Internal barriers to settlement as a cost-driver

Sometimes, when a law department recommends that a lawsuit be settled, the client from whose purse the funds must come may balk (See my post of Nov. 25, 2005 about whether law departments should manage settlement funds and recovered amounts.). To hit their numbers during the quarter, top executives may defer funding the settlement until the next quarter. Meanwhile, legal fees continue to bleed, which worsens the numbers of the law department.

If there are internal barriers to settlement that result only from business unit performance goals, and not from the wisdom of the settlement itself, law departments need to rush the barricades. At one company I worked with, headquarters would lend operating units funds so that units could settle litigation at the soonest appropriate time and yet not take drastic hits all in one quarter to their bottom lines. That’s a sensible workaround.

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