The other day, someone asked me a broad, open-ended question: why do most lawsuits settle? Given that a large portion of my practice involves representing clients in lawsuits and arbitration proceedings, I started to think about the question a bit more rather than resorting to my typical, one-word canned response of "risk." Sure, a settlement allows the parties themselves, rather than strangers (i.e., judges, juries, or arbitrators), to decide the outcome. A settlement avoids the "risk" of a potentially uncertain outcome. But, in reality, there are a lot of reasons why the parties to a lawsuit might resolve their dispute short of a trial, beyond simple uncertainty. What are some of those other factors? A non-exhaustive list of possible factors include:
- Time. Lawsuits often take a long time (i.e., years), and there's an appeal process available for the party who doesn't like the result. Sometimes, parties don't want to wait (or can't wait) a long time to resolve their dispute.
- Weird Rulings. Yes, sometimes judges will make decisions that can leave the parties scratching their heads. During the course of a case, the law isn't always mechanically (or even objectively) applied to the facts. And getting the decision "fixed" isn't a viable option.
- Expense. Lawsuits are expensive. Moving a case through the legal system takes a lot of work. Even a simple dispute can necessarily require a party to pay thousands of dollars in attorney fees and case-related costs.
- Attrition. This factor is related to time and expense, but lawsuits have a tendency to reduce the strength or motivation of parties to fight. Certain "rules of the game" allow lawyers to apply sustained pressure, which forces the parties to exert effort and holds them to their respective burdens of proof.
- Timing. This factor is different than time itself. While lawsuits generally take a long time from start to finish, there are different "stages" in a lawsuit. The first stage typically involves fighting over whether the claims, as alleged in a formal complaint, are legally sound. Then the parties start digging into the facts, which often requires witness testimony and the production of documents. Eventually, a judge may finally decide, in whole or in part, the outcome of the dispute before a trial ever takes place. Each of these different "stages" in a lawsuit may cause the parties to re-evaluate their respective positions and resolve the dispute.