Also known as: settlement negotiations · negotiating settlement · settlement talks
Written by attorneys · grounded in primary & secondary sources — see below
A process of communication between parties to a disputed claim in which they seek to reach agreement on the terms for resolving the claim without adjudication. The process occurs when the claim is already in litigation or arbitration or is likely to proceed to either if negotiations fail.
Sapphire Holdings retained a nonlawyer claims adjuster to evaluate fire damage and negotiate a payout from its insurer. The adjuster reached a contingent-fee agreement and secured a reduced settlement. When the insurer later disputed coverage, the adjuster sued to collect the fee. The court held that the adjuster's loss determination and settlement negotiation constituted the unauthorized practice of law, rendering the fee contract unenforceable.
Santiago Sanchez, lead plaintiff in a civil-rights class action against Sterling Manufacturing, received a settlement proposal that included both injunctive relief and a waiver of statutory attorney fees. Class counsel objected that the simultaneous negotiation of relief and fees was coercive. The court approved the settlement, finding that the defendants' bargaining advantage alone did not constitute coercion under the governing statute.
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A communication qualifies when a disputed claim exists and the parties engage in compromise discussions about that claim. The rule protects both offers of valuable consideration and accompanying statements made during those discussions when offered to prove or disprove the validity or amount of the claim.
The protection applies to pre-suit mediation and other pre-filing compromise efforts. The rule bars use of offers and statements made during such negotiations to prove liability or damages, regardless of whether formal litigation has begun.
No. When an acknowledgment of fault appears in the same communication as a compromise offer and directly addresses the disputed claim, the entire communication is protected. Courts decline to dissect such statements because doing so would undermine the policy of encouraging candid settlement talks.
The rule promotes settlement of disputes by protecting parties from the risk that good-faith negotiation efforts will later be used against them at trial. Without this protection, parties would hesitate to make concessions or candid statements during compromise discussions.
…is not supported by the record. The fact that the defendants’ superior bargaining power may have given them an advantage in the settlement negotiations does not constitute “coercion” within the meaning of § 1988. Pp. 736–738. 4. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent…