WHEN IS IT TIME TO SETTLE?

In the present litigious climate full of starving shark attorneys, most business owners and other professionals have or will receive a certified letter threatening legal action if the demands contained in it are not met. Of course it’s always best to be prepared before one receives such a demand, because the real question is when not if. Such demands should not be taken lightly; however, it is necessary to understand their genesis and prognosis to properly deal with them. It goes without saying that the most prudent course of action upon receipt of a formal demand is to immediately retain experienced legal counsel.

It should be understood that in general the prospective plaintiff’s attorney is being paid only to draft the demand letter, and nothing more. In many cases, if the disputed amount is too low no further action will be forthcoming as the costs and risks of legal action outweigh the desire or ability to extract a settlement or judgment. This balancing of factors in whether or not to respond to a demand should be performed in concert with your legal counsel who understands the dispute and how it will likely be litigated, should it get to that stage. At times the best response is no response, and other times an effective rebuttal properly stating the facts from the demand recipient’s point of view should be drafted, which will subsequently close the matter.

Once the dispute fact pattern is carefully reviewed, the legal liability and more importantly the provability of such liability should be ascertained. Is there a signed contract or other documentary evidence available? Is an alternative dispute resolution process mandatory? Where is the likely venue for potential litigation? Is there a statute that assigns or mandates liability? Is there case precedent that makes liability highly probable? Are other parties who may be equally liable also involved and can they be pulled into a co-settlement? Does the demand threaten legal action against an individual party or only a legal entity? There are many other issues to consider.

One should assume that an asset search has already been performed on the recipient of the demand, and the plaintiff will already have an idea of what property can be seized, if any. Should fault or liability most likely lie with the recipient of the demand, and if such liability may be shown to a clear and convincing standard at trial, and furthermore the recipient has assets that may be seized in the event of an adverse judgment or default, settlement should then properly be considered.    

The process of opening settlement negotiations is best left to legal counsel. Most disputes will be settled or mediated if properly handled for only a portion of the original demand. Of course, if legal counsel wants to litigate, that party can always convince their client that they have a strong case and to proceed with litigation, even if objectively such advise would not be based on fact.

Generally, the first settlement offer should be made by the prospective plaintiff/demand maker, which would establish the general parameters of negotiations. The offer would not be expected to be the same as that stated in the letter; the lower the offer from the original demand the more room there is for the demand recipient. Various tactics may then be utilized by the recipient’s counsel to make a counter-offer more palatable. The negotiations time schedule should be adjusted to fit the specific situation and make settlement more likely.

Remember that just because there is a high likelihood of an adverse judgment at trial for the demand recipient does not mean that the prospective plaintiff will pursue litigation. This would require a substantial deposit plus payment of monthly fees which, when discovery begins can easily run into five figures. Most people don’t have that kind of cash lying around to pursue a speculative venture; trial victory is in no way guaranteed, but a payday for plaintiff’s counsel usually is.

Furthermore, even with a trial victory the most important part of the process is collecting the judgment (assuming no appeal is made). If there are no assets to seize, or a judgment is solely against an entity, sometimes taking a default judgment may be the best option for a defendant; this decision may be made on a case by case basis.

Undoubtedly, most people fail to understand that attempting asset protection at this late stage of a dispute may run afoul of various creditor protection laws; therefore, it is prudent to plan for eventualities such as legal action well before these circumstances arise and properly protect one’s assets in concert with counsel. If asset protection is attempted during pending litigation, the defendant stands the risk of having the entire transfer of his or her property to whatever protected location is decided upon, nullified by the court.

If you have received a demand from anyone, you should not make a plan of action on your own. This is the single most important piece of advice to glean from this post. The Belenky Law Firm is available to review your matter and provide counsel as to the most prudent course of action for your situation, as has been done with so many other disputes previously. If alternative dispute resolution is necessary, this Firm stands ready to ensure the most aggressive defense of your interests.  

By | 2019-03-06T19:38:58+00:00 March 6th, 2019|Categories: Business Law, Working With Lawyers|Tags: , , , |0 Comments