How are settlements perceived?

At times, settlement agreements are entered into evidence in jury trials and/or decision-makers become aware of prior settlement agreements. Are settling defendants perceived as responsible for alleged conduct or is settlement perceived more neutrally as a convenient (less costly, less time-consuming) resolution? Do settlements send different signals than those conveyed by allegations, complaints, verdicts or other case resolutions?

Research

Bregant and colleagues (2021) conducted two studies exploring how the lay public views settlement in terms of both the parties’ reasons for settling and the defendant’s inferred responsibility for the alleged conduct.

In the first study, 265 research participants reported in their own words their inferences about the parties’ reasons for settling a legal dispute. Participants were provided one of five realistic examples of settlement, in the form of a mock news article, and then asked to provide likely reasons that each party to the case might have had for settling. Each news article described a settlement that was reached in a particular legal context, and included a: (1) civil case filed by a former employee against a television station alleging workplace sexual harassment, (2) civil case brought against a police officer and the city alleging excessive force, false arrest, malicious prosecution and the intentional infliction of emotional distress, (3) criminal case brought against an individual for computer crimes related to an alleged tech support fraud scheme, (4) civil wrongful death case brought against the driver of a car that killed and hit a pedestrian, and (5) SEC enforcement action brought against an accountant for alleged insider trading. Participants both described in their own words why each party agreed to settle the case and then reported their agreement or disagreement with six possible reasons that the defendant might have settled the case (e.g., avoid harsher consequences, pressured into agreeing, told to settle by lawyer, way to move on from situation, less costly than contesting, afraid would lose at trial).

The second study was an experiment that involved 592 participants to compare their perceptions of settlement to perceptions of a case being filed (but not litigated) and to a jury verdict. Participants were randomly assigned to read one of several versions of a mock news article about a civil wrongful death case brought in which a pedestrian was injured by a truck driver. The news articles varied in how the case posture was described: as settled, as filed, as a jury having reached a verdict for the plaintiff, or as a jury having reached a verdict for the defendant. Half of the participants in each case posture were told that the defendant was the individual truck driver while the half were told that the defendant was the trucking company that employed the driver. Half of the participants reading about a settlement read only about the settlement while the other half additionally read that the defendant denied responsibility for the accident. All participants then reported their view of the defendant’s responsibility for the accident and their impressions of the plaintiff and defendant. Participants reading about a settlement additionally evaluated the likelihood of ten reasons that the defendant settled.

Findings

Across the case types and across both studies, participants commonly and regularly attributed responsibility to the settling defendant for the alleged conduct.

The reasons participants attributed to settling defendants are varied. The most common reasons participants ascribed to the defendant were: (a) the defendant was responsible for the underlying conduct or harm (29%), (b) the defendant was worried about the evidence and the risk of losing at trial (27%), (c) the defendant wanted to minimize the harshness of any consequences (27%), (d) the defendant wanted to minimize negative publicity or harm to reputation (27%), and (e) not settling would have resulted in lengthy, expensive, and more difficult litigation (14%).

The most common reasons that participants attributed to settling plaintiffs were: (a) the plaintiff obtained a satisfactory outcome through the settlement (32%), (b) settling avoided lengthy, expensive and more difficult litigation (31%), (c) the plaintiff wanted to end the case and move on (20%) and (d) the plaintiff was worried about the risk of losing (19%).

Fewer than 4% of participants spontaneously suggested that either party settled on the advice of a lawyer or because such settlements are a routine part of doing business.

The reasons for settlement differed based on whether a party was an individual or an entity. In Study 1, publicity frequently was offered as a reason for settling defendants in the sexual harassment and excessive force cases, both of which involve entity defendants, while a want to close cases frequently was offered as a reason for settling plaintiffs in the criminal and SEC cases, both of which involve governmental entity plaintiffs. In Study 2, as compared to an individual defendant, participants reported that a company was significantly more likely to have settled the case to avoid the publicity of a trial, an insurance policy would cover the costs, or the company knew it was responsible for the plaintiff’s injuries. Interestingly, plaintiffs who sued a company were seen as less greedy than plaintiffs who sued an individual defendant.

When settling, defendant denials of responsibility did not erase the initial impression made by the plaintiff’s allegations. Participants inferred that a defendant denied responsibility even when that was not made explicit in the news article. The most common error made by participants, by a large margin, was for participants to respond that the case had been settled and that the defendant had denied responsibility when, in fact, the news article had said only that there had been a settlement.

Participants assigned responsibility to the defendant to a similar extent whether they heard about untried allegations, settlement, or a plaintiff’s verdict. Only a verdict for the defendant resulted in comparatively less responsibility attributed to the defendant. These results did not differ by whether a defendant was an individual or a company.

Conclusion

Members of the lay public presume, whether made explicit or not, that settlements are accompanied by denials of responsibility from the settling defendant.

Settlements are viewed as a victory for the plaintiff. Members of the lay public presume that a settling defendant is at fault, even as they acknowledge ways in which settlement might be made for reasons of efficiency and cost.

Members of the lay public are inclined to credit a plaintiff’s allegations, even when the case consists only of an allegation. The lay public views allegations, settlements and verdicts for the plaintiff as fundamentally equal signs of a defendant’s responsibility.

To the extent defendants might be induced to settle so that they can avoid the condemnation associated with a judgment of liability, the damage is already done as early as the moment of the plaintiff’s complaint.