Key Takeaways
- ABA Model Rule 4.1 bars a lawyer from knowingly making a false statement of material fact or law to a third person, including the other side in a negotiation.
- Under the rule's comment, estimates of price or value and a party's intentions about an acceptable settlement are ordinarily not treated as statements of material fact, so ordinary puffing and bluffing are permitted.
- Stating something you know is untrue, such as a projection contradicted by your own internal numbers, crosses the line and can amount to civil or even criminal fraud.
Can a lawyer tell the other side that a client will not settle for less than $10 million, knowing the client would happily take half a million? Where does tough negotiating end and lying begin?
In this TalksOnLaw Brief, Joel Cohen talks with Professor Carrie Menkel-Meadow, Distinguished and Chancellor's Professor of Law at UC Irvine School of Law and a leading scholar of negotiation and dispute resolution. She explains the ethics rule that governs truthfulness in negotiation, the gray areas it leaves open, and where a misstatement becomes fraud.
The Black-Letter Rule
Professor Menkel-Meadow calls this her favorite question. The governing rule is ABA Model Rule of Professional Conduct 4.1, which provides that a lawyer shall not knowingly make a false statement of material fact or law to a third person. She points out the lawyerly room built into that language: what is material, what counts as a fact or as law, and who is a third person, whether the other side of a negotiation or someone not involved at all.
What the Comment Allows
Her favorite line about the rule is that "what the rule giveth, the comment taketh away." The comment explains that, under generally accepted conventions of negotiation, certain 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, fall in this category. In practice, she says, lawyers may puff and bluff: nobody expects a negotiator to reveal a bottom line, so the $10 million demand is the classic example of what is allowed.
She credits the idea of "generally accepted conventions" to Professor James J. White, formerly of the University of Michigan Law School, who argued that lawyers routinely exaggerate and conceal what they value, and that ethics rules cannot change that behavior because important negotiations happen in private, without witnesses. Any dispute becomes a matter of he said, she said. The rule's drafters, in her account, accepted that reality. So a seller may describe a company with little revenue as worth $10 million; it is up to the other side to investigate and form its own view of value.
Where Puffing Becomes Fraud
Projections are different. If internal audits show a company will be worth much less, but the lawyer says it will be worth $15 million next year, the lawyer has affirmatively stated something known to be untrue. That, she explains, is actionable under state fraud law. An ethics violation of this kind has probably also been an act of fraud, which in some cases can be criminal, though in a sales setting civil fraud is more likely.
What to Know Now
Model Rule 4.1 and its comment on negotiation conventions remain in place, and most states follow the same approach, though each state's version controls. The ABA's Formal Opinion 06-439 confirms that ordinary puffing and statements about settlement goals are not false statements of material fact, while misstating facts such as insurance policy limits is. In October 2025, ABA Formal Opinion 518 addressed lawyers serving as mediators, concluding that the negotiation-convention allowance does not cover them and that a lawyer-mediator may not make statements known to be false. Scholars continue to debate whether the conventions should be narrower. For advocates, the practical line Professor Menkel-Meadow draws still holds: bargaining positions and opinions of value are fair game, but knowingly false facts are not.
