Know When to Settle and When to Go to Trial

by Theodore Spaulding on October 4, 2013

As an Atlanta attorney trying complex business matters throughout metro-Atlanta, I found a 2008 study finding that settling a case is better than going to trial in most instances rings just as true today as it did five years ago.  The New York Times article outlining the study indicates that “lawyers and clients in civil cases often decide to go to trial when they would have been much better off settling.”

There are several takeaways that are important to highlight in this article.

1      Plaintiffs suffer more than defendants in not agreeing to settle.  In fact, the study indicates that plaintiffs made the wrong decision to proceed to trial in 61 percent of cases.  Defendants, on the other hand, were wrong in 24 percent of cases.  It seems that plaintiffs consistently see the defendant’s offer as less than it is and believe they can and should get more.  They may fail, however, to appropriately factor in the monetary cost of the trial process including attorney’s fees and trial preparation expenses.  They likely also don’t fully account for the personal and emotional toll a trial can take.

2.      A good lawyer will tell you whether or not to accept a settlement. Some lawyers, depending on fee structure, have a financial incentive to go to court.  As the article suggests, it is key for clients to understand how their attorneys are compensated so they can appropriately interpret the attorney’s recommendations.  An ethical, professional attorney will not only advocate well for your position during a lawsuit, but will give you helpful advice based on real trial experience regarding whether or not to accept a settlement offer, not on what will make the lawyer the most money possible.

3.      Business people are risk averse.  They don’t want to go to trial.  Court battles are rarely as exciting as they appear in the movies.  The process is grueling, stressful, time-consuming, and uncertain.  Most business people would prefer to negotiate a deal that allows them to receive something they desire versus taking a chance on getting more or getting nothing.  The New York Times article includes a great, simple example of this human behavior tendency.  People are offered either a check for $200 or a coin toss that would grant them $0 or $500.  Most people will take the sure $200 rather than risk getting nothing.  A trial to a jury of your peers is many ways a coin toss.  Many different outcomes can happen.  Some good, some extremely good, and some bad.

One very interesting aspect of this article was the fact that although defendants made less errors in deciding to go to trial (meaning the verdict was for less than the plaintiff’s last offer), when defendants did make errors it was much more costly in terms of dollars above the last offer.

At the end of the day, it is all about risk aversion.  If the defendant’s offer is so ridiculously low that it is almost no risk to go to trial, then going to trial is a good risk.  If the offer made by a defendant is reasonable and well within the range of what you may receive from the jury, your risk in going to trial is much higher.  It is never good advice of a lawyer to tell a client they know they can win the case at trial.  The lawyer does not know that no matter how experienced he or she is in the courtroom.  Each jury within a specific jurisdiction is so different from another jury in the same jurisdiction that outcomes are unpredictable.

If you are struggling with determining whether or not to settle a case involving your business and would like professional legal advice, contact the Atlanta/North Georgia business attorneys at Boling Rice LLC at 770-887-3162.  Our Atlanta attorneys have experience dealing with claims involving business torts, contract disputes, construction litigation, insurance litigation, shareholder disputes and more.

Theodore Spaulding
Atlanta, Georgia business and commercial litigation attorney representing individuals and businesses throughout Georgia.
Theodore Spaulding

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