Attorney
– Construction
– Professional liability
– Environmental
– Personal Injury
– Defense and Plaintiff
• Private Mediations
Copyright 2018 - Burns Logan (www.burnslogan.com)

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ABA Section of Dispute Resolution –
Mediation Committee
www.americanbar.org (search “Mediation Week”)

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Ethical Obligations of Advocates in
Mediation
• Much written about the ethical obligations of
mediators.
• Not as much regarding the ethical obligations of
attorney advocates

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Two Ethical Topics for Today
1. Using Ethical Rules to Meet Client
Expectations
2. Negotiating Ethically To Meet Those
Expectations

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Ethical Rules Which Help Us
Accomplish This Goal In Mediation
• Rule 1.2
• Rule 1.4
• Rule 2.1
• Rule 4.1

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Colorado Rules of Professional
Conduct 1.2
Relevant parts for mediation:
1. “…a lawyer shall abide by a client's decisions concerning the
objectives of representation…."
2. "A lawyer shall abide by a client's decision whether to settle a
matter."
– Comment:
“… client [has] the ultimate authority to determine the purposes to be
served by legal representation…”

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Jones v. Feigler
• Jones v. Feiger, Collison & Killmer, 903 P.2d 27
(Colo. Ct. App. 1994)
– Wrongful termination case
– Engagement Agreement
• Hybrid Fee Arrangement
• Contingency fee + reduced hourly rate
– "The client agrees not to refuse unreasonably to
settle his claims should an opportunity arise.“
– Law firm had the right to withdraw. If the law
firm withdraws "the client will pay an amount for
fees and costs sufficient to equal 100%
of…normal hourly rates…"

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Jones v. Feigler
• Law firm filed the case and began
discovery
• Client tried to settle the case on his own
• Law firms met to discuss the case
– Client’s attorney suggested to the employer’s
attorney that they make an $800,000 offer
– Client was upset that his own attorney made
this “suggestion” to the opposing counsel

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Jones v. Feigler
• Client ultimately agreed to the $800,000
offer
– However, the client would not agree to other
non-monetary conditions

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Jones v. Feigler
• Law firm wanted client to accept the offer
• Wrote a letter to client:
– Law firm urged the client to accept this offer
and stating that he had an obligation not to
"refuse unreasonably to settle.“
– Indicated they may have to withdraw from
representation
• Client ultimately accepted the offer, but
refused to pay law firm any fees

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Jones v. Feigler
• What is the situation?
– Original Fee Arrangement
• Contingency fee with reduced hourly rates
• Affirmative Obligation for client not to “refuse
unreasonably to settle”
• Firm may withdraw if this term is violated
• If the firm withdraws, rate is “normal hourly
rate”

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Jones v. Feigler
• Did the Law Firm violate Rule 1.2?
– "a lawyer shall abide by a client's decisions
concerning the objectives of
representation…."
– "A lawyer shall abide by a client's decision
whether to settle a matter."

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Jones v. Feigler
• But, the court found a violation of Rule
1.2
– What was the violation?
• Setting up the wrong incentives for settlement
• It is the clients “absolute” right to control
their case
– How did the engagement letter change the
client’s right to settle the case?
• Court ruled the fee structure put too much
pressure on the client to settle the case right
before trial

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Jones v. Feigler
• Firm argued that risk to attorney’s in contingency fee cases
should be given latitude
– Attorney’s are taking risk
• Court found that though contingency fee arrangements put
more risk on the law firm, the client's right to control
settlement may not be diminished
• What could this firm have done?
– Change language in the engagement letter
• Make it objective
• Instead of “reasonable” standard, use specific amounts
• i.e. “Firm may withdraw if client refuses a settlement over $700,000”

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Conduct 1.4
– In relevant part for mediation:
• The attorney shall “reasonably consult with the client about the
means by which the client's objectives are to be accomplished“
• Comment:
• “The client should have sufficient information to participate intelligently
in decisions concerning the objectives of the representation and the
means by which they are to be pursued…”
– What does this mean for mediation?

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Does Your Client Know The
Purpose of Mediation?
• Clients often do not understand the
purpose of mediation
– Think it is a mini-trial and the mediator will
make a “decision”
– Think the mediator should “tell the other side
they are wrong.”
– Don’t understand what they need to do to
prepare

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People v. Morris
• People v. Morris, 2016 Colo. Discipt. LEXIS
138 (Dec. 2, 2016)
– Attorney hired to represent wife in emergency
child custody hearing
– At hearing, custody was awarded to the
husband
– Attorney later scheduled a mediation of the
custody issue

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People v. Morris
• Client questions about the mediation:
– "Will you be appearing there as well? And how
do I go about paying that? And do they call me
or do I call in? Sorry so many questions, I just
don't know much about mediation at all.“
– "Tomorrow is mediation and I still don't know
what is going on, I have no idea whether I call
in, they call me, if you'll be there, what I say,
what mediation even is…etc."

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People v. Morris
• Court Found a Violation of Rule 1.4
– Attorney "neglected to keep [the client] informed about the
mediation and how to prepare for the mediation.“

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Mediation Quick Description
[See next page]

MediationQuick
Description
What is Mediation?
Mediation is an “assisted negotiation.” All the parties are coming together
with a mediator to determine if the parties can resolve the dispute on their
own terms rather than a judge or jury making a decision.
Who is yourMediator?
The mediator is a neutral third-party.
The mediator is not a judge. The mediator's purpose is to facilitate the
exchange of information to help the parties reach an agreement.
The mediator has the responsibility to assist each party equally and
does not favor the interests of any one party over another.
The mediator does not favor a particular result in the mediation.
Basic Process
The mediator will meet with you and your counsel and, potentially, with
the other side as a group.
The mediator will ask you questions about the facts of the dispute.
The mediator will help you exchange information with the other side that
may help the parties reach an agreement.
The mediator will talk with you about the strengths and weaknesses of
your position.
The mediator will talk with you and the other side about how the dispute
could potentially be resolved. The mediator is there to facilitate the
negotiation.
If an agreement is reached, the mediator will assist in finalizing the
agreement.

MediationQuick
Description
Things To KnowAbout
Mediation
Confidential
The things you say during mediation are confidential and may not be
used against you in the litigation. It is to your benefit to be open and
straight-forward with the mediator.
The mediator will not disclose the confidential things you tell the
mediator privately unless you give the mediator permission to do so.
Voluntary
No participant in the mediation can force you to do anything. Each party
must agree to the terms of any agreement.
Opportunity to Resolve
The Dispute
You have the opportunity to work with the other side, through the mediator,
to explore whether an agreement can be reached. The mediator is there to
be a middleman between you and the other parties.

MediationQuick
Description
Preparing for the Mediation
Prepare to Tell Your
Story
Be prepared to tell your side of the story. The mediator may ask you to tell
your perspective privately or together with the other parties.
ThinkAboutWhatQuestionsYouHave
for The OtherSide
Are there questions you have about the other side’s position?
Are there any assumptions you are making that could be clarified by
asking the other side questions?
Do you think the other side is making any incorrect assumptions about
your position?
The mediator can help you get answers for your questions.
Think About What You Will Do IfThe
Dispute Does Not Settle
Think about what your options are if the dispute does not settle. For
example, how much will it cost to continue with the litigation? How much
time/effort will it take to see the litigation through to the end? Do you want
to take the risk of a judge or jury determining the other side “wins”?

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What is the Worst Mediation
Preparation Story?
• Office of Lawyer Reg. v. Stubbins (In re
Stubbins), 2014 WI 115 (2014)
– Associate at defense firm
• Failed to tell client about the mediation
• Went to the mediation without client
• Settled the case at mediation with no authority
• Didn’t tell the client the case settled!

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Conduct 2.1
Relevant parts for mediation:
1. “…a lawyer shall exercise independent professional judgment and
render candid advice. In rendering advice, a lawyer may refer not
only to law but to other considerations such as moral, economic,
social and political factors, that may be relevant to the client's
situation.“
2. “ A client is entitled to straightforward advice expressing the lawyer's
honest assessment. Legal advice often involves unpleasant facts and
alternatives that a client may be disinclined to confront. In
presenting advice, a lawyer endeavors to sustain the client's morale
and may put advice in as acceptable a form as honesty permits.
However, a lawyer should not be deterred from giving candid advice
by the prospect that the advice will be unpalatable to the client.”
3. “Advice couched in narrow legal terms may be of little value to a
client, especially where practical considerations, such as cost or
effects on other people, are predominant. Purely technical legal
advice, therefore, can sometimes be inadequate.”

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Rule 2.1 – Where Attorney’s
Provide Real Value
• How Attorney’s bring strategies and facts together is a way to
provide value to the clients
– We think about things our clients may not have thought about
– We have creative strategies
– We know how to use the process to advance the client’s goals
• This is an area where we can really show our value as
attorneys
– Area where I, as a client, do not hesitate to pay a premium for good
service

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Mediation Preparation Ideas
[See next page]

Ideas to Get Dispute Ready for Mediation
Facts • Any additional documents or interviews from the client which would help?
• What additional information do I need from the opponent?
• Are there other depositions which would help define the issues prior to
mediation?
• Any additional third-party discovery which would help?
Experts • Have all the experts necessary to evaluate the facts been engaged?
• Have the experts completed their work?
• Would additional depositions of any opposing experts help?
Law • Are there dispositive motions which could be filed?
• Are there other motions that will impact the trial of this case? (evidentiary,
venue, procedure)
Client Personal
Factors
• How will the client be judged in their personal relationships in the approach
to this settlement? (who is their “back table”)
• Does the client have to account for third-party personal/emotional factors?
• Can any personal/emotional factors be mitigated before mediation?
Client Business
Factors
• How will the client be judged in their own organization for this settlement?
• What business financial issues impact the ability of the parties to settle?
• What business timing issues impact the ability of the parties to settle?
• Are there outside business interests which impact potential settlement? (i.e.
a pending merger)
Risk Analysis • Are their similar cases in this jurisdiction on which to base a risk estimate?
• Is any expert work needed to determine a risk estimate?
• What is the client's best alternative if the case does not settle?
Cost Analysis • How much will it cost to take this case through trial?
• What are the expert Costs?
• Is the client potentially liable for the opponent's attorney's fees?

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What is the extent of information you should
share with the client?
Teague v. St. Paul Fire & Marine Ins. Co., 974 So. 2d 1266 (Louisiana, 2008)
- Medical Malpractice Case
- Court set a case management order
- CMO required a jury bond
- Firm failed to send the bond, jury trial was denied
- Case went to mediation and settled
- Physician did not want to settle
- Insurance Company mistake caused Physician problems

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Teague v. St. Paul
• Did the Law Firm Have the Obligation to Tell the Doctor About Their Own
Negligence Prior to Mediation?
- Yes
• Court held the law firm had the obligation to tell the doctor about the loss
of the jury trial and the effect that was going to have on the ability to
defend the case.
• What does that mean?
- Under Rule 2.1 an attorney has the obligation to tell their client all the
facts that affect the decisions in the case, even the attorney’s own
negligence

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Negotiating Ethically
Rule 4.1 - 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
• What does that mean for mediation?
• To what extent do you have to be honest with mediators and the
opposing parties in mediation?

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Puffing
• Widely agreed that “Puffing” is not a false statement of a material fact.
• What is Puffing?
• “Sales Talk”; statements that no one could reasonably rely upon or
mistake for claims of fact. FTC v. ColgatePalmolive Co. (1965) 380 US
374, 85 S.Ct. 1035
• A claim that one’s product is “better” than one’s competition is
“puffing.” Nikkal industries, Ltd. v. Salton, Inc. (SD NY 1990) 735
F.Supp.1227.

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Facts about Insurance Availability
Statewide Grievance Committee v. John B. Kennelly, 2005 Conn. Super. LEXIS
572 (2005).
• Right before mediation, attorneys and plaintiff discussed settlement
• Defense attorney stated there was a $1MM insurance policy
• $680,000 had been spent
• $320,000 left to pay claims
• At mediation session, during joint session, the attorney did not dispute
those amounts
• However, in private, told the mediator there was “more money”

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Facts about Insurance Availability
Court held:
- Nature and amount of available insurance has been continuously viewed as
necessary for informed settlement discussions.
- The court quoted a "a common sense and realistic treatment dictate that
the fact of liability insurance and disclosure of policy limits thereof are
essential to a purposeful settlement discussion."
You can’t “puff” about your insurance.

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Facts about Death of Party
Jackson v. Harris, 2003 Ky. App. LEXIS 283 (2003)
- Personal Injury case
- Defendant caused damage to Plaintiff and infant son in an auto accident
- Defendant died during the litigation
- Kentucky required substitution of estate within 1 year
- Defense lawyer did not notify Plaintiff of death
- When 1 year time ran, Defense filed a motion to dismiss for failure to
substitute the estate
- Court held failure to disclose the death was a “knowing, affirmative
misrepresentation” of a material fact

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Case Study Question 1
What if An Attorney makes a misrepresentation about the existence of a
favorable eyewitness?

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Case Study #1
Case Law Says:
• Attorney’s misrepresentations about the existence of a favorable eyewitness
is an improper false statement of material fact which is intended to mislead.
• Attorney is making representations regarding the existence of favorable
evidence for the express purpose of having the opponent rely on it.
• An Attorney’s misrepresentations regarding the existence of a favorable
eyewitness constitutes an improper false statement of a material fact and is
not permissible.

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Case Study #2
What if an Attorney makes an inaccurate representation to the mediator, which
Attorney intended to be conveyed to Defendant and Defendant’s lawyer,
regarding Plaintiff ’s wage-loss claim?
i.e. Attorney advises that Plaintiff was earning $75,000 per year, when Plaintiff
was actually earning $50,000 per year.

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Case Study #2
Case Law Says:
• This is an intentional misstatement of a verifiable fact. Attorney is not
expressing his opinion, nor his state of mind, but rather a fact that is
material to the negotiations.
• Attorney’s statement constitutes an improper false statement of a material
fact and is not permissible.

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Case Study #3
What if an Attorney makes an inaccurate representation regarding Plaintiff’s
“bottom line” settlement number?

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Case Study #3
Case Law Says:
• Per ABA Formal Opn. No. 06-439, statements regarding a party’s negotiating
goals or willingness to compromise are not false statements of material fact and
therefore do not constitute an ethical violation, they are also not fraudulent or
deceitful.
• In fact, a party negotiating at arm’s length should realistically expect that an
adversary will not reveal its true negotiating goals or willingness to compromise.
• Attorney’s inaccurate representation regarding Plaintiff ’s “bottom line”
settlement number is allowable “puffery”, not a misrepresentation of a material
fact.
• Attorney has not committed an ethical violation by overstating Plaintiff ’s
“bottom line” settlement number.

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Case Study #4
What if a Defendant’s lawyer represents that Defendant will litigate the matter
and file for bankruptcy if there is not a defense verdict?

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Case Study #4
Case Law Says:
• It depends upon the circumstances at hand.
• If Defense counsel knows that Defendant doesn’t qualify for Bankruptcy
protection, threatening that Defendant intends to file, in order to gain a
negotiating advantage would constitute an impressible intentional
misrepresentation of a material fact intended to mislead Plaintiff and
Attorney regarding Defendant’s financial ability to pay.
• If Defense counsel believes in good faith, that bankruptcy is an available
option for his client, even if unlikely, such a statement would likely be a
permissible negotiating tactic, rather than a false statement of material fact.

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Rule 4.1 Conclusion
• Attorneys are prohibited from making false statements of material fact,
including during the course of negotiating with a third-party.
• Attorneys may engage in permissible “puffery” during negotiations;
“puffery” may include statements regarding a client’s negotiation goals or
willingness to compromise.
• Engaging in “puffery” during negotiations does not constitute making a false
statement of material fact.

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