Most civil court cases are settled. The vast majority of cases settle at some point prior to trial, often “on the courthouse steps”. That being the case, it is essential for you to know about how and why cases settle and the pros and cons of settlement.
Settlement necessarily involves compromise. People who are involved in litigation don’t really want to think about compromise. So why settle cases? For one, it is certainty. There is no more risk of losing at trial. That’s worth something. It’s like buying insurance. We are prepared to throw away certain money to eliminate the risks of certain losses which may occur, but may not.
Settlement is finality. No more sleepless nights worrying about the outcome of the litigation. For a plaintiff, settlement also means money in hand, not some judgment that may be worthless.
At some point in the course of litigation, there is usually a moment in time where there is a serious effort to settle. It may be a pre-trial, mediation of some other meeting between the parties. Often, parties go into a settlement looking for a particular result. It is not uncommon for the parties to end up settling for a result less attractive than they thought was their “bottom line”. That’s OK, and here’s why:
Productive settlement discussions develop “momentum”. For example, if one party is willing to pay $50,000 to the plaintiff to settle the case, but the plaintiff wants $70,000 as its “bottom line”, are the parties going to go to trial over $20,000? I doubt it. Once they have reached that point, they realize that if each party moved by another $10,000, the file would be settled. They can be sure to spend that much to have a trial, and there is still the risk of losing.
Settle sooner, for less compromise. The longer it takes to have a productive settlement discussion, the more each party will have spent on their own legal fees and the more entrenched they will be in their position.
On the other hand, real settlement discussions are often not possible until all the facts and documents have been disclosed. Unless there is some sort of pressure (looming trial, or some other expensive process), my experience is that settlement efforts are not as productive. That’s probably why so many matters settle just prior to trial.
I always tell clients that if you settle an action and both sides walk away equally pissed off, then you have probably made the right deal. (Pardon the language, but it best describes the client’s feelings in that situation.)
When assessing settlement, look at your best and worst-case scenarios. Settlement should find you somewhere between those extremes. How far away from the mid-point will be determined by an examination of the weaknesses and strengths of your respective positions.
Finally, when deciding whether you settle, what is your best alternative to a negotiated agreement? You had better be prepared to accept the consequences of not settling.
