Wednesday, April 19, 2023

Most lawsuits settle. Here’s why.

$787.5 million. That's how much Fox News agreed to pay Dominion Voting Systems to settle its claims of defamation related to bogus claims of fraud in the 2020 presidential election.

Some people aren't happy that this case settled. For one reason or another they wanted these parties to have their weeks in court. But you know what? The only opinions that matter are those of Fox and Dominion.

When you litigate, you lose. This is an odd statement for a litigator to make. But it's true. When you litigate, the only people that "win" are the lawyers. It's for this reason that I believe that every claim or potential claim should settle. The two key considerations are when and for how much.

Here are three factors that litigants often consider in deciding the "when" and the "how much".

1.) Cost. Going to trial can be incredibly costly. WAY more than you think. Settlements, on the other hand, can be much quicker and are always less expensive.

2.) Distraction. Every minute you and your employees spend devoted to supporting and managing litigation is a minute not spent on your actual business. Time is money, and you’re not making it if you’re gathering documents, sitting in depositions, and appearing at hearings or trial.

3.) Privacy. Litigation are public, with the filings and proceedings open to the public and the media. Settlements, on the other hand, can be kept private, with the terms of the agreement remaining confidential. This can be especially important for high-profile cases or cases involving sensitive information.

Despite what I believe is a universal truth that all cases should settle, some don't. I'm not telling you to settle every case, no matter the cost. There is a calculus involved taking the above factors into consideration. The only way to survive as an employer is to draw a reasonable line in the sand on settlement value for a case and stick to it. If you are dead in the water, then you are better off settling early and not spending hundreds of thousands of dollars paying your lawyers to fight a lost cause. At the other extreme, though, if the employee's case is meritless (or frivolous, depending on your viewpoint), then do you want to spend even a penny towards settlement? Settling those cases will only paint your business as an easy mark, spurring copycat claims by other employees. For this latter category of claims, the only "fair" settlement is a voluntary dismissal, or, at most, a nuisance value.

These are business decisions, not emotional ones. Treat it like a business decision and you'll come out ahead each and every time (even if it feels like you're losing).