How Is COVID-19 Impacting Lawsuit Settlements?

While most courts have slowly resumed operations, the months-long closures and reduced capacity have resulted in large backlogs, which will take several months to resolve...

COVID-19 brought the country’s court systems to a screeching halt. While most courts have slowly resumed operations, the months-long closures and reduced capacity have resulted in large backlogs, which will take several months to resolve.

In order to resolve cases more quickly, many courts, including those in New York and New Jersey, are strongly encouraging litigants to engage in settlement discussions and/or participate in alternative dispute resolution, such as mediation. Others are going so far as to make settlement negotiations mandatory before scheduling trials.

Risks and Benefits of Settlement

When it comes to business disputes, it is important that the client and their attorney work together to analyze the advantages and disadvantages of both litigation and settlement and decide together which is most beneficial. Even in the best of circumstances, all litigation involves a certain amount of risk and uncertainty. Even if you have a strong case, there is no way to be absolutely sure how a jury will respond to the arguments made by each side. As a result, more than 80 percent of all lawsuits are resolved via settlement rather than a court or jury verdict.

In light of COVID-19’s impact on the court system, settlement has a distinct advantage of bringing the case to a conclusion much more quickly, which can save both time and money. If you are litigating against a distressed business, settling the lawsuit now can be advantageous over drawn-out litigation, as it helps ensure payment of your claim before the company goes out of business and/or declares bankruptcy. Similarly, businesses that have been overwhelmed by COVID-19 may prefer to settle the lawsuit to guarantee at least some recovery and limit legal expenses.

There are several other advantages of negotiating a settlement. Most notably, the parties control their own destiny and have complete control over the terms of the agreement. In addition, settlement often allows the two sides to explore more creative solutions, such as payments over time, or exchanging different assets from those in dispute. By comparison, courts can be restrained by statutes and legal precedent. Settlements can also be structured to ensure that the terms remain confidential, which can be beneficial for litigants hoping to keep a dispute out of the spotlight. Conversely, court documents are generally public records and may be accessed by the public.

Of course, settlement may not always be the best option. To negotiate a settlement, both parties must be willing to make concessions. Therefore, it is important to determine what you may be willing to concede and assess the true value of your claim. For businesses that have remained or grown more profitable during the pandemic, it may make sense to devote resources towards litigation. The extra time to gather evidence and build your case now could lead to greater success in the long run. 

Questions to Ask Before Entering Settlement Negotiations

In order for settlement negotiations to be successful, both parties must come prepared. Below are some important questions to consider before engaging in settlement discussions:

• What are the strengths and weakness of your case? What are the strengths and weakness of the other party’s case?
• What needs of each party must be satisfied in order for a resolution to be reached?
• What are the obstacles reaching a settlement, and what ideas do you have to overcome them?
• What are the consequences for each side if the case is not resolved via settlement?
• How much will it cost to litigate the case through trial/appeal?
• What material terms do you require in a settlement agreement, such as confidentiality, scope of the release, payment timeline?

Key Takeaway

The COVID-19 pandemic has strained the New York and New Jersey court systems and placed a greater emphasis on settlement negotiations. For businesses involved in litigation, it is important to understand the risks and benefits of resolving your lawsuit prior to trial. To achieve the best possible outcome, it is also wise to work with an attorney skilled in the art of both litigation and negotiation.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Thomas Herndon, Jr., or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.