Puff, The Magic
Negotiating Tool
Joseph J. De Hope, Jr.
Amanda K. Anderson
Tom Brown
Shay Gilmore
When may an attorney, bound by the
Rules of Professional Conduct, lie, puff,
exaggerate or, in another word,
negotiate?
ABA Model Rules of Professional Conduct, Rule 4.1 states: 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 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.
Puffing (continued)
• Counsel should carefully consider the difference between withholding
information while best stating a client’s position as opposed to making an
affirmative misrepresentation.
• Assuming that there is a difference between permissible “puffing” and
misrepresentation, what really happens if an attorney crosses the line and
misrepresents the facts?
Puffing vs. Misstating Facts
• California Civil Code Section 47 states, in
pertinent part:
A privileged publication or broadcast is one
made: …
(b) in any … (2) judicial proceeding…
• Other jurisdictions reach a different result.
• The privilege protects both an attorney
and an insurer who provides erroneous
information relating to insurance policy
limits, even if the limits were
misrepresented to induce the settlement of
a lawsuit. Home Ins. Co. v. Zurich Ins. Co.
(2002) 96 Cal. App. 4th 17, 20, 22-26.
• The litigation privilege bars fraud actions
based on a party’s statements made during
settlement negotiations. Flatley v. Mauro
(2006) 39 Cal. 4th 299, 325.
Anti-SLAPP Protection
(Strategic Lawsuit Against Public Participation)
• In addition to the litigation
privilege, California protects speech
in the context of litigation by the
application of California Code of
Civil Procedure Section 425.16 (a)
and (e)(1) and (2).
• Under the anti-SLAPP statute, “all
communicative acts performed by
attorneys as part of their
representation of a client in a
judicial proceed or other petitioning
context are per se protected as
petitioning activity by the antiSLAPP statute.” Cabral v. Martins
(2009) 177 Cal.App.4th 471, 480
Mediation Privilege
In California, statements made in a mediation are absolutely privileged.
All States, except Delaware, have enacted some
form of mediation privilege.
May an Attorney be Compelled to
Divulge Settlement Authority?
It is suggested by the Evidence Code sections 952, 954 and 955,
that the “bottom line” should not be disclosed.
Conclusion
• A Lawyer’s conduct in negotiating a settlement should be characterized by
honor and fair-dealing.
• Apply the Golden Rule.
Case Study Question 1:
What if An Attorney makes a misrepresentation about the
existence of a favorable eyewitness?
CA Case Law says:
• Attorney’s misrepresentations about the existence of a favorable eyewitness
is an improper false statement of material fact, intended to mislead
Defendant and his lawyer.
• Attorney is making representations regarding the existence of favorable
evidence for the express purpose of having Defendant 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.
Case Study Question 2:
What if an Attorney makes an inaccurate representation to the settlement
officer, 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.
CA 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.
Case Study Question 3:
What if an Attorney makes an inaccurate representation regarding
Plaintiff ’s “bottom line” settlement number?
CA says:
• Per ABA Formal Opn. No. 06-439, statements regarding a party’s negotiating goals or
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willingness to compromise, as well as statements that constitute mere “puffery,” 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.
Attorney revealing actual “bottom line” could be a violation of Business and
Professions code section 6068(e).
Case Study Question 4:
What if a Defendant’s lawyer’s represents that the Defendant’s
insurance policy is for $50,000, when it is actually for $500,000?
CA says:
• Defendant’s lawyer’s inaccurate representations regarding Defendant’s policy
limits is an intentional misrepresentation of a material fact intended to
mislead Plaintiff and Attorney. Shafer v. Berger, Kahn, Shafton, Moss, Figler,
Simon & Gladsone (2003) 107 Cal.App.4th 54, 76 [131 Cal.Rptr.2d 777]
(holding that the Plaintiffs “reasonably relied on the coverage representations
made by counsel for an insurance company”).
• Defendant’s lawyer’s intentional misrepresentation about the available policy
limits is improper.
Case Study Question 5:
What if a Defendant’s lawyer represents that Defendant will litigate
the matter and file for bankruptcy if there is not a defense verdict?
CA 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.
Case Study Question 6:
What if Plaintiff instructs its Attorney to conceal its new
employment from the Defendant and Defense counsel prior to the
follow-up settlement conference?
CA says:
(two issues)
1. Failure to disclose the information
• Failure to disclose new employment would be a suppression of material fact that is the
equivalent of a material misrepresentation, thus improper. (Vega v. Jones (2004) 121
Cal.App.4th 282, 291 [17 Cal.Rptr.3d 26].)
• The parties specifically agreed to participate in a follow-up settlement conference pending
exchange of specific information, including that involving the wage-loss claim.
Unquestionably the wage-loss claim is at the heart of the follow up negotiations, and is
therefore material.
• Even if Plaintiff is technically not employed on the date of the mediation, the wage-loss
claim is one that assumes wage losses going forward, and any representation of such a loss
that does not disclose the new employment would be a false representation regarding the
extent of the losses.
CA says (continued):
2. Plaintiff ’s instruction to Attorney to not disclose the information.
• Attorney was specifically instructed by his client, not to make the disclosure.
• That instruction, conveyed by a client to his attorney, is a confidential communication
that Attorney is obligated to protect under rule 3-100 and Business and Professions
Code section 6068(e). See also Cal. Evidence Code sections 952, 954, 955.
• While Attorney is generally required to follow his client’s instructions, Attorney must
counsel his client that Attorney cannot take part in a misrepresentation and/or
suppression of evidence. (Cal. State Bar Formal Opn. No. 2013-189, see also Los
Angeles County Bar Assn. Formal Opn. 520).
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.
The
End