California Opinion Enters the Fray on What is Puffing, What is Fact, in Negotiations

California earlier this year issued for comment Cal. St. B. Standing Comm. on Prof’l Responsibility & Conduct Proposed Formal Op. 12-0007 (Jan. 24, 2014).  This is a mess of an area, but this doesn’t shed much light, imho.

Some background.  Rule 4.1 prohibits lawyers from making false statements of material fact.  However, everyone knows that during negotiations people say things that sure sound like facts, but which no one takes as such.  For example, “we won’t pay more than 3% for this license” is seldom taken as meaning that, in fact, you won’t pay 4%.  It’s bargaining.

The problem is that it’s hard to distinguish what is a “fact” from non-fact in this environment.  The comment to the Model Rule says that what’s a fact can “depend on the circumstances” and gives 3 examples of what are not facts… no example of what is a fact, and points lawyers to “generally accepted conventions” to figure out the difference.

The California opinion doesn’t break a lot of new ground.  It says:  (a) L can’t say a witness saw the defendant texting while driving when no such witness exists; (b) L can’t say the plaintiff’s income was $X when in fact it was $Y; (c) L can lie about the bottom line settlement number of its client; (d) L can’t misrepresent the extent of insurance coverage (that is, from my research, the most common factual misrepresentation); (e) L can’t say his client will file for bankruptcy if he knows his client doesn’t qualify and (f) L can’t hide the fact that his client got a new job if the parties have agreed to supplement information.

So… not much to learn, but it tries.

I’ve done a CLE on this topic for patent lawyers over the years, and even have it up on cleonline.com if you need CLE credit.  It includes cartoons!