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Settling Down

By Eugene Wollan

Life is About Choices

• Hamlet debated whether to be or not to be.
• Ilsa Lund was torn between Rick Blaine and Victor Laszlo.
• Radames had to choose between Aida and Amneris.
• Robert Frost faced the fork in the road and selected the one less traveled.
• Eisenhower pondered landing in Normandy or in the Pas de Calais during World War II.
• JFK weighed a bombing attack vs. a naval blockade during the Cuban missile crisis in 1962.

To say that life is about choices is not intended as a contradiction of Woody Allen’s famous and insightful dictum that “85 percent of life is showing up.” In fact, the two perspectives dovetail nicely because you have to show up in order to make the choices.

Litigation Choices: Strategic and Tactical

In a very real sense, the practice of law, especially litigation, is all about choices, too, ranging from the grandly strategic:

• Should we sue?
• Should we counterclaim?
• Should we move for summary judgment?
• Should we demand a jury?
• Should we appeal? (A lawyer friend of mine used to say, “Justice has prevailed and we’re appealing.” Doesn’t that say it all?)

to the purely tactical:

• Should we depose that witness?
• Should we save that argument for the reply brief?
• Should we serve Contention Interrogatories?
• Should we ask for an adjournment?

And so it goes.

To Settle or Not to Settle

An obvious and important choice that sooner or later faces almost every litigator and his/her client relates to settlement of a pending case. In reality, this is generally not just one choice but a series of sequential decisions.

1. Are we interested in settling?

Answering this question calls for evaluating the case and making basic decisions about its merits and its potential. It is often said that every case can be settled if the terms are right, and this has a general ring of truth about it. There are, however, occasional situations in which settlement would simply be out of the question, perhaps because of a principle involved, perhaps because of a perceived need to establish the law on a difficult issue, perhaps because of the parties’ unswerving mutual detestation, or perhaps simply because of pure mulish stubbornness.

2. If we’re interested, how should we go about exploring a settlement?

There is a widespread perception that the party that first broaches the subject of settlement is signaling a lack of confidence in his/her own case and will thereafter and forevermore be “negotiating from weakness” in any settlement discussions. Unfortunately, this perception is all too often true, because as the poet said (or should have said), “weakness is in the eye of the beholder.”

There are several ways a party might try to defuse that harmful perception and still get discussions going:

• “I’m raising the subject now because I don’t want to incur a lot more expense if I don’t have to, but if the case isn’t settled now, the subject is permanently off the table.”
• “Your case has so many holes in it that you owe it to your client to start thinking about bailing out on some reasonable terms sooner rather than later.”
• “My client’s auditors are pressing him to get this receivable (or contingency) off the books before the close of the fiscal year, but if that doesn’t happen, my client is prepared to go for broke.”
• “Let’s lay it on the line: we’re interested in discussing settlement for a host of practical reasons, but if you’re going to think that this means we have less confidence in our case, or that you’ll be negotiating from strength and we from weakness, then there’s no point in pursuing it, so forget I said anything.”

And, of course, there are more variations and mutations. In each of them, the effectiveness of the approach probably depends primarily on two factors: the adversary’s perception of the attorney’s integrity, based either on past dealings or reputation; and the adversary’s own evaluation of the case.

3. When is the right time to raise the settlement issue?

Ideally, the way to avoid problem #2 is to wait until some outside circumstance brings the possibility of settlement to the surface. This can come about in various ways:

• the Judge orders a mediation;
• the Judge conducts a settlement conference;
• the case is suddenly listed for trial (that would certainly get everyone’s attention!);
• there is some other unexpected and dramatic development in the case (a key witness dies, a long-standing precedent is reversed, a judge retires and is replaced, a hurricane destroys the document depository, or whatever); or
• a particularly difficult and expensive phase of the case is about to start (for example, a few dozen video depositions are to be conducted in Nepal or Burundi).

In the absence of any such fortuitous developments, the interested party must simply bite the bullet and fall back on one of the rationalizations listed in #2. Too many cases that could have been settled have failed to settle simply because the lawyers on both sides were just too stubborn to be the first to bring up the idea of settlement.

4. How do I raise the possibility of settlement with the client?

Sometimes, of course, the client raises the question of settlement first, which makes the litigator’s life a lot easier. Otherwise, the answer depends on the kind of relationship that has been established between litigator and client. Is it long-standing and based on mutual understanding, respect, and trust? Is the relationship new, with both parties feeling their way? Is the client heavily involved in the strategizing and decision-making, or is he or she content to stand back and let the lawyer run the case? Is the client the ultimate decision-maker, or is his or her decision subject to review by a superior, a chief financial officer, a board of directors, a claims vice president, or anyone else?

One thing you can absolutely count on is that the client will be turned off by the lawyer who has given consistently upbeat reports and prognostications, and then phones in a panic from the courthouse after the case has been called for trial, reciting everything that’s wrong with the case and begging for authority to settle at any price. Analyses and projections for the client should always be realistic, and, if anything a bit conservative. (Corollary #4 to Murphy’s Law: It’s better to be a hero than a bum).

5. What is the right settlement amount?

Answering this question usually involves a combination of vigorous scrutiny of all the evidence; evaluation of the pros and cons; and pure, gut, experience-derived instinct. Obviously, the decision regarding the correct settlement amount is fact-driven, and probably the most important component is a scrupulously honest and objective evaluation of the facts.

6. How do I reach a settlement agreement?

Every so often a lawyer will be heard to say something like this: “Look, let’s not play games or waste time with the usual tap dance. I’ll give you, right now, the figure I think we’ll end up with after endless haggling; it’s not a negotiating figure, and you can simply take it or leave it.”

At least nine times out of ten, this maneuver is the kiss of death, because no matter how many protestations the lawyer makes to the contrary, the number is viewed and treated as a negotiating figure by the other party, and the lawyer has accomplished nothing except undercut his own leverage and flexibility. The only situation in which this approach has even a prayer of working is one in which both lawyers are like-minded regarding the desirability of a settlement and have great respect for each other’s integrity. Otherwise, don’t go there.

Tips for Negotiating

Volumes have been written about the art of negotiating (it really is an art), and fortunes have been made giving advice about how to do it. (Does anyone really buy those videotapes on “How To Be A Successful Negotiator” that are regularly advertised in airline in-flight magazines?) It would be silly for me to try to summarize all that wisdom here, so I will note only two points:

(1) Pick your starting number very, very carefully, because it must be realistic enough to engender interest in further discussion while still leaving plenty of room for maneuver.

(2) It is always easier to sell to the adversary a number that can be rationalized to him or her and (more importantly) to his or her client, instead of a number that seems completely arbitrary. For example, pointing out that: “This way we’ll be settling for 50 percent of item 1, 40 percent of item 2, and 60 percent of item 3,” will sound better than pulling a number out of a hat, even if that’s really what you did. Everything else is simply a matter of calculating backwards from the final number.

Last But Not Least

A final category, a putative number 7, might be headed “How do I really feel about settling?”

(1) Some lawyers dread the courtroom and heave a huge sigh of relief when a case settles.

(2) Some lawyers love the courtroom and feel a genuine sense of letdown when a case settles.

(3) Some lawyers, sad to say, hate to see a case settled because the meter stops running.

(4) Some lawyers are realistic enough to accept settlement as the most common final chapter of litigation. [I like to think of myself as belonging to groups 2 and 4.]

(5) Some lawyers, in addition to these feelings, find themselves playing the mental “what-if” game, usually in the wee small hours of the morning. They are scripting in their heads the scenario of how the trial would have played out if the case had not been settled. (This is not entirely a silly or useless exercise; it can be a helpful component of litigation as an always-learning-something experience.)

I often find myself in the last group, too. There are a few cases that particularly haunt me because I was deprived of something I had been really looking forward to: the opportunity to cross-examine certain particularly vulnerable witnesses who were either demonstrably lying or so self-important as to be oblivious to the deficiencies in their testimony. (If any of them read this: You Know Who You Are.) It’s astonishing how effective the cross-examination can be when you can script the answers as well as the questions, and there’s no one to object.

ABOUT THE AUTHOR

Eugene Wollan is Of Counsel at Mound Cotton Wollan & Greengrass. He is Certified as an arbitrator and umpire by ARIAS-US and wrote the Handbook of Reinsurance Law, published by Aspen Law and Business.

Reprinted with permission from the Summer 2006 issue of Newsletter, published by Mound Cotton Wollan & Greengrass.

riskVue | The webzine for risk management professionals
October 2006