The Right to Refuse to Settle
The Delaware Business Litigation Report recently reported a case in which the Delaware Court of Chancery upheld the right to refuse to settle “Court of Chancery Upholds Right To Refuse To Settle”). One might wonder why that right was ever in question.
The case was somewhat complex and involved an insurer, a company, the company’s former directors and D&O coverage. The company wanted the former directors to settle so it could use their admission of liability, part of the settlement, as a legal “club” against the insurer.
The Court did not think much of the company’s argument against its directors and upheld the directors’ right to refuse to settle. But, the company’s position was at least based on a thought-out, rational legal strategy. I won’t actually comment further about that particular case, the text of which is available on the DBLR post.
I will comment on situations, encountered often, in which clients refuse to settle not because of any legal strategy, good or bad, but because of strictly emotional reasons. These situations are unfortunate.
Settlement puts the parties in charge. They can decide the terms by which their dispute be resolved. In a fully litigated case, the court decides for the parties. Often, unlike the Delaware case, there is no insurance involved and the parties exhaust themselves financially.
In our firm, we make it a practice to counsel litigation clients to start thinking about the acceptable terms of a settlement at the outset of a case. Of course, not every case can settle or, even when it can, not necessarily early on. Sometimes the parties need to go through discovery and pre-trial procedures to fully understand their positions. Sometimes, as was once pointed out to me by a judge’s clerk, the parties need to start spend money to fully realize the wisdom of a settlement.
Most cases do settle. One of the challenges of litigation, however, is to bring around that client who for purely emotional, sometimes seemi