Weighing a pretrial settlement

In evaluating the merits of pretrial settlement, it is important for the employer and its attorney to consider the costs of litigation as well as how a jury of lay persons would respond to the plaintiff and his or her claims.

Possible damages include back pay and benefits, future lost wages and benefits (“front pay”), medical expenses, any expenses associated with the plaintiff’s mitigation efforts, emotional distress damages, punitive damages and attorney’s fees. The potential recovery of emotional distress and punitive damages, in particular, makes litigation more risky.

The costs of litigation include both monetary and intangible costs such as negative publicity, the time required by employees who will be involved in the investigation and litigation of a claim, the possibility that other employees will file claims if the current plaintiff succeeds, and decreased employee morale.

It might be helpful to break down costs through each stage of the proceeding at which the claim might be resolved by settlement or dispositive motion, including (1) after the first round of depositions and written discovery; (2) after a ruling on a motion for summary judgment; (3) after the trial has begun; and (4) after a full trial.

It is important to consider all costs, including attorneys’ fees, general litigation costs (which include expert and investigator fees), court filing fees, deposition transcripts, process server fees, travel expenses, and court reporter fees.

Settlement should be considered once the attorney’s investigation is completed. Early settlement may be advisable if the employer’s liability is fairly clear because the longer the matter is in dispute, the more entrenched in their positions the parties become and the more the employer will pay in attorney’s fees. Furthermore, early settlement may be advisable because employment disputes tend to be fairly debilitating for the plaintiffs and it may be advisable to settle early before damages and attorneys’ fees mount to the point that settlement is a less attractive option for the employee and his or her lawyer (who may have a contingency fee arrangement with the plaintiff).

On the other hand, pre-trial motions to dismiss and motions such as motions for summary judgment can be used to better ascertain and limit the scope of an action. Therefore it may be advisable to wait to settle until after a motion for summary judgment has been filed. Of course, if such a motion is unsuccessful, the plaintiff may become even more entrenched in his or her belief that the case is a “winner.” A particularly apt time to raise or be receptive to a potential settlement may be immediately after a summary judgment motion has been filed but before the plaintiff has had to expend time and resources preparing an opposition to the motion.

Weighing the possibility of settlement should include consideration of the facts learned during investigation, the relevant law, the strengths and weaknesses of the plaintiff’s claims, the strength of the employer’s witnesses and evidence, the realistic outcome of litigation, the advantages of early settlement, and the alternatives to a strictly monetary settlement (e.g., reinstatement, a new title or position, implementation of sensitivity training, and disciplining an alleged harasser).