When two or more businesses face legal conflict, the result is often one of a number of possible lawsuits filed in the appropriate civil court. But litigation, especially litigation involving complicated business matters, can quickly turn into long and expensive affairs. As a result, they often try first to negotiate a settlement.
This can be done either through private discussions, or through alternative dispute resolution options like mediation or arbitration. Here is a short guide to common corporate lawsuit settlements and how they can benefit all parties involved.
There are many reasons why a business would want to pursue legal action against another business or an individual, and in many of these cases the suing party is seeking monetary damages. A business may also seek some sort of injunctive relief or specific performance to prevent further damage to their profits, reputation, or another important asset.
Some of the most common lawsuits involving business matters include:
- Breach of contract: Contractual relationships between businesses are incredibly common, and can cover the full spectrum of their economic activity and operations. This forms a relationship between two business entities and creates specified legal duties. If one of these duties is not met, the offending party can be hit with a lawsuit. The parties involved in a business breach of contract suit are expected to be well-versed in contract law, so if litigation does occur, courts afford them fewer protections;
- Unfair competition suits: This type of lawsuit is usually used to protect consumers and sometimes employees. The idea behind them is to help maintain a neutral playing field for economic competition. What is considered a violation of this principle is constantly evolving, and can include slanderous advertisement, misrepresentations to customers, and price fixing. If a company’s practices result in unethical and injurious behavior towards customers, it might be material for a lawsuit. In addition, courts can deem unreasonable “non-compete” employment clauses as material for an unfair competition action;
- Intellectual property: Violation of a valid trademark, patent, or patent is an easy way to provoke a lawsuit. Intellectual property laws protect the owners of these properties, and any infringements can result in the owner seeking an injunction to prevent further use and monetary damages for the economic harm they suffered as a result;
- Stocks and Securities: Corporations that issue stocks and/or bonds must abide by federal and state law governing payouts, buy backs, issuance, and other related actions. Violation can mean a stockholder bringing a lawsuit against the company, and in some cases a class action lawsuit may be necessary; and
- Mergers and acquisitions: Although the sale of businesses is handled through contracts, there are certain laws that those in charge need to be aware of when they are looking to merge, sell, or buy a business entity. Restrictions and protocol for these transactions are governed by antitrust law and overseen by the Federal Trade Commission.
No. A security settlement is when a company uses financial securities (stocks, bonds, debentures, or other valued interest) to fulfill their contractual obligations in lieu of a money payment or as part of a securities trade.
Rather than a typical settlement as it is usually known, this is just another type of business transaction that companies use to further their interests, a “business lawsuit settlement” refers to the end result of negotiating a resolution to a business conflict. As noted above, these settlements can finalize agreements to wide range of legal disputes, not just those involving stocks and bonds.
If a legal issue or issues arise between parties over business matters, there are different ways that they can resolve the conflict without litigation. The sides can engage informal negotiations over how the wronged party will be compensated, and if an agreement is reached, it can be drawn up and executed in far less in both time and legal fees than a trial.
Alternative dispute resolution methods are also common ways to reach a settlement, and are becoming more common all the time. Examples include mediation and binding or nonbinding arbitration. As stated above, these options can help both sides save not just a lot of time but also quite a bit in legal fees.
Another big upside to settlements is that the parties can add in confidentiality and release of liability clauses to prevent further legal action and keep certain affairs as quiet as possible. Of course, any settlements must abide by any statutory regulations (federal or state), which is why it is important to seek legal help when negotiating and/or before signing a settlement.
All legal affairs can become complicated, but this is especially true with complex issues like potential business litigation. There is often so much at stake with these types of suits, often a lot of money and someone’s livelihood.
That is why if you are facing or are looking to file a business lawsuit, you need to seek out the expertise of a corporate/business attorney as soon as possible. They can serve as your negotiator during the settlement process and draft an agreement that puts you in the best possible position.