Monday’s announcement that noted film director Woody Allen settled his $10 million lawsuit against American Apparel on the eve of trial for $5 million raises an interesting question: why do so many cases get settled on the court house steps?
The American Apparel case had the classic making of a lawsuit. Every suit is driven by two things: (1) the emotional factors that push you over the edge and cause you to take action regardless of whether you’re right or wrong, and (2) the merits of the case – the facts and how the facts stack up against the law.
Here the emotions continued to run high even after the settlement was announced. According to the NY Times, Mr. Allen, said that “[t]hreats and press leaks by American Apparel designed to smear me did not work, and a scheme to call a long list of witnesses who had absolutely nothing to do with the case was also disallowed by the court.” It was this “dose of legal reality [that] led to their 11th hour settlement.”
American Apparel’s president, Dov Charney, was even feistier, reportedly saying he was not sorry for expressing himself that he didn’t want to settle the case, but that the insurance company who controlled his defense made the call.
The merits of the case involved competing claims of intellectual property rights and First Amendment free speech rights regarding American Apparel’s use in online and billboard advertisements of Mr. Allen’s image, dressed as a Hasidic Jew from his 1977 movie Annie Hall, without Mr. Allen’s permission. Even though the offending ads were removed shortly after they were first made public, Allen filed suit claiming American Apparel owed him $10 million in damages.
Depending on what survey you read, anywhere from 80-97% of all civil lawsuits get settled. Many courts require mediation or mandatory settlement conference at some point during the discovery process before a case is even scheduled for trial. Sometimes the parties are lucky and can resolve their differences. Others can’t. They proceed through discovery and to trial.
Discovery is a formal legal term that refers to the interval of time that begins immediately after the defendant answers the complaint up to almost the start of trial. It’s the time during which the parties collect and assemble evidence. It includes document production and deposition testimony. Depositions are witness testimony taken under oath by an attorney outside of a courtroom. Depositions are no picnic. I’ve heard them referred to them as root canals without Novocain.
The pre-trial discovery process is often punctuated by lengthy delays, for example, involving acrimonious battles over document production or spoliation of evidence. That’s not a typo. Evidence is “spoiled” if it’s destroyed or tampered with. Spoliation of evidence, as it’s called, is a huge no- no which can result in devastating sanctions.
By the time you reach the eve of trial you can roll the dice in a court of law, incurring the added cost of trial on top of everything else you’ve already spent, and risk an uncertain outcome; or you can control the result through a negotiated settlement. It’s a moment of clarity and sharp focus that allows cooler heads to prevail. That’s why many cases settle short of a verdict from a judge or jury.
If getting focused is the key to conflict resolution, doesn’t it make sense for the parties to focus early? Before they’ve incurred the bruising costs of discovery, including the negative publicity that can sometimes be associated with it?