Showing 'Weakness' In Settlement Talks
Does the conventional wisdom make sense?
Seemingly intelligent folks fret about showing “weakness” in settlement talks.
“We can’t possibly ask plaintiffs to make a demand three days before our summary judgment papers are due. Plaintiffs will think that we’re afraid to file our summary judgment papers, and that will show weakness.”
Or:
“We can’t make a settlement offer four days before we’re required to produce documents. Plaintiffs will think that there’s something terrible in the documents and that we don’t want to produce them. Let’s make the offer immediately after we produce the documents, so that we don’t show weakness.”
This is absolutely the conventional wisdom.
But does it make sense?
Suppose a defendant does something that signals weakness, such as soliciting a settlement demand before summary judgment papers are due.
The plaintiffs think: “Aha! Defendant is showing weakness!”
But what happens in the settlement negotiations?
Plaintiffs demand $150,000,000.
Defendant offers $5,000.
Plaintiffs demand $100,000,000.
Defendant offers $5,001.
Plaintiffs complain: “That’s an unreasonable move.” Plaintiffs think to themselves, “That’s a ridiculous move by a party showing so much weakness.” Plaintiffs counter $95,000,000.
Defendant offers $5,002.
Okay.
The case doesn’t look as though it will settle.
But the plaintiffs have surely caught on by this point. Soliciting a settlement demand just before the summary judgment papers were due wasn’t signaling weakness at all. The defendant was simply soliciting a demand at an opportune time.
The supposed weakness shown by the timing of the request for a demand was immediately corrected.
So folks don’t have to worry at all about showing weakness in the timing of their demands or offers. Implicit weakness is immediately offset by the realities of a negotiation.
This logic certainly goes against the conventional thinking; virtually everyone thinks I’m wrong.
But if I’m wrong, what am I missing?
Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Drug and Device Product Liability Litigation Strategy (affiliate links). You can reach him by email at inhouse@abovethelaw.com.
