In many if not most lawsuits between discordant business partners there comes a time when they launch settlement negotiations for a buy-out of one partner by the other. Sometimes this occurs early in the lawsuit and sometimes later, after one or more rounds of inconclusive motion practice and discovery proceedings.
The parties’ lawyers normally orchestrate and conduct settlement negotiations and are at their clients’ side at any face-to-face settlement meetings. Lawyers also are trained to ensure that any binding and enforceable settlement agreement entered into is fully baked, that is, it contains all the material terms and conditions necessary to effectuate the struck bargain, including appropriate representations and warranties, security and tax-related provisions, releases, and other necessary “boilerplate.” By the same token, lawyers are trained to flag any term sheet or other preliminary accord, that is, one that requires further fleshing out and negotiation, with an appropriate written acknowledgement that the stated terms are non-binding unless and until formalized in a future, comprehensive, signed agreement.
Sometimes, however, clients engage in direct settlement discussions without the lawyers. This can happen for many different reasons, with or without the lawyers’ approval and guidance. Clients have been known to initiate or take over settlement discussions directly with the other side when they feel lawyer ego or clash of personality are impeding the process. It also can happen when one or both clients believe their settlement demands and sentiments have been distorted or otherwise not communicated effectively by the other side’s lawyer to his or her client. Continue Reading Trouble Looms When Clients Negotiate Their Own Shareholder Buy-Out Settlement Agreements