Sleazy Attorney Technique No. 8: The Phantom Settlement Offer

Yesterday’s post about flat fees made me think of a war story which just happens to illustrate Sleazy Attorney Technique no. 8.

When I first started practicing I had to be hit over the head with this technique a few times before I knew what was happening. I tend to assume the best of people until they give me reason not to, and the first few times this happened I wrote it off as a simple mistake until I finally realized what they were doing.

Here is the scenario. You represent the plaintiff in a breach of contract action, and the opposition is about to take the deposition of your client. You’re all sitting around the conference table ready to begin, and opposing counsel turns to you and says, “Before we go on the record, I don’t want to go through a whole deposition if we don’t have to, so I was just wondering if you got a chance to present our settlement offer to your client?”

There was no settlement offer, as the attorney well knows. His goal is to plant a seed of doubt in your client, hoping it will blossom into conflict. The client will wonder, “why isn’t my attorney communicating settlement offers to me? Is he trying to keep this case going?”

Now, if you think this technique can be easily diffused by simply asking for the offer, you are not giving enough credit to opposing counsel’s strategery, to use a Bushism. Assume your client is suing for $500,000. Here is how the conversation will go:

Opposing counsel:  “Before we go on the record, I was just wondering if you got a chance to present our settlement offer to your client?”

You:  “Counsel, despite my settlement demands, you have never responded with a counter-offer. Are you saying you now have a settlement offer?”

Opposing counsel:  “Well, we made that original offer of $450,000 back when you first filed the complaint, but since you never responded, we had to incur additional attorney fees responding to all that unnecessary discovery you propounded, so as I told you the offer is now $400,000.”

So, by engaging, you have only provided greater opportunity for opposing counsel to use the tactic. Despite its sleazy nature, it can be amazingly effective. If your client falls for it, in his mind you just cost him $50,000 by failing to communicate the original (fictional) offer. Now the client’s goal is just to get back to that $450,000 offer that never existed. After some wrangling, the opposition will graciously agree to put $20,000 of the lost $50,000 back on the table, settling for $420,000. He just saved his client $80,000 plus all pre-judgment interest and attorney fees, all because of the effective application of a mind game.

No, this technique has never worked against one of my clients because I have always been able to bring them back to reality. However, I have seen how effective “the disappearing offer” can be during settlement negotiations at a mediation. The opposition will open with the offer of $400,000, we counter with a demand of $475,000, and they respond that they are so offended that we did not accept the generous offer of $400,000 that they will now only pay $350,000. Some clients will go into a panic, thinking they just lost $50,000, asking how I could ever let that happen.

I’ve seen many variations on this technique, so be on your toes whenever the opposing counsel is in a position to indirectly communicate with your client, such as at depositions and settlement conferences.  Some attorneys apply the technique through their clients, instructing their client to contact your client to deliver the message.

So how do you protect against this sleazy attorney technique? Just explain the technique to your client, and tell them to expect it. Explain that you are required to present all settlement offers, no matter how absurd, and that you can get in trouble with the Bar if you fail to do so, so the client never needs to worry that you won’t communicate a settlement offer.  So if opposing counsel ever claims otherwise, he is just employing this tactic.

Back to my war story, a funny example coming from a tragic situation. This attempt to drive a wedge between you and your client is not limited to phantom settlement offers.  I represented a client who had been defrauded out of half a million dollars, and the con artist was represented by his attorney daughter. It was truly sad to watch this woman have to defend her con artist father, and you could see that she desperately wanted not to believe what had happened.

In any event, I guess the fruit doesn’t fall far from the tree as they say, because during my deposition of her father, she launched into one of the most extreme applications of this technique I have ever seen. Her father was evading all the questions so I had to keep pushing, and his daughter suddenly blurted out the following diatribe:

“Counsel, you told me at the beginning of this case that you were going to turn this case into a cash cow, that you were going to churn the file and run up the attorney fees for your client, and I hoped you were just posturing, but I have never seen an attorney spend so much unnecessary time on a case just to get a big fee out of it.”

There was this moment of stunned silence, I turned and looked into my client’s eyes, and we both burst into almost uncontrollable laughter. What the attorney failed to realize or anticipate was that I was handling the case for a flat fee. If, indeed, I was spending a great deal of time on the case, then she had paid me a tremendous compliment, because whether I spent 100 or 500 hours on the case I was going to be make the same amount.

Had I been representing the client on an hourly basis, the trick might have worked. I can imagine it would be hard for any client to believe that an attorney would engage in such theatrics to gain a tactical advantage. Make sure you educate your client on this possibility.

[Sidebar:] The defendant in the aforesaid case presented a case study in how con men work. My client had invested $500,000 in defendant’s business, but when the business really took off, defendant denied that my client had invested anything. Of course, that claim didn’t withstand scrutiny for long because it was easy to show the flow of the money from my client into the business, so the defendant then changed his story and claimed that while it was true the defendant had provided $500,000 to the business, it was basically tuition money. The defendant claimed that my client was interested in the business, so defendant had graciously agreed to permit him to observe the operation for $500,000.

The defendant stuck to that story to the day of trial, at which time he stipulated to judgment in the full amount of our claim. The business was sold and our client was paid in full for the value of his interest in the business.

Defendants of this sort view business as a Ponzi scheme. He knew his defense would not work, but he put off judgment day as long as possible so that he could find someone else to con, and use that money to deal with the prior victim. If you ever find yourself in a case where you can’t fathom how defendant thinks his defense is going to fly, the answer is probably that he has no intention of really trying that defense.