If you’ve been running a business for long, chances are you’ve faced a business lawsuit settlement scenario. Whether you were at fault or not, being sued is an unpleasant experience at best and disastrous at worst.
Most cases involve employee lawsuits against employers or disputes with shareholders. Many lawyers take these cases on contingency—meaning they only get paid when they win or negotiate a settlement. That creates a strong incentive to pursue large settlements, sometimes reaching seven figures, which can be extremely frustrating if you know you did nothing wrong.
It’s easy to feel indignant and eager to fight for your innocence in court. However, when you weigh the risks of fighting a lawsuit, the smart move is often to settle instead. Here’s why,
Why Fighting a Lawsuit Is Riskier Than You Think
As the CEO or business owner, your top priority is protecting your business reputation and financial health. Choosing to fight a lawsuit all the way to trial introduces serious risk—both financially and publicly.
You might hope a judge will dismiss a frivolous lawsuit. But that’s a gamble. Even worse, if the case goes to trial, juries often side with employees or smaller claimants. In employee lawsuits against employers, jurors are quick to support the “David” against the “Goliath.”
For example, I have a client who was sued by a former contractor over an alleged unpaid bill of $10,000. My client insisted they were innocent and refused to settle. However, when he lost the case, the jury awarded the contractor $1.9 million in damages for pain and suffering, as well as lost opportunities. Do you think my client wishes they could have a mulligan (a do-over) on their decision not to settle?
How Jury Bias Can Destroy Your Business
Juries often sympathize with individuals over businesses, especially in employment disputes. This bias makes the cost of going to trial incredibly high—not just financially, but reputationally.
Negative publicity around a jury trial can cause long-term damage to your brand, regardless of whether you win or lose. This is why understanding the business lawsuit settlement process is critical for protecting your company’s future.
Why Lawsuit Settlements Protect Your Reputation
One often overlooked benefit of settling is confidentiality. When you settle, the details typically remain private, shielding your business from damaging headlines or online reputational attacks.
I’ve worked with businesses on the brink of major deals when a shareholder lawsuit threatened to derail everything. Settling quietly allowed the transaction to move forward without public scrutiny—a crucial outcome that preserved company value.
How to Negotiate a Fair Business Settlement
The goal of any lawsuit mediation for businesses is simple: end the dispute with minimal damage.
Hiring an experienced mediator can help broker a fair resolution where both sides feel slightly uncomfortable. Typically, the plaintiff doesn’t get everything they want, and the business pays a bit more than they’d like. If both sides feel a little pain, it’s likely a balanced outcome.
Pro Tip: Ensure the settlement includes non-disclosure clauses to protect your business reputation further.
Key Lessons for Business Owners Facing a Lawsuit
When emotions run high, it’s tempting to “fight the good fight.” But the practical reality is that settling a business lawsuit often saves far more money, time, and reputation than fighting ever could.
Remember:
- Your duty is to protect your business reputation and financial health—not to win a moral victory.
- Settling early can avoid years of litigation costs and massive jury awards.
- Confidential settlements keep damaging details out of the public eye.
The bottom line is that settling a lawsuit is smart because the alternative can be far more costly and destructive.
