Why should I settle my lawsuit?

Let's talk about why you may want to actually settle that lawsuit. Now, of course, everyone will think that the reason you shouldn't settle the lawsuit is to simply keep your attorney happy. If you look at the economics of it, the person making out the most in any litigation is normally the attorney and usually, it's the attorneys for both sides. I've been in many a courtroom where the judge has looked at both of the parties, looked at the attorneys, and explained that if you spent half as much time getting this matter settled as you did on motions, you would save yourselves so much money in attorneys fees, that none of this money would even matter.

The Economics of the Lawsuit

So when you're in the middle of a lawsuit, and you're wondering what the next steps are, the first natural step to look at is the economics of the loss. It doesn't make economic sense for you to settle when your loss is completely unaffordable. If you're in a lawsuit, you have to pay the attorney to file the lawsuit. You have to go through discovery. There are court conferences, depositions, all kinds of motions to draft, and then you finally get to a pre-trial conference. And then after that, maybe years later, you may finally get to a trial.

Paying Your Attorney

All of that money can really add up. Some attorneys will represent you on a contingency fee, which means that they only get money when they win you money at the end of the case. But in those arrangements, you're still often on the hook for expenses. So you have to pay something for an attorney, and if you're a company, you can't represent yourself in court. You have to hire an attorney if your company is a party to a lawsuit. No matter what, you have to factor your attorneys' fees into the economics of any lawsuit you're engaged in.

Costs of Trial

The other thing you need to remember is the trials are extremely expensive. Chances are your attorney has a separate trial retainer, meaning that before the case even gets ready for trial, you have to make a large payment so they can spend the time to get ready for trial. If you have multiple witnesses, expert witnesses, if it's a long trial going day after day, you would also have the expense of ordering a transcript from the court reporter at the end of every day for the attorney to look at overnight and get ready for the next day. So while it may look cool on TV and you see lots of drama, which with whatever law program you like to watch, the fact is those trials are extremely expensive. And if you're in a lawsuit over a small sum of money, that trial time itself may cost more than the amount you're fighting over.

Other Settlement Options

The second reason you may want to consider settling your lawsuit is that by settling, you can actually get things that a judge wouldn't be able to give you. This is something that not everyone considers, but for example, if you're getting sued, and you know you're going to end up owing somebody $1,000. If it's awarded to them by a judgment from a court, the judge orders you pay $1,000 and now it's a judgment that the other party can enforce. Maybe they get to earn interest on top of the $1,000. As the interest increases, they can try to garnish your wages, they can try to garnish your bank accounts, they can go after your assets. If you settle the case for $1,000, maybe you can work out a payment plan where you're paying $100 a month or $100 every other month, so that the money gets paid off, maybe with a little interest built in. But that's not something that a judge is going to order after a trial. The judge will find a judgment for one or the other party.

Another advantage of settling the case is you may want to seal the court record and have the settlement be part of that so that if you're in an industry where you know your competitors are constantly monitoring court dockets to figure out what other companies are doing. Maybe there's some trade secret or client information that's an important party of your lawsuit. You want to make sure that the case files gets sealed. One way to do it is have a settlement where the settlement itself will seal the record in the case you both agree to it. And you both agree never to talk about what happened in the case. For example, if you're doing trademark licensing, one of the options you get in a settlement that you wouldn't necessarily get from going to trial and getting a judgment is you can actually work out a deal where for example, you can both stay in business using your respective trademarks, but agree that it's not an infringement of each other's trademark for you to continue operating.

Another clause that you should always think about, especially if you've had a nasty lawsuit, is a non-disparagement clause or a confidentiality clause in your settlement agreement. And that is as I was just talking about the clause that says nobody's going to talk about what happened in the lawsuit. The files will stay private and nobody will discuss anything. There are usually exceptions, for example, your lawyers can talk about it with the IRS if there's a tax issue, or if somebody has to go to court, you can talk about it in that context. But as a general matter, you don't tell the general public what happened in your lawsuit, who won who lost who had to pay anything. You can use that settlement to keep things private.

So while it may feel like you need to go to trial because it's the principle of the fight that is the most important thing, you want to consider the economics and the other options you may be able to get from a settlement. Now if all this seems a bit overwhelming, or if you're just at the start of litigation yourself, let's set up a Legal Strategy Session. We can talk about where you are in the process and what are your best next steps, we can hop on the phone for 15 or 20 minutes and discuss where your business is in this process. Many people tell themselves, especially lawyers on TV, will never settle and they'll fight till the end. But the fact is, in a lot of cases, it's a better idea to get a settlement because you can gain extra advantages that you wouldn't get from going through a trial.