Settlement Strategy Is More Important Than Litigation Strategy

In the world of federal government contract disputes, a great deal of time is frequently spent drafting a request for equitable adjustment (REA) or a claim under the Contract Disputes Act. Both of these actions are often a prelude to litigation and, when the parties cannot agree to an amicable resolution, lead, inevitably, to a trial. Once this process is underway, contractors and their attorneys begin the tedious process of developing a litigation strategy that involves reviewing voluminous documents, identifying and interviewing potential witnesses, and everything that goes into pre-trial discovery.

The process is time-consuming and expensive. This is unfortunate because there is little doubt that putting a dispute in the hands of a judge is the most hazardous and unpredictable way to resolve a dispute. The sad truth is that some judges have a government bias, but there are also some who are more willing to accept a contractor's point of view. Ideally, the result of litigation should not depend on the luck of the draw when it comes to the appointment of a judge.

It has been said that the best way to avoid a trial is to prepare for trial. While it is always a good idea to out-prepare your opponent, winning involves more than superior preparation. The facts need to be on your side, the documents must support your position, the recollection and credibility of witnesses may be an issue, and the law may not be completely on your side. In other words, there are few claims that amount to "slam dunk" winners so a compromise settlement may provide the best opportunity for success, even if it is only a partial success. It is important in all of this for contractors to refrain from "falling in love" with their claims. One thing is certain, recovering some time and money is preferable to a total loss.

Lawyers normally perform a litigation risk assessment in order to advise their clients on the probability of success if a case goes to trial. The greater the risk, the more important a settlement strategy becomes. Just as there are rarely "slam dunks" for the contractor, the government normally has its own concerns and will perform its own litigation risk analysis. When both sides recognize that they have exposure and could ultimately lose the case, the stage is set for settlement discussions. A successful settlement strategy involves convincing the government that a compromise in its best interest. This requires developing a non-combative working relationship with government counsel, opening a dialogue that communicates the strength of your position, and inviting the government to hear a presentation of your case. While some might see this as giving the government "free" discovery, there is no reason to hide the quality of your position.

Once a claim has been submitted, or even after the appeal of a Contracting Officer's Final Decision, contractors should continue to press for meetings and open discussions about the claim. Depositions of the government's witnesses can be an effective way of demonstrating weakness in the government's case and should be followed up by discussions with counsel. Timing is very important, and knowing what buttons to push (and when to push them) is critical. The goal in all of this is to devise a strategy to settle the case and avoid a costly and risky trial. Contractors should be wary of those who prioritize winning the litigation battle over doing what is best, in the long run, for the contractor. Unfortunately, there is no such thing as a cookie-cutter approach to settling a case. It takes experienced counsel and reasonable people on both sides.

While preparing for trial, contractors and their counsel should spend an equal amount of time exploring what a reasonable settlement would look like and devising a plan to achieve it.

-Michael H. Payne, partner, Cohen Seglias Pallas Greenhall & Furman PC 

Reprinted with permission by Cohen Seglias Pallas Greenhall & Furman PC.