When to fight – and when to fold – in the eyes of the Law
Every legal fight comes to a crossroads. To keep on fighting in the courts, or settle at the bargaining table? Whether you are a business faced with a breach of contract claim or an individual seeking compensation for an injury, this decision has huge strategic, financial and emotional implications. There is no one answer, but the law gives you a clear framework to try to approach it.
The case for litigation
Litigation is a formal method for resolving conflicts through the courts. By design, litigation is adversarial, meaning that a judge or jury will ultimately deliver a binding decision. When an individual has a clear legal right, litigation can be very effective as it creates an environment of full disclosure through discovery, compels individuals to testify and produces a legally enforceable judgment that may include the following remedies: seizure of assets, the garnishment of wages, and injunctive relief.
Litigation is crucial from a legal perspective, where a precedent needs to be established. Litigation is often the only way for courts to create boundaries that will protect an entire industry or class of individuals when dealing with matters such as class action lawsuits, constitutional challenges, and intellectual property disputes. To settle these types of disputes would mean losing out on the most important aspect of the case.
“Courts do not just resolve disputes – they shape the law. Sometimes, the fight itself is the point.”
The disadvantages of litigation are substantial. Litigation is a time-consuming and expensive way to resolve disputes, and there is no way to predict with certainty how long it will take or how much it will cost. Legal fees accumulate quickly, and complex cases can take many years to resolve. Unlike the discovery process, where something very sensitive can be produced and made public as part of the proceedings, it is often impossible to know the outcome of the litigation until the jury renders its verdict, regardless of how compelling your evidence is.
The Case for Settlement
A settlement is an agreement between two or more parties to resolve a disagreement without going to court. A settlement gives the parties involved what the court system cannot: certainty. When parties reach a settlement, they have control over how their matter will be resolved by establishing the terms of their agreement (e.g., terms, deadlines, confidentiality provisions, and remedies). The ability to create these terms with this level of flexibility is important in commercial relationships where it is often more important to preserve goodwill than to win.
In addition to providing the parties with the ability to resolve their dispute in a manner of their own choosing, settlements also eliminate the risk of an appeal from a court ruling. A court’s judgment can be overturned on appeal; however, a party cannot appeal a signed written settlement agreement. Consequently, many lawyers advise their clients to settle their cases for this reason alone; even if a case is ultimately settled in a manner favourable to one party, it is of limited value if that party does not have the ability to collect on the judgment.
The overwhelming majority of civil lawsuits – over 90% in almost every jurisdiction in the U.S. – settle prior to the commencement of trial. This statistic does not indicate a lack of strength on the part of the parties who elect to settle; rather, it indicates that the parties have made rational business decisions in light of the uncertainties associated with trial. Mediation and arbitration have further advanced the professionalism of the settlement process by creating structured venues through which legal counsel can negotiate in an orderly manner.
What Should Guide Your Decision?
Litigators consider many things: how good their evidence is, how much money they both have at risk, how much they care about their reputations, how long it will take to get there, and what type of decision-maker (judge or jury) they will be dealing with. Even if you have a totally valid lawsuit, if the damages don’t justify spending the money it will take to go through the process, it probably won’t do you any good to try.
If you have very strong facts, if you are facing a lot of risk, and if you are prepared to go through a long and difficult legal battle, then litigation is your best option. On the other hand, if you would prefer to reach an agreement quickly, maintain your current relationship, and avoid taking the risk of losing at trial, then settling is probably a better choice. A legal strategy should be planned in the same way you’d plan for a new construction project. Start by figuring out what winning at trial means to you; don’t start out thinking about how to win at trial.