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Litigation: When a settlement is worse than a bad trial result

Attorneys these days are sometimes too quick to settle, often to the detriment of the justice system and companies’ pocketbooks

Somewhere in the “Ancient Book of Trial Lawyer Truths” is the precept that a bad settlement is better than a bad trial result. But over time, this truism has been pushed well beyond itsintent to the practice we seem to have now—the infinitely absurd notion that a settlement is the only result. According to the 2009 book “The Death of the American Trial” by Northwestern University law professor Robert Burns, the number of federal civil cases ending in trials has declined from 11.5 percent in 1962 to just 1.2 percent in 2002.

While the consequences on the civil side are dire, the same kind of thinking is destroying even more important principles on the criminal side. As Supreme Court Justice Anthony Kennedy noted in a recent majority ruling that expanded the right of a criminal defendant to effective counsel not only in trial but also in plea bargaining, 97 percent of federal criminal convictions and 94 percent of state criminal convictions are the results of guilty pleas. He went on to say that “in today’s criminal justice system, the negotiation of a plea bargain, rather than the unfolding of a trial is almost always the critical point for a defendant.” It is all too frequently the case that defendants plead guilty and accept prison terms in cases where they are in fact innocent. In these cases, the consequences of a conviction through trial would be so much greater than the “plea bargain” that they feel compelled to accept the “deal”.

The justice system is complex. Interests of litigants, lawyers, judges and juries, not to mention insurance companies and the public’s values are directly implicated. And, settlement decisions should not and cannot be reduced to formulas. The go or no-go trial decision is a complex one that requires careful and continued evaluation of all these factors as well as experience, judgment and often nerve. To be clear, settlements are a perfectly legal and viable solution to legal challenges. There are situations when they are completely appropriate. The key is to look beyond the economic stakes and consider more fully the broader context of what a trial or settlement will mean. Here are three basic scenarios describing when the decision to make a good settlement may prove to be worse than a bad trial result.

When reputation is at stake

Contributing Author

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Howard Scher

Howard Scher is co-managing shareholder of Buchanan Ingersoll & Rooney's Philadelphia office and is a former member of the firm's Board of Directors. With experience acquired in...

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