An excellent article in the current issue of the Wisconsin Lawyer, titled “Negotiating in the Red Zone,” discusses the risk of legal malpractice liability for lawyers conducting settlement negotiations for clients. The “red zone” occurs when an opposing party makes an offer within the client’s stated acceptable range but the attorney believes that they can obtain a better offer by rejecting it and negotiating further. The risk is that the opposing party will terminate the settlement discussions and a trial will result in a worse outcome. The author argues that lawyers are more vulnerable to professional liability when a settlement opportunity is lost in red-zone situations than in non-red-zone cases.
The article suggests that attorneys fully advise clients of the risks and benefits of continuing negotiations in such situations, and that they document and not deviate from the client’s agreed-on strategy. It also mentions that this advice should be followed even in mediation. It does not discuss how the mediator should address or participate in the decision to accept or reject a red zone offer. At a minimum, the mediator should be aware of the ethical considerations and risks of liability that the attorney is facing. While the mediator probably has no obligation to advise the lawyer of the heightened risk, doing so could enhance the prospect of a final settlement. Without a participant’s consent, a mediator cannot disclose whether an offer is a final bottom line. But the mediator can help attorneys and their clients to intelligently consider and evaluate the risks and benefits of continuing to negotiate versus accepting an offer. The mediator might also help to document the attorney’s advice and the client’s decision regarding red zone negotiation strategy. Thus, a mediator may help to reduce the attorney’s risk of ethical problems or professional liability.
In other words, the article demonstrates another reason to seek out a mediator to assist in delicate or complex negotiations to resolve litigation or civil disputes.