When a lawsuit is settled, the clients cut a deal, the legal gladiators lay down their briefs, and everyone breathes a sigh of relief. But is that sigh premature?
The dynamics of settlement negotiations often invite parties and their counsel to cut cornersand to fall into traps when they wander off the path. Falling into a settlement trap may mean further litigation: a Bloomberg Law search reveals that more than 1,000 lawsuits have been brought in the past decade for breaches of settlement agreements.
To craft a settlement that has staying power, and to avoid buyers remorse, both clients and their counsel should learn how to avoid the most common settlement traps.
1. Talk to Your Adversary
One of us clerked for a federal judge whose practice, when conducting settlement conferences, was to hand the lawyer for each side an index card. On the card, the judge instructed counsel to write down their no-B.S. settlement number. For the defendant, this meant the highest number that would willingly be paid. For the plaintiff, it meant the lowest number that would willingly be accepted.
The judge would then compare the two cards. Usually, there was a gap between the numbers. Sometimes, however, that gap was small, and the numbers were very close. Once, the plaintiffs and defendants numbers were exactly the same. Another time, the defendants number was larger than the plaintiffs.
Were not advocating index cards as a new method of mediation. The moral we draw, instead, is that counsel should not be afraid to talk to each other about settlement early on. Particularly in the two cases noted, if counsel had communicated candidly about what their clients needed, expensive trial preparation could have been avoided. Even if it doesnt result in an immediate settlement, a constructive settlement discussion early in the process can educate the parties about their adversaries positions and help them understand what is really at stake.
2. Put it in Writing
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