FAQs on ABA’s new ethics opinion on mediation

By David A. Hoffman, BridgeTower Media Newswires

RICHMOND, VA – Last October, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 518, “A Lawyer’s Duties to Avoid Misleading Communications When Acting as a Third-Party Neutral Mediator.”

Although the opinion applies only to those mediators who are also lawyers, it could impact the entire mediation community because of its broad strokes about what mediators should and shouldn’t say in their discussions with the parties in mediation.

Why is the ABA regulating the activities of mediators?

It’s become increasingly common for lawyers to serve as mediators. Although the percentage of lawyers who are mediators may be relatively small, the percentage of mediators who are lawyers is large. The ABA’s Model Rules of Professional Conduct regulate many aspects of what lawyers do outside the practice of law, including mediation. For example, MRCP Rule 5.7 obligates lawyers to observe the model rules when they provide title insurance, tax return preparation, trust services, and financial planning. (See Comment 9.) Rule 2.4 recognizes that lawyers sometimes serve as mediators and arbitrators and regulates the type of disclosures that lawyers must make to the parties when the lawyer is serving as a third-party neutral, so that the parties understand that the mediator is not representing them. Importantly, for purposes of this opinion, the broad prohibition of “conduct involving dishonesty fraud, deceit or misrepresentation” set forth in Rule 8.4(c) is not limited to the attorney’s actions while practicing of law.

What does this opinion require lawyers serving as mediators to do, and what does it prohibit them from doing?

Basically, three things: (a) explain clearly the difference between the role of counsel vs. the role of mediator; (b) be honest as an intermediary and refrain from vouching for statements by a party that the mediator knows, or reasonably should know, are false; and (c) don’t advise the parties about what’s in their “best interest.”

What’s wrong with discussing the client’s “best interest”? Mediators are supposed to talk with the parties about their goals and interests!

Yes, it’s true that mediation is all about interest-based bargaining — as opposed to positional bargaining. And it is certainly a core role of a lawyer representing a client in a mediation to advise that client about the client’s best interest. But the opinion points out that the lawyer-mediator’s role is different: When lawyer-mediators provide advice (as opposed to legal information), a mediation party might conclude that the lawyer-mediator has the same fiduciary duties to that party that a lawyer would have in representing that party. This risk is even more pronounced when the party is not represented by counsel in the mediation.

Does the opinion allow lawyer-mediators to talk with the parties about their interests at all?

There’s nothing in the opinion that prohibits discussion of the parties’ interests. For example, a lawyer-mediator could ask a party about their interest in a speedy and inexpensive resolution on the one hand, versus their interest in public vindication via a court judgment. What the opinion prohibits is the lawyer-mediator advising such a party about how they should resolve the tension between those competing interests.

Does this prohibit lawyer-mediators from proposing settlement terms?

No, but only if lawyer-mediators are clear about their role in making such proposals. For example, some mediators use a double-blind “mediator’s proposal” as an impasse-breaking technique in which the parties respond separately and confidentially to the mediator as to their willingness to accept the mediator’s proposed terms. The opinion suggests that lawyer-mediators should frame such proposals not as advice, but rather as a prediction of where there might be a ZOPA (zone of possible agreement). Lawyer-mediators should also distinguish such proposals from “case evaluation,” which is not advice but rather a prediction of how the court would likely rule if the case went to trial; this too needs to be properly described to the parties — especially unrepresented parties. The opinion states: “A mediator may offer an opinion as to how a tribunal is likely to rule on an issue, but the lawyer-mediator should not state or imply that a settlement is in the parties’ best interest because a tribunal is likely to decide adversely to the party.”

The opinion requires “honesty,” but isn’t that self-evident as an ethical requirement? What’s the problem that the opinion is trying to solve?

The opinion draws a useful distinction between a lawyer’s duty of honesty under Rule 4.1 and Rule 8.4(c). Under the former, lawyers — when representing clients — are allowed to lie about settlement authority to a third party (such as stating that “x” dollars is the client’s “bottom line” when the actual number is “y” dollars). Comment 2 of Rule 4.1 describes such “puffing” as follows: “Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact.” But, in mediation, this leeway applies only to the lawyers representing the parties; lawyer-mediators are not allowed to “puff” regarding the parties’ settlement positions, because the lawyer-mediator’s duty of honesty is governed by Rule 8.4(c) (quoted above), which contains no carveout for puffing in negotiations. Accordingly, when a lawyer-mediator is asked in a private caucus session whether the other side’s professed “bottom line” is genuine, she can decline to answer, but she cannot give an answer that she knows, or reasonably should know, is false.

How does the opinion compare to other ethics rules for mediators?

It’s pretty much the same. For example, the Model Standards of Conduct for Mediators (jointly promulgated by the American Bar Association, American Arbitration Association, and Association for Conflict Resolution) emphasize honesty and prohibit mediators from “knowingly misrepresent[ing] any material fact or circumstance in the course of a mediation.” The model standards also stress party “self-determination” and describe as problematic “mixing the role of mediator and the role of another profession.” Thus, if a lawyer-mediator’s recommendation of a settlement could be reasonably interpreted by a party as legal advice, such a recommendation would violate the model standards’ prohibition of mixing roles.

Are ABA ethics opinions binding on all lawyers?

In the United States, the regulation of lawyers is done by the individual states, and each state is free to adopt their own rules. Although the MRPC have been adopted by most states with only slight variations, and although most states tend to adhere to the ABA’s formal opinions, Opinion 518 is not self-enforcing and therefore serves only as an advisory opinion unless and until it is adopted by a state as a valid application of the legal ethics rules enacted in that state.

What about the many mediators who are not lawyers? Could they be affected by this opinion?

Not directly. But because of the large numbers of lawyers serving as mediators and the influence of the ABA’s ethics opinions on lawyers’ conduct, the opinion could have at least a ripple effect on the interpretation of ethical standards in the mediation community.

So, what’s the bottom line on this opinion? Should mediators and people who use mediation be concerned?

The opinion’s insistence on making sure that clients understand the difference between the role of lawyer and the role of mediator is nothing new. It has been part of the MRPC since the adoption of Rule 2.4 in 2002. Likewise, the opinion’s admonition against the lawyer-mediator providing “legal advice” is not new; many states have codes of ethics for mediators that prohibit such advice. The opinion’s clarification about “puffing” and honesty is new but unsurprising, given the emphasis on honesty in the model standards. What is both new and surprising is the opinion’s caution against stating that “a proposed settlement is in a party’s best interest.” To be sure, the opinion then softens that admonition by stating that “the lawyer-mediator may, of course, provide truthful information that helps the parties to conclude for themselves, or even makes it obvious to them, whether a proposed resolution is in their best interest, given their objectives.” Bottom line: the opinion will likely cause lawyer-mediators to be more circumspect about recommending specific settlements, as opposed to simply discussing the pros and cons of a specific settlement.

David A. Hoffman is an attorney, mediator, arbitrator and founding member of Boston Law Collaborative, where he handles cases involving family, business, employment and other disputes. He is past chair of the American Bar Association Section of Dispute Resolution. He was not involved in the ABA committee’s deliberations on Opinion 518.