When Do Defendants Settle RPA Cases, If at All

Initial Publication: 3/1/98; Last Update: 2/24/02 10:01

The main, underlying question is why don't defendants settle an RPA action shortly after it is filed, assuming the action is meritorious?

Another question you might ask is why don't defendants write a check for $1,000,000 each time someone sends them a demand letter, one saying that unless you pay me $1,000,000 (or some other figure) within 10 days I'm going to file suit?

We know that demand letters seldom work, and that they are generally disregarded. But don't think they are thrown away. They generally are not. They are kept in a file and find their way into the file after a suit is commenced, and often used to suggest to the court that the plaintiff (victim of defendant's unlawful RPA practices) tried to extort money from the nice, law-abiding defendant.

Have you thought through what happens when an action is commenced against a defendant? The summons and complaint are reviewed by the in-house attorneys for the defendant, and then (typically) a major law firm is retained (not necessarily in the city where the action is brought but in a city where the hourly rate for the attorney is perhaps $25 or so less - an instance where the monopolist makes use of competitive principles, against his own attorney no less).

When the summons and complaint are faxed or federal expressed to the newly-retained law firm, one which presumably has not too much RPA litigation experience because there aren't too many RPA lawsuits these days, what do you think is the attitude of the law-firm partners?

Do you think they are shocked and angry that the defendant has been sued?

A law firm, especially a major law firm working for the defense, is in the business of selling hours of legal time for approximately $200 to $500 per hour or more.

When a new case arrives, wouldn't you suspect that someone in the firm worries about whether there are sufficient lawyers available to handle the case; doesn't this involve a rough estimate of the number of hours which will be required; doesn't this translate quite quickly into a projection of income to the firm which will result during the next several years if the case is fought aggressively. Don't you think that a law firm might lose its client if it did not fight aggressively? Wouldn't you expect your law firm or attorney to fight aggressively for you?

Then, what do you think the law firm is going to do after investigation of the charges made in the complaint? Let's assume the law firm decides that the claim is meritorious, that the defendant is violating the RPA. Do you think that the law firm is going to call up the client and suggest that the client settle the case knowing that the firm was retained to aggressively fight the case?

The answer usually is that the law firm has little incentive to do more than fight until called off by the client.

Under what circumstances might the client want to call off the litigation? Here are some possible answers to that important question, derived from real-life experience:

  1. When the adverse publicity gets too great, the highest management (who may not even remember that the suit exists) might make a call to subordinates and say "Get rid of that damned suit right away!" this possibility makes one conclude that publicity for the plaintiff and his case is good for the plaintiff and bad for the defendant, which may well be why most lawsuits in the U.S. are not publicized by the press. The ones which get the publicity, judging from the past few years, are the ones involves issues which do not adversely affect the profits or bank accounts of the major corporations; this type of publicized case includes: the O.J. Simpson trials, both civil and criminal; the Oklahoma City bombing (McVeigh/Nichols trial); the Atlanta, Georgia Olympics pipe bombing; Whitewater; Special Prosecutor Starr including his dealings with Monica Lewinsky.
  2. When the top management is required to submit to depositions. The reason for this is that top management knows much more than the typical middle manager, who is limited to specific areas of the business. When the top managers are involved, such as the C.E.O. and Chairman of the Board, the plaintiff's lawyer has the rare opportunity of obtaining answers, under oath, from someone who should know more than others about the alleged wrongdoing. Settlements frequently are considered at this point, especially because the top management's time is quite valuable, often being compensated for at the rate of about $10,000 per hour (which would be $16,000,000 per year for 1,600 hours of work). Some top managers will conclude that their time is so valuable to the company that they would rather settle than lose that time preparing for the deposition, and possibly giving more ammunition (or evidence) to the plaintiff. Also, the top management understandably feels that litigation is a negative influence and cannot result in anything good for the top manager or his/her company.
  3. If the plaintiff is willing to settle for nuisance value, except that such settlements are generally not recommended by the attorneys, it seems, using the argument that any settlement for whatever amount might result in more lawsuits, especially by the same attorneys. Keeping the settlement confidential would not change the fact that the plaintiff's attorney is aware of the settlement, and might be interested in bringing more cases for other persons similarly situated. You might wonder, then, why the defendant doesn't merely put a provision in the settlement agreement under which the attorney agrees not to commence any more suits against the defendant. The answer to this is that such a provision is considered a violation of the Code of Professional Responsibility and cannot ethically be put into the settlement agreement by an attorney; and in any event it probably would not be binding upon the plaintiff's attorney.
  4. If the discovery starts uncovering wrongdoing and other secrets which the defendant must disclose, after efforts in not disclosing such matters have failed; this often means that the court has to order the defendant to produce or disclose things before the defendant finally decides to settle instead of disclose.
  5. If the suit becomes the talk of the industry and could generate more litigation and customer dissatisfaction for disclosing the inequality of treatment of the defendant's customers.
  6. If the defendant loses its motion to dismiss the complaint for alleged failure to state a cause of action under Rule 12(b)(6), Fed. Rules of Civ. Proc., or denies the defendant's motion for summary judgment dismissing the action under Rule 56, Fed. Rules of Civ. Proc. Defendants and their counsel figure that they might as well try to get rid of the case by making a motion to the court before considering any settlement. The problem with this, however, is that the publication of the Court's decision, whether favorable or not, will give other plaintiffs and their attorneys a good source for seeing how to recover damages from the defendant, including the strengths and weaknesses of the original complaint and the defendant's answer thereto. Thus, some defendants choose not to take a decision; but because antitrust litigation is becoming increasing rare, there is less pressure on the defendant to avoid taking a decision, especially when they recognize that the odds favor the defendant in antitrust litigation.
  7. After the plaintiff has cleared all hurdles, including the costly fight for more than a year, surviving the inevitable motion to dismiss and/or summary judgment motion, and the costly, time-consuming negotiation and preparation of a "pre-trial order" which too often spells out every single aspect of the case in about 25-50 pages, including exhibits, witnesses, expert witnesses, legal theories, factual statements, agreed upon statements of fact, estimated length of trial, legal issues to be decided by the court, and so on. Also, there are the time-consuming and difficult requests to charge the jury to be prepared and negotiated with the opposing counsel; then there are the exhibits to put together and number and copy; and the witnesses to subpoena and interview and prepare; and the overall orchestration of the trial so that everything comes together at 9:30 a.m. on a date specified by the judge. At this point, because the C.E.O., Chairman of the Board, and other officials of the defendant will have to spend a lot of time on the case, in court, being briefed by counsel, preparing for their testimony before the jury, reviewing transcripts of prior testimony; reviewing exhibits; going through explanations of why they did what they did -- finally, the top management may say, "Enough! How much will it cost?" -- and the case may well be settled the night before trial is to commence. But often or sometimes this is not the case.
  8. Sometimes the defendant decides to go all the way, regardless of the cost, to deter anyone else from bringing suit. Such defendant wants to ensure that nobody could ever mistake the defendant for being a patsy and settling a legitimate claim, and that the plaintiff and plaintiff's lawyer will have to spend far more in time and money to try to obtain a recovery than the recovery would be worth, knowing that in a certain (too high) percentage of the time there will be no recovery at all in typical Sherman Act and Clayton Act antitrust lawsuits. RPA lawsuits appear to be different, for a variety of reasons, but these distinctions may not be appreciated by defendants and their attorneys.
  9. The right to go to trial, obtained through denial of the defendant's motion(s) to dismiss and/or for summary judgment, and the start of trial, are two powerful forces urging settlement. If the plaintiff prevails before the jury (and a jury trial is almost always preferable to a non-jury trial), the defendant generally will not pay the amount won at trial. The defendant has more motions it can make, including a motion to overturn the jury verdict for a variety of reasons; and of course the right to appeal to the United States Circuit Court of Appeals.
  10. Accordingly, there may not be a settlement even when the plaintiff wins a jury verdict. Of course, if the verdict is upheld after all motions and appeals, the judgment can be enforced starting 10 days after the "Mandate" is issued by the Court of Appeals.
  11. One possibility to explore as soon as possible, and at any time prior to trial, is mediation, which should be done before a competent lawyer, usually with both sides paying part of the mediator's fee. Both sides present their case to the mediator, in front of each other, and in sessions without the other side, and the mediator after hearing what he needs to hear, including how much each side might be willing to settle for, if anything, would then try to convince both sides to compromise. It makes sense to conclude that, if both sides agree to submit to mediation (which is not binding, except if an agreement is reached by all parties), both sides are willing to settle the matter at a price, and that the defendant is not intransigent about settlement.
  12. Inasmuch as it is safe to assume that the defendant ordinarily maximizes it unlawful profits by extending the length of the litigation, believing (as is often true) that the amount it will pay in attorneys' fees, costs and damages, if any, will amount to less than interest on unlawful profits the defendant will earn during the extended litigation, you should try to think of way to make this thinking erroneous, and obviously so; one thought is for you to remember that when a defendant loses after trial, the decision becomes subject to the doctrine of collateral estoppel in litigation with the same defendant involving other plaintiffs similarly situated. This means that the losing defendant (after trial and appeal) probably would not be able to contest liability in additional suits, which is a major factor in the defendant's determination whether to sell before trial, or run that risk.
  13. Another factor to consider is that even though a defendant is clearly liable under the RPA, there is usually much more room for litigation to reduce damages, from a claimed multi-million dollar amount to a much lower amount, through use of experts, taking of depositions, use of document requests and interrogatories, and generally trying to convince the trier of fact that the damages of the plaintiff were not caused by the illegal RPA-violating conduct of the defendant. For such reasons, a defendant clearly violating the RPA might still choose not to sell and to place its hopes on keeping the damages down, which of course would act as a deterrent to future litigation to some extent.

Anyway, you wanted to understand when defendants settle lawsuits or RPA suits in particular, the answer is when it suits their convenience, which means when things get too hot for them. Unless the RPA suit is pursued with the determination to get to trial, if the judge allows, there will probably be no settlement.

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Copyright © 1998 by Carl E. Person