Settlement (litigation)

A settlement in litigation is a resolution between disputing parties about a legal case, reached either before or after court action begins. It is a contract between the parties and a common result when parties sue each other in civil proceedings, allowing plaintiffs and defendants to end the dispute without a trial. The contract is based on a bargain where a party forgoes its ability to sue or continue a claim in return for certainty written into the settlement. Courts will enforce the settlement; if breached, the defaulting party may be sued for breach of contract, and in some jurisdictions, the original action may be restored.

The settlement defines the parties’ legal requirements and is often put into effect by a court order following a joint stipulation, or the parties may simply file a notice of dismissal if claims are satisfied. Most cases are decided by settlement, as both sides have strong incentives to avoid the costs, time, and stress of a trial, particularly where a jury is available. A settlement offer is often made early in litigation, and parties may hold a settlement conference, sometimes required by the court. In controversial cases, settlements may include confidentiality clauses or a disclaimer that the defendant admits no fault.

A "drop hands" settlement occurs when both parties bear their own costs and walk away. A "global settlement" addresses both civil claims and criminal charges across multiple jurisdictions, as seen in the Tobacco Master Settlement Agreement and the Global Analyst Research Settlements. Settlement agreements typically identify parties and counsel, describe the dispute, define released claims, specify obligations and consideration, disclaim liability, and address disposition of litigation, contingencies, and collateral items like fees. In the United States, fewer than 2% of cases go to trial, with about 90% of torts and 50% of other civil cases settling.

United States

Settlements are usually private contracts, not court orders, except for consent decrees. Confidentiality is common but not possible in class actions, which require court approval. Confidentiality is controversial, as it can conceal damaging actions; some states like Florida have passed laws limiting it for public hazards, while similar federal legislation has been proposed but not passed. Agreements that keep secrets from regulators are likely unenforceable.