In most US commercial disputes, the first recommendation a client hears from counsel is to settle. The calculus in a listed company is easy to understand: managers are on a payroll, lawyers have commercial reasons to close the file, and public shareholders, in aggregate, will never notice. Nobody in that system is spending their own money.
In a family-controlled business, the calculus is different. Where the family is genuinely convinced it has done nothing wrong, we advise fighting the case to its conclusion, regardless of how long it takes. The Westwick view is that families should never settle simply to make a problem disappear, and never accept to be bullied.
The reasoning is twofold. First, settling creates a precedent. The next claimant will assume that a sufficiently aggressive demand will produce a payout. The costs compound across years, in ways that are invisible until the third or fourth claim has been filed.
Second, refusing to settle sends a clear message: family-controlled businesses are not lambs ready for shearing. Families that return blow for blow when attacked, in our experience, rarely regret it over the long term. Families that settle because settling feels easier almost always regret it, usually about a year later, when the next claim lands.
Frequently asked questions
Should a family-controlled business settle a claim it believes is unfounded?
In our view, no. Where the family is convinced it has done nothing wrong, settling to make the problem disappear creates a precedent: the next claimant assumes an aggressive enough demand will produce a payout, and the costs compound across years. Refusing to settle sends the opposite message. Families that fight such claims to their conclusion rarely regret it; families that settle usually do, when the next claim lands.
Why do listed companies settle more readily than family-controlled ones?
Because nobody in that system is spending their own money. Managers are on a payroll, counsel has commercial reasons to close the file, and public shareholders will never notice. In a family-controlled business the owners carry the cost and the precedent personally, which changes the calculus.
This article is part of our series on family governance. The reference piece for the series: Governing Families, Not Corporations — the Westwick white paper.