Kellie Howard-Goudy, Attorney with Collins Einhorn Farrell, joins the podcast to talk about strategies for settlement negotiations. Since over 95% of cases settle, honing the skills and process to manage settlement negotiations is a critical skill for litigators. Kellie shares her strategy for settlement negotiations with Dr. Steve Wood including developing a risk/benefit analysis. Communication with the client is also key to the settlement strategy as it is important to consistently remind your client about the definition of a win. Kellie also talks about how critical it is to know the strengths and weaknesses of your case and the opposing counsel’s case, as well as knowing what your case is worth, in advance of entering into settlement negotiations. Lastly, Kellie and Steve discuss the impact of Covid on settlement negotiations and the expected volume of settlements, the importance of doing jury research and working up a case as if it will go to trial and not assuming your case is going to resolve.
Full Episode Transcript
[00:05] Steve Welcome to another edition of the Litigation Psychology Podcast, brought to you by Courtroom Sciences Inc. I am Dr. Steve Wood, and today with me is Kellie Howard-Goudy. She is from Collins Einhorn and Farrell. Kellie’s here to talk to me about cases. As we know, few cases actually go to trial nowadays. A lot of them will end up either settling on the eve of trial or settling earlier on in the case. So we’ve talked a lot about the psychology of trial prep and taking cases to trial, but today I wanted to spend a little bit of time on talking about settlement negotiations. So like I said, Kellie’s here with me to talk about that. Kellie, how are you?
[00:44] Kellie I’m good, how are you doing?
[00:45] Steve I’m excellent, thank you. Could you give the listeners a little bit of background about your area of expertise as it relates to the law?
[00:51] Kellie Sure. So I have been practicing for 16 years. I am a litigator and specializing in civil litigation, uh, defense claims. So we handle, uh, large loss claims on behalf of business entities and other sorts of, um, insured and self-insured. Um, it—like—like you said earlier, probably there’s been a lot of different numbers quoted, but somewhere north of 95% of all cases resolve by way of settlement. So if you are in litigation, if you are handling claims, um, anywhere in this area, you have to be familiar with settlement, uh, settlement negotiations. And it’s something that you see literally every single day of the week, something that you have to consider from the minute a case lands on your desk to the second the case is closed. You have to be thinking about, um, you know, what are ways to resolve this case.
[01:51] Steve I think that’s a great segue. So for some of our listeners, I know that there are a lot of experienced litigators who listen to this podcast or watch this podcast, but I also know that there’s some people who are less versed in areas of the law. So could you start at the top and talk to us about, you know, who’s involved in a settlement negotiation? Which—how is—how’s the process play out?
[02:14] Kellie Okay, so we—settlement is basically a way to resolve a case short of, you know, getting a finding by a fact finder, which would be a judge or a jury, you know, given whatever the circumstances of your case were. And so a settlement negotiation or a settlement is something that’s meant to head off that process. And the primary reason why people undertake settlement and settlement negotiations is generally for cost considerations. Um, even in cases where you might have a viable defense or the plaintiff might have a really, really good claim, everyone has to think about sort of a risk-benefit analysis. What am I putting into this case versus the likelihood that I will gain some financial benefit at the end of the day? Um, some of the most difficult cases to resolve are those in which clients come to you and say, “It’s the principle of the thing.” I think all lawyers quake in terror when our clients say, “It’s the principle of the thing,” because all of us have found that principles are extremely expensive.
Um, so that—that’s kind of how settlement starts out. It’s—it’s really a risk-benefit analysis that’s engaged in by all parties to a matter. So there may be a plaintiff, a defendant, um, you know, if there’s—if—if there’s a case involving insurance, then you may have a claims representative who’s involved as well as their insured, who may be your client, um, and a plaintiff who has a claim and their attorney is involved. All those folks are involved in a—in a settlement negotiation. And everyone has to decide at—at the very beginning, you know, what—what are the risk, what are the benefits, what—what do I want to get out of this case right from the outset? So that’s kind of the anatomy of a settlement, um, sort of at the outset who’s involved and—and—and how about it.
[04:03] Steve Yeah, and you know, we had talked before about the principal and some—some clients don’t want to settle. Who usually initiates the settlement negotiation? Is it usually the plaintiff, the defense? I think I know the answer to this, but I’m curious to—to hear who usually initiates the settlement negotiation talks.
[04:21] Kellie I would be curious to hear who you think it is. So I have not found—I can’t say that there’s a rule about who initiates it. I—I think I would say most often the plaintiff will ask if there’s any interest in resolving the case. But who initiates it may not necessarily be who’s interested in it, or who’s interested in it from the beginning. For strategic reasons, you may not hear defendants saying that early on and, you know, by the same token, some plaintiffs may not say it early on. But that doesn’t mean that it’s not something that defense attorneys and our clients aren’t thinking about right from the outset of the case. Um, most defendants, especially that, you know, when you represent large entities who are running business organizations anyway, um, are interested in their bottom line from the very beginning. You know, they—they generally have an overarching sort of, um, doctrine about the way that they deal with litigation. And, you know, that you should—if you’re their lawyer, you know that going into a case. How does my client feel in general about resolving cases? Do they want to do it early on? Do they want to engage in a lot of discovery up front? I mean, that’s something that the lawyer should know, um, so that when and if the plaintiff does approach you about settlement, you have a reasoned position based on your client’s business goals and needs. I mean, that’s something that should always be at the forefront of your mind. What—what’s going to fit their—their business needs and what’s going to fit the particular, uh, facts of this case?
[06:01] Steve Yeah, and it’s—it’s funny that you said—said the plaintiff. That was kind of what my initial thought was, was that it was the plaintiff that was doing it be—although I will tease a little bit later, I think we’re going to talk a little bit about this topic. But you know, my thought was that plaintiff attorneys tend to want to get in and get out, right? Get a case, work it up just a little bit, and then try to go into settlement negotiations and get their money and get the heck out, versus having them to really draw the thing out and spend a lot of money to actually work up a case. Versus the defense, who is willing to spend the time and the money to work up a case and get it prepared to go forward. But obviously, both sides at some point are considering settlement negotiations. But, you’ve talked before about all the different areas that you’ve—you’ve done work in. Have you found any sort of area that or type of case that is a little bit more difficult to settle than—than others?
[06:53] Kellie Yeah. So the—the type of case that you probably will see resolutions that come up very early on in a case are cases where there are not disputes about liability. So here’s a perfect example, like, kind of a low-level example: a dog bite case in the state of Michigan. Dog bite is what’s called strict liability. Is it a dog? Did it bite somebody? Then someone has to pay for that, um, unless, you know, there was trespassing or there was an issue of provocation of the animal. Then someone’s paying for that. So when you come into that kind of a case very early on, you already—already know it’s just a matter of what are the damages.
Now, that can get sticky you know, sometimes it’s like, okay, you have a—a paperclip-size cut, so that’s $1,000, or whatever little amount of money that we want to give you, and you say it’s worth a $100,000. And then, you know, that’s going to be—cause issues. But those are the kind of cases that you want to resolve because you’re not disputing liability. And if—if you get in front of a fact finder, you know, the issue that you did whatever is said you—that’s—that’s going to be established fact. So that’s not something you want to talk about.
Um, the most difficult kinds of cases to settle, conversely, are those that do involve liability disputes where, I, you know, the client does not think that they are liable for whatever it is that you’re saying they’re liable for. Because if—if we’re talking about psychology, then the psychological—even for a business entity—you may not think that businesses have psychology, but they do. And the psychology of anyone involved in the lawsuit who does not think that they are liable for whatever it is you’re saying that they did can be very intransigent. They—they, you know, they view—they can stop viewing a settlement in terms of those—those business cost and benefit analysis and start to see it more as an admission of liability. Even though in our settlement, um, papers or, you know, settlement agreements, we say right up front: “This is not an admission of liability.” You know, psychologically you feel like paying a bunch of money, it’s like I’m saying that I did something wrong. So that can be very, very difficult when there are issues of liability. Th—those—those folks can dig in. You know, they—they want to be vindicated and they don’t want you to get a penny out of the case. And not—not that I necessarily blame them.
And the same thing is true on the other side, on the plaintiff side. You know, when plaintiffs feel like you have definitely wronged them in some way, you know, whatever it is, then they may not want—they may not want to take a settlement. They may want, um, to have their rights vindicated in front of a fact finder. They want a third party to come in and say, you know, “You were wrong, this did happen.” Even if the amount of money is lower, there’s still some sort of psychological vindication from having someone outside of the case say that this is what happened. So those cases can become very sticky to negotiate by the attorneys who are involved because you can sometimes be the only remaining people who are like, “Okay, listen, everyone has to come back and focus on what’s important here. You know, we’re going to spend a lot of money, you know, fighting over who’s right and who’s wrong when that may not be necessary.”
[10:05] Steve Yeah, and I think that’s a good point. When you’re—you’re talking about that, you and I were talking before we got on air here about witness training and stuff. And you could get a witness, especially on—on either side of the case, that’s really wants to dig in and really wants to feel vindicated, that they go into their deposition and what becomes a normal deposition causes them to go off the rails because they’re getting really defensive, they’re really trying to dig in, they’re really trying to win the case. And then that settlement offer either gets pulled or the number that was initially on the table now all of a sudden becomes a lot higher and now your settlement negotiations become a lot stickier, you know, and they become a lot more difficult to—to do. So that’s another thing, like you said, from a psychological standpoint. If people are really, really digging in, they got to be careful that to not let that bleed over into the deposition and cause problems.
[10:59] Kellie Yeah, you know what the psychology has to be is, you—everyone has to understand what it means to win a case, right? And I mean, winning a case doesn’t mean that you get a jury verdict in your favor. Winning a case doesn’t mean that, um, you pay nothing for the case. You know, everyone has to come in with a—with a good sense of what it means to win a case. Winning a case might mean that I don’t spend two years litigating this case and, you know, $300,000 just to get a no-cause verdict at the end of the day. I mean, that’s great, but I’m out $300,000 in two years’ worth of litigation. So that—that may not be a win.
So, um, I think, you know, you—you watch law shows on TV and, you know, winning is all about what happens in front of a jury. But in real life, that has very little to do with whether clients walk away feeling like they won a case. So I think that everyone has to keep that front of mind. It’s the lawyer’s job really to, um, balance the client’s right to vindication. Whether you’re on the defense or plaintiff side, you have to appreciate that your client has a right to be vindicated in their position with what a win looks like for them in that case. And you have to continuously remind the client: “I know that you have your right to vindication, but this is what it looks like to win this case.”
[12:22] Steve Yeah, it’s another good segue. I think, yeah, you—I think you should become a podcaster here, you know, you’ve had two good segues going into the next topic. So—so we’re going to talk—now that we’ve kind of got all the background stuff out of the way—and now I wanted to talk to you more about, so we kind of get in a sense of we’re going into settlement negotiations. What have you found is the beneficial approaches to take? What are some good approaches to take in settlement negotiations?
[12:49] Kellie So one thing that I think you have to be building up your credibility in a case from the beginning, or maybe, you even from the beginning of your career. Like, settlement negotiations take a lot of credibility by the people involved because there’s some degree of trust that is being exchanged between the parties. So if you—if I come into a settlement negotiation and I tell—let’s say that we’re—we’re settling the case and we’re using a facilitator, which for those of you who don’t know a lot about settlements, settlements can be undertaken as we call direct negotiations. So that’s negotiations between the plaintiff attorney and the defense attorney and the parties. We can directly negotiate with one another, or sometimes we bring in a what we call a neutral third party, and that’s a facilitator or mediator, and they will work with the parties to reach some sort of a resolution.
So, uh, particularly if you’re doing the second kind of negotiations using a facilitator or a mediator, your credibility as an attorney is paramount. So if you come into a settlement negotiation and you represent, “I only have $5. So, you know, facilitator, I need for you to get me this case for $3 because I only have five. And if I spend all five, my client’s gonna be mad because they’re gonna feel like I just ran, you know, all their money out.” And so the facilitator has to trust you. They have to think that you’re telling the truth, that your client is straightforward, that you wouldn’t lead them wrong. And at the same time, the other party has to have some degree of trust in what you’re saying as well.
And—and what I have found is that it was difficult to establish that at, you know, back when I was younger and I was just starting out in this. And, you know, I’m—I’m very well preserved, but I’ve been around for a long time. And so now I’ve seen a lot of the facilitators, I’ve seen a lot of the attorneys, you know, we practice all in the same areas, and so you—you built up that credibility over a number of years. And that really does sort of grease the wheels of a settlement negotiation. Because if you have to spend a lot of time just proving to the other person, “I’m not trying to rob you blind, you know, I’m not trying to be a jerk,” that takes up a lot of time. And—and time really is money in this industry. So you can wind up wasting a lot of, um, money just trying to prove that—that—that you’re a credible person. So that’s one thing.
Um, the other thing is you need to have had really clear communication with your client. Your client needs to know what, if any, exposure they have in the case before you get to the point of negotiating a settlement. That is particularly true if you’re going into a mediation or a facilitation. I, um, had a mentor told me way back in the day, you know, “You never want to surprise your client with a settlement.” You know, if you’ve been telling your client all along, “This case is worth $5,” and you get to some point, you know, way down in the case at a mediation or facilitation, you say, “Surprise! It’s $500.” Nobody is going to be happy. You know, you better have a very specific reason for doing that or, psychologically, the feeling might be that—that you, you know, you flaked at the last minute, that you were scared, that you, you know, you weren’t able to take it all the way. But if you’ve been telling them all along, “Listen, this is what your exposure is, this is what I’m going to try to do. You know, I’m gonna try to get it for $5, but really, between you and I, it’s worth $500,” then that—that’s a different story. They’re not surprised, and that doesn’t throw everyone off. So you don’t want to—you don’t want to surprise them.
Um, the other thing—and I had actually wrote some of these down—is that you want to be aware of the strengths and weaknesses of your case and of the other party’s case. Um, you know, it’s good to be confident. I—I had a property professor when I was in law school who said, you know, “The job of a young lawyer is just to fake it until they figure it out.” That’s good when you’re young, but you know, once you start representing clients who have large amounts of money invested in their litigation, you better not be faking it anymore. You better know the strengths of your case, know the weaknesses of your case. You know, that’s part of being able to clearly communicate with your client. If I—oh, I say this all the time: “You can serve the Kool-Aid, but do not drink it.” Now, you are welcome to—to hand it out to other parties, but you cannot drink your own Kool-Aid. You cannot go into a settlement negotiation, you know, high on your own supply.
[17:21] Steve I like that.
[17:22] Kellie You have got to go in there sober-minded. Aware that, you know, I’m saying this, but you know—you know truthfully I know that, you know, my guy was drunk when he was driving that truck. So, you know, I know that, you know. So those are kinds of things that you have to know. You have to be aware of the strengths and the weaknesses.
And the last thing that I will say, and this is definitely a matter of psychology: you have to have a stone-cold poker face. Because at some point, you might have to pull the plug. And you might be thinking to yourself, you know, “Man, it—it’s 200,000, and that’s a really good number.” And—but your client doesn’t want to pay that much. Your client is like, “No, you know, I want it for a 100.” And you’re like, “That 200 is so good.” At some point, it’s the client’s case, it’s the client’s money. You got to have the poker face. You got to be able to say, you know, “No, we’re gonna walk. If—if that’s what it is, we’re gonna walk. We’ve made the evaluation, this is what we think it’s worth. That’s the end of the story, we’re done. The—the day is over.”
And you know, I—I cannot tell you that I haven’t left settlement negotiations or facilitations, you know, with my armpits were sweaty and, you know, I was like, “Oh my God, this is never gonna work out.” But that—that is part of how things are done. I mean, there is a point at which the client wants to pull the plug, and you have to have the fortitude to pull it, and then you got to be able to back that up later on as the case goes on. So those are the sort of strategic considerations I would say apply to any settlement negotiation.
[18:46] Steve I think you brought up a couple good points there that—that I wanted to touch on. The biggest thing being knowing what your case is going to be worth prior going into settlement negotiations. And I think a lot of times when we—we talk with attorneys or we talk with clients, the thought is that we come in and do these mock trials and focus groups at—right—basically right before going up to trial. But a lot of stuff that we’re seeing is we’re seeing it more on the front end, right before settlement negotiations, because it allows the client to go in and it allows the attorneys to go in and know what the value of the case is. You know, worst thing is you don’t want to go in, as you said, and say it’s—it’s worth $5 and then find out later it’s worth $500. You want to be able to go into that settlement negotiation having a clear vision.
Like I said, the way we’ve been able to help clients is to do it—is to do mock trials and focus groups on the front end, rather than waiting all the way until it gets up to trial. Because then it also puts you in a better position of strength going into settlement negotiations. I know I can think of at least one settlement negotiation where the information that was used from a focus group that we did was actually used in the settlement negotiations to help clean up the case and settle the case. I think that was a good point where you’re talking about knowing the value.
The second one—and—and I love it—is you’re serving the Kool-Aid versus drinking the Kool-Aid. I can’t tell you how many times I have seen where, you know, attorneys and clients just won’t get out of their own way. And we—we’ll do mock trials, and people will be having panic attacks listening to juries talk about things, and they just can’t get past the idea of what their thoughts are and what’s beneficial to the case and what’s impactful, and they can’t believe that other people don’t see it that way.
[20:31] Kellie Yeah.
[20:32] Steve Yeah, I think—I think that that was great. I think I might steal that going forward. I like it.
[20:36] Kellie Yeah, one of my mentors told me a long time ago, he said, you know, “I thought I had this great case. It was—it was a good case and I was saying, you know, ‘We’re gonna go in there, we’re gonna stomp them, we’re gonna polarize—'” you know, whatever young lawyers say when they haven’t lost a trial yet. Um, and he said, “Listen,” he said, “That guy on the other side of the table, he’s got—” We have in Michigan, we have P numbers. And the numbers—the—the lower the number is, the longer the person’s been practicing law. He said, “You know, that guy’s got like a two-something P number. That means he’s been around for a long time, been practicing law. He looks like he’s done reasonably well. There’s a reason for that. Don’t forget that.”
Like, as good as you are, just think about it: there’s somebody on the other side who, you know, some of—some of them are not good, but some of them are very good and they’ve been around for a long—you have to remember there’s another perspective out there. And we can become sort of enshrined in—in our world, you know, whether that’s defense world or plaintiff world. And all—all you talk to are defendants, all you talk to are claims folks, all you talk to are business folks. Those folks all have a certain perspective, and it doesn’t serve your client well if you never journey outside of that world and see what the psychology is like in the rest of the world.
And so organizations like yours Steve, actually do help us. Even we’ve done, like, mock trials within the firm sometimes, but even if you take a paralegal, if you take the people from the accounting department—I mean, we’re all still defense folks. They’re defense accounting folks, you know, defense secretaries, defense spirit. We’re all still defense folks. So we all have a certain orientation. You really have to find some way of getting outside of your world, and that’s the value that I see in services like yours. It gives us a way outside of our echo chamber.
[22:23] Steve Yeah, excellent. I just want to wrap up with one—one more topic. You know, with COVID, I know Michigan is higher on the—on the scale right now as far as the number of—of COVID-related cases and stuff. How do you think about kind of the future of settlement negotiations? Whether or not cases are going to be settling more often? Have you seen that judges are pushing for settlement negotiations more than usual? Kind of what’s the temperature gauge in Michigan right now as far as that goes?
[22:51] Kellie Yeah, that’s a good question. So judges have always sort of pushed for, um, settlements. You know, judges are the people who’ve been in more trials than any of us, so they know what the risks are for all the parties to get involved in a trial. They know how long they take, how costly they are. You know, they’re always kind of pushing us to resolve our cases if it’s at all possible. Um, and I have seen more of that just because it’s difficult to get a trial date in some jurisdictions, or impossible to get a trial date in some jurisdictions, because they’re not convening juries or, you know, they’re only convening one jury at a time. And there are, you know, thousands of cases sitting on the docket.
So under those circumstances, you know, the judges have an interest in getting you to resolve the cases. And also the clients who are, you know, sitting around—the defendants can’t clear their books of whatever the—the claim is, and the plaintiffs don’t get anything while their case is just sitting there and languishing. So I do think that there is, um, a lot more emphasis on settlement right now, especially in the state of Michigan. I suspect it’s going on in other places as well. Um, one way that I can tell that—that’s the case is because, you know, the facilitators that—that have the—the most sort of credibility in the community, it’s like six months to get on their calendar. So you’re like, “Okay, this is—something definitely is going on here because you can’t get in to see anyone.”
Um, and there are more facilitators cropping up actually, so more people sort of dipping into that world and—and—and trying their hand at that. I think that that will—you know, settlements are something within an organization—they trend. They trend back and forth. Sometimes an organization will look at their legal expenditures and they will think to themselves, “We’re spending way too much money on litigation, like, we need to start moving these cases along.” And so you see a lot of settlements. And then, you know, a new general counsel will come in and look at the books and say, “We spent all this money on settlements, like, we’re not settling anymore. We need to show these people that we’re going to stand up and fight.” And then, you know, nothing settles anymore. It just depends on what—and I can think of one large organization that—that definitely happened with, that was known to be intransigent, never settle any cases, and then as their leadership changed, the attitude about that within the organization changed.
So, organizationally, that’s a thing that happens. I know that when COVID first started, there was the thought that—that plaintiffs might have a desire to settle their cases earlier on. That did not prove to be true. I did not—there were not a bunch of fire sales out there, you know, people just kind of waited it out. So, um, that definitely wasn’t the case. But I—I do think that—that, you know, if we were already settling 99% of cases, then maybe now we’ll settle 99.3% of cases. Um, I do think that there’ll be a slight uptick just because of the lack of availability of—of courtrooms and juries.
[25:51] Steve I think it was a good point and I’m glad you touched on it, actually. That’s been my sense as well listening to the narrative kind of across the country from plaintiff attorneys is that there is a subsection of plaintiff attorneys who are basically saying, “Do not settle, do not settle,” because they’ve spent a lot of time in COVID talking and strategizing. And I think that’s one thing the plaintiff bar does better, actually, than the defense bar, is sharing information. In my sense from some of these plaintiff attorneys is they’re ready to come out swinging out of COVID and they’re not settling anytime soon.
So I think it was good that—a good point that you brought up that, you know, the thought being that everybody’s just going to settle might not necessarily be true. So you can’t really go in with the case thinking, “Nah, this is going to settle, we’re not going to work this up properly,” because we find out—we’re gonna find out really quick and you’re going to find out and you’re wrong, and you’re going to be paying a lot more when you can’t settle a case.
[26:45] Kellie Yeah, and that—that probably should never be your thinking. You know, that—that I think the thinking should always be, “I’m—I’m going to prepare to resolve if there’s a way to resolve, but I’m going to work the case up like it’s going to a jury.” Because that—that improves your chances of getting a settlement that’s favorable to your client. Um, you never want to just sit on it for so many reasons. You know, I’m—I do professional liability work, so um, I represent lawyers and legal malpractice cases. And so again I will say there are so many reasons why you do not just sit on a case and do nothing. You do not want to become one of my clients in one of those cases! So yeah, you know, don’t—don’t ever assume that a case is going to resolve. That—that’s not the proper way to handle the settlement negotiation.
[27:34] Steve Yeah, and very true. Well, Kellie, I really enjoyed this conversation. I thought it was really good information to get out there to the listeners. If people want to talk to you more, if they have questions, if they want to get a hold of you, how do they go ahead and get a hold of you?
[27:47] Kellie Oh sure. I’m on email, and my husband will tell you, “She’s on email all the time.” So you can always email me. It’s my—okay, my email address is so long, but it’s my first dot last name. It’s k-e-l-l-i-e dot Howard hyphen Goudy, which is G like goodness, o-u-d as in dog, y, at ceflawyers.com. That’s Charles Edward Frank lawyers dot com. Really, really long email address, but you can always just look us up on the web. Collins Einhorn Farrell. Simple Google searches show you, you know, where we are. And email, telephone calls—we’re always available.
[28:24] Steve Excellent. And I can be found at swood@courtroomsciences.com. I can also be found on LinkedIn. This has been another edition of the Litigation Psychology Podcast brought to you by Courtroom Sciences Inc. We’ll see you next time.
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