Settlement and Alternative Dispute Resolution (ADR)

• Author: Scott Brister (Ret.)/Dan S. Boyd
• Pages: 1231-1272

38-1

Chapter 38

SETTLEMENT AND ALTERNATIVE

DISPUTE RESOLUTION (“ADR”)

QUICK VIEW

Scope of chapter:

Settlement: How to evaluate a case for settlement; how to negotiate towards settlement (both from a plaintiff’s

perspective and from an insurer’s perspective); offers of judgment; the role of courts in settlements; the mechan-

ics of settlements; and the enforceability of settlements.

Alternative Dispute Resolution: Mediation and arbitration, including both court initiated (non-voluntary) arbitra-

tion and contractual arbitration.

Strategies and overview:

Settlement: The settlement process is integral to the practice of law since most cases by far are settled. Prepare

for settlement with care, and maintain an awareness of what will be convincing to the other side.

Alternative Dispute Resolution: Mediation and arbitration provide increasingly popular alternatives to the choice

of trial or settlement through negotiations by the parties. Parties in contractual relationships may include provi-

sions for mediation or arbitration of disputes in their contracts, but even without a prior contractual requirement,

parties may choose mediation or arbitration at any time.

Statutes and rules:

Settlement: CPRC ch 32, ch 33, ch 151, ch 155; TRCP 11, 192.3(g); TRE 408.

Alternative Dispute Resolution: CPRC ch 152, ch 154, ch 171.

Related topics: Taking the Case, Ch 1; Presuit Activities, Ch 2; Parties, Ch 6; Defaults and Dismissals, Ch 37.

TABLE OF CONTENTS

I. Settlement

A. Case Evaluation

1. WHY TRY TO SETTLE?

§38:01 Most Cases Settle

§38:02 Benefits Not Achievable by Litigation

§38:03 Financial Considerations for Client

§38:04 Financial Considerations for Attorney

2. WHEN SHOULD YOU SETTLE?

§38:10 Key Times

§38:11 Know the Case

§38:12 When Not to Settle

(Rev. 10, 4/13)

TEXAS PRETRIAL PRACTICE 38-2

3. TAX CONSEQUENCES

§38:18 PI and WC Settlements Not Generally Taxable

§38:19 Worker’s Compensation

§38:20 Discrimination Actions

§38:21 Interest Payments

§38:22 Punitive Damages

4. IMPACT ON GOVERNMENT BENEFITS

§38:28 Settlements Remove Medicaid and SSI Eligibility

§38:29 Preserving Medicaid Benefits

5. ETHICAL RESPONSIBILITIES

§38:34 Settlement Authority

§38:35 Duty to Keep Client Informed

§38:36 Duty to Provide Advice

§38:37 Safekeeping of Client’s Property

§38:38 Confidentiality Clauses

B. Negotiation

1. GENERAL POINTS

§38:44 Method and Style

§38:45 Keep Authority Clear

§38:46 Communicate All Offers

§38:47 Offers of Settlement Not Admissible

2. PLAINTIFF’S PERSPECTIVE

a. Settlement Letters or Brochures

§38:52 General Points

§38:53 Liability Statement

§38:54 Documentation of Liability

§38:55 Documentation of Damages

§38:56 Demand Statement

§38:57 Set a Time Limit

b. Negotiations With Insurers

§38:62 Know the Motivating Factors

§38:63 Reserves

§38:64 High-Balling and Low-Balling

§38:65 Learn the Policy Limits

§38:66 Stowers Considerations for Plaintiffs

3. INSURER’S PERSPECTIVE

§38:72 Attorney’s Duties

§38:73 Duty of Good Faith and Fair Dealing

§38:74 Stowers Considerations for Defendants

C. The Court’s Role

1. GENERAL POINTS

§38:80 Pretrial Conferences

§38:81 Reporting Settlement

2. SETTLEMENTS REQUIRING COURT APPROVAL

§38:86 Minors Without Legal Guardians

§38:87 Class Actions

38-3 SETTLEMENT AND ADR

§38:88 Installment Payments in Motor Vehicle Cases

§38:89 Incapacitated Persons

§38:90 Agreements Affecting Child Custody

§38.91 Agreements Incident to Divorce or Annulment

D. Mechanics and Effects of Settlements

1. REQUIREMENTS

§38:94 Capacity and Authority

§38:95 Intent

§38:96 Consideration

§38:97 Writing

2. TYPES OF SETTLEMENTS

a. General Types

§38:102 Cash (Lump Sum)

§38:103 Structured Settlements

§38:104 High-Low Agreements

§38:105 “Mary Carter” Agreements Void

§38:106 Other Collusive Settlement Agreements Also Illegal

b. Structured Settlements

§38:112 Advantages and Disadvantages

§38:113 Valuation

§38:114 Attorney Fees

§38:115 Tax Liability

§38:116 Appropriate Cases

3. SETTLEMENT DOCUMENTS

§38:122 Preparation of Documents

§38:123 The Settlement Agreement

§38:124 Counterclaims

§38:125 Notice to the Court

§38:126 Releases

§38:127 Liens

4. MULTIPARTY TORT ACTIONS

a. General Points

§38:132 Joint Tortfeasors Not Discharged

§38:133 Dual Contribution Schemes

b. Intentional Torts

§38:138 Coverage of Chapter 32 Contribution

§38:139 Recovery After Settlement

c. Most Tort Actions

§38:144 Coverage of Chapter 33 Contribution

§38:145 Recovery After Settlement

d. Subsequent Trial

§38:150 Evidence of Settlement or Settlement Offers

§38:151 The Empty Chair

5. OFFERS TO SETTLE AND THEIR EFFECT ON AWARDS OF LITIGATION COSTS

§38:152 Tactical Settlement Offers

§38:153 The 80% and 120% Rules

(Rev. 10, 4/13)