In-House Counsel

Settlement Happy CEO? Don’t Be Afraid To Push Back

Legal concerns may take a backseat to business ones, but that does not mean you should simply fold.

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In my experience, there are two types of settlements that exist in the in-house world.

The first are the cases which are obvious candidates for a settlement. Those where the facts and evidence are not overly favorable to one side and the outcome in a court could be a toss-up.

Tasked with being overly cautious by nature, I always push my team to settle these sorts of cases out of a fear of the unknown. And by and large, I generally feel positive each time I sign-off on one of these types of settlements.

The second type of settlements I have dealt with are those in which I have been instructed to reach a settlement at all costs. This second type, to be blunt, often sting.

These sorts of settlements generally arise out of a desire of a member of the C-suite to maintain an existing relationship with a vendor, contractor, or some other known entity. Fearing that a potential lawsuit could harm the relationship or bring unwanted outside attention, I have been tasked with settling many cases in which I think our company would stand a good chance of prevailing if it were heard before a judge.

Although it often pains me to settle a case when I know our company would likely prevail, as in-house counsel, I understand I may need to set aside my legal mind for a business one. However, that does not mean you or your team should be afraid to push back if your company is truly getting a raw deal.

Our in-house team has been engaged on a matter dating back over three years. As a high-level restatement of facts, this matter involves a long-standing vendor of ours whom we pay an annual bulk rate and subsequently adjust the value of the contract at the end of the year where we, in theory, either recoup unused funds or issue additional remuneration to the vendor if it is owed.

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Three years ago, a routine audit uncovered the vendor was billing our company for a line of services our contract expressly stated could not be counted toward their annual rate. In essence, going back at least five years, we had documented proof the vendor had overcharged our company which had resulted in several million dollars in errant overpayments.

Despite this clear and documented proof, our CEO had instructed we simply work through it via small rate adjustments to their future contracts.

A fine plan, with which I had no original objection, if the vendor had agreed to keep up their end of the bargain.

After the first year in which they failed to make any effort to make an adjustment, I alerted our CFO who subsequently had lunch with the vendor and later advised me to give them a second chance.

After the second year in which they failed to make any effort to make an adjustment, I alerted our CEO who subsequently had dinner with the vendor and later advised me to give it another year.

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Sensing a pattern here?

After the most recent year of failure by the vendor to make any effort to make good on their back debt, I was finally able to convince our C-suite that a painless settlement may not work in the scenario.

Thankfully, this time, they agreed and gave my team the permission we needed to finally drop the proverbial hammer.

Working in-house, I appreciate that my legal concerns may take a backseat to business ones, but that does not mean you should simply fold if you are given a directive with which you disagree. Sure it took me three years before I was finally given the clearance I wanted from day one, but at least I know this will be the vendor’s final year of giving us the run around.

Stephen R. Williams is in-house counsel with a multi-facility hospital network in the Midwest. His column focuses on a little talked about area of the in-house life, management. You can reach Stephen at stephenwilliamsjd@gmail.com.

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