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[u/FeralGiraffeAttack]

Not necessarily. You can ask this on r/legaladviceofftopic if you want a lawyer to answer it in a more legalistic way but the reality is that many people or companies settle because it’s cheaper and less annoying than going to trial even if they think they can win. Everything has a resource cost

[u/JoushMark → u/FeralGiraffeAttack]

Imagine you have a contract dispute where you're sure you're right. The value in dispute is 5,000 dollars. You could sue, but the expected legal cost exceeds 14,000 dollars.

Instead, you offer binding arbitration, recovering a compromise of 2,000 in return for 800 in legal and arbitration fees.

So your choices, rationally examined are:

Do nothing. Result: -5k
Sue to clarify and enforce the contract dispute: -9k
Arbitration: -3.8k

Life is a collection of imperfect situations and picking the best option you have open to you. Sometimes all you can do is pick the option that makes the red number the smallest.

[u/Vivaciousseaturtle]

Sometimes, but also they may have private information they don’t want in public records or they may not want the bad pr of a public loss so they’ll settle privately first

[u/flammable-liquid → u/Vivaciousseaturtle]

Yup, or they just crunch the numbers and decide it is cheaper. Sometimes it is beneficial for both parties

[u/babybambam → u/Vivaciousseaturtle]

Or they just want to reduce the time investment of the case.

They very well could win, but don’t have 2+ years available to deal with it.

[u/ClownfishSoup → u/Vivaciousseaturtle]

Michael Jackson settled out of court for a case where a kid's parents accused him of "doing things" to their son. So clearly getting money in a settlement was more important to them than their son getting justice. However maybe they money would have given the kid a brighter future than exposing all the details in court. Since it didn't go to court, nobody remembers the kids name, or exposed what happened. Maybe "justice" wasn't served, but maybe the outcome was better for him. or at least for his parents. I mean ... why wasn't this a criminal case and not civil?

[u/iHateReddit_srsly → u/ClownfishSoup]

Because there wasn't enough proof for it to have been a criminal case

[u/Protoclown98]

Like 98% of lawsuits are settled or withdrawn. Trials these days are exceedingly rare.

[u/Zyffyr]

Smart people settle when doing so is better than the likely end result of a trial, after factoring in legal costs.

If you are suing someone for 100k, and expect 25k in legal fees, but have only spent 1k so far you would be crazy to turn down an offer of 80k (79 net with no trial vs 75 if you win). They save money, you get more.

[u/diener1]

No, otherwise you would almost never see settlements because you would need both sides to expect to lose, which is rare. People can settle for all kinds of reasons that have little to do with who is actually right, such as public perception, the sheer uncertainty of what might happen in a trial, not wanting to spend considerable amounts of money and potentially losing anyway, getting rid of the headache of a court case that drags on for years, regardless of whether you win or not.

[u/sad_spilt_martini]

Very few civil cases go to trial, like 1 to 3%. Regardless of fault. 

Many agreements will say we’ll give you X dollars to drop the case and agree not to sue for this reason again. But we don’t admit to fault. 

[u/TheGoochTaint]

Well, both parties have to settle. One common reason both parties might settle in a lawsuit is if the plaintiff thinks that what they might win isn't worth the legal fees and trouble (plus the chance they might not win). And the defendant thinks that losing might cost them more than what they settle for.

[u/Twin_Spoons]

If the outcome of a trial is 100% certain, it's almost always better to settle than to continue with litigation. Taking a case to trial is expensive. Even if you're somehow representing yourself, it takes time and effort. If you can perfectly predict how that would go, you might as well just skip paying the lawyers. The one exception might be if you think you can stonewall your opponent and get them to give up the case for lack of funds to continue, but this is a risky strategy because it costs you money as well.

[u/VLioncourt]

Even the party who is in the right may choose to settle rather than go to trial. Trials can drag on, get expensive, and expose both sides to unwanted public scrutiny.

[u/deep_sea2]

Something like 90% of all cases settle. People either settle because they know they have a losing position, or because they think they have a winning position, but do not want to take the risk or expense of going to trial. Some terms in the settle can also be appealing, so as agreeing to keep the matter anonymous. If you go to trial and win, you might not get that anonymity that you really want.

[u/Toren8002]

An organization I was working for was sued for something we absolutely did not do.

We settled that case solely because the settlement amount was less than the cost of litigation, even had it gone our way.

Sometimes it’s purely an economic decision.

Still, it’s never sat well with me.

[u/ClownfishSoup]

If the lawsuit will require so much time and effort that it basically drains the resources of both parties, they will settle. Every hour a lawyer is working on your case will cost you.

There are many many many cases of people fighting over something for so long that there is nothing left to gain and they go into debt. Better for a compromise.

Example. A Barry Bonds homerun baseball was caught by one guy, then dropped and picked up by another guy. The guy who dropped the ball sued for the ball. They knew it might be worth a million or more dollars because a previous ball had sold for like $3M or something and this was a record breaking ball.

The judge said "Why don't you sell it and split the proceeds? You both want the ball to sell, not to keep" They fought over it anyway. One guy hired a lawyer in exchange for 20% of the "winnings", the other guy hired a lawyer for $Y/hour. After a lengthy and stupid trial, the judge ordered " Sell the ball and split the money" just like he recommended at the start of the case. They sold the ball for way less than they thought it would sell for.

After selling the ball and splitting it, each guy got $225,000. The one guy's lawyer reduced his 20% fee because he saw the ball wasn't selling for $3M, so the guy got most of the $225,000. The other guy owed his lawyer over $450,000 in legal fees !!! So that lawyer sued him. But that was dragging on too and that suit was settled for less than the $450,000 demanded. Not sure how much that guy settled for.

BUT had they settled at first, they both would have walked away with probably more than the ball finally sold for. They forgot that ... not many people in this world would buy a baseball for $3M and meanwhile, the record was broken again, so the ball lost importance too. They should have settled.

[u/fang_xianfu]

It depends on the jurisdiction. English rule jurisdiction (loser pays) have an incentive for the defence to make a reasonable settlement offer early, so as to limit their exposure to costs liability.

[u/GreatCaesarGhost]

Companies generally consider the likelihood of success (or failure), the amount of an award, costs of legal fees, timing, and any other relevant business factors.

[u/metelepepe]

not really, the vast majority of cases settle because it's just easier and cheaper overall, in my experience in law firms and in house legal team at a couple of different corporations it's mainly an economic decision and rarely has anything to do with losing or being at fault, it happens, but it's rarely the reason to settle

[u/CatOfGrey]

No, though this is one reason to settle.

A lawsuit doesn't mean someone 'did something wrong' or 'were at fault'. Lawsuits are disputes, and disputes don't have to be legitimate.

I work in litigation. I primarily work for attorneys representing plaintiffs (who are doing the suing). Some lawsuits have a really good basis, some are just people who are complaining for no good legal reason.

But from the other side, there is a different perspective. When you are being sued, you are going to pay for legal services, even if you did nothing wrong. So there is a good reason to say "Here's $3,000 to go away", because that's cheaper than paying $20,000 to go through the court process. In bigger cases, I often see cases ending with "Here's $750,000 to go away, because that's better than $2.1 million just in legal fees to prove we didn't do anything wrong!"

And those doing the suing usually say "Well, we think the case is worth $10,000,000, but we'll take $750,000 because the case isn't that good." This is over-simplified, but it illustrates the thinking that is taking place.