Anatomy of a Settlement Offer

I'm gonna tell on you

As part of Rogers' settlement negotiations, on October 4, 2006, Rogers sent me a settlement offer on top of which they wrote the words "with prejudice" and in which they said: "Take our offer of $5,000 on your $10,000 claim or we're going to move for summary judgment, claiming that, with our payment of $5,000, we've fully paid your claim."

The conjunction of an offer to settle with a proviso that, if the offer is refused, Rogers will go to court to get what they cannot get by consent is a bit puzzling. Why bother making an offer if you feel you can anyhow get a juge to order the other party to accept your offer? Why not go straight for the court order?

It's sort of like the following, isn't it?:

Imagine your big brother takes your new bike for a joy ride without asking and returns home at the end of the day and informs you that he left it by the side of the road when he was buying candy from the corner store and a truck ran over it. You throw up a mighty storm of complaint and head off to go tell mom. But as you're on your way up the front stairs, your big brother grabs you by the shirt and tells you: "Look, I'm going to offer to buy you a used bike to replace your new one. If you don't accept my offer, then I'm going straight to mom to tell her that I've already replaced your bike and complain to her that you've got nothing to complain about. Take it or leave it. What do you say? "

This formulation is odd, no?

Why bother asking your kid brother to take a used bike in exchange for his squashed new one if you're confident that mom will anyhow regard this as a stellar solution to the present squabble.

And if you were going to approach things in the manner of this big brother, wouldn't you want to be pretty damn sure that your mom will unequivocally take your side about how much a shattered new bike is worth? Who wants to be humiliated in front one's kid brother. Your little brother could just smugly turn around and gloat about what a doofus you are and do the whole nana nana boo boo thing as mom tells you you have to cough up for a new bike out of your allowance.

What function does such an oddly formulated offer serve?

"With Prejudice"

And what function is served by that phrase "with prejudice" that Rogers wrote across the top of their offer?

Isn't that phrase kind of like saying to your kid brother "And anyhow, my buddy here just heard me offer to get you a used bike and he'll tell mom that I'm the reasonable one and you're just going nuts over your stupid bike that was anyhow just a crappy imitation racer."

What if you're the kid brother and your big brother added "You know, I'm only making this very generous offer to get you a used bike because I don't want the hassle of having to deal with mom when she's coming home from a busy day of work. You know what she gets like."?

Does that phrase "with prejudice" serve a purpose other than the grandiloquent emphasis "And I mean it!!" or "I'm gonna tell on you!"?

Does it do anything more than spread a vague kind menace all over the whole page?

Does "with prejudice" have some kind of formal legal voodoo in it, or is it all just a bunch of hooey?

If you had all sorts of thrilling plans to ride your gleaming new bike like the wind, do you think you'd just accept your big brother's "with prejudice" offer of a used bike?

Or would you say: "You're not the boss of me!"

Kid Psychology and The Law

The legal prohibition on alerting the trial judge to the existence and content of settlement negotiations has some analogies with that point that parents reach when they refuse to let one child tattle on the other, preferring to encourage siblings to learn how to resolve their fights on their own, and also preferring to be left in bloody peace from the particular plague of resolving petty little rivalries.

Ordinarily, entering settlement offers into the court record is strictly forbidden, both in the general Rules of Civil Procedure, and in the Rules of Small Claims Court. It's fully recognized that trials are costly, not only for the parties, but for the state. And it's also recognized that justice at law can be crude. The court can only decide who's the winner and who's the loser. There's nothing subtle about a court judgment; there's no room for compromise, nor for taking into account all sorts of innovative ways to ensure that all parties come away with something. While parties can come to imaginative solutions through settlement agreements - through what might be called "private law-making" in which the parties craft a unique contract suited to the particular needs of each party - the court can only order what the law tells them it can order.

In light of the blunt instrument of a court judgment, in light of the costs of going to trial, and in light of limited state resources, the law does what it can to encourage people to settle their disputes out of court. One of the structures that promote the negotiated settlement of disputes is this legal rule that says that it is forbidden to let the trial judge know about settlement offers, and counter-offers.

If Party A tries to compromise and offers to settle for less than the full claim, or party B tries to avoid a costly trial by offering to pay a good part of the claim, those attempts at compromise shouldn't subsequently be used against them. It wouldn't be right if one party tries to compromise and the other party turns around and goes to trial and says: "Look here. Party B already admitted liability." Or said to the judge: "You see? Party A already accepted that her claim was too high." If settlement negotiations could be presented to the judge in that way, then who would ever offer to negotiate in good faith?

To foster good faith in negotiations, then, and to promote the timely, and well-crafted settlement of disputes, the court precludes parties from alerting the trial judge to what they have been talking about.

So strict is this rule that communications about settlement negotiations are NOT to be shared with the trial judge that it would also be illegal to go through the back door and talk about a settlement offer in the media, hoping to catch the judge's ear.

The law is clear: Settlement negotiations are strictly confidential. The only purpose for entering them into the court record is for those deliberations that arise AFTER the judge has determined liability and damages. At that juncture, the court will hear about settlement offers because the matter who has to pay costs hangs on this point:

If Party A offered to pay Party B $50 of a $100 claim and the judge, at the end of a trial, ordered Party A to pay $50 or less, then the judge could say to Party B: "You can pay Party A's legal costs. This whole trial could have been avoided, including the costs to which you put Party A, if you had just accepted Party A's offer in the first place."

The law is clear, but lawyers have adopted a practice of writing "without prejudice" on the top of their settlement offers. This phrase has virtually no meaning. It's meant to flag for the party receiving the offer that this missive is part of a settlement negotiation and therefore should not be entered into the court record in a way that prejudices the judge against the offeror.

But the law already forbids parties from entering settlement negotiations into the court record. So the phrase is redundant. It operates, I suppose, as a way of saying: "This is a settlement offer. Don't tell the judge about this." Well, duh. It's a settlement offer.

As it is meaningless to write "without prejudice" on settlement negotiations, it is even more meaningless to write "with prejudice". The phrase "with prejudice" can only mean: "I'm going to tell the judge on you about how unreasonable you've been in settlement negotiations." But that defeats the whole point of the law that shores up good faith and compromise in settlement negotiations by ensuring their confidentiality.

One can easily imagine that many parties get to the point where they think the other guy is being unreasonable and obstinate and a downright jerk. One can easily imagine that many parties want to tell the trial judge how irrational and stubborn they think their opponent is. Many parties have reached that moment when they feel like grabbing a judge by the collar as he walks past the negotiation room to say "D'you see what I have to deal with? D'you see what this guy's putting me through. He's going to put you through it too if you let him."

But because doing so would violate the very strict rules of confidentiality surrounding settlement negotiations, which are a verboten topic with the judge.

So how come I can tell you about Rogers' settlement offer?

In the circumstances of a motion for summary judgment, Party A advances an argument that there are no genuine issues for trial - that there's no point wasting the parties' and the court's time on a trial. Under these circumstances, very exceptionally, a court might allow a party to enter their settlement offer into the court record to show that the other party is being completely unreasonable, has nothing left in law to argue about, and should be finding another venue for their sense of disgruntlement.

Rogers, like the big brother who busted his little brother's new bike, appears to be endowed with a robust sense of self-righteousness. Though Rogers pitched itself as graciously stooping to make a generous offer to settle my claim, Rogers' legal team was simultaneously confident that a judge and Rogers would be of the same mind; that a judge would agree that Rogers offer to pay $5,000 into court on a $10,000 claim would render all further legal issues moot. Therefore, claiming Spock-like powers of mind-meld with the motion judge, Rogers was confident that it would not be violating the rule against entering settlement offers into the court record.

And so, Rogers entered its offer into the court record.

Once Rogers' offer is in the court record, anybody can walk off the street into Toronto Small Claims Court and pay $10.00 to have a look at it.

Or I can spare you the cost and trouble and just share with you what is now part of the public record.

Given that Rogers entered their offer of settlement into the court record and claimed that I rejected that offer, I, of course, had to set the record straight and rectify the claim that I was obstinate and obstructionist and unreasonable. I had to enter my counter-offer into the court record.

And so, now you have it, you can look at both documents that would ordinarily constitute confidential exchanges. Ordinarily, Rogers' modus operandi would be off the record, hived away from public view, private, secluded, and inaccessible to the scrutiny of inquiring minds. But Rogers is laying it out for all to see in this case.

And now that Rogers has entered these otherwise confidential negotiations into the court record, the trial judge, too, can peer in on how our negotiations are going, can make a little mental note that Rogers clearly thinks that it needs to pay my TOTAL claim; can observe that Rogers has already assumed full liability for my damages; can take in that Rogers is fully desirous of paying both compensatory damages for breach of contract (despite Rogers' Wireless Service Agreement) and fully desirous of paying punitive damages.

The trial judge can even see whether another judge thought Rogers was right that I was being unreasonable in my assertion that $5,000 is HALF my total claim; and combining it with a goodwill payment from Ted of $5309.60 doesn't make up the difference. "Let's just see," he or she might mumble to him or herself, rifling through the file, "what the motion judge for Rogers' October 26, 2006 summary judgment thought about Rogers' arguments in this nifty, well-bound, factum from Lang Michener, LLP here. Hmm. Look at that. The motion judge thought Rogers' arguments were pretty bogus."

Of course the judge can do this: Rogers entered all this stuff into the court record that the trial judge now has to plough through.

And if Rogers now worries that its "with prejudice" offer and my "with or without prejudice" counter-offer might prejudice the mind of the judge, well it's hard to see how Rogers can plead its own contempt of the Rules of Small Claims Court. Rogers explicitly and redundantly wrote "with prejudice" on their settlement offer - i.e., "I'm prepared to have the judge hold this against me"; and shortly thereafter, through a motion for summary judgment, Rogers called the judge to come and have a look at how things are progressing between Rogers and me.

I suppose I could get a motion to hold Rogers in contempt of court for entering settlement negotiations into the court record. I just don't happen to be, at the moment, inclined to do so.

Anatomy of a Summary Judgment

Anatomy of a Humiliation