To Settle or Not to Settle: The Strategic Question

Melissa Gomez has a good article in the new edition of The Jury Expert on using mock trials to gauge potential damages awards. She shows that damages estimates drawn from mock trials can be used in several ways to help make settlement decisions. I agree with her completely that measuring likely damages should be a central part of any mock trial. The information gained about mock jurors’ views on damages can provide defendants with important guidance on deciding whether to settle a case or to take it to trial. However, in many types of litigation, the decision whether to settle or not will be based on much more than the potential outcome of a single trial.

Large companies often face multiple lawsuits with similar claims. Corporations in the automotive, pharmaceutical, chemical and insurance industries may have to deal with multiple lawsuits with similar fact patterns all stemming from a single product or event. Under these circumstances, defendants must formulate a comprehensive litigation strategy based not only the individual cases, but also on how the disposal of each case might affect the outcome of the others. For example, the decision to settle a case before trial can send a message to plaintiffs in other cases, perhaps emboldening attorneys to bring additional suits or to push for higher settlements. On the other hand, the decision to take a case to a jury verdict -- even a losing case -- can signal a willingness to fight every lawsuit to the end, potentially discouraging plaintiffs from pursuing marginal cases.

This strategic signaling between corporate defendants and plaintiffs depends on the unique circumstances of the cases involved, the products involved, and also the nature of the defendant company itself. How does that company want to be perceived by the plaintiff’s bar? How does the company want to be perceived by the public at large? What does a company’s litigation strategy say about its products? Is ownership willing to face the uncertainty of pending litigation? All of these questions and many others can affect the decision to settle. So what may appear on the surface to be a defendant’s stubborn unwillingness to settle a losing case may in fact be a calculated gambit intended to send a message: this company will vigorously defend itself against all claims.

Comments

[Melissa Gomez]

All excellent points. Settlement decisions are never easy. There are so many issues to consider, especially when dealing with serial litigation. I did not address that scenario in that article, and I completely agree- that is a whole other ball of wax. Thanks so much for the comments!