By Rachelle Cohen

Cohen is a principal at Valensi Rose, PLC in Los Angeles, and is a member and former Chair of the LACBA Professional Responsibility and Ethics Committee and a former member of the California Lawyers Association Ethics Committee. The views expressed are her own. Ethics articles are provided regularly by LACBA’s longstanding Professional Responsibility and Ethics Committee.

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A foundational concept of the attorney-client relationship is the duty of loyalty or, as stated by the California Supreme Court, the "attorney's duty to protect his client in every possible way, and it is a violation of that duty for him to assume a position adverse or antagonistic to his client without the latter's free and intelligent consent."[1]  However, the duty of loyalty has bounds, one of which is expressed in Rule 4.1.[2]  Rule 4.1 prohibits a lawyer from knowingly making a false statement of fact or law to a third person in the course of representing a client. 

The State Bar Committee on Professional Responsibility and Conduct, Formal Op.  2015-194 (2015) (the "COPRAC 2015 Opinion") addressed the question of where the line is between zealously advocating for a client, such as in negotiating a settlement, and violating the duty to be truthful. When that opinion was published, California's Rules of Professional Conduct did not contain Rule 4.1, but the opinion in part looked at the obligations of an attorney to be truthful under the State Bar Act and to the ABA Model Rule 4.1 for guidance. 

The State Bar Act includes that an attorney has a duty to "employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth."  Cal. Bus. & Prof. Code §6068(d).  A lawyer also may face discipline for committing "any act involving moral turpitude, dishonesty or corruption" whether in the course of a representation or otherwise.  Cal. Bus. & Prof. Code §6106.

California's version of Rule 4.1, which is almost identical to ABA Model Rule 4.1, is consistent with the 2015 COPRAC Opinion.  Although the rule itself doesn't address non-factual statements that are allowed, Comment [2] to Rule 4.1 distinguishes between a lawyer making a statement of fact versus a bluffing statement.  It states:  

"This rule applies to statements of fact.  Whether a particular statement should be regarded as one of fact can depend on the circumstances. For example, 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."

The COPRAC Opinion cites to disciplinary cases in which lawyers were suspended for intentionally deceiving opposing counsel, either by the attorney's own acts or by misrepresentations made to opposing counsel.  See Coviello v. State Bar, (1955) 45 Cal. 2d 57 (where lawyer added a client's name to a deed for purpose of deceiving the opposing counsel); Scofield v. State Bar, (1965) 62 Cal. 2d 624 (where lawyer representing client who had been in two accidents one week apart claimed special damages against both insurance companies without informing each about the other accident); Monroe v. State Bar (1961) 55 Cal. 2d 145 (where lawyer negotiated agreement that included that lawyer was holding funds in trust that could be used as security, although no funds were being held by the lawyer).   

A lawyer also might face claims by a nonclient for fraud or negligent misrepresentation for these types of actions.  See Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, (1976) 57 Cal. App. 3d 104 (where court reversed a demurrer on a claim of negligent misrepresentation against a law firm that made a representation about its borrower client, and the law firm was alleged to have known that the borrower would show the representation to a prospective lender and also  that it was a misrepresentation); but see Koehler v. Pulvers (1985, SD Cal.) 606 F. Supp. 164 (court applied California law and granted a motion for summary judgment against a lawyer being charged with negligent misrepresentation by a nonclient because the lawyer did not intend to influence the nonclient plaintiffs). 

Based on the disciplinary cases, it seems that a violation of Rule 4.1 requires some expectation that the opposing side in a negotiation will rely on the statement.  As stated in the COPRAC 2015 Opinion, "[a] statement of opinion is not actionable, nor is a statement of 'puffery.' A statement of puffery is one that is 'extremely unlikely' to induce reliance."

For example, a lawyer who states that a client has an asset that can be used as security when the lawyer knows that to be false could expect that the opposing party might rely on that statement in making a decision about the agreement.  On the other hand, a lawyer who states that his client is in no rush to sell its business even though the lawyer might know that the client wants to sell as quickly as possible does not expect the other side to rely on that statement; rather, the lawyer is hoping to influence the negotiation for the benefit of the client.        

Although lawyers should take direction from and act to zealously advance clients' interests, lawyers should be mindful that they cannot knowingly make a false statement of fact.  In negotiations, lawyers should be sensitive that posturing does not bleed into false factual statements.