13 How Do I Settle My Lawsuit?

Dan was shocked but pleased that his lawsuit was over. It had been a long slog, right up to trial. But then, just as they were ready to go to trial, Dan’s case had settled, virtually without warning. Dan’s attorney had told him that the insurer might just be waiting until trial to see if Dan caved on his demand. Dan’s attorney had recommended against doing so. Dan agreed that he seemed to have a pretty solid case. Dan just hadn’t expected the insurer to budge. And then, the day before trial, the insurer had called, offering nearly everything that Dan had been demanding. Dan jumped at the offer, relieved at not having to go through trial after all. 

Settlement

You may settle a lawsuit, although it takes both you and your opposing party to agree to do so, and so settlement is not entirely up to you. Generally, though, each party will have some settlement stance, meaning that if the other party caves, entirely gives up their own position, and accepts the last outstanding offer, the case then settles. Thus, settlement is generally possible at any time. Cases don’t settle when the parties remain apart in their settlement stances, not generally because either party is adamantly against resolution. Of course, you may settle your dispute before you file a lawsuit or your opponent calls you to answer a lawsuit your opponent files. But you may also settle your dispute once the lawsuit has already commenced. Indeed, the judge is likely to encourage you and your opposing party to settle, hoping to clear the docket of another time-consuming trial. So, the question of settlement always hangs in the air over litigation, sometimes approaching and at other times receding. If you want to settle, you generally may do so. Your bigger question is inevitably the terms that you and your opposing party will agree to accept. 

Negotiation

Negotiation is an art form more than a science. Indeed, negotiation is several different art forms. Each attorney, insurance company, claim representative, and party has their own way of going about it. Attorneys and other professionals regularly involved in negotiation generally have some training in negotiation. Schools of thought and forms of practice do exist around negotiation. The following discussion mentions a couple or few of them. But the point of negotiation is clear enough, which is to encourage the parties to reconsider their relative positions enough to move them closer to the point of agreement. How you get the other party to budge, and what causes you to change your own position, very much depends on the case, its stakes, the circumstances, and the negotiators. While negotiations have patterns, and experienced negotiators definitely draw from their experience recognizing those patterns, every negotiation is different. 

Ranges

Experienced negotiators of civil litigation generally have an idea of the reasonable range of settlement. Settlements are, surprisingly, not widely reported. Settlements tend to be confidential. Neither the plaintiff nor the defendant or defendant’s insurer especially want the money or other valuable interests they exchange to be public information. They often bind one another to confidentiality in their settlement agreement. Services purporting to report settlements can be notoriously inaccurate for that reason. They may only report a fraction of settlements and only ones that the parties or their attorneys peculiarly want to trumpet for their especially large or especially small size. Without a reliable source for settlements, attorneys, insurers, and mediators all tend to go by their personal experience as to the values of certain claims. Listen to your attorney, who probably knows the reasonable range within which your case might well settle. Expect to settle, if at all, within that reasonable range.

Counteroffers

Whichever side makes the first offer generally does so expecting a counteroffer. Few if any parties accept the first offer. They generally want to test whether the offer is the best offer, which they generally assume it isn’t. Who would be so foolish as to make their first offer their best offer when they might be able to do better by negotiating? Thus, plaintiffs generally start higher, not expecting the defendant to agree but instead to start lower. Indeed, first offers and first counteroffers are often outside the reasonable range of settlement, each side trying to set the tone. If the plaintiff starts way too high, the defendant will counteroffer nothing. If the plaintiff starts at the upper edge of the reasonable range of settlement, the defendant will start at the lower edge. This sort of posturing can be useful in beginning to confirm the reasonable range of settlement. Pay attention to the range that you and your opposing party are establishing through the course of your negotiation.

Increments

Negotiations over money generally involve offers and counteroffers, back and forth, moving closer in increments. The incremental jumps that each side makes are important. Small increments can make it appear that a party is unwilling to budge much. Bigger increments can make it appear that a party is ready to settle or even caving in to the other side’s position. But increments can also just be more posturing. Indeed, initially the parties may move little from their initial offer. Deadlines, though, can drive the parties to move their positions more quickly. In an in-person negotiation, the parties often move most just before the time to adjourn, such as when one side or the other has a plane to catch home. The parties may also move most as trial approaches or as the judge signals that a ruling on a motion to dismiss is coming. So, pay attention to the increments relative to upcoming events and deadlines. 

Positions

In litigation as in life, parties can get stuck in their positions. Once your attorney finally convinces you to communicate an offer to the other side, but the other side promptly rejects it, convincing yourself to go even farther toward some unknown settlement mid-point can be hard. A key to negotiation can thus be how to stimulate the parties to soften and then alter their positions. The main way to do so is to point out new information or evidence that increases a stuck party’s risk of losing. The thought of a looming loss can quickly soften a party’s position. A successful negotiation often involves getting both sides to see more of their risks and fewer of their rewards, until both sides have softened their positions enough to come together. If your negotiations are stuck, look for new information or evidence that might change a party’s position.

Interests

Another negotiation approach in litigation is to encourage the parties to focus on interests over positions. Interest-based negotiation is harder when the whole case is about money, as in personal-injury cases, and easier when the case involves multiple interests, as in divorce and child-custody cases. In interest-based negotiation, the key is to get the parties thinking about what their interests are, enough to begin to look for common or overlapping interests that bring the parties together. For instance, in a child-custody case, each parent has their own interest in custody, but both parents should be seeing the child’s greater interests in cordial parental relationships, an established custodial environment, and frequent positive interactions with both parents. If your negotiations are stuck, focus on interests over positions. 

Options

Another negotiation approach is to generate more options for resolution than the parties currently see. For example, while money is generally the single object in personal-injury litigation, even in those cases the parties may have other options beyond more money or less money. Tax laws, for example, advantage annuitizing a personal-injury settlement. If the plaintiff agrees to put the money directly into an annuity, the money can grow to a larger sum than the plaintiff initially received. The defendant pays the same amount, but the plaintiff sees a bigger figure because of the tax savings. Confidentiality of the settlement, an apology, and assurances of changed behavior may be other options that could hasten along a personal-injury settlement. It’s not money, but it’s something. Look for those other options that might have sentimental or emotional value, when the parties are otherwise stuck on money or other tangible interests. 

Mediation

Procedures can be just as important to a successful negotiation as strategies, approaches, and tactics. Parties in civil litigation often use mediation as a settlement procedure. Retaining a skilled professional mediator to gather the parties and their attorneys at a single site for a day or half day of negotiations can hasten settlement. The mediator generally places each side in a different room to shuttle back and forth between rooms with settlement proposals and information influencing settlement positions. In this way, the mediator can speak privately with each side, highlighting case risks. Yet the mediator can also show empathy to each side, acknowledging their emotions in a way that builds trust. Parties can have greater emotional investment in the litigation subject than the financial or other practical interests represent. When a party feels seen, heard, and understood, even if only by a mediator, the party may feel more in control of the matter and more willing to be practical about it. Consider mediation if you need to get your negotiation moving.

Evaluation

Some states and courts also require the parties to go through a process of case evaluation. In case evaluation, a single evaluator or panel of evaluators reviews written case summaries by both sides to put a settlement figure on the case. Each side has the option of accepting or rejecting the settlement figure. If both sides accept the independent and therefore presumably reasonable figure, then the case settles for that figure. If either side rejects the figure, the case proceeds but with the helpful new information of the figure, for which the parties may later settle. Some courts add a sanction for rejecting an evaluation figure and failing to improve the party’s position over that figure at trial. Case evaluation can thus involve a carrot-and-stick approach to settlement.

Pretrials

Pretrial conferences are another settlement opportunity. Judges typically hold pretrial conferences a month or so before the trial to ensure that the parties are ready for trial and to streamline the trial issues if possible. The judge may simultaneously require the parties or their representatives, with full authority to settle, to attend the pretrial conference to confer about settlement. Judges can take different attitudes toward participating in those settlement discussions at a pretrial conference. Generally, judges prefer not to do so and may even have a code or rule prohibiting their participation. But some judges will ask the parties’ permission to help along with settlement, by meeting privately with one side and then the other, after the fashion of a mediation. Use your pretrial conference as a last-ditch settlement effort, if the judge permits or requires it.

Attorneys

Attorneys, with their attitudes for or against settlement, can certainly play a role in whether a settlement will come about. The attorneys on both sides may want to see the case settle, whether for their economic interests in case fees, their stress levels, scheduling conflicts with their other professional obligations, their vacation schedules, or some other personal or professional reason. If so, they may communicate and confer privately, to take any fruits of their discussions back to their clients. If one side communicates a settlement offer to the other side’s attorney, that attorney has an ethical duty to communicate the offer to the attorney’s client. The clients, not the attorneys, get to decide on settlement. The vast majority of case settlements may well occur simply by the attorneys communicating with one another on behalf of the parties. 

Parties

The parties don’t have to wait for their attorneys to initiate settlement discussions. Attorneys have the ethical obligation not to go behind one another’s back, directly to the opposing attorney’s client. Attorneys must speak with attorneys, not directly with a represented party, unless the attorney representing the party gives permission, which they generally don’t give. But parties have no such ethical duty to communicate through attorneys. Parties may, if they wish, speak directly with one another. If the attorneys aren’t interested in settling the case for whatever personal or professional reason, but the parties wish to do so, the parties may find it efficacious to simply negotiate directly with one another. Divorce and child-custody cases sometimes settle that way, when the parties finally tire of battling it out through attorneys, remember their prior intimate relationship, and decide on their own to work it out between them.

Agreement

If you and the opposing party agree to settle your lawsuit, you need to promptly reduce that agreement to a signed writing. Don’t delay. Sit down immediately and write out the agreement by hand, if you must, to get an immediate signature on it. Don’t allow any time for a change in heart, if both sides have finally agreed. Until it’s in writing, you have nothing but trust, when the litigation between the parties already suggests good reason not to trust. Once you have a signed agreement stating the basic material terms, your attorneys can formalize the agreement with additional details as necessary. Those details may include a confidentiality clause, a mutual non-disparagement clause, and an agreement to dismiss the pending litigation. The alternative to a written agreement is to place something on the record in open court, if the settlement occurs at a court hearing or pretrial conference. An oral agreement on the stenographer’s record in open court is just as binding as a signed and written agreement, although the attorneys may well prepare a written agreement for the parties to sign anyway, with the additional settlement details.

Dismissal

Once the parties have agreed to settle, the court must dispose of the pending lawsuit, one way or another. A common procedure, especially for the resolution of personal-injury and business litigation, is for the parties to agree to dismiss the lawsuit with prejudice, based on the private and confidential settlement. An order for dismissal leaves no public record of how much the defendant paid or what were the other terms of the settlement. An alternative used in divorce, child-custody, and other complex cases involving ongoing obligations and relationships is for the court to enter a consent judgment reflecting the terms of the settlement. Divorce judgments are especially detailed, lengthy, and complex insofar as they must dissolve the marriage, assign child custody, award parenting time, divide marital property, and determine spousal support, among other things. The entry of a consent judgment formally ends the pending case, as would an order for dismissal.

Enforcement

The parties and their attorneys generally plan for court enforcement of a settlement agreement if necessary. A consent judgment for divorce is again a good example. Although the judgment ends the case, the court retains the authority to enforce the judgment. Either party to the judgment may move the court to enforce the judgment if the other party fails to comply with its terms. If, instead of a consent judgment, the court enters an order for dismissal, the attorneys would likely have already seen to an exchange of the settlement check for the stipulated order of dismissal, thus needing no enforcement. If enforcement was for some reason necessary anyway, such as if the check bounced, then the aggrieved party could move to set aside the dismissal and seek to enforce the settlement agreement instead. Help your attorney plan the best way of ensuring your settlement’s enforcement. See the later chapter on enforcing judgments.

Reflection

How close to settling are you and your opposing party? What is keeping you apart? What might bring you closer together? How badly do you want to settle? How badly does your opposing party want to settle? Are your attorneys helping promote settlement, or are they keeping the sides apart? Would your direct communication with the opposing party promote settlement? Would your attorney recommend your direct communication or advise against it? If your case involves money, how far apart are the two sides in their settlement figures? How much has each side moved their position? Are both sides within the reasonable range of settlement yet? Would retaining a mediator help move the parties closer more quickly? Would case evaluation help? Has your judge encouraged settlement talks? Are both sides required to attend the pretrial conference with full settlement authority? Are the attorneys communicating settlement offers and counteroffers back and forth timely and with accompanying recommendations and advice? Does your attorney have a settlement agreement or consent judgment ready to execute, once the two sides agree? Do you anticipate needing court enforcement of your settlement agreement? 

Key Points

• You may still settle your case after having filed your lawsuit.

• Settling a civil lawsuit can depend on skilled negotiation methods.

• Attorneys often have a good idea of the reasonable settlement range.

• Negotiation typically proceeds through offers and counteroffers.

• The increments with which a party changes positions are important.

• Parties get stuck on their positions, needing to soften them to settle.

• Focusing on interests over positions can generate common approaches.

• Generating additional settlement options can help move positions.

• A trained mediator may facilitate settlement through private caucuses.

• Case evaluation sets an independent settlement figure on the case.

• Judges may encourage settlement talks at pretrial conferences.

• Attorneys settle most cases through their private communications.

• Parties may negotiate directly with one another without attorneys.

• Settlement agreements need to be signed or on the court record.

• Settlements result either in an order of dismissal or consent judgment.

• Courts may retain authority to enforce a settlement agreement.

Read Chapter 14.