Indiana, Montreal, and Vermont’s legal ethics rules on honesty.

Earlier this week I used rather extreme misconduct to highlight the duty to safeguard client funds.  I’m back at it, but with today’s example an opportunity to mention rules that I don’t often discuss anywhere but in the Friday quiz.

In February, the Indiana Supreme Court suspended a lawyer for 90 days after concluding that the lawyer violated two of the honesty rules while deposing an unrepresented opposing litigant.

Wait . . .

. . . having re-read the previous sentence, I can sense a collective yawn.  So, let me try this.

Here’s the headline from the ABA Journal article that reported the Indiana opinion:

Lawyer is suspended for deposition threat to expose intimate photos of woman in court record

According to the opinion, the lawyer “represented a man against whom a woman had petitioned for a protective order.”  The opinion goes on:

  • “During a deposition of the unrepresented petitioner that was attended by a court reporter and others in Respondent’s firm, Respondent confronted the petitioner with several 8”x10” color copies of intimate photos she had sent the man during their relationship, prior to the events giving rise to the protective order petition, displaying them facing up on the table for all in attendance to see. Respondent asked the petitioner, ‘why do women who seek the aid of the court send these kinds of pictures to men?’ Respondent then asked her if she still intended to pursue a protective order or whether there would be a ‘better way’ to handle things than for her to be ‘drug through’ and ‘exposed in’ the court. When the petitioner responded she just wanted the man to stop harassing her, Respondent ended the deposition and told the petitioner ‘[t]he court reporter will transcribe this to final form, submit it to the court, it then becomes a public record. There’s a way to stop that, but otherwise with the matter still pending we’ll have to submit it to the court and attend a hearing, which will be a very public hearing as well.’ The petitioner then indicated she wanted to dismiss the case, Respondent instructed the court reporter to go off the record, and Respondent instructed the petitioner how to file for dismissal, which she did immediately after leaving the deposition. Respondent later bragged to an associate about having secured a dismissal by threatening to have the photographs become part of the record.”

But for the short suspension, this would’ve qualified for Was that Wrong?

Anyhow, the Indiana Court concluded that the lawyer’s conduct violated several provisions of the Indiana Rules of Professional Conduct, including Rules 4.1(a) and 8.4(c).  Let’s review Vermont’s version of each.

In Vermont, V.R.Pr.C. 4.1 states that “in the course of representing a client a lawyer shall not knowingly make a false statement of material fact or law to a third person.”  Aspects of the Comment are instructive.

Comment [1] reminds lawyers that they are “required to be truthful when dealing with others on a client’s behalf.” It goes on to state that a lawyer can violate the rule by incorporating or affirming another person’s statement that the lawyer knows to be false, as well as by making a misrepresentation by omission.

Next, Comment [2] sets out what I refer to as “the puffery exception.”

  • “This rule refers to statements of fact. Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud. Lawyers should be mindful of their obligations under applicable law to avoid criminal and tortious misrepresentation.”

As Comment [2] suggests, puffery most often arises in negotiation.  I first blogged about puffery here, a post in which I noted that “I’ve often kidded, but only half-jokingly, that the Comment really means that it’s okay to lie to other lawyers.”

In any event, with respect to Rule 4.1, the takeaway from this post should be the first sentence of Comment [1]: “a lawyer is required to be truthful when dealing with others on a client’s behalf.”

Next, Vermont’s 8.4(c) makes it ”professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation.”  As stated above, the Indiana court concluded that the lawyer violated this rule as well.

Now, I can sense what some of you might be thinking: “Mike, of course the court concluded that the lawyer violated Rule 8.4(c).  A violation of Rule 4.1 is necessarily a violation of Rule 8.4(c).”

In the words of the inimitable Lee Corso:


Many years ago, two Vermont lawyers were representing a client charged with murder.  Mid-trial, a person claimed to have information that would exculpate the lawyers’ client.  The court granted a short reprieve to interview the witness.  The interview took place by telephone.  The witness asked if the interview was being recorded.  The lawyers knew that, in fact, they were recording the interview.  Nevertheless, one answered “no” and the other remained silent.  Eventually, a disciplinary complaint was filed, and the lawyers were charged with violating Rule 4.1 and Rule 8.4(c).

A hearing panel concluded that the lawyers had violated the former but not the latter. The panel determined that Rule 8.4(c) only applies “to conduct so egregious that it indicates that the lawyer charged lacks the moral character to practice law” and that given the circumstances, the lawyers’ conduct did not rise to that level.

On review, the Supreme Court affirmed.  The Court stated that it was:

  • “not prepared to believe that any dishonesty, such a giving a false reason to break a dinner engagement, would be actionable under the rule. Rather, Rule 8.4(c) prohibits ‘conduct involving dishonesty, fraud, deceit, or misrepresentation’ that reflects on an attorney’s fitness to practice law, whether that conduct occurs in an attorney’s personal or professional life.”

So, there you have it.

On a personal note, and as many of my friends & relatives will not be surprised to learn, I’m quite relieved that giving a false reason for not showing up for dinner or drinks isn’t actionable.

In closing, I’m not sure where this post was ever intended to go.  So, I’ll leave with you this tantalizing morsel.

On April 29, Andrew Manitsky and I will present at the YLD Thaw in Montreal.  We intend to discuss all aspects of the honesty rules, including just how far a lawyer can go without crossing the line.  Not only will we mention “puffery,” but we’ll touch upon its cousin: “paltering.”  Paltering is a condition that my French-Canadian mother is certain that my father’s Irish genes afflicted her sons:  the active use of the truth to deceive.

Join us for a lively seminar!

In the meantime, when it comes to honesty, and as always, let’s be careful out there.

Wellness Wednesday: on ponds, puffery & paltering.

It’s Wellness Wednesday!

Remember – wellness is about much more than the staggering rates at which lawyers are afflicted with behavioral health problems.  Wellness is also about taking action to be well.  For instance, making time for what matters, taking 6-minutes a day for yourself, and making wellness a habit.

Last week, I debuted “Wellness Wednesday” with this post congratulating the lawyers who ran in the Island Vines 10K. This week: some thoughts on the ethics of puffery & paltering, but only after a big thank you to Jennifer Emens-Butler!

Jennifer is the VBA’s Director of Communication and Education. She’s a staunch ally in the quest to encourage lawyers to be well.  Among other things, Jennifer pens Pursuits of Happiness, a regular column in the VBA Journal, and she is commited to including wellness components at the VBA’s conferences & meetings.

For example, at last weeks’ annual meeting in Manchester, Jennifer organized an early morning walk on the trails at the Equinox Preserve.  Not even a little rain could keep Jennifer & me from starting the day with wellness!


Now, the ethics part of this post: paltering.

The night before the morning walk, I had the privilege of joining Andrew Manitsky and Tad Powers on a CLE panel.  Our topic was puffery and the ethics of negotiation.

One of my favorite parts of the program (we’ve presented it before) is a piece that Andrew does on “paltering.”  A person palters by actively using the truth to deceive.  As this piece in the Washington Post points out, many consider “the behavior of someone who paltered in a negotiation as being just as unethical or untrustworthy as the person who outright lied with a known falsehood.”

Remember: when representing a client, Rule 4.1 prohibits misrepresentations of fact or law to a third person.  Per Comment [1], “[m]isrepresentations can also occur by  partially true or misleading statements or omissions that are the equivalent of affirmative false statements.”

So, what’s this got to do with Wellness Wednesday? I’m glad you asked.

On our walk, Jennifer & I set out on the Pond Trail.  We never found the pond.  Either it evaporated or it’s so small as to be indistinguishable from the rain puddles we encountered on the trail.

Later, throughout the morning at the conference, several people asked if I’d hiked to the pond.  Normally I proudly display my Chittenden County roots. However, not wanting to admit that a kid born & raised by the airport couldn’t find a damn pond in Southern Vermont – even while hiking on “the pond trail” – I replied:

“we took the Pond Trail. It was terrific.”

True statements indeed.  But, I paltered.

Enjoy Wellness Wednesday! Do something for yourself, even if it’s only for 6 minutes!



Puffery & Ethics of Settlement Negotiations

Last week’s word was “woodshedding.”  This week’s: “puffery.”

As I blogged, at some point, woodshedding crosses the line.  What about puffery?  Is there a point when a lawyer violates the rules by intentionally misstating a client’s bottom line?

As most of you know, the rules prohibit dishonesty.  Indeed, Rule 4.1 states

  • “[i]n the course of representing a client a lawyer shall not knowingly make a false statement of material fact to a third person.”

With the rule in mind, here are two scenarios:

  • the plaintiff’s attorney who knows her client will accept $100,000 but who states to defense counsel that her client “won’t go below $200,000.”
  • the criminal defense attorney who knows his client will take a plea that includes jail time, but who tells a deputy state’s attorney “if your offer is anything more than probation, we’re going to trial.”

In each,  didn’t a lawyer knowingly make a false statement to a third person?

Maybe.  Or maybe not.

Per Comment [2] to Rule 4.1:

  • “This rule refers to statements of fact.  Whether a particular statement should be construed as one of fact can depend on the circumstances.  Under generally accepted conventions in negotiations, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud. Lawyers should be mindful of their obligations under applicable law to avoid criminal and tortious misrepresentation.”

I’ve often kidded, but only half-jokingly, that the rule makes it unethical to mislead others, but the Comment makes it okay to mislead other lawyers.

There’s also Rule 8.4(c), which prohibits lawyers from engaging in conduct involving dishonest, deceit, misrepresentation, and fraud.  And don’t forget about the duty of candor to a tribunal imposed by Rule 3.3.

Here’s an interesting advisory ethics opinion from the State Bar of California.  Some outlets are touting the opinion as giving the green light to puffery in negotiations.  I suppose that’s a fair reading of an aspect of the opinion. However, if that’s your only takeaway, it’s a reading that ignores the first two sentences of the opinion’s digest:

  • “Statements made by counsel during negotiations are subject to those rules prohibiting an attorney from engaging in dishonesty, deceit or collusion. Thus, it is improper for an attorney to make false statements of fact or implicit misrepresentations of material fact during negotiations.”

The opinion begins by presenting a fact pattern. Then, it describes various scenarios that might arise from the fact pattern. Finally, for each scenario, the opinin provides an “answer.”  Give it a read.  If you don’t have time, I’ve pasted in some excerpts below. Otherwise, that’s the end of this blog.


See the source image


The fact pattern presented in the California Advisory Opinion is as follows:

  • “Plaintiff is injured in an automobile accident and retains Attorney to sue the other driver (Defendant). As a result of the accident, Plaintiff incurs $50,000 in medical expenses and Plaintiff tells Attorney she is no longer able to work. Prior to the accident Plaintiff was earning $50,000 per year. Attorney files a lawsuit on Plaintiff’s behalf. Prior to any discovery, the parties agree to participate in a court-sponsored settlement conference that will be presided over by a local attorney volunteer. Leading up to and during the settlement conference, the following occurs:

Scenario 1.  In the settlement conference brief submitted on Plaintiff’s behalf, Attorney asserts that he will have no difficulty proving that Defendant was texting while driving immediately prior to the accident. In that brief, Attorney references the existence of an eyewitness to the accident, asserts that the eyewitness’s account is undisputed, asserts that the eyewitness specifically saw Defendant texting while driving immediately prior the accident, and asserts that the eyewitness’s credibility is excellent. In fact, Attorney has been unable to locate any eyewitness to the accident.

Answer:  Attorney’s misrepresentations about the existence of a favorable eyewitness and the substance of his expected testimony. Attorney’s misrepresentations about the existence of a favorable eyewitness and the substance of the testimony the attorney purportedly expects the witness to give are improper false statements of fact, intended to mislead Defendant and his lawyer. Attorney is making representations regarding the existence of favorable evidence for the purpose of having Defendant rely on them. Attorney has no factual basis for the statements made. Further, Attorney’s misrepresentation is not an expression of opinion, but a material representation that “a reasonable [person] would attach importance to . . . in determining his choice of action in the transaction in question . . .” (Charpentier v. Los Angeles Rams Football Co., Inc. (1999) 75 Cal.App.4th 301, 313 [89 Cal.Rptr.2d 115] quoting Rest.2d Torts, § 538). Thus, Attorney’s misrepresentations regarding the existence of a favorable eyewitness constitute improper false statements and are not ethically permissible. This is consistent with Business and Professions Code section 6128(a), supra, and Business and Professions Code section 6106, supra, which make any act involving deceit, moral turpitude, dishonesty or corruption a cause for disbarment or suspension.

Scenario 2.  While the settlement officer is talking privately with Attorney and Plaintiff, he asks Attorney and Plaintiff about Plaintiff’s wage loss claim. Attorney tells the settlement officer that Plaintiff was earning $75,000 per year, which is $25,000 more than Client was actually earning; Attorney is aware that the settlement officer will convey this figure to Defendant, which he does.

Answer: Attorney’s inaccurate representations to the settlement officer which Attorney intended be conveyed to Defendant and Defendant’s lawyer regarding Plaintiff’s wage loss claim. Attorney’s statement that Plaintiff was earning $75,000 per year, when Plaintiff was actually earning $50,000, is an intentional misstatement of a fact. Attorney is not expressing his opinion, but rather is stating a fact that is likely to be material to the negotiations, and upon which he knows the other side may rely, particularly in the context of these settlement discussions, which are taking place prior to discovery. As with Example Number 1, above, Attorney’s statement constitutes an improper false statement and is not permissible.

Scenario 3.  While talking privately outside the presence of the settlement officer, Attorney and Plaintiff discuss Plaintiff’s “bottom line” settlement number. Plaintiff advises Attorney that Plaintiff’s “bottom line” settlement number is $175,000. When the settlement officer asks Attorney for Plaintiff’s demand, Attorney says, “Plaintiff needs $375,000 if you want to settle this case.”

Answer:  Attorney’s inaccurate representation regarding Client’s “bottom line” settlement number. Statements regarding a party’s negotiating goals or willingness to compromise, as well as statements that constitute mere posturing or “puffery,” are among those that are not considered verifiable statements of 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. Here, Attorney’s statement of what Plaintiff will need to settle the matter is allowable “puffery” rather than a misrepresentation of fact. Attorney has not committed an ethical violation by overstating Plaintiff’s “bottom line” settlement number.

Scenario 4. In response to Plaintiff’s settlement demand, Defendant’s lawyer informs the settlement officer that Defendant’s insurance policy limit is $50,000. In fact, Defendant has a $500,000 insurance policy.

Answer:  Defendant’s lawyer’s representation that Defendant’s insurance policy is for $50,000 although it is really $500,000. Defendant’s lawyer’s inaccurate representations regarding Defendant’s policy limits is an intentional misrepresentation of fact intended to mislead Plaintiff and her lawyer. (See Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107Cal.App.4th 54, 76 [131 Cal.Rptr.2d 777] [plaintiffs “reasonably relied on the coverage representations made by counsel for an insurance company”].) As with Example Number 1, above, Defendant’s lawyer’s intentional misrepresentation about the available policy limits is improper.

Scenario 5. Defendant’s lawyer also states that Defendant intends to file for bankruptcy if Defendant does not get a defense verdict. In fact, two weeks prior to the mediation, Defendant consulted with a bankruptcy lawyer and was advised that Defendant does not qualify for bankruptcy protection and could not receive a discharge of any judgment entered against him. Defendant has informed his lawyer of the results of his consultation with bankruptcy counsel and that Defendant does not intend to file for bankruptcy.

Answer:  Defendant’s lawyer’s representation that Defendant will file for bankruptcy if there is not a defense verdict. Whether Defendant’s lawyer’s representations regarding Defendant’s plans to file for bankruptcy in the event that Defendant does not win a defense verdict constitute a permissible negotiating tactic will hinge on the specific representations made and the facts known. Here, Defendant’s lawyer knows that Defendant does not intend to file for bankruptcy and that Defendant consulted with bankruptcy counsel before the mediation and was informed that Defendant is not legally eligible to file for bankruptcy. A statement by Defendant’s lawyer that expresses or implies that Defendant’s financial condition is such that he is in fact eligible to file for bankruptcy is therefore a false representation of fact. The conclusion may be different; however, if Defendant’s lawyer does not know whether or not his client intends to file for bankruptcy or whether his client is legally eligible to obtain a discharge.

Scenario 6.  The matter does not resolve at the settlement conference, but the parties agree to participate in a follow-up settlement conference one month later, pending the exchange of additional information regarding Plaintiff’s medical expenses and future earnings claim. In particular, Attorney agrees to provide additional information showing Plaintiff’s efforts to obtain other employment in mitigation of her damages and the results of those efforts. During that month, Attorney learns that Plaintiff has accepted an offer of employment and that Plaintiff’s starting salary will be $75,000. Recognizing that accepting this position may negatively impact her future earnings claim, Plaintiff instructs Attorney not to mention Plaintiff’s new employment at the upcoming settlement conference and not to include any information concerning her efforts to obtain employment with this employer in the exchange of additional documents with Defendant. At the settlement conference, Attorney makes a settlement demand that lists lost future earnings as a component of Plaintiff’s damages and attributes a specific dollar amount to that component.

ANSWER:  Plaintiff’s instruction to Attorney to conceal material facts from Defendant and Defendant’s lawyer prior to the follow-up settlement conference. This example raises two issues: the failure to disclose the new employment, and Plaintiff’s instruction to Attorney to not disclose the information.

First, as to the underlying fact of employment itself, it is assumed that Plaintiff would not be entitled to lost future earnings if Plaintiff found a new job. As such, including in the list of Plaintiff’s damages a separate component for lost future earnings is an implicit misrepresentation that Plaintiff has not yet found a job. This is particularly true because Plaintiff agreed to show documentation of her job search efforts to establish her mitigation efforts, but did not include any documentation showing that she had, in fact, been hired. Listing such damages, then, constitutes an impermissible misrepresentation. (See, e.g., Scofield v. State Bar, supra, 62 Cal.2d at 629 [attorney who combined special damages resulting from two different auto accidents in separate claims against each defendant disciplined for making affirmative misrepresentations with the intent to deceive]; Pickering v. State Bar (1944) 24 Cal.2d 141, 144 [148 P.2d 1] [attorney who alleged claim for loss of consortium knowing that plaintiff was not married and that her significant other was out of town during the relevant time period violated Business and Professions Code section 6068(d)].)

Second, Attorney was specifically instructed by Plaintiff 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). While an attorney is generally required to follow his client’s instructions, Rule 3-700(B)(2) requires withdrawal if an attorney’s representation would result in a violation of the ethical rules, of which a false representation of fact or implicit misrepresentation of a material fact would be. When faced with Plaintiff’s instruction, Attorney should first counsel his client against the misrepresentation and/or suppression. If Plaintiff refuses, Attorney must withdraw under Rule 3-700(B)(2), as Attorney may neither make the disclosure absent client consent, nor may Attorney take part in the misrepresentation and/or suppression. (California State Bar Form. Opn. No. 2013-189; 7 8/ see also Los Angeles County Bar Association Opn. 520).

Monday Morning Answers: #90

Friday’s questions are here.  Spoiler alert – today’s answers immediately follow the honor roll.

Honor Roll

  • A1A – Beachfront Avenue!
    • Kane Smart, Office of General Counsel, Agency of Natural Resources
  • Ed AdrianMonaghan Safar Ducham
  • Karen AllenKaren Allen Law
  • Matt AndersonPratt Vreeland Kennelly Martin & White
  • Penny Benelli, Dakin & Benelli
  • Alberto Bernabe, Professor of Law, John Marshall Law School
  • Robert Grundstein, Esq.
  • Glenn JarrettJarrett & Luitjens
  • Jim Johnson, Chittenden South Supervisory Union
  • Kevin LumpkinSheehey Furlong & Behm
  • Hal Miller, First American
  • Herb Ogden, Esq.
  • Daron Raleigh, Deputy State’s Attorney, Windsor County
  • Nancy Hunter Rogers, Chamberlin School, South Burlington
  • Jack Welch, Esq.


Question 1

If you attend a CLE and I discuss “puffery,” what ethics issue am I most likely addressing?

  • A.   Whether a  lawyer violates federal law by using marijuana
  • B.   The extent to which the rules on candor & honesty apply during negotiations.
  • C.   Dishonest trust accounting practices
  • D.   Viewing an adverse party’s social media posts

Here’s my post on whether “puffery” constitutes dishonesty or a false statement of material fact to a third person.

Question 2

In legal ethics, the word “imputed” is most often associated with:

  • A.   The advertising rules
  • B.   Interest earned on lawyer trust accounts
  • C.  Conflicts of Interest.   Vermont’s rule on imputed conflicts is V.R.Pr.C. 1.10.
  • D.  Technology & The Duty of Competence

Question 3

I spoke at CLE yesterday.  One point I emphasized was:

“If it’s yours, get it out.”

When I made the statement, what general topic was I discussing?

Trust accounting.  Leaving your own money in trust is “commingling.”  If it’s yours, get it out of trust.

Question 4

By rule, “a lawyer employed or retained by an organization represents the organization acting through its duty authorized constituents.”  Do the rules allow the lawyer who represents an organization to represent its individual directors, officers, employees, members, or other constituents?

  • A.   No
  • B.   Yes
  • C.   Yes, subject to Rule 1.7 (the rule on conflicts of interest).  See, V.R.Pr.C. 1.13(g).
  • D.   The rules are silent on this issue

Question 5

And speaking of lawyers who represent organizations . . .

. . . in 2008, Tilda Swinton won the Academy Award for Best Supporting Actress for her portrayal of corporate lawyer Karen Crowder.  Crowder was in-house counsel for U-North, a giant manufacturer of agro-chemical products.  U-North was the defendant in a class action lawsuit involving allegations that U-North manufactured, marketed, and distributed a carcinogenic weed killer.

Crowder retained an outside law firm to handle the defense.  The firm’s leading litigator, Arthur Edens (Tom Wilkinson), discovered an internal memo that Crowder and U-North had intentionally withheld from the plaintiffs.  The move proved that, in fact, U-North continued to sell its product despite knowing that it would kill people in addition to killing weeds.

On the horns of the ethical dilemma of whether to blow the whistle on Crowder and U-North, Edens cracked.  During a deposition, he stripped naked and ran outside into a snowstorm.  Fearful that Edens would disclose the memo, Crowder did what any self-respecting in-house counsel would do – brought the matter to the attention of U-North’s CEO, then had Edens killed.

Shocked, Edens’ firm brought in George Clooney to figure out what happened.  It didn’t take Clooney long to determine that the firm’s client and its general counsel had been up to no good.  And it didn’t take Crowder & U-North long to attempt to send Clooney to the same fate as his law partner, Arthur Edens.

Your task: identify this movie, a film replete with legal ethics issues, including the duty to disclose a client’s fraud and crimes.  Oh yeah, and the duty not to have outside counsel murdered.