The Percentages Favor Settlement of Claims and Appeals

Cohen Seglias Pallas Greenhall & Furman PC
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As a follow-up to my earlier post about the need to develop a settlement strategy when a claim is headed for litigation, I reviewed the various decisions of the Armed Services Board of Contract Appeals (ASBCA) for the first five months of 2022. The Board entered 107 decisions, and 54 of those decisions were orders dismissing the appeals because the parties had reached a settlement. Some of those settlements resulted from Alternative Dispute Resolution (ADR), which the Board enthusiastically promotes, or simply reflected settlements achieved by the parties through negotiation. Interestingly, only two opinions sustained an appeal by a contractor, while most of the other appeals were denied on the merits or due to various pre-trial motions. These motions included Motions for Summary Judgment, Motions to Dismiss for lack of jurisdiction, or the failure to comply with the applicable Statute of Limitations.

I am not suggesting that this abbreviated sample size is a statistically accurate record of what has occurred before the Board over a period of years, but it does illustrate that a contractor has a much better chance of receiving a favorable outcome through a negotiated settlement than by taking a case to trial. Admittedly, many of the settled cases would have resulted in favorable outcomes at trial, a fact that the Government obviously recognized, but at a significant cost in both time and money. My point is that so far, in 2022, less than 2% of the cases have been won by a contractor who took a case to trial, but 50% of the appeals pending before the Board have been settled. This certainly demonstrates the wisdom of developing a settlement strategy, as explained in my previous post.

Most experienced trial attorneys know how to prepare a case for trial, but preparing a case for settlement is not as straightforward. It involves a realistic litigation risk assessment that provides the client with an explanation of the strengths and weaknesses of the case. Some attorneys are reluctant to provide an honest assessment to their clients for fear that the client will conclude that the attorney is not on their side or unwilling to fight. Contractors who look at things that way, in my opinion, are short-sighted. It is important to take emotion out of the equation and make an informed business decision. Most contractors, in my experience, will appreciate an attorney’s honest assessment rather than simply being told what they want to hear. It is important, however, to provide this assessment early in the litigation process and well before a lot of time and money is spent on discovery (although some discovery may be necessary to reach a well-reasoned assessment).

None of this matters, of course, if there is not a convincing argument to be made. Cases are usually not black and white, and developing a winning argument is what effective lawyering is all about. Once the client is on board with the settlement approach, the next step is to convince the Government attorney and the Contracting Officer that negotiation is in the Government’s best interest. Ideally, the Government will agree to participate in an ADR where an experienced Board judge can structure the negotiation. Over 90% of the ADRs before the Board have resulted in settlements. Many cases are also resolved through less formal discussions among the parties and their counsel. It is important to avoid antagonism and aggressive behavior and to approach the Government in a spirit of compromise. It is a good idea to concede those points where the Government has the better argument while, at the same time, being prepared to persuasively argue those points that will cause the Government to reconsider the strength of its position. Once the Government realizes that it could lose at trial and that a compromise is likely to be a better deal for the Government, the case will settle. That should always be the goal.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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