Settlement of All Claims, Settles All Claims

Posted on July 5, 2010 by Grace Healy

I was taught to expressly include costs and attorneys’ fees in any release or settlement agreement because – if I didn’t -- the opposing party would come back and demand that the client pay those claims on top of the settlement amount. I always did it but, frankly, I thought this was an urban legend. I was wrong -- this issue made it all the way to the Washington Supreme Court. The dispute in McGuire v Bates illustrates the wisdom of using belts and suspenders when drafting agreements.

After a settlement of $2,180 plaintiff asserted that the settlement of “all claims” did not include statutory attorneys fees, which are awarded to a prevailing party in Washington in certain situations. An arbitrator denied this claim; the Superior Court decided plaintiff was the prevailing party and awarded attorneys' fees, costs and interest on the settlement amount.  The Court of Appeals affirmed.  The Washington Supreme Court, in a unanimous decision, reversed and ruled that a settlement of “all claims” includes a claim for attorney fees.

Despite this decision, it seems like a good idea to always expressly include costs and attorney fees in any settlement and release, since one superior court judge and an appellate panel saw this the other way. 
 

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Study Shows Turning Down Settlement Statistical Mistake

Posted on August 8, 2008 by Grace Healy

Today’s New York Times reveals that plaintiffs who reject settlement offers and go to trial often recover less than the offer at trial.  This is based upon a study of cases that will be published in the September issue of the Journal of Empirical Legal Studies.  The Times article says that the findings “raise provocative questions about how lawyers and clients make decisions, the quality of legal advice and lawyers’ motives.”  “The study found that factors like the years of experience, rank of a lawyer’s law school and the size of a law firm were less helpful in predicting the decision to go to trial. More significant was the type of case.”

What the Times article doesn’t suggest -- and statistics probably can't show --  is that parties often have legitimate differences of opinion about the merits of a case, and those differences play out at a trial.  Or, that  possibly, plaintiffs’ lawyers – who are willing to be paid by contingency fee – are intrinsically less adverse to risks than defendants’ lawyers – who choose to live by the hourly rate.  Or, that plaintiffs may be seeking to vindicate what they see as personal wrongs as opposed to defendants who generally view litigation as a cost of doing business.  Or, that defendants are paying more in settlement than they would lose if the cases were taken to trial.

Decisions to go to trial are often incorrect in hindsight, but saying that a decision to go to trial is a mistake that can be remedied in advance of trial ignores the enormous number of variables that occur during trial – such as, who turns up for jury duty that day, or whether that jury thinks your witness is not truthful because he or she begins to perspire while testifying.  Where you go to law school isn’t a big help at that time.

Certainly, each party wants the best result – if they agreed on what that was, there would never be a need for a lawsuit or a trial.  It doesn’t mean that the decision to reject a settlement offer to go to trial is a “mistake”.

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