Negotiations have broken down, and the parties are not close to reaching an agreement. Soon, one party will file a complaint and, in turn, start down the road to trial.
Once a complaint has been filed, is trial the only option? Fortunately, the answer is no. Civil actions may be settled immediately after the complaint is filed,on the courthouse steps just before trial, or at any time in between. In fact, some cases settle while the jury is deliberating. The discovery process often facilitates settlement. After discovery is complete, the parties are in a better position to understand each other’s strengths and weaknesses. Litigation is time consuming and expensive, and settlement may be in each party’s financial interest. Defendants must consider the likelihood of not just losing, but losing big. Plaintiffs must consider the costs and likelihood of collecting any judgment. Settlement negotiations can occur informally in discussions between counsel or more formally at mediation.
If the parties agree to settle, what means can they use to reach the desired end? Common forms of settlement include:
1. PAYMENT AND DISMISSAL: If the parties have agreed on a settlement amount and the defendant is able to pay, the process is simple: In conjunction with the execution of a settlement agreement and release, the plaintiff will voluntarily dismiss the lawsuit upon the lump sum payment of the settlement amount by the defendant. The case is closed with no judgment being entered against the defendant.
2. CONFESSION OF JUDGMENT: What if the parties have agreed on a settlement amount, but the defendant needs time to pay? In these situations, the use of a confession of judgment works nicely. The parties sign a settlement agreement in which the defendant acknowledges the debt and is allowed to pay the amount owed under a payment plan. The defendant will also sign a confession of judgment. The confession of judgment will function as a type of security or collateral to make sure payments are made as scheduled. Upon the execution of the settlement agreement and confession of judgment, the plaintiff will file a voluntary dismissal of the civil action.
If the defendant defaults on the agreed upon payment schedule, the plaintiff will merely visit the clerk’s office to file the confession of judgment. No new complaint need be filed. No more litigation is required. No trial is necessary. The plaintiff simply files the confession of judgment, and it is recorded on the books as a judgment against the defendant.
If the defendant pays the settlement amount as scheduled, the confession of judgment will be returned to the defendant without having been filed by the plaintiff.
3. CONSENT JUDGMENT: What if the parties have agreed on a settlement amount, but the defendant cannot pay? In this situation, a consent judgement is usually the most efficient way to close the case. A consent judgment is essentially a settlement contract that is signed by the parties and approved by the judge. The consent judgment is filed immediately and recorded as a judgment against the defendant. A consent judgment keeps litigation costs down for cases in which the defendant admits the debt owed but is not likely to have the means to pay in the foreseeable future. Many times, the parties will execute a payment plan providing that the plaintiff will not execute on the judgment as long as the agreed upon payments are being made by the defendant.
4. CREATIVE SOLUTIONS AND DISMISSAL: Some cases do not fit neatly into the above described scenarios because they do not necessarily involve monetary damages or require the payment of money to reach a settlement. These cases afford the opportunity to use, and often require, creative solutions. The defendant seller may agree to buy the property back from the plaintiff buyer. A contractor may agree to repair the homeowner’s crumbling retaining wall. The parties may agree to repair their fractured business relationship and forge a new business deal in order to settle the dispute at hand (stranger things have happened, and occur more often than one might expect). Once the defendant has completed the agreed upon course of action, the plaintiff dismisses the action.
If the parties cannot come to an agreement, only one option remains: Trial. Some cases need to be tried. And each case should be approached as if it is going to trial. The parties and their attorneys cannot meaningfully negotiate the settlement of a case without putting the time and effort into preparing the case as if it is going to be tried. However, many cases should, and do, settle. Litigation is expensive. Few cases are black and white. Going to trial requires that the parties turn THEIR case over to a judge or twelve strangers. Which people will end up in the jury box and be given the power to decided YOUR fate? Do they think like you? Have they had different life experiences than you? Do the jurors think like the other party? Are their past experiences similar to your opponent’s? Furthermore, the dynamics and uncertainty of the courtroom mean that trials rarely go as the attorneys or parties have scripted in their heads. Settlement negotiations allow the parties to retain control over their destinies. It is often said that with a good settlement, nobody leaves happy. Is the hope of catching those two birds in the bush really better than the one in your hand? Both parties can be well served by using creative solutions to settle cases. If the parties find it in their best interest to settle the case, these settlement options outlined above help ensure the parties do the smart thing, even if nobody is happy.