Negotiating a Settlement During Litigation
As most people already know, the vast majority of lawsuits settle before they go to trial. In many instances, parties realize that they can save time and resources by negotiating an out-of-court settlement among themselves. Although every case is different, there are certain things that parties should keep in mind when negotiating a settlement during litigation.
Bargain from a Strong Position
The first step toward successfully negotiating a settlement during litigation is to build your claims and defenses. This process starts at the beginning of a lawsuit, when the plaintiff has the chance to include claims in a complaint, and the defendants have an opportunity to answer plaintiff’s claims and make claims of their own against the plaintiff and other defendants. This process continues into the discovery phase of the litigation, when parties exchange relevant documents among themselves and answer questions under oath.
Most cases settle after parties have already exchanged materials and taken testimony, since this is the time that parties have a solid understanding about the claims and defenses at issue in a case. If a party has litigated a case effectively up until this point, the other parties to the case might not think their position is defensible and might be more willing to settle. As a result, the first step toward negotiating a settlement during litigation is solid lawyering from the beginning of a case to the point when settlement is on the horizon.
The Initial Demand
It is very tricky for parties to come up with a sum that they would take to settle a matter. Usually, this number is based on past settlements involving similar facts, and experienced lawyers should know how to value a case based on previous matters. In addition, this number is also based on jury verdicts involving similar facts, and databases can be consulted to determine how much money juries awarded for similar damages in the past. The initial offer can also be based on how far along the parties are in litigation, how much money has already been spent litigating the case, and how much a recovery might be reduced due to a plaintiff’s own conduct.
Usually, the initial offer is not the absolute minimum sum that parties will take to resolve a lawsuit. Negotiating a settlement during litigation oftentimes requires much back and forth between the parties, and both sides usually want to feel like they received something out of the deal. In addition, clients need to explicitly authorize attorneys to settle cases under ethical rules, and clients usually specify a particular amount of money above which the client will take to settle a matter. It is important that attorneys request more than the amount authorized by a client, so they have room to negotiate and still comply with their client’s wishes. In addition, while negotiating a settlement during litigation, the party receiving an offer might be unwilling to talk if the initial offer is too high. As a result, it is important that the initial offer be reasonable, but still provide enough room for parties to negotiate the terms of the settlement.
The Initial Response
Once a party makes their initial settlement demand, the other party needs to respond. Of course, this amount is typically lower than the amount a party will actually pay to settle a case. However, this amount cannot be so low such that the other party feels slighted and refuses to continue negotiations. The amount of the initial response will largely depend on the amount of the initial offer, and the initial response usually leaves room for substantial back and forth between the parties. Sometimes, parties will not provide a counteroffer when presented with a demand, and will simply continue to litigate the matter. In this case, the parties may continue their settlement negotiations at a later point during the litigation.
Back and Forth Between Parties
After the initial response has been conveyed, the parties negotiating a settlement during litigation typically engage in a process by which the party receiving a settlement gradually lowers their demand while the party paying a settlement increases their offer. It is important that the party receiving a settlement not lower their demand too much after they receive a response from the other party in order to leave room to negotiate. However, they cannot lower the demand too little, since this might show bad faith between the parties.
Usually there is a point while negotiating a settlement during litigation when the parties are frank about how much they are willing to pay and how much they are willing to take to settle a lawsuit. At this point, the parties may come to a “take it or leave it” mentality, and each party stands on their final offers. At this juncture, parties can either chose to accept the settlement or continue to litigate the case. Of course, even if parties fail to settle a case during one part of the litigation, this does not preclude settlement during another part of the litigation. Indeed, many matters can be in the settlement process for months or years, and only settle when parties are set to go to trial or after a trial is already underway.
The Rothman Law Firm has substantial experience settling lawsuits. We are familiar with the numbers parties typically use to value cases, and this helps us obtain the best possible recoveries for our clients. If you would like to talk with an experienced New Jersey and New York attorney about your matter, please feel free to contact The Rothman Law Firm to request a free legal consultation.