At every stage of litigation, a client should be aware of the possibility of settling a case rather than resorting to a trial. A trial can be stressful, costly and full of uncertainty. A trial requires attention and work from a client, as well as witness preparation. While a trial places the outcome of a case in the hands of the judge (in the case of a bench trial) or in the hands of a jury (in the case of a jury trial), a client has great input on a settlement and can sculpt the outcome in a creative way. Even though a settlement provides relief, great care must be used when drafting a settlement to address all outstanding issues and contingent events.
Pitfalls To Be Avoided
New Jersey case law notes that settlement agreements are contracts, and there must be a meeting of the minds on essential terms. See Nolan v. Lee Ho, 120 N.J. 465 (1996); Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div. 1983), certify. denied. If a settlement is too general or ambiguous, a client’s expectations may not be met. For instance, if a settlement agreement specifies that a party shall provide insurance coverage, but there is no mention of proof of insurance or what type of coverage is contemplated, the agreement may yield an undesired result. Even if a settlement agreement is specific, it may be a disappointing failure if a full understanding of the specific terms is not achieved. For instance, if a tax appeal is settled and the refund is contingent on a municipal refunding bond, the timing of a client’s receipt of the refund may not suit the client’s anticipated timeline. A settlement agreement may fail if a client does not know the ultimate intent of the adversary. For instance, if there is an agreement to settle a lawsuit with periodic payments due from the adversary every month, but the adversary has entered the agreement in bad faith and has no intention of paying. Rather, it is the adversary’s intent to buy time to file for bankruptcy. Lastly, it is possible that a settlement may be vacated even if it has been executed and filed with the Court, if there are “changed circumstances” or relief from judgment under New Jersey Court Rule 4:50-1 is warranted.
Thus, when entering a settlement, one should not only consider specific terms, but also practical ones. It is important to consider what outcome would not work and to use this worst-case scenario to sculpt the settlement in your favor. Settlement agreements are bargaining tools, but clients should be careful not to bargain for something they do not ultimately want. The Litigation Department at WJ&L takes pride in helping clients structure and understand settlement agreements or, when necessary, taking cases to trial. Remember, although this may sound pessimistic, it is a suitable guide in the settlement process: do not become the victim of the maxim “no good deed goes unpunished.”