Every Client Matters To Us

Why do so many business lawsuits eventually settle?

On Behalf of | Apr 2, 2024 | Uncategorized

When one party files a lawsuit against another, everyone likely anticipates going to trial. Those who have been unable to agree on what is appropriate and fair may need to ask a judge to interpret the law and any contracts that govern the situation.

Business lawsuits allow companies to prevent misconduct, enforce contracts or recover losses generated by another party. Lawsuits may result in a judge or sometimes even a jury hearing from the plaintiff and also the defendants. The courts help review the circumstances and any applicable statutes, court precedent or business contracts to resolve conflicts.

Many business lawsuits focus on contract violations or non-performance issues. A large percentage of business lawsuits actually end up settling instead of going to trial. Why is it so common for organizations to settle legal conflicts?

Settling is often cost-effective

Even if an executive or representative of a business believes that the organization is in the right, the cost of business litigation is a major deterrent to full-fledged business lawsuits. The cost of settling, even if the business might win in court, is often lower than going to trial. It may take months to wait for a hearing in court, and then people may face major expenses when taking a business dispute to trial. Research has long indicated that settlements are more cost-effective in most cases. Even when businesses may assert that no wrongdoing occurred, settlements outside of court can be a means of limiting how much the lawsuit costs the organization.

Companies worry about bad publicity

While some marketing professionals claim that all publicity is good publicity, cancel culture can have dire implications for businesses. Negative online chatter related to legal matters can diminish an organization’s customer base and make it more difficult to recruit workers in the future. When lawsuits with consumers, service providers or former employees go to trial, the publicity can damage how people perceive the organization. Many businesses choose to settle so the details of the case remain as private as possible. Settling does not necessarily mean admitting fault, and the contract signed when settling can help protect businesses against future disclosures and other potential losses.

Understanding why settlements are so common in business litigation cases may benefit those evaluating their options after a contract breach or other major business issue. Business owners and executives focus who on long-term organizational needs may find it easier to resolve legal disputes in ways that are favorable.