Settlement (litigation)

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In law, a settlement is a resolution between disputing parties about a legal case, reached either before or after court action begins. A collective settlement is a settlement of multiple similar legal cases. [1] The term also has other meanings in the context of law. Structured settlements provide for future periodic payments, instead of a one time cash payment.

Contents

Basis

A settlement, as well as dealing with the dispute between the parties is a contract between those parties, and is one possible (and common) result when parties sue (or contemplate so doing) each other in civil proceedings. The plaintiffs and defendants identified in the lawsuit can end the dispute between themselves without a trial. [2]

The contract is based upon the bargain that a party forgoes its ability to sue (if it has not sued already), or to continue with the claim (if the plaintiff has sued), in return for the certainty written into the settlement. The courts will enforce the settlement. If it is breached, the party in default could be sued for breach of that contract. In some jurisdictions, the party in default could also face the original action being restored.

The settlement of the lawsuit defines legal requirements of the parties and is often put in force by an order of the court after a joint stipulation by the parties. In other situations (as where the claims have been satisfied by the payment of a certain sum of money), the plaintiff and defendant can simply file a notice that the case has been dismissed. [3]

The majority of cases are decided by a settlement. Both sides (regardless of relative monetary resources) often have a strong incentive to settle to avoid the costs (such as legal fees, finding expert witnesses, etc.), the time and the stress associated with a trial, particularly where a trial by jury is available. Generally, one side or the other will make a settlement offer early in litigation. The parties may hold (and indeed, the court may require) a settlement conference, at which they attempt to reach such a settlement.

In controversial cases, it may be written into a settlement that both sides keep its contents and all other information relevant to the case confidential or that one of the parties (usually the one being sued) does not, by agreeing to the settlement, admit to any fault or wrongdoing in the underlying issue.

A "global settlement" is one employed where suits have been filed or charges brought in multiple jurisdictions and is defined as "a legal agreement that addresses or compromises both civil claims and criminal charges against a corporation or other large entity". [4] Examples of a global settlement include the Tobacco Master Settlement Agreement between the attorneys general of 46 U.S. states and the four major U.S. tobacco companies in 1999. [5] Another example is within the Global Analyst Research Settlements.

Specific jurisdictions

United States

Usually, lawsuits end in a settlement, with an empirical analysis finding that less than 2% of cases end with a trial, 90% of torts settle, and around 50% of other civil cases settle. [6] In American law, settlement agreements are normally private contracts, not court orders, except for consent decrees, which are relatively uncommon in the United States.

Negotiations

Under Federal Rule of Evidence 408, settlement negotiations cannot usually be introduced as evidence at trial, [7] and many state rules of evidence have similar rules modeled after it. [8]

Confidentiality

Most settlements are confidential. In these cases, the court order may refer to another document which is not disclosed, but which may be revealed to prove a breach of the settlement. Confidentiality is not possible in class action cases in the United States, where all settlements are subject to approval by the court pursuant to Rule 23 of the Federal Rules of Civil Procedure and counterpart rules adopted in most states.

In some cases, confidential settlements are requested in discovery. Federal courts can issue protective orders preventing the release, but the party seeking to prevent disclosure must show that harm or prejudice would result from the disclosure. [9] In specific states such as California, however the burden is on the party seeking release of the confidential settlement. [9]

Limitations

The confidentiality of settlements is controversial as it allows damaging actions to remain secret, as occurred in the Catholic sexual abuse scandal. [10] In response, some states have passed laws which limit confidentiality. For example, in 1990 Florida passed a 'Sunshine in Litigation' law which limits confidentiality from concealing public hazards. [11] Washington State, Texas, Arkansas, and Louisiana have laws limiting confidentiality as well, although judicial interpretation has weakened the application of these types of laws. [12] In the U.S. Congress, a similar federal Sunshine in Litigation Act has been proposed but not passed in 2009, 2011, 2014, and 2015. [13] Confidentiality agreements which keep secrets from regulators about violations is probably unenforceable, but a specific carveout granting regulators access is usually not included. [11]

England and Wales

In England and Wales, if the matter is already before the courts, except in a case where the claim is to be dismissed outright and the Claimant agrees to pay the Defendant's costs, the matter is usually dealt with by a consent order, signed by the legal representatives of both parties and approved by the judge.

To get around the issue of confidentiality referred to above, a standard procedure consent order, known as a Tomlin Order is entered into. The order itself contains an agreement that the claim is stayed and no further action can be taken in court (except for referring a dispute in the implementation of the order to court, which is allowed). The order also deals with payment of costs, and payments of money out of court if any money is held by the court (as these are matters which must be dealt with by Court Order). However, the actual terms of the settlement are dealt with in a 'schedule' to the order, which can remain confidential. Breach of the schedule can be dealt with as breach of contract, or breach of the consent order.

Israel

In Israel, which is a common law jurisdiction, settlements almost always are submitted to the court, for two reasons: (a) only by submitting the settlement to the court can the litigants control whether the court will order one or more parties to pay costs, and (b) the plaintiff (claimant) usually prefers for the settlement to be given the effect of a judgment.

See also

Related Research Articles

A class action, also known as a class action lawsuit, class suit, or representative action, is a type of lawsuit where one of the parties is a group of people who are represented collectively by a member or members of that group. The class action originated in the United States and is still predominantly an American phenomenon, but Canada, as well as several European countries with civil law, have made changes in recent years to allow consumer organizations to bring claims on behalf of consumers.

<span class="mw-page-title-main">Mediation</span> Dispute resolution with assistance of a moderator

Mediation is a negotiation facilitated by a third-party neutral. It is a structured, interactive process where an impartial third party, the mediator, assists disputing parties in resolving conflict through the use of specialized communication and negotiation techniques. All participants in mediation are encouraged to actively participate in the process. Mediation is a "party-centered" process in that it is focused primarily upon the needs, rights, and interests of the parties. The mediator uses a wide variety of techniques to guide the process in a constructive direction and to help the parties find their optimal solution. A mediator is facilitative in that they manage the interaction between parties and facilitates open communication. Mediation is also evaluative in that the mediator analyzes issues and relevant norms ("reality-testing"), while refraining from providing prescriptive advice to the parties. Due to its voluntary nature, a person cannot be compelled to use mediation to resolve their dispute. However, a suggestion from the Court may be difficult to resist.

A lawsuit is a proceeding by one or more parties against one or more parties in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used with respect to a civil action brought by a plaintiff who requests a legal remedy or equitable remedy from a court. The defendant is required to respond to the plaintiff's complaint or else risk default judgment. If the plaintiff is successful, judgment is entered in favor of the plaintiff, and the Court may impose the legal and/or equitable remedies available against the defendant (respondent). A variety of court orders may be issued in connection with or as part of the judgment to enforce a right, award damages or restitution, or impose a temporary or permanent injunction to prevent an act or compel an act. A declaratory judgment may be issued to prevent future legal disputes.

In English civil litigation, costs are the lawyers' fees and disbursements of the parties.

Attorney–client privilege or lawyer–client privilege is the common law doctrine of legal professional privilege in the United States. Attorney–client privilege is "[a] client's right to refuse to disclose and to prevent any other person from disclosing confidential communications between the client and the attorney."

Confidentiality involves a set of rules or a promise usually executed through confidentiality agreements that limits the access to or places restrictions on distribution of certain types of information.

A consent decree is an agreement or settlement that resolves a dispute between two parties without admission of guilt or liability. Most often it is such a type of settlement in the United States. The plaintiff and the defendant ask the court to enter into their agreement, and the court maintains supervision over the implementation of the decree in monetary exchanges or restructured interactions between parties. It is similar to and sometimes referred to as an antitrust decree, stipulated judgment, or consent judgment. Consent decrees are frequently used by federal courts to ensure that businesses and industries adhere to regulatory laws in areas such as antitrust law, employment discrimination, and environmental regulation.

The Federal Rules of Civil Procedure govern civil procedure in United States district courts. They are the companion to the Federal Rules of Criminal Procedure. Rules promulgated by the United States Supreme Court pursuant to the Rules Enabling Act become part of the FRCP unless, within seven months, the United States Congress acts to veto them. The Court's modifications to the rules are usually based upon recommendations from the Judicial Conference of the United States, the federal judiciary's internal policy-making body.

Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy.

In law, a joinder is the joining of two or more legal issues together. Procedurally, a joinder allows multiple issues to be heard in one hearing or trial and occurs if the issues or parties involved overlap sufficiently to make the process more efficient or fairer. That helps courts avoid hearing the same facts multiple times or seeing the same parties return to court separately for each of their legal disputes. The term is also used in the realm of contracts to describe the joining of new parties to an existing agreement.

Insurance bad faith is a tort unique to the law of the United States that an insurance company commits by violating the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract.

<span class="mw-page-title-main">Arbitration</span> Method of dispute resolution

Arbitration is a formal method of dispute resolution involving a neutral third party who makes a binding decision. The third party neutral renders the decision in the form of an 'arbitration award'. An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding.

In England and Wales, the principle of legal professional privilege has long been recognised by the common law. It is seen as a fundamental principle of justice, and grants a protection from disclosing evidence. It is a right that attaches to the client and so may only be waived by the client.

<span class="mw-page-title-main">Legal financing</span>

Legal financing is the mechanism or process through which litigants can finance their litigation or other legal costs through a third party funding company.

Civil discovery under United States federal law is wide-ranging and can involve any material which is relevant to the case except information which is privileged, information which is the work product of the opposing party, or certain kinds of expert opinions. Electronic discovery or "e-discovery" is used when the material is stored on electronic media.

Civil procedure in South Africa is the formal rules and standards that courts follow in that country when adjudicating civil suits. The legal realm is divided broadly into substantive and procedural law. Substantive law is that law which defines the contents of rights and obligations between legal subjects; procedural law regulates how those rights and obligations are enforced. These rules govern how a lawsuit or case may be commenced, and what kind of service of process is required, along with the types of pleadings or statements of case, motions or applications, and orders allowed in civil cases, the timing and manner of depositions and discovery or disclosure, the conduct of trials, the process for judgment, various available remedies, and how the courts and clerks are to function.

FTC v. Actavis, Inc., 570 U.S. 136 (2013), was a United States Supreme Court decision in which the Court held that the FTC could make an antitrust challenge under the rule of reason against a so-called pay-for-delay agreement, also referred to as a reverse payment patent settlement. Such an agreement is one in which a drug patentee pays another company, ordinarily a generic drug manufacturer, to stay out of the market, thus avoiding generic competition and a challenge to patent validity. The FTC sought to establish a rule that such agreements were presumptively illegal, but the Court ruled only that the FTC could bring a case under more general antitrust principles permitting a defendant to assert justifications for its actions under the rule of reason.

<i>Johnson v Gore Wood & Co</i>

Johnson v Gore Wood & Co[2000] UKHL 65 is a leading UK company law decision of the House of Lords concerning (1) abuse of process relating to litigating issues which have already been determined in prior litigation or by way of settlement, (2) estoppel by convention, and (3) reflective loss of a shareholder with respect to damage which was done to the company in which he holds shares.

<i>In re Garlock Sealing Technologies, LLC</i>

In re Garlock Sealing Technologies, LLC is a court case heard in the United States District Court for the Western District of North Carolina which involves the entry into bankruptcy proceedings by Garlock Sealing Technologies, once a manufacturer of coated asbestos gaskets, as a result of potential liability from current and future settlements. The plaintiffs were over 4,000 asbestos victims suffering from mesothelioma, including many Navy veterans, as well as an unknown number of future mesothelioma victims. As noted by the court, mesothelioma "is always fatal, causing death essentially by suffocation within about eighteen months of diagnosis" and involves "a horrific death."

Reid Collins & Tsai LLP is a national trial law firm with offices in New York, Austin, Dallas, Wilmington, and Washington, D.C. The firm represents plaintiffs in complex commercial litigation on a mixed-fee or contingency-fee basis.

References

  1. ↑ Erichson, Howard M. (2010–2011). "Uncertainty and the Advantage of Collective Settlement". DePaul Law Review. 60: 627. Archived from the original on 21 September 2021. Retrieved 21 September 2021.
  2. ↑ "settlement (law)". Encyclopaedia Britannica. Archived from the original on 6 October 2014. Retrieved 23 April 2014.
  3. ↑ Weier, Steven (27 April 2020). "Negotiation & Settlement: What You Need To Know". Weier Law. Archived from the original on 25 October 2020. Retrieved 18 September 2020.
  4. ↑ "questions.com". Archived from the original on 16 June 2021. Retrieved 19 April 2016.
  5. ↑ Global Settlement of Tobacco Litigation: Hearing Before the Commerce, Science, and Transportation, U.S. Senate (U.S. Government Printing Office, 1997)
  6. ↑ Barkai, John; Kent, Elizabeth (1 January 2014). "Let's Stop Spreading Rumors About Settlement and Litigation: A Comparative Study of Settlement and Litigation in Hawaii Courts". Rochester, NY: Social Science Research Network. SSRN   2398550.{{cite journal}}: Cite journal requires |journal= (help)
  7. ↑ "Admissibility of Settlement-Related Evidence at Trial". apps.americanbar.org. Archived from the original on 14 March 2016. Retrieved 21 March 2016.
  8. ↑ "THE SETTLEMENT PRIVILEGE: FACT OR FICTION?" (PDF). Ethics & Privilege. Archived from the original (PDF) on 3 April 2016.
  9. 1 2 "Confidential Settlement Agreements: To Produce Or Not To Produce?". Archived from the original on 20 March 2016. Retrieved 20 March 2016.
  10. ↑ Goodstein, Laurie (27 June 2002). "Albany Diocese Settled Abuse Case for Almost $1 Million". The New York Times. ISSN   0362-4331. Archived from the original on 1 April 2016. Retrieved 21 March 2016.
  11. 1 2 "Confidentiality in Settlement Agreements Is Bad for Clients, Bad for Lawyers, Bad for Justice". americanbar.org. Retrieved 20 March 2016.
  12. ↑ Lothes, Alison (December 2005). ""Quality, Not Quantity: An Analysis of Confidential Settlements and Lit" by Alison Lothes". University of Pennsylvania Law Review. 154 (2): 433. doi:10.2307/25047592. JSTOR   25047592 . Retrieved 20 March 2016.
  13. ↑ Fan, Mary D. (18 September 2015). "Private Data, Public Safety: A Bounded Access Model of Disclosure". Rochester, NY: Social Science Research Network. SSRN   2662678.{{cite journal}}: Cite journal requires |journal= (help)
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