As most litigators already know from their experience in practice, “nuisance value” is the amount of money a defendant will pay defending a lawsuit and which they may fork over to a plaintiff to make a matter go away. The circumstances of the case, and the strength of claims and defenses, will determine how much money nuisance value is, but this is usually (but not always) anywhere between $5,000 and $50,000. Sometimes, it just makes sense for defendants to offer nuisance value as a business decision so that they can conclude a case with finality rather than spend a similar sum on litigation and possibly lose. However, it can be tricky sometimes to propose settling for nuisance value, and this subject needs to be handled carefully with clients.
One of the biggest reasons why it might be difficult to settle for nuisance value? Clients may think that their lawyer does not wish to litigate their case or perhaps does not have the fire to advocate effectively on the client’s behalf, and this is why settling for nuisance value is suggested. This is true for all settlements, but since resolutions for nuisance value often occur during the beginning stages of litigation before the lawyers and parties engage in too much litigation, it might seem that a lawyer proposing this resolution may not have the drive to take a case further.
Of course, lawyers rarely propose settling for nuisance value because they do not wish to further litigate a case. Indeed, a lawyer usually has incentives to keep litigating a case, since active files give lawyers the chance to bill more hours and generate additional revenue for their firm. As a result, it is important to fully explain the benefits of settling for nuisance value rather than bringing a case further into litigation so that clients are satisfied that the decision to settle for nuisance value is being made for the client’s benefit and not because the lawyer apparently does not want to further litigate a matter.
Another reason why clients may not wish to settle for nuisance value is because they may have an inflated sense for how good their case is. Clients usually have difficulty seeing the insufficiency of their own arguments since people naturally want to believe that they are in the right about a given issue. Moreover, lawyers may influence a client’s belief that they have a better case than they actually have since lawyers have a tendency to make positive predictions about a client’s situation so that they can get a client on board with a representation. Many clients may think that they would rather pay a law firm to defend their case than pay the same amount of money to the other side.
However, we all know that litigation is unpredictable since the legal system often depends on human beings who cannot be counted on to decide matters one way or the other. Given this unpredictability, it almost always makes sense to hand over a sum of money to the other side rather than spend a similar amount of money on litigation costs since settling for nuisance value guarantees that the matter will be resolved. Lawyers can do a better job explaining the unpredictability of the legal system if they feel that a nuisance value settlement is in the best interest of the client so that a client has the most relevant information upon which to base a decision.
There are, of course, perfectly good reasons why a client should not settle a case even for nuisance value. For instance, a client may not wish to settle a case easily for fear that other people will sue the defendant expecting an easy payday in the future. In addition, sometimes clients do not wish to settle a matter for nuisance value because they are true believers in their position and they do not want to settle a matter since settlement to them is akin to admitting that the other party is right. In other situations, clients may have deep pockets so nuisance value is not a big deal to their bottom line, and it might actually make sense to pay a lawyer to defend the case for a while and then settle later so that they can benefit from the time value of money.
These are all nuanced situations that require extensive discussions so that lawyer and client can get on the same page about the benefits of settling for nuisance value and how this aligns with a client’s goals. Lawyers should not just assume that clients understand the concept of nuisance value and how there can be benefits to resolving a case early with finality rather than risking the unpredictability of litigation. With sufficient explanations, lawyers can navigate the tricky subject of nuisance value settlements so that a client’s interest can be best promoted.
Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.
