6 Reasons to Settle a Legal Dispute
As a mediator and former civil litigator, I occasionally meet lawyers and others who are against any form of settlement on principled grounds.
To quote Yale Law Professor, Owen M. Fiss, in his (in)famous article in The Yale Law Journal entitled “Against Settlement,” “Like plea bargaining, settlement is a capitulation to the conditions of mass society and should be neither encouraged nor praised.”
In fact, there are people who take a principled approach with everything – and not just lawsuits. They are so principled that they will send back every hamburger they order if it doesn’t contain ham—and don’t them started on hot dogs – since the word is an inherent lie. Such people are so principled that they will also send back income tax refunds to the government because the correct amount of tax should have been deducted in the first place.
As you can imagine, they are a lot of fun at parties.
Yet even the über-principled should be open to testing whether their principles are correct, and if they are serving their actual interests in any given situation – especially the difficult ones.
Also, I find that most people embroiled in a legal dispute are not generally “settlement skeptical” as a matter of principle. Prof. Fiss’ views are not the mainstream. At most of my mediations, the disputants (parties) and their lawyers prefer settlement to trial (despite how they may come across prior to the mediation or in its early stages). There is just a wide gap between the settlement positions of the opposing sides of the dispute. So, it is vital to have a simple, but useful, way of testing reality to determine if the gap should be as wide as it is, and if it can be narrowed to the point where a resolution is possible with my help.
If you’ve hired me as your mediator, you have likely heard me say that there are six reasons to settle any legal dispute (“6 Reasons”). After listing and explaining them, I then encourage the parties and their lawyers to consider my 6 Reasons during the mediation in the privacy of separate caucuses.
Examining these 6 Reasons—one by one—also helps people to move beyond emotional reactions and to engage their brains’ rational, problem-solving parts. They may discover that deeply held principles (like never settling) are simply strong, but irrational, feelings that don’t serve their long-term interests.
Here goes…
Six Reasons to Settle
- Risk
There are no “slam dunks”. Every case is risky. If you maintain that your case, or any part of it, is too strong to fail then at least accept that the judge or jury can still “get it wrong”. Therefore, even if you feel certain, lawsuits are inherently uncertain. Settling on terms which are short of your best-case scenario is rational since:
– a third-party decision maker is taken out of the equation, leaving those who know their own case best (including you and your lawyer) to craft the outcome, and
– no one suffers their worst-case scenario after trial (or beyond – see Finality below).
Also consider that:
A lawyer can never guarantee you a win—and often the “winner” and “loser” of a lawsuit are unclear anyway because you can win on some issues and lose on others.
While you might still believe that being declared a loser after trial is better than settling, if people are honest with themselves then they will admit that they hate losing.
- Time
Most cases typically move (very) slowly toward their day in court. The main reason is that our courts are backlogged – and things only got worse in recent years with the COVID-19 pandemic and a shortage of judicial resources. When settlement is bemoaned by naysayers as “a capitulation to the conditions of mass society” they are, in part, pushing back against the idea that we should settle our legal disputes because it takes so long to get to court.
I agree in the adage “justice delayed is justice denied”. That said, I also believe in the adage “the more things change, the more they stay the same.”. Over 400 years ago, in Shakespeare’s day, Hamlet bemoaned “the law’s delay” during his famous soliloquy.
Frankly, from a philosophical standpoint, the worst reason to settle a case is probably the delay in getting to trial.
Yet, while the government appointing more judges and putting more money generally into the civil justice system might result in getting to trial sooner, trials will never take place soon enough for the average person. There are still pre-trial processes to deal with like discovery, motions and pre-trial conferences – busy lawyers have full calendars, and trials themselves can still last for days or weeks (and some last for months).
Then, there is the preparation and meeting time for pre-trial and trial procedures for lawyers, client and other witnesses. Most lawyers will agree (yes, occasionally they agree on things) that for each day of trial, there is anywhere between one to three days of preparation. While lawyers don’t mind this, their clients are pulled away from other things they can be doing with their time. It also costs them buckets of money (see below).
So, time is and should always be a reason to settle, and settling early – such as at mediation – will normally result in the greatest time savings.
- Costs
No matter how a lawsuit is funded, there are always costs. Even if someone is not paying their own legal fees due to insurance or a lawyer working pro-bono, or they are not paying their lawyer “as they go” because the lawyer is working on a contingency basis, there are still monetary (like out-of-pocket expenses / disbursements) and non-monetary costs (i.e., opportunity costs resulting in lost income, time away from family, friends and other pursuits).
Also, if you lose at trial, the court may order you to pay the other side’s legal expenses (“costs”).
Alternatively, you may be paying your own lawyer as you go, you actually win, but the court decides that everyone will bear their own costs–since it can do that. You had better hope that you at least recover what you paid your lawyer. Experienced lawyers can tell you about cases where “successful” clients recover less than their legal bills (and if they don’t, I can).
However, if you only break even, then was the whole exercise even worth it?
By settling, you control monetary and non-monetary costs, thereby avoiding these unpleasant surprises later.
“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.” Abraham Lincoln (1850)
- Privacy
Our courts are open to the public. Court decisions—and the detailed reasons for them and the names of the people involved—are also public. They are usually, and permanently, on the internet for all the world to see. Bloggers and journalists will typically write about these public court decisions, as will assorted strangers on social media.
Incidentally, don’t expect judges to be kind in their reasons either, regardless of the result. For example, have a look at this decision. It is well known to Toronto lawyers and was also extensively covered by the media at the time of its release. After you read it, ask whether you would you like a judge to write similar things about you – particularly when it is part of the public record in perpetuity?
However, settlements made prior to trial, or other court events, are generally private. Those not directly involved in the case rarely, if ever, know the settlement terms. As well, parties to a settlement normally do not acknowledge any liability or responsibility (liability is almost always “expressly denied”), even if payments are made from one side to another.
While publicity may not deter determined litigants from going to court, they should at least consider publicity as a necessary by-product of court, well in advance, so that they can weigh the value of their privacy and insulation from humiliation before deciding to pass on a settlement opportunity.
- Creativity
There are often freely agreed-upon settlement terms that a Court could never order if called upon to do so because they lack the jurisdiction—or they routinely refuse to exercise that jurisdiction. For example: reference letters, confidentiality and non-disparagement agreements, favourable (but legal) tax treatment of settlement funds, apologies or expressions of regret, and payments to charity or third parties. There are many other creative mechanisms to resolve disputes that address their interests as opposed to just their legal positions.
What settlement critics often ignore – and what people in conflict often forget – is that courts cannot right every wrong. It’s the people who are in conflict, with their professionals’ help, who can come up with the most effective and creative solutions to their problems. Except in rare cases, we don’t necessarily need the “state”, in the form of courts, to determine our private disputes.
- Finality
Since the last reason to settle is “finality”, I always save it for last. Court decisions following trials or motions for judgment are often appealed to higher courts. Some appeals are successful, while others are not. Appeals bring new risks, time, costs and publicity. You might win at trial, but lose on appeal. Why? Because, like lawyers, judges often disagree with one another. We are dealing with human decision making, and not science.
Settlements are different. They are, by nature, final binding contracts and not subject to appeal like court decisions. With the dispute at an end, you can put it behind you and move on.
A final note on finality: after judgment has been rendered and all appeals exhausted, it is not unheard of that the nominal “loser” of a lawsuit refuses or is unable to pay or otherwise comply with what the court ordered. In many of these cases, the so-called “judgment debtor” declares bankruptcy or they simply don’t have any assets or income sources that can be easily seized. In the end, the judgment might be suitable for framing (and evidence that the “judgment creditor” stuck to their principles), but nothing more. Meanwhile, the same judgment debtor may have offered—and was able to honour—a smaller sum or less onerous terms to settle at an earlier point in time.
Conclusion
In the end, I recommend that people weigh a particular settlement opportunity (for example, to either make or accept a final offer to settle at mediation or to accept a mediator’s settlement proposal) against all of these 6 Reasons and then ask themselves this question:
Is it better to settle the dispute or lawsuit, or to continue it indefinitely despite the risk, the time involved, the cost, and the lack of privacy, creativity and finality?
For some people, risk and cost will not be compelling reasons to settle on terms proposed by the opposing side that imply the case is riskier and will be more expensive to try (assuming there has been an honest and serious assessment of risk and cost – along with the other reasons – with the help of their lawyer and the mediator ). However, the remaining 6 Reasons may make settling on the same terms compelling. In fact, any one of the 6 Reasons may be reason enough to settle a particular case at a particular time, depending on the person and their individual needs.
Nevertheless, if you are still of the view that one should “never settle” on principle then at least you will have put your principles to the test. You will be continuing the litigation under no misapprehensions about what the civil justice system can and cannot deliver. That said, I suspect that you have other motivations for taking a case to trial besides “principle”-but those motivations will be the subject of a future blog.
If you are a lawyer or paralegal looking to hire a mediator or arbitrator for your civil dispute – including employment law, business disputes, estate litigation, insurance matters, and construction law – I have been a neutral for over a decade. I conduct mediations, arbitrations and med-arbs via videoconference, in-person, and in hybrid formats.
This blog is for educational purposes only and is not intended as legal or other professional advice.
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