PEACE THROUGH WAR – A SHORT PRIMER ON HOW TO ACHIEVE A COST EFFECTIVE AND RELATIVELY QUICK SETTLEMENT
PEACE THROUGH WAR – A SHORT PRIMER ON HOW TO ACHIEVE A COST EFFECTIVE AND RELATIVELY QUICK SETTLEMENT
- “All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.”
Sun Tzu, The Art of War
Many business people that come to our office for a litigation consultation utter a similar refrain: “how long will a litigation take, how much will it cost and when will this case be settled ?” These are all good questions for which there are, most often, no easy answers.
Typically, prior to the initial consultation, we have not been involved in the underlying dispute and, therefore, cannot reliably predict what stimuli will bring the other side to the settlement table. However, there are several universal truths, that are, or should be, self-evident.
- Very Few Wars End on the First Day
In a perfect world, we would file and serve a complaint, and the other side, either through counsel or on their own, will plead for a settlement conference or make an offer to resolve a pending lawsuit. The problem is that, the receipt of a summons and complaint most often does not inspire the receiving party to become more conciliatory. Usually, the initial reaction is for the other side to “go to the mattresses,” a phrase made famous in the G-dfather, which means to get ready for a long and contentious fight.
So, if the client’s objective is to settle quickly, then it would be reasonable to conclude that, if the other side begins to gear up for a long fight, that is a bad thing.
- Sometimes Wars Need to Be Fought
How many business people come into our office, after having tried unsuccessfully, to settle a dispute, despite multiple efforts, which occur over an extended period of time. The distressed business person walks into the conference room, lays the settlement correspondence out on the conference room table, and justifies what is sometimes an extensive delay in bringing suit by stating:
“Look at how many letter and emails I sent. Look at how many times I spoke to my adversary on the phone. We had lunch. We had dinner. I offered them everything. I got nothing.”
This somewhat sad scenario is a regular occurrence in business. A client who offers everything and who gets nothing. To the battle tested litigator, the problem should be obvious; to the average business person and the neophyte, it is likely not. Here are some suggestions which will help the client, a prospective combatant, move from the “I offered everything approach and got nothing” to a place where maybe he or she will get a lot, maybe everything.
- Learn to Love the War
If you can accept the proposition that there is likely to be a war, you might as well win it. In order to do this, you must reconcile yourself to the fact that you might be involved in a prolonged conflict most often against your wishes. This happens when you have an adversary who simply will not cooperate. As we all know, there are people like this whom we encounter in business and in life. The trick is to learn how to convince them to move their position. The only way to effectively do this is to convince them that they will lose more by fighting than by settling.
When you learn to love the war, and see it as a means to an end, there is a greater likelihood that you will be able to convince your adversary that you will defeat him. Therefore, rather than dreading the many hearings which are part of litigation, or the depositions, a business person would be wise to look forward to, and indeed, embrace those occasions.
Each circumstance, in which you and your lawyer are in the presence of your adversary, provides an opportunity for you to convince your adversary that he will lose more by fighting. This is often accomplished by persuasive and competent advocacy. This objective is also assisted by the demeanor of the client. It is the client who must be able to convince the adversary that he or she has the stamina, the will power and the funds to take the case to trial. If both the client and the lawyer or able to convince the adversary of this fact, whether true or not, it often causes the adversary to look at their checking account balance, assess the likelihood of prevailing, and take stock of their stomach for conflict.
Does your adversary really plan to take the case to trial? It is only by convincing your adversary that you plan to do this that you will ever know.
- Judges and Mediators Don’t Love War
Judges and mediators have a sentimental love for settlement. This is laudable. This sentiment exists because judges and mediators know that the court system can be unfair and, in some instances, a settlement which the parties negotiate on their own is often better than a trial decided by a Judge or a Jury.
Litigators most often welcome a Judge who encourages the parties to talk to one another, after a court hearing, or a mediator who tries valiantly to bridge the gap between the parties at mediation. The problem is that judges, and sometimes mediators, understandably have no idea of the prior efforts which have been made to settle the case and the timing of their request.
- Every Battle Presents an Opportunity
In any lawsuit, the concept of settlement never completely disappears. It can often be seen lurking, silently, beneath the surface. Depositions and court hearings often provide opportunities for the parties to reassess their settlement position.
Court hearings sometimes provide insight into what the Judge may think of the case. Reading the Judge’s mind is often a business that is fraught with peril; nonetheless, a concrete decision by the Court can often provide an excellent forecast for the long term outcome of the dispute.
Depositions are also wonderful tools for inspiring settlement. They can be far more effective than the client’s letter writing campaign or invitations to dinner. A deposition often reveals how a person’s testimony will play at trial. Will the adversary be a good witness or a bad witness ? Is the witness likely telling the truth ? Does either side’s story cohere ? Will it stand up to scrutiny and cross-examination ?
Unless you are willing to wage war, you and your client are likely to never know the answers to these and other questions about the long term prospects for success.
- In Litigation, as in War, Timing is Everything.
The person who wishes to win the war on the first day, and believes that he or she can do so, will surely lose. The reason that “scorched earth” litigators are often successful is because they are able to convince the opposing parties that, before a settlement can be achieved, he or she will burn down the village.
Will they actually burn down the village?
However, the old adage that perception is reality is useful in this context since it is only when your adversary believes that you will pursue the case to conclusion that you will be able to favorably resolve it.
Pursuing legal action sucks time, money, and often it may seem, the very life out of you.
Am I telling you something you don’t know? I’m pretty sure the answer is no, as everyone knows that getting into a legal battle is not a small deal.
More difficult is how to tell the difference between those times when you absolutely must throw the first punch and swing a situation toward litigation, and those conflicts that are best solved before it goes that far.
When I was little, my father taught me a lesson that sticks with me to this day and informs this blog post.
He told me to “do everything that you can to avoid a fight. Negotiate, apologize, and even run if you must.”
But if you are cornered, he advised, “Clench your fist, throw the first punch, and make it count.”
As a kid, I paid attention to what went on in the schoolyard. Coming from New York City, it was a foregone conclusion that there’d be a fight at lunchtime or after school (or both!) nearly every day. First two people would stand off against each other and argue, and then someone would start chanting “Fight… fight… fight… fight!” and it was ON.
Sometimes the jeers and cheers were the fuel for the brawl, and in those cases, it was never clear whether or not there was any reason to be fighting in the first place.
If you’re getting fired up because OTHER PEOPLE are egging you on, I have three words for you: forget about it. (Or, depending on where you’re from, it could actually be one word: fugedaboutit.)
Smart people who want to keep their teeth (as a kid), or their savings (as an adult) and will back down at that point.
But if you’re the person standing there and you know there is something non-negotiable on the line BEYOND your pride, and it’s not about starting a fight – it’s about finishing one – then it’s GO TIME.
The same thing applies to litigation.
As a former schoolyard scrapper, and also someone who’s made his living for the last twenty years in litigation, I always counsel clients to turn to pursue legal action ONLY when there is no other recourse. But then it’s time to come out swinging.
Here are the top 8 reasons that say you must litigate:
1) When there’s enough at stake
I once had a client who owned a shopping center worth millions of dollars that was facing allegations that were both untrue and also potentially financially devastating. The cost of pursuing legal action versus what was financially at stake made the decision to litigate a no-brainer – he had far more to lose had he chose a path of inaction or even settlement.
Deciding if there’s enough at stake is 100% defined by the economics of the conflict. Your decision to pursue legal action should never be emotional or principally driven. When calculating the monetary implications, you have to factor in the cost of suing someone and going to trial. For example, you wouldn’t want to spend $50,000.00 to litigate a case worth $45,000.00 to you.
Other aspects of economic impact that aren’t as simple to calculate but that are easy to see include when:
- • Someone is attempting to steal your brand or your trademark.
- • Your copyright is being infringed upon.
- • Your entire business is impacted by the conducted of some third party; you’ve tried to make them cease their behavior, and they’ve refused.
- • The cost of the litigation pales in comparison to what is at stake if you don’t take legal action.
2) When the other side is non-responsive
In any conflict you should always make an informal attempt at settlement. I know that I must be able to look my client in the eye before we litigate and advise him or her that we have done everything possible to avoid this outcome, but we have been left with no choice. So in the pre-litigation attempt to resolve the conflict, if the other side does not respond to your or your lawyer’s overtures, phone calls, emails, letters, etc. AND it’s clear that they won’t engage in a constructive discussion with you aimed at resolving the dispute, then it is indeed GO TIME.
3) When the other side’s expectations surpass your worst-case scenarios
If someone is threatening to sue you, and you’re done all you can to resolve it to no avail, then you have to take a close look at what they think the dispute is worth. For example, if the other side says they’ll settle for $1.5 million, but your lawyer and you calculate what the most the other side would get out of going all the way to trial, which they win… and it’s not more than $500,000, then the other side is not giving you any incentive to settle. They are asking for a fight, and in my experience, sticking to your guns to, wearing them down and introducing reality into their absurd expectations will usually pay off in a much more modest settlement.
4) When you need immediate relief
The classic case that perfectly illustrates this point is the story of an owner-landlord that leases a farm full of fruit trees to a tenant that is supposed to be caring for them and harvesting the produce. The tenant breaches the lease not only by not paying his rent, but also by refusing to harvest the fruit or to tender control of the property back to the owner. In this case, the owner-landlord has no choice but to go into court and ask for an injunction, which is what lawyers call “equitable relief.” This action is not so much about money as much as it’s about the court directing someone to do something or, conversely, ordering him or her to refrain from doing something.
Other instances that are related to immediate relief include:
- • Someone stealing your trade secrets (e.g. customer lists, market research or strategy, manufacturing techniques, to name just a few)
- • Trespassing
- • Stalking and other ongoing threatening actions
- • Domestic violence
- • Someone cutting down your trees or otherwise impinging on your property
- • In all of the above situations, time is essential, and any delay could have grave results. The court is the only option with the power and authority to effectively provide for immediate relief.
5) When you’re out of time
Let’s say you loan someone money, and that person never pays you back. Hopefully you have a contract, but even if you don’t, you may still technically have two years from the date of the last payment received or from the date of your oral agreement in order to bring a lawsuit. This is call the statue of limitations, which has a built-in expiration date: most claims against third parties or civil claims have two years until the ticking clock runs out. When you run out of time thanks to a statute of limitations, then you are also out of luck. In this case, you must litigate before you lose the right to recourse.
Note: Statute of limitations varies from state to state and claim to claim. If this scenario rings a bell to you, and you are wondering about what the statute of limitations is for a resolution that you may want to pursue in a legal capacity, please contact me, and I’ll be happy to fill you in based on where you live.
6) When not suing would harm someone else and give rise to a whole new dispute
If you have a duty or an obligation to a third party, and you have subbed out some of the work and now your subcontractor is breaching his or her obligation to you, then you are in the unenviable position of having to assert a claim against your colleagues in order to fulfill your obligations. This situation gets complicated if it drags on too long and then you are the one that is facing a lawsuit from the third party. So dealing swiftly and decisively with your deadbeat subcontractor is the only way to prevail. In fact, the law imposes a duty on people in this situation to “mitigate their damages.” In other words, you will make the matter worse by not addressing it proactively.
7) When you are trying to resolve the dispute but you cannot get to the decision makers on the other side
Sometimes the only way to get the attention of the person with the authority to rectify a serious issue is to sue the company or other responsible party. A perfect example of this is a bank. Often banks are unresponsive behemoths that could care less about customer service. Many people find themselves on the receiving end of a lender who blatantly violates the terms of the loan (e.g. sending you into default when you are current on your obligations) and then refuses to respond in any way to your overtures to fix it. Calls, emails and letters go without response. When you file a lawsuit you quickly get the matter turned over to the decision makers. And believe it or not, the institution’s lawyers often encourage them resolve the matter (especially when the bank is dead wrong).
8) When the other side is going to file a lawsuit first if you don’t
Back to the schoolyard, where sometimes being the first one to take a swing is what saves you from sure devastation. This is a tough position to be in, because you are taking a calculated risk that says not only do you believe the time for negotiation has passed, but also that if you don’t file quickly, your opponent certainly will.
And if that happens, then they’re the plaintiff and will have the advantage of asserting the original claim, and moreover they will then be characterized as the aggrieved party for the balance of the litigation. So beating the other side to the punch is your only real option.
When you’re considering “the Litigate 8” – the top situations when you MUST come out swinging – the one thing they have in common is the necessity of being swift and decisive. You can’t afford to sit on your hands, or sit on your rights.
“Keep your friends close and your enemies closer.” Sun Tzu
We have spent a substantial period of time in this column discussing the importance of understanding your own client, the law and relevant Court procedure. What we have not focused on, however, is the need to understand your adversary. Ignoring your adversary, or underestimating him or her, can have drastic consequences for the fate of your case.
By adversary, I do not mean opposing counsel; I mean the opposing party. Whether you are plaintiff or defendant, it is only the foolish lawyer who ignores who is on the other side of the case. The good news is that there are plenty of opportunities to learn as much as possible about your adversary without spending a lot of your client’s money on a trained investigator. Here are a few suggestions.
- Google Search
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Imagine that your long time international business client calls you one day, in a panic, to tell you that a foreign court has entered a judgment against his company. Now, some local lawyer is attempting to “domesticate” that judgment and enforce it against your client in the United States. The judgment is for a large dollar amount and the stakes are high. But the case is already over, isn’t it? Your client has already lost, hasn’t it?
Of course not.
This is because foreign legal systems do not always comport with our notions of “due process” and substantial justice. Look carefully at the foreign judgment and the proceedings and circumstances which gave rise to it. There may be ample reason/opportunity for you to poke holes in it and, ultimately, defeat the entry of the judgment.
Foreign country judgments in Florida are governed by F.S. § 55.605. That Statute provides several reasons…
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The Discovery of Private Financial Information in Commercial Litigation – Are your Secrets Safe and, if so, Until When ?
Imagine that you are a Plaintiff in a very large, complicated, and potentially, very expensive commercial litigation matter. You meet with your attorney to discuss the case. You review the facts. You ask the attorney how much it will cost and, of course, the attorney declines to describe with certainty the ultimate cost of the case. It depends, she explains, on various factors outside of her control, mostly relating to the reaction/behavior of the other party and their attorney after they are sued. She assures you, however, that it will be expensive. There will be pleadings to be filed, discovery to be requested, depositions to be taken and, potentially, a very long trial.
Naturally, you ask her – what are your chances of winning ? Once again, your attorney demurs explaining, instead, that it is too soon to determine the answer to that question. That will depend…
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Settlements can be achieved at the strangest times. There are settlements which can be made over the telephone, in the office, on the courthouse steps, or while you are driving in your car. Seldom does a settlement occur at the optimum time. The key to achieving an enforceable settlement, whenever and wherever it may occur, is understanding how to properly document it.
1. When to Make a Settlement Offer and Demand (and when not to).
There is an art form to settling cases. Part of the art consists of, as poker players say, “when to hold em and when to fold em.” This takes experience and generally cannot be described in detail in the context of this article. However, there are several general rules which bear mention.
The worst time to discuss settlement is generally after a ruling on the Summary Judgment Motion. If you have won the motion, chances are that your opponent is likely not in the proper frame of mind to discuss settlement. If you lost the Motion, it is likely that you or your client will not be in the proper frame of mind. Try discussing settlement after the motion has been fully briefed but before argument and before it has been ruled upon. At this time, there is often uncertainty in the air. Uncertainty is one factor which often convinces litigants to resolve disputes. After all, a settlement will remove the uncertainty and take the decision out of the hands of the Court or the Jury which is often desirable.
I like to discuss settlement after an important deposition has gone well for my client’s case. Most lawyers know, instinctively, whether the deposition has helped their case or hurt their case. During depositions, the parties are often all together in the same room. This is often a good time to discuss a potential resolution of the case. However, as mentioned, settlements can be discussed in a variety of contexts and there is no hard and fast rule as to when to make a settlement offer or demand.
2. How to Make a Settlement Offer.
Written settlement offers are often helpful. However, there should always be a legend at the top of the letter which indicates “Privileged and Confidential Settlement Communication.” Similarly, I like to include the phrase in the body of the letter which says: “this settlement shall not be enforceable unless a written agreement is signed by all parties.” This statement will likely eliminate the possibility that opposing counsel may argue that there was a “meeting of the minds” as to “all material terms” and, therefore, the settlement, which has yet to be signed, is enforceable. The settlement cannot be enforceable if there is a caption on your letter or email which indicates that no such enforcement can take place until a settlement agreement is signed by everyone.
3. Are Client Signatures Required ?
There are several misconceptions about settlements under Florida law. The first is that all of the relevant parties must sign settlement documents. While this may be a requirement for an enforceable mediation settlement, client signatures are not necessarily required in order to enforce a settlement achieved outside of mediation. See Fla. R. Civ. P. 1.730; Gordon v. Royal Caribbean Cruises Ltd., 641 So.2d 515, 517 (Fla. 3d DCA 1994) (holding that a settlement agreement reached in mediation must be in writing and executed by both parties in order to be binding); see also Smiley v. Greyhound Lines, Inc., 704 So.2d 204, 204-06 (Fla. 5th DCA 1998) (enforcing a settlement agreement despite one party’s refusal to sign the release); State Farm Mut. Auto. Ins. Co., 781 So.2d 500, 502 (Fla. 3d DCA 2001) (noting that when all parties have agreed to the essential terms of a settlement, it will be enforced). Since email can be the preferred mode of communication in the modern world, many settlements can actually be achieved by email and may be enforced by a Court. See Miles v. Northwestern Mutual Life Ins. Co., 677 F.Supp.2d 1312, 1315 (M.D. Fla. 2009) (concluding that an email constituted a binding and enforceable settlement agreement). The key is not necessarily the mode of communication but, rather, the ability to demonstrate that there has been a meeting of the minds as to all of the material terms.
4. The Material Terms of the Settlement
So, what are the material terms? Monetary settlements in collection cases tend to be straightforward and easier to document. For example, if your client is suing for the repayment of money the settlement can be easily documented by making a determination as to how much is to be paid, when, and what happens if the payments are not made. Complicated settlements arise when the parties are required to do things such as return products, calculate amounts owed based upon future events and exchange releases. The more extensive the settlement terms, the more likely the Court is to find that the settlement has to be in writing and signed by the parties.
However, the courts have held that a settlement does not necessarily need to be signed by the parties to be enforceable. Settlements can be enforced based upon an email exchange between the lawyers if the Court finds that all of the “material terms” have been included as part of the email exchange. See Warrior Creek Dev., Inc. v. Cummings, 56 So.3d 915, 917 (Fla. 2d DCA 2011) (finding that an email contained the essential and material terms of the settlement and thus enforcing the settlement agreement); Blunt v. Tripp Scott, P.A., 962 So.2d 987, 989 (Fla. 4th DCA 2007) (the party seeking to enforce a settlement agreement must show that the opposing party agreed to all of the material terms).
Generally, the mere fact that the parties have not agreed to the scope of a release is not enough to prevent enforcement of the settlement. See BP Products N. Am., Inc. v. Oakridge at Winegard, Inc., 469 F. Supp. 2d 1128, 1133 (M.D. Fla. 2007) (holding that uncertainty as to nonessential terms in a settlement agreement will not preclude its enforcement); Sands v. Wagner & Hunt, P.A., No. 09-60557-CIV, 2009 WL 2730469, at *4 (S.D. Fla. 2009) (noting that the “scope of the release” is not an essential settlement term). Conversely, lack of client approval can often be a valid reason for a Court to decline enforcement. See Sharick v. Southeastern Univ. of Health Sciences, Inc., 891 So.2d 562, 565 (Fla. 3d DCA 2004) (a party seeking to compel enforcement of a settlement must prove that the attorney has the “clear and unequivocal” authority to settle on the client’s behalf); see also Baratta v. Homeland Housewares, LLC, No. 05-60187-CIV, 2007 WL 2668585, at *2 (S.D. Fla. 2007).
5. How to Conclude a Settlement
If you want to conclude an enforceable settlement, treat it as an urgent matter. This is because the longer each side has to negotiate the terms of the settlement, the longer they will negotiate. Trading one draft of the settlement agreement per day is a very inefficient way to conclude the deal. I like to have meetings with opposing counsel in which it is agreed, in advance, that no one will leave until the principals have all signed the settlement agreement or reached an impasse. In this manner, you will be able to see whether the parties are serious about settlement or are simply blowing smoke.
One way to document a settlement is to put it on the record in Court or at deposition. Many settlements are achieved at deposition, during a hearing or even at trial. If there is a court reporter present, it is usually a good idea to announce a settlement on the record and explain the terms in as much detail as possible. If clients are present, have them affirm the terms of the settlement by indicating their agreement on the record. In this manner, the client will not be able to change their minds and the settlement will later be immune from challenge.
In real life, even the best meaning people sometimes get cold feet and change their minds. The best way to prevent this is through signatures of all parties or an announcement on the record.
Litigation concerning the enforcement of the settlement can be time-consuming and expensive. Be forewarned, however, the courts will enforce settlements even when a client signature is not present and even when the scope of releases to be exchanged is in doubt. The key to the enforcement of settlements is the same as the law that governs the enforceability contracts – whether the parties had a meeting of the minds as to all of the material terms of the deal.
The Author gratefully acknowledges the assistance of Jacob Epstein in the preparation of this Post.