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How a Settlement Can Lead to a Win-Win Outcome

Business and Commercial DisputesLitigation By Harvey Binnall PLLC - 2018/06/22 at 12:23pm

If you are involved in the early-goings of a business dispute, then chances are that you’ve considered the possibility of a settlement (i.e., a negotiated compromise where both parties agree to an end to the dispute and to further litigation).  Despite the fact that the majority of cases end in a settlement, they are only vaguely understood by most people.  As such, plaintiffs may not realize the point of settlement and the benefits in engaging in negotiations in order to reach a settlement compromise.

According to a study conducted by Cornell Law School researchers, aggregate settlement rates ran as high as 87.2 percent (in some claim categories), though it mostly hovered around 70 percent.

As the plaintiff in a business dispute, it’s critical that you understand the various contours of a settlement so that you can make an informed decision about whether a negotiated compromise is the “right choice,” given the circumstances.  if the defendant is low-balling your requests, for example, and you believe that you have a strong case to present at trial, then it may be worth following-through with trial litigation (rather than accepting a low-ball settlement offer).

Why do so many plaintiffs — in business and other disputes — eventually move towards a settlement compromise?  The answer is rather simple, actually.  Let’s take a look at some of the basics for further clarity.

Protracted Litigation Can Be Costly and Uncertain

Litigation can be a messy process, overall.  Depending on the circumstances surrounding the lawsuit (and the hostility of the defendant), you may find yourself in protracted litigation that works as a substantial drain on time, money, and effort.  It’s not unheard of, in fact, for some litigation to drag on for years.  As a business, you might also not want to remain in the media spotlight for a dispute that can damage your brand with consumers.

A level of uncertainty underlies all litigation.  There is no guarantee that you will necessarily win the case if it goes to trial, or that — even if you do secure a favorable verdict in the case, that you will be awarded the full damages that you’ve claimed.

Consider, for example, a standard breach of contract claim.  You sue the breaching party for damages.  After a year of protracted and challenging litigation, the case proceeds to trial and the court agrees that there has been a breach.  At first glance, this seems positive — after all, the court has given you the “win.”  The jury might disagree with the damages total, however, and may award you only $200,000 where you instead claimed $400,000 in damages.  That is a 50 percent drop-off based on expected damages!

This uncertainty affects some cases more than others.  The more airtight your case, the less likely it is that you will run into unexpected problems during litigation.  If the facts clearly point to the defendant’s liability and the defendant admits fault, for example, then you will not have to overcome that hurdle, and the risk of litigation will be substantially reduced.

Negotiated Settlements Account for the Risks Inherent to Litigation

Settlement can give all involved parties a win-win outcome by reducing the uncertainty and risk that is associated with litigation.  Each party comes to litigation with an idea of their “chance of success” at trial, if the case were to advance to that point — this is dependent on the evidence currently available in the case, and the arguments made by each party (and how convincing those arguments are).

Let’s use a quick example to simplify how this all works.

Imagine that you are involved in a business dispute over the delivery of goods.  Each party agrees that the goods are valued at $100,000, and that — if there was a breach of contract in the case — the damages would be roughly equivalent to $100,000, or the cost of the delivered goods (that were not returned to the plaintiff) plus transportation/administrative costs.

Now, the only issue is that of liability.  The defendant does not believe that they breached the contract, and thus feels entitled to retain the delivered goods, as per the contract.  In the early phase of litigation, your attorney and the defendant’s attorney go back-and-forth, discussing the evidence and the arguments in favor of each party.  Ultimately, both parties may agree that you have a 50 percent chance of success at trial, which means that your $100,000 claim could either lead to a $100,000 damage award, or $0.

Each party wants to reduce their risk.  Perhaps you’d prefer to secure $50,000 in guaranteed recovery instead of gambling at trial.  The defendant may also prefer to pay out $50,000 and avoid protracted litigation (as well as the risk of losing more at trial).  Eventually, you both agree to $50,000 — which accounts for a 50 percent chance of success on $100,000 damages — and reach a settlement compromise, thus ending litigation outright.

Under such circumstances, it could be reasonably argued that the result was a win-win for both parties.

Speak to an Experienced Alexandria Business Dispute Lawyer for Further Guidance

Harvey & Binnall, PLLC is a boutique litigation firm based out of Alexandria, VA.  Our attorneys have decades of combined experience litigating civil claims — including those that relate to business dispute issues — in state and federal courts.

We are prepared for trial litigation from the very beginning of the engagement, which gives us an advantage during negotiations and in securing a more favorable settlement.  This comprehensive approach to litigation has served us well over the years and has led to a number of successful case resolutions for our clients.

If you are involved in a business dispute, call (703) 888-1943 or submit an online form to schedule an appointment with an experienced Alexandria business dispute lawyer at Harvey & Binnall, PLLC.  We look forward to speaking with you.