ethics in negotiating... © tom adolph 2003-2008. or how bad can i be?

Ethics in negotiating ... Ethics in negotiating ...

© © Tom Adolph 2003-2008Tom Adolph 2003-2008

Ethics in negotiating ... Ethics in negotiating ...

© © Tom Adolph 2003-2008Tom Adolph 2003-2008

Or how bad can I be?Or how bad can I be?

Gulliver’s TravelsGulliver’s Travels17261726

TThere was a society of men here was a society of men among us, bred up from their among us, bred up from their youth in the art of provingyouth in the art of proving … …that white is black, that white is black, and and black is white, black is white, according as they are paid. according as they are paid.

… … I, who am the right owner, lie I, who am the right owner, lie under two great disadvantages:under two great disadvantages:

……first, my lawyer, being first, my lawyer, being practised almost from his cradle practised almost from his cradle in defending falsehood, is quite in defending falsehood, is quite out of his element when he out of his element when he would be an advocate for would be an advocate for justice, which is an unnatural justice, which is an unnatural office he always attempts with office he always attempts with great awkwardness, if not with great awkwardness, if not with ill-will. ill-will.

The second disadvantage is, The second disadvantage is, that my lawyer must proceed that my lawyer must proceed with great caution, or else he will with great caution, or else he will be reprimanded by the judges, be reprimanded by the judges, and abhorred by his brethren, as and abhorred by his brethren, as one that would lessen the one that would lessen the practice of the law.practice of the law.

And therefore I have but two And therefore I have but two methods to preserve my cow. methods to preserve my cow.

The first is, The first is,

to gain over my adversary's to gain over my adversary's lawyer with a double fee, lawyer with a double fee,

who will then betray his client by who will then betray his client by insinuating that he hath justice insinuating that he hath justice on his side.on his side.

The second way is for my lawyer The second way is for my lawyer to make my cause appear as to make my cause appear as unjust as he can, by allowing the unjust as he can, by allowing the cow to belong to my adversary: cow to belong to my adversary: and this, if it be skilfully done, and this, if it be skilfully done, will certainly bespeak the favour will certainly bespeak the favour of the bench. of the bench.

When and where didWhen and where didAmerican lawyers adopt their American lawyers adopt their

first ethics rules?first ethics rules?

1887 Alabama1887 Alabama

19081908 CanonsCanons

19691969 CodeCode

19831983 Model RulesModel Rules

Texas Disciplinary Rules of Texas Disciplinary Rules of Professional ConductProfessional Conduct

Texas Lawyer’s CreedTexas Lawyer’s Creed

No teeth?No teeth?

Rules Rules - - misconduct charge 8.04misconduct charge 8.04

Rules Rules - - do not specify any penaltydo not specify any penalty

Creed Creed - - expressly “aspirational”expressly “aspirational”

Taping ConversationsTaping Conversations

In negotiations.In negotiations.

Other attorney says your client has Other attorney says your client has renegged on promise in past session.renegged on promise in past session.

He has taped conversation to prove it.He has taped conversation to prove it.


Professional Ethics Committee Opinion Professional Ethics Committee Opinion No. 575, November 2006No. 575, November 2006

Overruled two prior opinionsOverruled two prior opinions


1.1. Legitimate purpose – lawyer or Legitimate purpose – lawyer or clientclient

2.2. Protect confidenceProtect confidence

3.3. Not a Not a seriousserious criminal violation criminal violation

4.4. Not contrary to a representation to Not contrary to a representation to any personany person

Lies and SilenceLies and Silence

You know each is falseYou know each is false

You intend to misleadYou intend to mislead

MisrepresentingMisrepresentingyour minimum priceyour minimum price

Client will go as low as $1200 per unit.Client will go as low as $1200 per unit.



““Client will not accept less than $1400 per Client will not accept less than $1400 per unit.”unit.”



$2000?$2000?



$4000?$4000?



$10,000?$10,000?

““What’s your authority limit?”What’s your authority limit?”


““What’s yours?”What’s yours?”

Refuse to answerRefuse to answer

““You know neither of us can discuss You know neither of us can discuss our authority. Let’s talk about what is our authority. Let’s talk about what is fair.”fair.”


““I would like to get ...”I would like to get ...”

““I see no reason to accept less I see no reason to accept less than ...”than ...”

““I will not, under any circumstances, I will not, under any circumstances, accept anything less than ...”accept anything less than ...”


““I can’t recommend anything less than I can’t recommend anything less than ___________.”___________.”

Advise client not to give you authority Advise client not to give you authority to settleto settle


Blatantly lie.Blatantly lie.


Misrepresenting prior priceMisrepresenting prior price

Client has often accepted $1,000 per Client has often accepted $1,000 per unitunit



““We have never accepted less than We have never accepted less than $1200 per unit.”$1200 per unit.”



““Our past prices have been in the Our past prices have been in the range of $1500 per unit.”range of $1500 per unit.”

Misrepresenting prior pricesMisrepresenting prior prices


Client says: Client says: “Most agreements have “Most agreements have been at $2,000 per unit.”been at $2,000 per unit.”

New New price price informationinformation

Past Past pricepricess $1,000$1,000

5 5 new new agreements agreements at $500at $500

New New price price informationinformation

Past Past pricepricess $1,000$1,000

Misrepresenting offersMisrepresenting offers, , valuevalue,, or authorityor authority

Distributor Distributor A offerA offerss $1,000,000 $1,000,000



““We now have a competing We now have a competing offer of $1,200,000.”offer of $1,200,000.”



““I expect aI expect another person nother person to to offer offer $1,200,000.”$1,200,000.”



““CClient wants to license US and lient wants to license US and Canada togetherCanada together at at $2,000,000, $2,000,000, but I talk him but I talk him into into $1,400,000.”$1,400,000.”

SilenceSilenceClient will soon roll out a new technology that will Client will soon roll out a new technology that will obsolete the technology of the negotiations.obsolete the technology of the negotiations.


Can you remain silent about the new technology?Can you remain silent about the new technology?


If the agreement is for 5 years, can you remain If the agreement is for 5 years, can you remain silent?silent?

SilenceSilenceThe silence could also have concerned:The silence could also have concerned:

A serious prior art or prior trademark use A serious prior art or prior trademark use problemproblem

A key employee leavingA key employee leaving

SilenceSilence

ClientClient misrepresented that it can misrepresented that it can grant grant certain rightscertain rights

Client Client promised to include a promised to include a territory already territory already exclusively exclusively licensedlicensed

SilenceSilence

Client Client admitted to you that the new admitted to you that the new machinery was the sole cause of this machinery was the sole cause of this cost savings.cost savings.

““Five new customers cut their costs by Five new customers cut their costs by $500 per unit $500 per unit afterafter using our service.” using our service.”

SilenceSilence

Can you remain silent after Can you remain silent after Supplier’s misrepresentation?Supplier’s misrepresentation?

SilenceSilence

Could you make the Could you make the

statementstatement??

SilenceSilence

Purchaser has no attorney.Purchaser has no attorney.

(1)(1) Client Client may increase prices each may increase prices each year no more than 3%year no more than 3%

(2)(2) Client must prClient must provide minimum ovide minimum levels of service.levels of service.

SilenceSilence

[3%] [3%] CPI CPI – – 5.2%5.2%

accumulate increasesaccumulate increases

reasonable efforts reasonable efforts vs vs specific specific minimumsminimums

““essentially the agreementessentially the agreement””

““matter of lawmatter of law” ”

Playing Your ClientPlaying Your Client

Client Client $1,000,000$1,000,000

YouYou $ 600,000$ 600,000

Initial offerInitial offer $ 400,000$ 400,000

Playing Your ClientPlaying Your Client

After 1 dayAfter 1 day $500,000$500,000

Tell clientTell client the $400,000 offerthe $400,000 offer

With anotherWith another

day of hard day of hard negotiationsnegotiationsmaybe $550,000maybe $550,000

Stubborn ClientStubborn Client


SSettlement overturesettlement overtures

CClientlient: I will n: I will never settle.ever settle. You You should never negotiate.should never negotiate.


Angry JudgeAngry Judge

Opportunity for discoveryOpportunity for discovery

Billing IssueBilling Issue

Recently completed a complex negotiation Recently completed a complex negotiation for Client A.for Client A.

Substantial research and discussionSubstantial research and discussion

8 month negotiations / 60-pages8 month negotiations / 60-pages

At your standard hourly rate, the bill was At your standard hourly rate, the bill was steep.steep.


Client B -- almost identical situationClient B -- almost identical situation

You can provide an almost complete You can provide an almost complete agreement in a few hours.agreement in a few hours.


How do you bill Client B?How do you bill Client B?

standard hourly rate?standard hourly rate?

same or similar amount you charged same or similar amount you charged Client A?Client A?

something in between?something in between?

Extraneous MattersExtraneous Matters

UUndocumented alienndocumented alien

Unlikable AttorneyUnlikable Attorney

Big jBig jerkerk

EEasily flatteredasily flattered

We are We are always always looking for looking for good lawyersgood lawyers. . AAfter fter we close we close this deal, this deal, come come talk to talk to us us about a about a position at the position at the firm?firm?

Unlikable AttorneyUnlikable Attorney

Opponent’s MistakeOpponent’s Mistake

PProposroposal:al:

SSilent on insurance because ilent on insurance because law law requires requires Client Client carry as additional carry as additional insuredinsured


What if no attorney?What if no attorney?


Negotiations have finished.Negotiations have finished.

You receive signed copies from the the other side You receive signed copies from the the other side for your client’s signature.for your client’s signature.

You discover a mistake in the agreement.You discover a mistake in the agreement.


An indemnity obligation that your client owes has An indemnity obligation that your client owes has been omitted, orbeen omitted, or

““No-cause” termination - negotiated for seller only - No-cause” termination - negotiated for seller only - is now mutual.is now mutual.

Do you disclose the error to the seller?Do you disclose the error to the seller?

Opponent’sOpponent’sConfidential InformationConfidential Information

Client wantsClient wants $1,000,000$1,000,000

will acceptwill accept $ 750,000$ 750,000

Purchaser’s counsel mistakenly faxes Purchaser’s counsel mistakenly faxes to you a letter intended for his client.to you a letter intended for his client.

The letter reveals that Purchaser will The letter reveals that Purchaser will go as high as $2,000,000.go as high as $2,000,000.

Out of Control AttorneyOut of Control Attorney

You are convinced opposing You are convinced opposing counsel is not honestly counsel is not honestly communicating your client’s communicating your client’s positions to his client.positions to his client.

– Communicate Communicate directly with his directly with his client?client?

– Have your client Have your client contact his client?contact his client?

– What if his client What if his client calls you?calls you?


Is what that attorney did ethical?Is what that attorney did ethical?

Can an attorney delay drafting an Can an attorney delay drafting an agreement to kill a deal his client agreement to kill a deal his client wants?wants?


Applicable LawApplicable Law

Texas party - Texas clientTexas party - Texas client

California party - California clientCalifornia party - California client

Far East party- Far East clientFar East party- Far East client

ethics in negotiating... © tom adolph 2003-2008. or how bad can i be?

Documents

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