Friday, February 22, 2013

Maybe they should have settled...

Lawsuits (and even criminal trials for that matter) can be tricky situations in most cases. Even though you think you are right, there is still enough doubt that the other side thinks that they are right. Clear-cut cases seldom end up in court. Given this, the issue always comes up about negotiating a settlement. A settlement is going to cost you something, and that cost can taste extra sour given your convictions that you are right, but sometimes settling is the best choice. It's just that you will be left with nagging doubts about whether you should have settled or whether you should have stuck to your guns. You just never know for sure that it was the best choice...

Except in this case. The plaintiffs charged price-fixing against a number of suppliers of chemicals used in making polyurethane foam. All of the suppliers except one settled:
"In 2006 Bayer AG agreed to pay $55 million. In 2011 Huntsman International LLC agreed to pay $33 million and BASF Corp agreed to pay $51 million."(Source)
Those are not inconsequential sums of money, but at the same time, those figures would barely show up in the annual report, as these companies all have sales around 1000 times larger.

But as I said, all but one of the defendants settled. The last defendant, Dow Chemical, stood firm on their convictions and pressed on with the trial. The end result could not have made anyone in Midland happy - the jury found them guilty and hit them with a $400 million fine. The judge also has the option to triple this making it a nice sum of $1.2 billion. While this will all be appealed (never an easy process as appeal courts loathe overturning jury decisions, and are more likely to just reduce the fine), it's seems pretty clear that taking a bite of the settlement-humble pie might have been the better choice.

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