Resolving Disputes: Why 95% of all Cases are Settled Out of Court

It is hard to say exactly how many cases settle before a final judgment in the courts, in any particular State, Province or Country, however, the general assumption is that most legal disputes do get settled at some point or the other, before the court reaches its verdict. This is certainly the “conventional wisdom” taught in law schools. Therefore, anyone in the midst of a dispute, or at the beginning of a potential dispute with another party, should consider alternate dispute resolution mechanisms to reach a quicker and more efficient settlement. Over the past years, we have helped a number of clients with alternate dispute resolution, with the help of practitioners in Canada, the US, Europe, and the MENA region (UAE and Bahrain). Therefore, this article consolidates some key takeaways and lessons we have learned in this process.

There are many good reasons why most cases are settled. In any legal process, the result at the very end (barring a settlement) is a judge or jury decision, where human discretion and possible error, play a major part. When the stakes are high, minor technicalities can have major implications for parties to a dispute. For example, if you are trying to collect a payment or money judgment, perhaps a judge or jury will write off a part of the debt if the creditor stopped supplying services, or had a duty to mitigate losses, in a business deal. Perhaps you will win a major award, only for the matter to be thrown out or ordered for retrial on appeal, because of a question about the court’s jurisdiction to hear the dispute, or some other procedural error on the part of the judge. The cost of the retrial could then erode your prospective award even further. In addition, legal expenses in the form of attorney fees, court costs and the many sleepless nights which come with a dispute, may outweigh any prospective gains to be had from a lawsuit.

What is needed in most cases, is a compliance expert, or specialist in the resolution of a dispute, who considers not only the litigation process in isolation, but who looks at the financial, emotional and psychological realities with equal measure. A lawyer or consultant should initially, and ideally focus on giving the client a breakdown or estimate of the costs involved in the process, while working through a cost benefit analysis for the client. However, this usually does not happen until it is too late, as many clients rush to litigation attorneys who promise big victories with big fees attached. When the time to settle comes, it is often too late, and the client has to endure a heavy loss. The lawyer, being an expert in legal processes, will still receive their payment in full. Given the fact that the lawyer can often use their own expertise in utilizing state machinery to enforce their client’s contractual obligations, there is little option for the client but to pay up. Therefore, even if the client loses, the litigation lawyer will win many times.

That is not to say that expert litigation lawyers and barristers are not needed to solve complex legal matters. Litigation is a fact of life, and there will always be a need for attorneys who know how to fight for their clients before the courts. However, what many clients may fail to understand is that the court battle should be the last step, in many cases, not the first option.

Litigation is a battle. One can compare the litigation process to a kind of cold war. In this process, two parties are petitioning the State apparatus, to use coercion and physical force to compel another party to comply with their demands. The party who wins the court case can ask the court to freeze assets and garnish assets, or order the detention of the opposing party, if they fail to comply. These orders will usually be carried out by police or court officers, who have authority by law to use physical force. It is an extensive procedure to regulate and “civilize” the use of force to achieve compliance.

In the absence of this legal process, many parties would have little option but to resort to physical coercion, if not violence and vigilante style conflict, to force their opposition into submission. This can be seen in a number of communities and countries where the court system, or traditional dispute resolution mechanisms (whether they be tribal or social systems) break down.

Therefore, parties to a dispute should understand this psychological reality of the dispute process before rushing to the courts. Oftentimes clients do not grasp the extent of this reality. That is not to say that certain matters should not be brought before the courts. However, at some point or the other, a settlement is likely to become a viable option. Therefore, in such cases, dispute resolution becomes more about solving a social or business matter between two parties, than petitioning the state to use coercive actions against another.

Oftentimes, clients don’t want to concede a position, or a supposed advantage when trying to settle. Many times, clients feel that if they approach settlement, they will appear “weak” and “cowardly”. Such attitudes are often childish, impulsive and immature, when considering the huge costs, both financial and physical, a client will possibly undertake by fighting out the matter in court.

Therefore, the most successful clients we have worked with are those who are willing and able to look at the dispute dispassionately, from a truly objective perspective. At the very least, the parties should look at their financial position, and try to calculate how much the dispute process will actually cost them. Adjusting for the costs of the dispute in any financial claim against the other party can lead to a logical and cost effective solution for both sides. Payment plans, settlement agreements and compromise can also bring quicker and more profitable solutions for all in the long and short run, when it comes to financial disputes.

With respect to social and family issues, high emotions and grudges can have lifelong implications. If children are involved, the scars of a court battle can last multiple lifetimes. Therefore, there is always a good reason to attempt mediation, reconciliation and some form of mutual settlement, as the first step to resolving the dispute. This would be a logical approach to sorting out problems.

In conclusion, there are a number of good reasons why many cases are settled out of court. Unfortunately, some clients and litigants only realize this reality when it is too late.