After a lawsuit is filed in court, there are a number of ways it can end before it gets to trial. Ultimately, most litigants will find some way to resolve their dispute before a trial. While most parties will explore alternative dispute resolution (ADR) at some point, the process has its pros and cons.
Settlement Negotiations Are a Form of ADR
Many people do not think of settlement discussions as a form of ADR, but ADR refers to any process for resolving a legal dispute outside of court. In most cases, there is little downside to trying to learn more about the other side’s position and what they want. Unless a plaintiff’s case completely lacks merit, the defendant should at least consider the fact that it may cost more to litigate than it would pay in a settlement.
These negotiations can be more flexible and private than handling matters in court. They also could present a less adversarial way of resolving a dispute. Additionally, the parties have nothing to lose by engaging in settlement negotiations. If negotiations fail, the parties generally cannot introduce evidence at trial concerning what they learned through settlement negotiations. In other words, there is a kind of confidentiality attached to settlement negotiations. If negotiations do not work out, the parties can simply continue to trial.
Some parties may be suspicious of settlement negotiations. They may think the other side is trying to buy time or figure out their strategy. They may think the other is not acting in good faith and may be trying to take advantage of an imbalance of power. However, the other option is trial, which takes far longer and comes with far more significant potential financial risks.
The Advantages and Drawbacks of ADR
ADR can be a cheaper way to resolve litigation because you may be able to avoid going through an expensive trial. Mediation is a form of ADR that can help the parties bridge their differences. While a mediator is not able to issue binding decisions, they can make recommendations to help the parties find common ground. It is less likely that a plaintiff will voluntarily consent to arbitration, which is similar to mediation, but arbitrators can make binding decisions. However, any kind of help in negotiating a settlement or bridging gaps in positions may bring a case to an end more quickly. If you can find the right mediator or arbitrator, they could provide a quicker and less expensive route to resolution than going to trial.
While mediation does introduce added expenses, most courts require it and the parties share the cost for the mediator; however, each pays their own attorney for those proceedings. One downside is that mediation cannot guarantee a successful resolution of all issues presented. If you hire the wrong mediator who is not up to the job, they could end up complicating things more than helping. This is why it is so important to work with an experienced mediator like Shareholder Bob Black who has successfully mediated over 5,000 cases.
One helpful form of ADR is early neutral evaluation. Each party may not be entirely sure how their position will be received by a judge or jury. One party might be more confident in its side of the case than the facts warrant. Usually, an attorney will inform their client that they may have a tough case; however, not every client wants to believe this at first. Early neutral evaluation can give you a helpful look at how a trained, objective, and knowledgeable third party will view the case. Their read of the case could determine your position in settlement negotiations.
Very Few Cases Go to Trial
Chances are good that you will use at least one method of alternative dispute resolution at some point during a lawsuit you’re involved in. Very few lawsuits end up in going to trial. In fact, estimates indicate that only 4-6% of lawsuits go to trial. Nearly every case will involve settlement negotiations. While there are risks and expenses that come with going to trial, defendants often prevail in front of a judge or jury. Corporations, businesses, and insurance companies should continuously weigh their exposure risk against the potential costs of litigation.
Often, the only cases that advance all the way to trial are:
- Cases where a plaintiff rejects all settlement offers
- Cases where an insurance company denies a claim in its entirety
There is a good reason why cases fall into the latter category. Oftentimes, the claimant has not provided enough proof to support their claim, and a judge or jury may not find in their favor due to this lack of evidence.
Most attorneys will at least encourage their clients to explore some sort of ADR during a lawsuit – and most judges will require it in civil trials. After all, there is a reason why so many cases settle. Given the pros and cons of ADR, parties to a lawsuit will rarely refuse to consider engaging in good faith settlement negotiations and/or going to mediation.
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