(The following has been excerpted from Mr. Crowder’s book, LAWSUIT SURVIVAL 101, available for purchase here: https://www.crowderlaw.com/product/lawsuit-survival-101/ ).
The line between settling and defending the lawsuit is thinly drawn. Most lawsuits are settled before trial, and the percent of lawsuits that are actually tried is very small – about 5% or less.
However, most settlements involve some degree of defending the lawsuits – and the better the lawsuit is defended, the better the settlement that the defendant is likely to obtain.
The essence of settling a lawsuit is this:
The plaintiff starts out asking for a certain amount, probably the highest amount that the plaintiff thinks it could get in the best case scenario. The defendant counters by saying that the defendant should pay a very small amount, or even nothing. In some cases, the defendant contends that the plaintiff is totally at fault and should be paying something to the defendant.
Then, through conversations back and forth, each party moves its position closer to the other party’s position. The plaintiff reduces its demand, and the defendant increases its offer.
Note: the term “demand,” is usually used to refer to what the plaintiff wants to receive. The term “offer,” means what the defendant has offered to pay.
At some point, the amount that the plaintiff is willing to accept will be the same amount that the defendant is willing to pay. At that point, the lawsuit is tentatively settled. The settlement will be final when it has been reduced to a written agreement, and in some cases, has also been approved by the court.
The following is a step-by-step procedure for settling a lawsuit.
STEP ONE: ESTABLISH PRELIMINARY COMMUNICATION.
The first communication with the plaintiff should accomplish three things:
a) Get acquainted with whoever you will be dealing with on the other side.
b) Get a first settlement demand from the plaintiff, and
c) Request an extension of time in which to answer.
This begins by calling the plaintiff’s attorney. If you are dealing with a firm that does a lot of collection work, the odds of speaking to an attorney are slim. Collection law firms usually have quite a number of bill collectors being supervised by a few attorneys. If you are fortunate, however, you may get connected with someone who may be willing and able to help you reach a reasonable settlement.
Next, find out what the plaintiff will settle for. My preference, when negotiating with a creditor (“creditor” is used as a general term meaning a bill collector, collection attorney, or whoever is talking on behalf of the plaintiff) is to get the creditor to make the first settlement proposal. In other words, get them to give a discount before you propose a payment. Not all creditors will do this. Some will tell you to make the first proposal (which is a better negotiating technique on their part.) But a surprising number will offer you a discount before you offer them anything.
It is also my preference, when negotiating, not to make a counter-proposal during the same conversation.
Finally, request an extension of time in which to respond to the lawsuit. Why? So that you will have more time in which to decide whether you want to fight the lawsuit or not. If you decide not to fight it, you will have more time to come up with funds for a settlement.
STEP TWO: CALL BACK WITH A COUNTER-PROPOSAL
As indicated above, it is my preference to get the plaintiff to make the first settlement offer (or technically “demand.” “Offer” implies tendering money; “demand” implies requesting money. However, the term “offer” is often used for both.)
It is also my preference not to make a counter-proposal during the same conversation, but to call back after waiting a day or two. Why the delay? You don’t want to seem too anxious to settle. Besides, in most lawsuits, it is the plaintiff who wants to speed things along and get the judgment as quickly as possible. The defendant is in no hurry to have the case go to trial or for the plaintiff to get a judgment. The defendant should be happy to have the case delayed indefinitely. Also, when dealing with creditors, the longer a creditor has to wait to get his money, the bigger the discount he is willing to accept.
STEP THREE: CONTINUE NEGOTIATIONS UNTIL YOU REACH EITHER A SETTLEMENT OR AN IMPASSE.
The basic procedure for settlement is to just continue to go back and forth with demands and offers until one of two things happens:
One. You and the plaintiff reach an agreeable figure and payment plan, or
Two. You reach an impasse – that is, when you just won’t be able to get the plaintiff to accept what you’re willing to pay.
If you don’t reach a settlement, you will be able to tell, at some point in the negotiations, that you won’t be able to get the plaintiff to come down what you’re willing to pay.
The impasse may happen immediately, or may not occur until after several phone calls. When the impasse is reached, then you look at the other three major available options, which are: (a) ignore the lawsuit (b) file a bankruptcy or (c) fight the lawsuit. If you choose to FIGHT the lawsuit, there will probably be more chances for negotiation before you get to trial. (The foregoing has been excerpted from Mr. Crowder’s book, LAWSUIT SURVIVAL 101, available for purchase here: https://www.crowderlaw.com/product/lawsuit-survival-101/ ).