Edward T. Kang of Kang Haggerty Fetbroyt.

With fewer and fewer cases going to trial, lawyers must be competent in settling claims and preparing settlement documents that accurately capture the terms of the settlement. While settlements often bring a sigh of relief from lawyers and their clients, getting from the point of settlement to execution and payment—this article is written from mostly the plaintiff's perspective—can take months, and sometimes requires court-intervention. This usually happens, as stated in more detail below, when one side wants to renegotiate the material terms of a settlement agreement; and the main reason for seeking to renegotiate is often the other side was not adequately prepared going into and during settlement negotiations. This is particularly true in complicated cases involving multiple parties and claims.

Most litigators, if not all, have negotiated settlements and prepared many settlement documents. And there are many articles written about the “dos and don'ts” of negotiating a settlement or preparing a settlement document. This article focuses on a few additional points for practitioners to consider when negotiating a settlement or preparing a settlement document.

Know the Substantive Law

While this sounds simple and obvious, many settlements are broken because a party did not fully understand the substantive law regarding claims or defenses during settlement negotiations. The terms of a settlement agreement often depend upon substantive legal issues requiring lawyers to understand not only what should be in a settlement agreement, but also how those provisions are affected by the substantive law in the claims being settled, including whether they are legal and enforceable. If you practice in complex business litigation, as I do, virtually any area of the substantive law can be implicated in a business dispute.

I was reminded of the complexities surrounding settlement agreements recently where opposing counsel tried to break the parties' settlement in a civil RICO case after the parties settled with no uncertain terms at a settlement conference with the assistance of a magistrate judge. The RICO action involved multiple defendants and multiple defense counsel. With the assistance from the judge, the plaintiff and a group of defendants settled their disputes. After the settlement, however, defense counsel argued that plaintiff should indemnify the settling defendants if any non-settling defendant brings a cross claim against the settling defendants—a material provision never negotiated nor permitted under RICO. In this case, defense counsel was on a fool's errand as she was advocating for an unenforceable provision—a provision that would be of no value to her clients.