By Michael J. “Mick” McGirr, Esq. | Phocus Law

I get asked regularly, “Mick, is my position strong enough that I would win in court?” I would venture to say that more than 99% of business disputes are resolved short of judgment. While it’s helpful to know how strong your position is, it should not be the sole factor in deciding whether you take a dispute to trial or not. Rather, it should be a factor that helps you determine what a reasonable settlement should look like, and which knowledge you can then use to avoid the burden and expense that comes from a costly, protracted lawsuit.

I am certain that many readers are sitting there saying, “yeah right, lawyers love expensive lawsuits because then they get to run up their bills.” While those readers are correct about the stereotypical attorney, any honest, capable, and successful attorney will show you their long history of settled cases, a list that will probably be ten times the length of their favorable trial outcomes. In this article, I want to briefly discuss the elements of a good settlement.

First, let’s discuss the why of a settlement. I have never encountered an attorney who is comfortable guaranteeing an outcome at trial. Speaking for myself, I am proud of my trial record, where I have batted nearly a thousand for my career. Regardless of success at trial, it is common knowledge that, no matter how good the facts and law might be for your case, the human element (the judge and/or jury) are the uncontrollable variables. No jury or judge is a sure thing, so it makes good business sense to hedge against the risk of a dodgy arbiter and reach a settlement that closely reflects the expected outcome at trial.

So, what strategy do we employ at Phocus Law in determining what a ”good” settlement looks like? Well, first we need to take into consideration what the client’s preference is. No matter how strong a case may be, if the client just wants to be done with the matter, and is willing to leave money on the table, then a “good” settlement would look a lot different than a settlement for a client who is penny-tight and committed to getting their pound of flesh. Starting from the client’s preference, we then turn to try to take emotion out of the decision by turning the dispute into a math problem.

At its core, a business dispute is a money problem. So, to decide what a good settlement looks like, we need to approach it from that angle. Our formula goes something like this:

• Factor 1: If judgment were to be entered today, what would our client’s best and worst-case outcomes (within reason) be? For instance, if this is a breach of contract matter where a client’s vendor breached, resulting in a loss for our client, then the best case scenario for the client would be the full value our client was damaged by the breach plus an award of all attorneys’ fees and costs. (ex: $10,000 breach plus $3500 legal fees to date equals $13,500 top-end Loss at trial would be a $0.00 award plus potential exposure of owing the opposing party’s legal fees).
• Factor 2: What is the likelihood of prevailing at trial? While attorneys can’t guarantee an outcome, most experienced practitioners have a pretty solid idea of how likely their client is to prevail at trial. We try to reduce this to a percentage. If in the above example, I believe my client has a 65% to 75% likelihood of prevailing at trial, then that is our second factor.
• Formula: We now simply take the best-expected outcome ($13,500) and adjust it for the likelihood of prevailing at trial (.65-.75). What we end up with is the approximate true instant value of the claim, expressed as a dollar amount ($8,775 to $10,125).

Armed with the approximate instant value of the claim, our negotiation process in search of settlement can focus on those figures. If the vendor is offering $8500 to settle a claim of $13,500, and you figure you have approximately a 65-75% chance of prevailing at trial, then you should consider the matter close to settling, and you and your attorney should be working to get the vendor up a bit to close the matter out.

One other factor to keep in mind while working toward settling a matter is the expense of settling later rather than now. The longer you wait to settle, the higher the attorneys’ fees will be, making it more painful to settle for both sides. So, if you are close to settling, realize that a small haircut on what you would like to get now might be a lot less painful than continuing to pay your blood-sucking (I kid) attorney to keep the fight going.

By taking some of the emotion out of your dispute and looking at it strictly as a business issue, I am certain you will save time, money, and effort in the long run.

The Phocus Law team has litigated disputes small and large, simple and complex. Our goal is to achieve an outcome our client is happy with without breaking the bank. If we can ever assist you in bringing a resolution to a business dispute, please don’t hesitate to reach out. I can be reached by email at Mick@PhocusCompanies.com or by phone at 602-457-2191.