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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.