Factors Favoring Settlement

Factors Favoring Settlement

Certain cases are more appropriate for settlement than others. However, that there are a number of factors favoring settlement in a particular case does not mean that a case can or should be settled, or that the parties can reach agreement on terms that are fair to both sides. Similarly, that there are factors which weigh against the likelihood of settlement does not mean that a case cannot or should not be settled. Nonetheless, the Trial Attorney may want to consider some of the various factors favoring and disfavoring settlement in weighing the potential for settlement versus litigation.

(a) Factors favoring settlement include the following:

(i) The case involves largely factual issues and the legal principles are well established (e.g., valuation cases, substantiation cases, trust fund recovery cases).

(ii) The case is legally and/or factually complex.

(iii) The case involves multiple independent factual issues (e.g., bankruptcy cases).

(iv) The case is one where there is a particular need for a prompt resolution of the dispute (e.g., summons, estate tax and bankruptcy cases).

(v) The case is one where a consensual resolution may lead to greater future compliance (e.g., employee-independent contractor cases).

(vi) A settlement in the case would be based solely on collectibility.

(vii) The other party has a particular need to keep information confidential (e.g., financial information or trade secrets).

(viii) There are problems perceived either with respect to the decision-maker or the forum, for example:

(A) The judge is particularly slow in resolving cases;

(B) The docket is backlogged with criminal and/or civil cases;

(C) There is the potential for jury nullification.

(ix) The case is one where the Government will be required to litigate in a forum other than a federal court.

(x) The case is one where the nature or status of a party to the dispute might, in itself, influence the outcome of the litigation (e.g., sympathetic plaintiff).

(xi) The case is one where there are substantial litigating hazards for both parties.

(xii) The case is one where trial preparation will be difficult, costly and/or lengthy and the expected out-of-pocket and lost opportunity costs outweigh any benefit the Government can realistically expect to obtain through litigation.

(xiii) The case is one where it is desirable to avoid adverse precedent.

(b) Factors disfavoring settlement include the following:

(i) Taxpayer's case clearly has no merit (e.g., certain Bivens cases or protestor suits).

(ii) The case is one that should be resolved on motion, such as a motion to dismiss or for summary judgment.

(iii) The case presents an issue where legal precedent is needed, for example:

(A) Issue involved is of national or industry-wide significance;

(B) Issue is presented in a substantial number of cases;

(C) Issue is a continuing one with same taxpayer.

(iv) The importance of the issue involved in the case makes continued litigation necessary despite some adverse precedent.

(v) The information presently available about the case is insufficient to evaluate meaningfully the issues involved or settlement potential.

(vi) The case involves significant enforcement issues, for example:

(A) Case involves protestors;

(B) Case is high profile and will involve publicity which could encourage taxpayer compliance;

(C) Case involves a uniform settlement position (e.g., shelter cases).

(vii) The case involves a constitutional challenge.