Settlement Tactics Series: Knowing when to walk away

December 18, 2014

Settlement ADRAlthough our entire series so far has been focusing on how to make your settlement efforts as successful as possible, sometimes it’s not always possible to reach a fulfilling end to negotiations.  But you also shouldn’t give up on settlement too soon.

So how do you know when the time is right to walk away from settlement?

Usually, you’ll need to cease settlement efforts, at least for the time being or altogether, in any one of three of these circumstances.

Parties have reached impasse in terms of settlement

This situation is one of the most obvious that things aren’t going to reach an agreeable resolution: you’ve been stuck arguing over the same terms with the other side for longer than you should, and it doesn’t appear that either side is going to budge.

Again, though, don’t give up too soon – i.e. as soon as you and your opposition appear to reach an impasse.  You must be absolutely certain that no agreement is going to be reached at that point in time, and that there are no more “different angles” from which to approach the issues.

Perhaps your opponent is offering terms worse than you believe your WATNA (“worst alternative to a negotiated agreement”) to be.  Maybe communications between the parties has broken down and there’s no way to sufficiently salvage the relationship at that point in time to make settlement possible.  Essentially, it’s when you make the realization that you aren’t going to be able to settle the dispute no matter how much you may want to.

However, it’s important to understand that walking away from such a situation such as this may be the only way to keep open the possibility of an agreement later on down the line.  If you can walk away from an increasingly hostile situation before it escalates too much, you may be able to reach an agreement later when the parties have had some time to cool their heads and think things through more separately.  Circumstances in the case may also change that may make one or both parties more likely to agree to settle.

Lack of understanding of the factual and legal circumstances of the case

Speaking of the circumstances of the case affecting settlement efforts, situations in which the other party significantly lacks a reasonable understanding of the strengths and weaknesses of their position may make an agreement impossible.  Specifically, your opponent may believe that their case is stronger than it actually is.

You can typically tell whether you’re in this situation fairly early on in the dispute based on their proposed settlement terms or just how your opposing counsel speaks about the case.  In this scenario, it’s good to take a break from negotiating until later in the case when your opponent may have gotten a reality check from a court appearance or may have had an opportunity to do more research or speak with another attorney about the case’s prospects.

Unfortunately, there’s just no way to inform the other party of their case’s strengths or weaknesses because they’ll likely just believe that you’re attempting to use some kind of negotiation tactic to gain an advantage.  The best choice is to just put settlement on hold until after the other party has had a reality check (it’s possible that this may never happen, making settlement impossible).

Opposing party’s behavior is damaging to settlement efforts

Although there are a variety of legitimate bargaining tactics to employ during negotiations, there are also quite a few that you shouldn’t use – and you shouldn’t tolerate an opposing party who does.

These tactics involve the use of fear and deception as a means to pressure the opponent.  It may take the form of other party constantly threatening to end negotiations if their demands aren’t met; perhaps the opponent is constantly deriding the strength of your case; you may even encounter those attorneys who attack the very relationship you have with your client by calling your competency into question or by trying to make you second guess your client’s motivations.

First, be quick to recognize when this behavior is present so that it doesn’t have a chance to poison your position.  If the opposing party persists in this behavior, call them out on it, and refuse to negotiate any further if they do not relent.  Settlement simply won’t be reached in good terms with your opponent acting in this manner, and attempting to do so will only compromise your own case.

And that’s generally true for any other circumstance in which you should end settlement attempts: walking away does less harm to your case than continuing negotiations.