To Settle or Not to Settle
June 13, 2010

I am a big proponent of settling cases and find that settlement is often more advantageous than long drawn out litigation even in strong cases where I know I can prevail.   Whether to accept a settlement offer can be a difficult decision and depends on the procedural posture of the case, the amount of the offer, and the strength of the plaintiff's case.   Usually, a defendant's initial offer reflects what the defense attorneys believe it will cost to defend the case.  Rather than pay their attorneys to defendant case, defendants in a rational world should be indifferent to paying them or paying the plaintiff's this cost as they will end up paying the amount either way.    However, this is not always the case.  An offer may be less than this amount as the defendant may only be willing to pay "nuisance dollars" just to make the case go away if they believe they can prevail especially thorugh a motion to dimiss.   If a defendant is being sued by multiple parties, the amount a defendant may pay may also be on the low side because the settlement amount could set the bar for settlement payments with other plaintiffs.  In other words, since other plaintiffs could seek discovery of what a defendant paid to settle with another plaintiff (despite settlement confideniality provisions, such an amount can be obtained through discovery if ordered by a judge), defendants have an incentive to pay as little as possible as they don't want to other plaintiffs to find out they were willing to pay or the plaintiff will hold them to similar expected payments.   Given the inehrent uncertainty of the legal system (neither a plaintiff nor defendant knows what a judge or trier of fact will in fact do during the course of litigation), it is often better for a plaintiff to take a settlement amount that may be less than what they are seeking, but when adjusted for the risk of ligition, that they could lose at trial, get a judgment for less than the settlement amount, or risk losing or  a large award or have it reduced via a remittur on appeal), settlement is often the best way to resolve contentious litigation.    
Posted By Justin at June 13, 2010  
   
 
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