When do you know it’s time to settle?
Lawsuits are expensive, and nearly every lawyer will agree it's frequently better to settle a case than it is to fight it out in court—provided, of course, that the deal is a good one for the client. After all, the client just may lose the case.
Still, settling is not an easy decision. There's always the unknown answer to the question of what would happen if the lawsuit were to go to trial. And a settlement often means that clients don't get exactly what they hoped for. In the defendants' case, a settlement can mean at least a tacit acknowledgement of wrongdoing. For those who filed the lawsuit, a settlement may not result in the desired outcome.
We can't imagine when a lawyer would know when is the best time to settle a case—other than "when you know you'll lose" or "when the other side offers you boatloads of cash." Certain that there are more intricacies to that decision, we put the question to some of the most well-regarded franchise litigators in the country. Here are their answers:
"I know it is definitely time to settle when I wake up in the middle of the night thinking, 'How am I possibly going to win this case?' Short of that, I know it is time to settle when, after considering various factors it appears that it is in the client's best long-term interest to settle the matter. Those factors (many of which are obvious) include: the likelihood of a favorable/unfavorable result, the potential impact on the client of an unfavorable verdict (in both monetary and non-monetary terms), the costs involved in settling (e.g., setting a bad precedent, opening the floodgates to other lawsuits) and the costs involved in not settling (in terms of legal fees, management time, and disruption of the ongoing business). In the end, whether to settle and, if so, when to settle are decisions that need to be made after a
detailed analysis and much discussion with the client, considering its goals and the particular issues and circumstances it is facing."
—Barry Heller, DLA Piper
"A good litigator is always looking at settlement possibilities, from before filing the complaint until the judgment is collected. A satisfactory, even if not optimal, resolution of a dispute between the parties is almost always better for the client than the time, money, and risk involved in taking a case to its conclusion. Mediation, whether before or during litigation, is often a good method to promote the parties' understanding of the risks they face and the
possibilities to settle the case. Virtually every step in litigation should be done both to prepare for and win the case, and to promote the client's prospects in settlement. When the client's objectives can reasonably be accomplished, measured against the cost and risks involved in going forward, it is time to settle."
—James Rubinger, Plave Koch
"When to settle litigation is perhaps one of the must difficult strategic decisions for lawyer and client to make. The glib response to your question is, of course, as soon as possible—preferably before suit is filed, if your business and strategic goals can be met by a prompt settlement. For the most part, litigation costs, including attorneys' fees, are forever lost to both parties to the dispute. In evaluating when to settle, the client should know what its risks
are—not just of winning or losing the lawsuit—but the damage to its reputation and goodwill and its relationships with its stakeholders, and should have in mind a carefully considered analysis of all of the risk factors and potential rewards before making a settlement decision. Once it knows what it has to gain, to lose, the costs and the timeframe for getting there, the client should make a concerted effort to settle by negotiation. If that effort fails, seek mediation before a competent evaluative mediator—one who can persuade both sides that
settlement is in almost every instance a better result than full contact litigation."
—Steven Fedder, Leitess, Leitess Friedberg & Fedder
"Clearly, there is no definitive answer to this question. Rather, the determination to settle a case should be made after enough discovery has been exchanged to allow for an informed decision to be reached. That decision should be based on the consideration of a number of factors, including: the goals of the client (whether or not he or she is seeking monetary damages or to enact some type of systemic change), the strengths and weaknesses of the parties' respective cases, the client's ability to incur the economic and emotional costs
associated with protracted litigation, the tenacity of the adversary, and the unpredictability of a jury. Based on my experience, the litmus test is that if all of the parties are equally unhappy with the terms of the settlement, a successful resolution has been reached."
—David Paris, Marks Klein