Settlement Should Never Be Your Only Option
Multiple studies have confirmed that at least 97 percent of all civil cases settle before trial. The percentage of cases involving multi-million-dollar damage claims that will be decided by a jury is even higher. Cases against big businesses with large footprints and concerns over public perception, higher still. Large corporations, especially those with recognizable and dominant brands, fear the spotlight of jury trials and the potential disaster verdicts that receive so much publicity. But for many companies, the pendulum may have swung too far in favor of settlement. As a result, companies end up paying significant sums for cases that could be won at trial, or at least could result in a verdict for less than the settlement demand. Worse still, companies build a reputation as an easy mark that will settle even weak and unjustified cases, encouraging yet more lawsuits. Settlement is certainly the best option in some cases. But it shouldn’t be the only option, even where a well-funded plaintiff can take a big-dollar damage claim to a jury.
DGS recently defended a major oil company facing environmental contamination claims brought by a group of property owners claiming their land and water had been contaminated by the company’s Superfund site. The landowners had deep local roots, were well-funded, and were represented by big-name plaintiffs’ lawyers. Our oil company client, which had experienced a series of recent environmental problems (both local and national) that generated enduring negative publicity, no longer had meaningful operations in the state, and there was no dispute the contamination on the plaintiffs’ property had come from the company’s Superfund site. The plaintiffs initially asserted claims in the hundreds of millions, but they were reduced significantly by the judge’s pretrial rulings. Nonetheless, the plaintiffs presented a claim for $25 million in compensatory damages to the jury, plus punitive damages, which could be as much as 10 times compensatory damages in this jurisdiction. Based on these facts alone, the case might seem like an obvious one to settle—the equities appeared unfavorable, the exposure was significant, and a trial would be long, expensive, and public. And there were opportunities to settle: a pre-complaint meeting, a court-ordered mediation, and on the eve of trial. Although the plaintiffs’ settlement demands were aggressive, our client was capable of paying such a settlement without a material effect on the company’s finances, and had settled many such cases before.
However, we believed there was good reason a jury would not award the plaintiffs the amount they were demanding to settle. We vetted these assumptions carefully, using most of the tools identified above, including a mock trial exercise where two separate jury panels returned verdicts. Both mock juries awarded some money to the plaintiffs, but significantly below the settlement demand. Confident in our risk assessment, and with a fully informed client, we tried the case over three weeks to a jury in federal court. The real jury decided the case even more favorably for our client, returning a complete defense verdict.
While the results of a trial can never be predicted with complete accuracy, we believe the result in this case vindicated our assessment of the client’s risk—which was confirmed not just by the outcome, but also by our post-verdict interviews with the jurors, where many of them echoed comments we heard from our mock jurors and focus-group participants. While a different jury may have returned a different and less favorable verdict, we think our risk assessment accurately predicted that most juries would have returned a verdict lower than the plaintiffs’ settlement demand, which drove the decision to try the case.
Assessing the Risk
When confronted with a lawsuit, every company, no matter the size or industry, will need to make a careful assessment of the risk involved with going to trial. Below are the strategies, considerations, and tools that can be used when faced with such litigation.
- Open, frank communication about risk and exposure
- Early assessment of settlement value and strategy
- Reassessment of settlement value and strategy at regular intervals during the case
- Holistic assessment of settlement value
- Success at trial, not just legal defenses
- Intangible factors, not just facts and law
- Client’s risk tolerance—both monetarily and otherwise
- Venue and jury pool research
- Jury consultants
- Focus groups
- Peer review
- Mock trial
About Davis Graham & Stubbs LLP
Davis Graham & Stubbs LLP, one of the Rocky Mountain region’s preeminent law firms, serves clients nationally and internationally, with a strong focus on corporate finance and governance, mergers and acquisitions, natural resources, environmental law, real estate, and complex litigation. Our lawyers have extensive experience working with companies in the energy, mining, technology, hospitality, private equity, manufacturing, asset management, and aviation industries. As the exclusive member firm in Colorado for Lex Mundi, the world’s leading network of independent law firms, DGS has access to in-depth experience in 100+ countries worldwide.