Q: Dear Ethics Lawyer, I am a business lawyer negotiating with an opponent over the price to acquire a non-public company. May I state that the business is only worth $10 per share, although I have an expert evaluation opinion at $15 per share? May I also state that $12 per share is “all I will offer” if my client in fact has given me authority to go up to $15 per share?
A: These questions of negotiation ethics implicate Model Rule 4.1(a), which prohibits a lawyer from making a “false statement of material fact” to a third person. Comment 2 to Rule 4.1 states that “[u]nder generally accepted conventions in negotiation, certain types of statements are ordinarily 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….” This implies an expectation by all concerned in negotiations that no reliance should be placed on these types of statements, i.e., that it is not truth being sought in negotiations over price, but a deal. But be careful not to extend this too far. For example, query whether stating to a mediator that you only have authority to offer a certain amount when your client has specifically given you greater authority than that has gone beyond a statement of intention to a false statement of fact.
It is prudent either to not obtain greater authority until needed, or to speak only in terms of what you are willing or intend to offer rather than the amount for which you have authority. In addition, do not rely on these conventions to extend to other non-price-related terms in a negotiation. See, e.g., In re Rosen, 198 P.3d 116 (Colo. 2008) (lawyer’s statement leading insurance co. to believe deceased client was still alive until after settlement violated Rule 4.1). In addition, be aware of other applicable law that may apply to your communications in a particular context, e.g., applicable state law concerning misrepresentation, state or federal securities laws.