Settlements in Litigation

It is often said that the best settlement is one where both sides walk away a little unhappy. This makes sense. In order to resolve a dispute, each side must compromise. When one or both parties to a dispute are unwilling to compromise and decide to litigate and go to trial, they place their fate in the hands of a judge or jury and face the costs and uncertainties of litigation. In any settlement negotiation each side must weigh those costs and uncertainties against what rights and property they might be giving up in any potential settlement.

One aspect of this that I find interesting is the study of human behavior and psychology. In order for there to be a settlement, there must be pressure on both sides that induces them to conclude that an unhappy compromise is still better than an uncertain and expensive future. I referred to this pressure as “consequences.” Without legal consequences or risks, parties will simply have no impetus to settle. Just like the mantra in real estate is “location, location, location” one could say that the mantra for litigation settlements is “consequences, consequences, consequences.” Simply put, this means that you must convince your adversary that there is a possibility that they will lose part or all of the case if they were refuse to compromise. It is the fear of consequences that almost always triggers a settlement.

Sometimes clients try to avoid calling the lawyer they need and instead attempt to resolve a matter on their own. Without realizing it, they find themselves negotiating from a position of weakness and wasting time with calls, e-mails, letters, and/or meetings that go nowhere or which end up with broken promises. To the experienced business litigator, the reason for this is obvious. The client who negotiates without instilling any fear of legal consequences on the other side has very little leverage to negotiate with. Sometimes it takes the commencement of legal action to bring about a settlement. To negotiate from strength, you need to educate your adversary about the consequences and risks. A summons and complaint often accomplishes at least this much.

The idea of consequences is present everywhere in our society. I noticed it just this morning several times. As I was walking by the Port Authority I noticed a soldier in full camouflage holding an automatic rifle. There were people everywhere and this one soldier appeared to be holding a loaded automatic weapon that could have killed everyone. Why didn’t he? Obviously, the consequences of being caught or shot far outweighed whatever benefits might be obtained from this kind of behavior. This sounds like an extreme example and it is but it serves to demonstrate the power that one person might have over many others at any given moment and the reason why that person would choose not to exercise that power.

Walking down Eighth Avenue in New York, I came to a crosswalk. The light turned red and the cars stopped to allow me and other pedestrians to cross. Again, this was another example of consequences. Drivers have been trained to know that the consequences of going through that red light far outweigh the benefits of getting somewhere faster.

In martial arts, as in litigation and life, there are also consequences to every action or inaction. If you are attacked you must decide on fight or flight. If you are training and sparring as I often do, many opponents will continue to press an attack until you do an offensive move. It is commonly said in martial arts and many sports that the best defense is a good offense. It is very hard for someone to attack you when you are attacking them. This is true regardless of the context – a dojang, a football game, or a court. Opponents can be “taught” that they will get punched in the nose, sometimes literally, sometimes figuratively, if they do something that may cause harm to you.

There are circumstances and consequences that we each encounter every day in our lives without even thinking about it. Maybe it is not so important that you do think about these things day to day. Most of them are ingrained and taught from a young age and become second nature. We behave and act in certain ways because of the rules society imposes and because of our morals or values. We simply know the consequences of certain things and do not give them a second thought. But understanding the concept in the context of a potential legal dispute is important because it may bring about a settlement quicker. After all, almost no one wants to be in court and almost everyone wants to get out of court as quickly as possible with a fair result. The irony is that sometimes it is only possible to reach that end by actually starting a litigation. If you don’t educate your adversary about the consequences, no one else will.


If you have any legal questions or need help with settlements or litigation, please contact Attorney Scott Lanin at (212) 764-7250 x 201 or use the contact form in the right sidebar.

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