Corporate Law: Settlements, ADR, and Court Reluctance Analysis

This report delves into the advantages and disadvantages of settling disputes out of court in corporate law. It highlights that settlements are often less expensive and less stressful than court trials, offer privacy, and are predictable. However, compensations may be lower, and punitive damages ...Read More

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Settlement out of Court
Settlement out of court can be seen to be having both advantages and disadvantages.
However, according to the various studies that have been conducted it can be seen that settling
out of courts has more benefits than going to the court (Ross, 2017). The advantages and
disadvantages of settling out of court are discussed as below.
Advantages:
1. Out of court settlements are seen to be far less expensive than a trial in the court. In
any personal injury law suit there is always a risk of spending a large sum of money in return of
receiving nothing in return. Even if there is a chance of getting an award for damages it needs to
be weighed with the costs of the litigation (Alter & Hooghe 2016).
2. Trials are seen to be stressful. In out of court settlements there is less stress than the
trials.
3. In case of a settlement privacy of thee case can be maintained, however in any trial the
court documents are seen to be made into public records and available to everyone unless
otherwise ordered by the judge.
4. Settlements are easily predictable as the terms of the settlement agreement are dictated
by the parties themselves. In case of trial the decision of the juries are not easily predictable.
Disadvantages:
1. The compensations received in settlements are generally less than the court trials.

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2. In most settlement cases punitive damages, like emotional suffering, are not considered
into the claim amount.
Legal issues not benefitting from Alternate Dispute Resolution
Alternate Dispute Resolution (ADR) can be described as the ways of resolution of
dispute outside of the court. Although a trial is believed to be the most common way for
resolving legal problems, yet only a small percentage of the cases actually reach trial. By way of
alternate dispute resolution the parties are allowed for the settlement of their disputes in a faster
and inexpensive way (Blake, Brown & Sime 2016). The methods of alternate dispute resolution
can generally be described as variations of arbitration in which the parties can submit their
claims to a non-government tribunal while agreeing to be bound the decisions of the tribunal.
Basically six forms of alternative dispute resolution. Those are: negotiation, mediation,
arbitration, conciliation, hybrid alternate mechanisms and diversion of the cases out of the court.
Most of these forms can be described as more efficient, more economical and quicker than the
traditional trials in a court. However in certain situations alternate dispute resolution cannot be
seen to be a beneficial option and dispute needs to be left for resolving in the courts. These
situations include:
1. When there is an involvement of any kind of violence or threat of violence
2. When there is a requirement for definite and broadly applicable solution for the dispute
3. When either of the parties does not want the case to be private
4. When there is a risk of the outcome of the case to be affecting a large number of
people

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5. When a power imbalance is seen to be present between the parties of the case
Is Alternate Dispute Resolution a good trend
Although alternative dispute resolution is a well advanced movement in the USA the
trend of settlement outside of the court is seen to be a relatively new concept in Canada. The
practice of alternate dispute resolution method can be said to be a good trend (Singer, 2018). As
per many experts the ADR methods are said to be most sensible and cost effective ways for
keeping the parties out of the court and from the cases that devastate both the parties similarly.
Reason for reluctance of the Courts to reopen settlements
As seen in the case of ConnectU Inc. v Facebook that there was a former dispute
resolution between the Winklevoss brothers and Facebook was settled. However the Winklevoss
brothers were seen to be attempting to reopen the settlements with the claim that they have been
misled. Both their attempts have been declined by the US Circuit Court and US Court of Appeal.
The courts declined there appeals because there was a skepticism among the judges about the
legal justification for voidance of the settlements. The court further stated that the twins were
represented by a team of good lawyers and further the twins themselves are well-educated people
and were counseled by their father who was a business scholar. As per the judges there was a
mutual intention between the parties for the creation of legally binding contract and for that all
essential terms were agreed upon by both the parties and hence the appeal was dismissed on this
ground. Similar situation was seen in the case Cox v Baker 2019 where the case involved the
settlement of a trust by a mother for her two daughters.

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Reference
Alter, K. J., & Hooghe, L. (2016). Regional dispute settlement. Forthcoming in Karen J. Alter
and Liesbet Hooghe “Regional Dispute Settlement Systems” in Tanja A. Börzel/Thomas
Risse (eds.), Oxford Handbook of Comparative Regionalism (Oxford: Oxford University
Press, 2016: 538-558).
Blake, S. H., Browne, J., & Sime, S. (2016). A practical approach to alternative dispute
resolution. Oxford University Press.
ConnectU Inc. v Facebook Inc et al., No. 1:2007cv10593
Cox v Baker 2019 OnSC 2859
Ross, H. L. (2017). Settled out of court: The social process of insurance claims adjustments.
Routledge.
Singer, L. (2018). Settling disputes: Conflict resolution in business, families, and the legal
system. Routledge.