United States: Every Time A Current Or Former Employee Threatens Or Brings Legal Action, In-House Counsel Faces The Question: Should We Litigate Or Settle?

Every time a current or former employee threatens or brings legal action, in-house counsel faces the question: Should we litigate or settle?

But the question often is not as straightforward as it seems. If you forego an early settlement, will the company incur significant defense costs only to settle for a larger amount later? Will a settlement with one employee invite similar claims from others? Which cases merit a full-throated defense as a matter of principle?

While it is common to approach each case on an ad hoc basis, legal departments would be wise to invest the time to develop a more comprehensive strategy for when to settle, and when to go to the mat in litigation, that is in line with the company's broader goals and values.

Here are 10 steps to develop such a strategy.

1. Identify key goals.

The legal department should begin by identifying a set of key goals for the company around litigation and settlement. For example, key goals for many businesses include reducing overall defense costs, reducing overall spend on settlements and judgments, and protecting reputational interests.

2. Involve critical stakeholders.

In setting a strategy around settlement of employment claims, it is wise for the in-house legal team to involve critical stakeholders up front. For example, legal may wish to involve human resources and leaders of the major business units or departments. Doing so helps ensure that the major constituencies have bought into the strategy and avoid later conflict or territorial struggles over individual claims.

Listening to the perspectives of the different stakeholders — who may have different cost centers, financial incentives or business pressures — may also result in a strategy more finely tuned to the overall company's interests.

3. Review metrics.

A critical starting point to any strategy is to review metrics on the company's past settlements and litigation. For example:

  • " In the past five years, what has been the range of settlements paid out?
  • What is the average settlement paid?
  • At what stage of litigation were such settlements paid?
  • For cases that have not been settled, what was the success rate in litigation, and what was the average cost of defense and/or judgment?
  • If there was a period in which the company settled more claims, did the overall number of claims brought go up, stay the same, or go down?

4. Set a goal for an average resolution cost.

Consider setting a dollar figure that is the goal for the average cost to resolve a claim. Review of historical data may help assess what the average cost has been, and what it should be going forward.

Give thought to whether there is a dollar amount under which the legal department can settle claims with notice to, but without pre-approval by, the business unit or HR. This helps achieve the targeted average cost and provides efficiencies in the process.

5. Identify a set of "core" cases to defend most vigorously.

Some in-house departments find that human resources or internal clients are more amenable to settling some claims if there is reassurance that those claims that require a vigorous defense as a matter of principle will not be as readily settled.

For example, a client may decide that certain cases deemed "core" cases will be taken out of the ordinary process for resolution of claims. For consistency, it is important to decide in advance what will constitute a "core" case.

For instance, the company might decide that a "core" claim is one that threatens the reputation of the company; is brought by a former employee who committed certain egregious misconduct; or accuses an executive of wrongdoing.

6. Practice early case assessment.

A core best practice of any settlement strategy is early assessment of cases. The company should consider which factors it will regularly review, or ask its outside counsel to review, for each new claim. Factors might include, for instance:

  • The nature of the legal claims and strength of legal defenses.
  • The factual summary. Here, it is useful to ask: "Is the one-minute summary of this case favorable or unfavorable to the company?" The answer to this question is a good predictor of how a claim would ultimately fare with a jury.
  • The potential damages. What are the potential compensatory damages? Are multiple or punitive damages available? What is the range of awards, settlements and verdicts for comparable claims in the last few years?
  • The forum. Is the assigned investigator, judge or jury pool favorable or unfavorable?
  • Availability and strength of witnesses. Do the witnesses still work for the company? Are the witnesses on good terms with the company or the plaintiff? Will they come across well in testimony?
  • Impact of litigation on the business or work of the company. Litigation takes time and attention from the business. Is the business willing and able to invest that time? What witnesses and business operators will be needed to assist in the defense of the case? Are high-level executives likely to be deposed?
  • Amenability of the claims to a dispositive motion, based on the nature of the claims and the facts known to date. For example, factor in that certain types of claims, such as those that rely exclusively on motive, can be difficult to resolve on summary judgment.
  • Estimated budget to defend the claims through dispositive motion or trial. Given the number of plaintiffs, defendants and claims, and the likely scope of discovery, how much will it cost to defend the case?
  • Potential proliferation of claims. Is litigating or settling likely to invite other similar claims?
  • Reputational concerns. Is the plaintiff likely to seek to publicize the matter? Will the case draw media interest? Does the publicity factor weigh in favor of confidential settlement or vigorous defense?

7. Consider the stage of litigation.

It is important to consider carefully the stage of litigation in an overall settlement strategy. If outside counsel offers defense of administrative charges on a flat-fee basis, it may make sense to err on the side of defending claims (unless there is obvious liability) when they are in the EEOC or stage agency stage, on the theory that many can be won at low cost at that stage.

On the other hand, the company may decide to take advantage of the built-in conciliation process offered or required at the agency level very early on in the case, to keep defense costs to the barest minimum. Review of historical data can provide insight into the extent to which the settlement value of a case increases as the litigation continues.

8. Strategy around confidentiality.

An integral part of an overall settlement strategy is consideration of best practices around confidentiality. It is common to include a confidentiality provision in any settlement, but there are ways to strengthen such provisions to add to the deterrent effect. For example, an agreement can include liquidated damages provisions for each breach of the non-disclosures.

Having an array of options for confidentiality protections available can help assuage concerns that the fact of settlement will encourage new claims.

9. Measure success.

Once a strategy is in place, consider how success will be measured and at what intervals. For example, the company might decide to review the relevant metrics (such as average settlement cost, legal spend and litigation success rate) annually or semi-annually. Doing so helps ensure that the strategy is producing the desired results, and also can offer all stakeholders assurance that the strategy will be tested and modified as needed.

10. Partner with outside counsel.

Find the right outside counsel to partner with the company in developing a strategy. Look for outside counsel with a proven track record in helping clients achieve efficiencies, and who offers the technological tools to track and analyze the company's historical settlement and litigation metrics and measure the success of a new settlement strategy.

Ask outside counsel to help recommend a strategy that will reduce defense costs and average settlement value, and otherwise meet the company's goals.

Given the many demands on the time of the in-house team, outside counsel can be an invaluable partner in setting a smart course for the future, periodically evaluating whether the strategy is working, and recommending future improvements based on hard data.

Conclusion

While many in-house legal teams approach each action on an individual basis, legal departments would be wise to invest the time and resources to develop a more comprehensive strategy for when to settle and when to litigate. Investing in a strategy that aligns with the company's broader goals and principles will pay off in the end. 

Originally published by ACC

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions