Why Settlements Can Be Expensive

Litigation is more like a settlement negotiation than a war, even while the company is acting tough to demonstrate that a compromise is in the plaintiff’s interest. Keeping that perspective can help control litigation costs. This article discusses some specific steps that can be useful.

How the company and the law firm determine what the firm will do to defend the case will determine the costs of the litigation. Other things being equal, the law firm is more likely to do too much than too little. In-house counsel can control the tendencies of outside counsel to be too thorough and produce too much by having a close working relationship with the lead lawyer.

A thorough initial investigation – whether by in-house counsel or the law firm – is likely to be a wise investment, even if it’s expensive. The primary goal is to develop a feel for the settlement value of the case.

How much a company should spend is best determined through budgeting.

The law firm is best positioned to develop detailed estimates of the cost of litigation. Over the course of the case, the attitude usually evolves from “millions for defense but not one penny for tribute” to “we need to settle this case.”

Ongoing mediation can help focus the parties on the goal of settlement. By telling the parties to take specific steps after failure, the mediator can guide and facilitate the information exchange process necessary for eventual settlement.