Earlier this month, a jury in South Carolina awarded a Target shopper $4.6 million after she was stuck with a hypodermic needle in a Target parking lot. Prior to trial, Target rejected the plaintiff’s proposal to settle the case for $12,000. Target’s counter-offer was only $750.
Statistics show that the vast majority of cases settle. The decision to settle a case or not is a difficult one for individuals and companies. Large companies, like Target, have to consider the ramifications of settling lawsuits. On the one hand, in the wake of large verdicts like this one, it may seem advisable to have settled for the amount offered. But on the other hand, companies have to consider the effects of a settlement on all of the other potential plaintiffs out there.
If Target were in the habit of settling every case brought against it for more than $10,000, the company would soon feel the effects. And if potential plaintiffs learn that Target will settle claims for large sums, it may create an incentive to sue. Companies with lots of potential plaintiffs – pharmaceutical manufacturers, large companies with high volumes of customers – need to be cautious of creating a reputation for settling cases for large sums. This is particularly true if a problem is discovered that cannot be rectified going forward, such as a product defect.
At the same time, however, large verdicts like this one are likely to incentivize potential plaintiffs, and drive up the amounts of future settlements, because plaintiffs may believe that there could be a large verdict awaiting them. Had Target successfully defended this case, of course, the impact on potential plaintiffs would have been the opposite, possibly creating a disincentive to sue or perhaps a decrease in future settlement amounts.
Large companies like Target also have to consider the public relations effects of a large jury trial. Even with a win, the negative publicity resulting from a trial might factor into settlement decisions. For instance, if a plaintiff appears sympathetic in the media, particularly in a personal injury case, a large company may lose in the court of public opinion, even if they are successful at trial.
Smaller companies have different factors to consider when deciding whether to settle a dispute. While large companies like Target may be able handle the law of averages over time, smaller companies are often risking a single home run verdict that they may not be able to afford. Thus, the settlement analysis can be quite different.
Settlement strategy in every case can be a dynamic process, with multiple factors (and personalities) to consider. After large verdicts like this one, it will be interesting to see if Target adjusts its settlement posture in future lawsuits.