Image of the board game "Risk"

The Risk Involved in a Settlement

The risks of going to trial can be much greater than most people imagine. During the investigation of a case, there are a lot of unknowns. But there is generally the opportunity-even the responsibility-to negotiate towards a settlement. Why are settlements so popular? Risk.

When you go into a settlement negotiation, you can do exactly that: negotiate. While you and the other party may be quite a distance apart, you always have control over whether or not to agree to a particular settlement amount.

In trial, that control goes out the window. In trial, a panel of jurors, or a judge in a "bench trial," listen to both sides and make a decision. Unlike a settlement negotiation, where you argue between a small number and a larger number, the number could go down to zero-as in, a defense verdict for the plaintiff. You lose. Your lawyer loses contingency fees. Game over.

That said, it's no wonder that over 90 percent of cases end in settlement, because parties would rather have control over the outcome. For the plaintiff, that means accepting a lower amount than he thinks is fair, and for the defendant, that means paying more than he thinks is fair. And, in reality, the defendant may feel that no amount is "fair" because he doesn't believe he's responsible for the injury or contract breach.

A Personal Anecdote 

Attorney C. Michael Alder learned about risk the hard way. Fearing his client, who suffered severe brain damage after a fall, would not be compensated, he accepted a $350,000 settlement during trial-in fact, after the trial while the jury was returning with its verdict. Surprise: the jury was returning with a $9 million verdict. Whoops!

In many cases, that would be the end of the story. You agreed to a settlement, you are bound to that settlement. In this case, the lawyer argued that he never had consent from his client to accept the settlement, so the judge gave the client a do-over, allowing the case to be re-tried. While most likely a just outcome for the client, many people would argue this isn't fair. Generally, clients are held to whatever mistakes their lawyers make. For example, if the client's lawyer had failed to file the case within the Statute of Limitations-that is, within the time state law allows you to file-his client wouldn't be allowed to say, "Hey, that was my lawyer's fault, not mine." He'd be out of luck.

That probably doesn't sound fair. But the alternative-everyone gets a do-over if their lawyer messes up-would bring chaos. What attorney wouldn't be tempted to say, "I messed up," if it helped his client get justice?


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