June 19, 2009
Over the years of representing mostly employers but some employees in employment disputes it has occurred to me TIME AND TIME AGAIN that if the case had settled early for what seemed then like an exorbitant amount that the plaintiff demanded a lot fewer total resources would have been expended. Meaning add up what was paid to plaintiff in settlement after summary judgment was filed (let’s say $60,000), plus defense attorneys fees at a pretty serious hourly rate (conservatively, $50,000), out of pocket costs (travel, deposition transcripts, maybe an electronic discovery consultant (modestly, $15,000) . . . Dollars alone make the plaintiff’s $75,000 early demand look like a great deal. Especially when you realize that if $55,000 or $60,000 had been offered it would probably have settled for less. But it’s not dollars alone. Hours and hours of management time have been taken up gathering documents, preparing for and testifying at depositions. The gossip network has been in full force throughout the litigation as the plaintiff keeps in touch with her former co-workers – resulting in lost productivity and some loss of credibility for management. (“Get this – he admitted in his deposition that . . . !”)
Don’t get me wrong – I’m not saying that just because a discharged employee makes noises about filing a lawsuit a company needs to throw money at it. But (as I have often said to employer clients) there’s SOME amount of money that it would be worth to resolve ANY dispute early on – I might ask would you pay $500 if this could be over and behind us? And that answer is pretty much always yes. If the case really doesn’t have legal merit then maybe you can figure out a way to get it resolved for a small palatable amount that allows the plaintiff to save face. And if it’s a case with enough murkiness (or big problems like a terrible document yet to be produced or a critical witness that will turn to Jello) you can’t win summary judgment on (other than state court in Missouri, but that’s a whole other story) then recognize that early on and see if you can reach a settlement that makes sense given all those factors you’ll some day be looking at with 20/20 hindsight.
My friend, mentor and former law partner Susan Hammer (an extraordinary mediator, formerly extraordinary employment lawyer) – http://www.susan-hammer.com/ – in Portland, Oregon alerted me to an interesting study on settlement decision-making. She sent me an article she’d written for the Oregon Bar (available on her website) and gave me rights to borrow liberally. I became engaged and fascinated and ended up writing “Let’s Make a Deal; Settlement Savvy” which will be published this summer in the DRI In-House Defense Quarterly. I’ve spoken on the subject for the Missouri Bar Employment Section and at a UMKC CLE on the subject of alternative dispute resolution. A short article on the subject is also on my website. Bottom line – parties and their lawyers REALLY don’t do a very good job at deciding when to go to trial versus taking the last offer from the other side, it’s costing them a lot of money AND we’re getting worse at making these decisions than 40 years ago, despite enormously greater data to look at.