ABA Section of Business Law

ABA Section of Business Law
Business Law Today
May/June 1998

Freund recently retired as a partner of Skadden, Arps, Slate, Meagher & Flom LLP, in New York City, and is now of counsel to the firm.

Business lawyers of the world unite — you have nothing to lose but your credibility gap!
That's my sound bite (so de rigeur nowadays). Now bear with me while I elaborate on the theme.

I've been mediating some commercial disputes lately, and just the other day it hit me why I enjoy the process so much: I relish the credibility that attaches to what I say and do. To be sure, I can't make the parties agree to anything; and one or the other of them may well disagree with me (when, for instance, I tell him he's making a weak argument); but the presumption of neutrality that derives from my mediator's role forces them to give my views a lot of weight.

By contrast, I sense that the reaction of most mediators to the lawyers representing parties is to take what they say with a few grains of salt — viewing them as nonneutral advocates for their clients, and extrapolating from this an underlying bias that sometimes undermines their credibility. And when you move outside mediation to ordinary two-party settings — including friendly deal negotiations — this questioning of the motives of the other side's lawyer is even more widespread.

It's not, however, all-encompassing. Those legal opinions, for instance, that one side's lawyer furnishes to the other party in business transactions are still relied on as credible substantiation of their subject matter – even though the delivery of a favorable opinion may be crucial to the ability of the lawyer's client to consummate the transaction. The underlying premise here is that an ethical lawyer would decline to render a formal legal opinion if he couldn't properly do so. In performing this function, then, lawyers are accorded a degree of independent stature — akin to that possessed by the CPA firm that audits the client's books and is considered independent, even though it is paid by the client and has a healthy interest in nourishing the relationship.

So, why isn't this the case when the subject on which the lawyer holds forth shifts from a formal legal opinion to something that's more a matter of judgment? In a dispute, for instance, when one side's lawyer says to her counterpart, "We've got an airtight case," or "We'll really lick you in court," the words lack credibility and are rarely treated as gospel by the other side. The reason such utterances have little weight is that they're classified as "puffery," which is tolerated by the rules of the game. It's not considered unethical to distort the value of one's case or strongly advocate weakly held views about the meaning of decisions or statutes. We thus have a situation where, when a lawyer's ethical standards are on the line, then what she says has some credibility; but if this isn't the case, then we presume she's simply a mouthpiece.

Now, I can understand this kind of either-or positioning in the realm of litigation. After all, a lawsuit is a fight to the finish, with full recognition that a client who is under siege or besieging is entitled to zealous representation. There's a noticeable absence of the kind of gestures that lawyers might otherwise make to lower the temperature — even when the possibility of settlement is on the table — and the mutual distrust fosters suspicion that an evil plot or stratagem lurks behind actions and words of seeming innocence.

But should this mouthpiece mentality apply equally to negotiated transactions — to the matters that form the grist of a business lawyer's mill? I submit that it shouldn't. The operating premises are that both sides want to do a deal, each recognizes that he or she will have to compromise to get it done, and most clients want their lawyers to act constructively to achieve these aims. In this climate, lawyers should not have to labor under the presumption of bias. And let me assure you, there are substantial rewards in store if you can shuck off the mistrust and develop credibility. The two principal areas where this pays off for a lawyer in a negotiated transaction are in the transmittal of information and in presenting a "sticking" position. When you have truthful information (the effect of which is helpful to your cause) that you're imparting to the other side, you want to be able to persuade them that the information is genuine. Representing a seller, for instance, if you do have in hand a higher competing bid for the property — constituting significant positive negotiating leverage for your side — how do you persuade the buyer's lawyer that the other bidder really exists? If she believes you, and her client wants the property, then her client is likely to up his bid in order to win the competition. If she doesn't believe you — if she thinks you're concocting a fictitious competitor — and so advises her client, then he might choose to tough it out without rising to the bait.

Even more important is the credibility of your client's final position. This occurs when, after much negotiating, you say to your counterpart — and it happens to be the truth — "This is as far as my client is willing to go; he won't extend any further." Your counterpart may not like the content of what you say, but it's important that he carry the message back to his client that you do mean it. If you lack credibility at this point, then the other side may well keep negotiating to try to move your client further in their direction. Your goal is to transmit the reality of your client's intransigence so that the other side doesn't misread the situation — so that they recognize if they want the deal, they have to say "yes."

How do you go about achieving such credibility? Before speaking to that point, I should note, as a threshold issue, that you ought to explain to your client from the outset what you're up to. The client needs to realize that she may be foregoing some intermediate gains for the long term advantage of having you as a credible spokesperson. She may want a gladiator, but she has to realize that the concomitant of gladiatorial status is that the presumption of bias will be working against you. And she should also understand that striving for credibility does not mean any diminution in the effectiveness of your representation. You're still asking for whatever you think your client deserves — and on those issues, you can actually muster up more force than usual. What you're passing up is what your client doesn't deserve and probably wouldn't end up getting anyway. To earn credibility with the other side, you have to really work at it. For openers, what you say should be truthful. Resist the temptation to overstate your case. Don't look for edges, or take unreasonable positions, or dissemble or exaggerate, even when it might pass muster ethically to do so. Consistency is requisite. The minute you step out of character — the first time you indulge in one of those gladiatorial forays — you're finished. The presumption of bias reattaches, and you won't be able to rid yourself of it. In terms of sticking credibility, be aware that you won't be able to achieve your goal by taking a "this is it" position on multiple issues. The other side simply won't believe you. You must differentiate between those issues that are truly your blue chips and those that are just bargaining chips. And with the blues, you need to convey a sense of the importance you ascribe to them right from the outset and consistently throughout the negotiations.

So, let this be a clarion call to business lawyers. Shake off those old stereotypes. Position yourself as a credible advocate who can be more effective by achieving a "trust me" consistency than through bending the facts, looking for edges and pounding on tables.