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May 14, 2012

Settling Litigation- The Business Side of the Equation

Intel Corp., the semiconductor giant, settled an antitrust lawsuit brought by the New York Attorney General in February, 2012. The suit, filed in Delaware, was compromised by procedural missteps committed by the AG's office. That said, the suit was otherwise viable. Intel paid 6.5 million dollars to settle the dispute although it absolutely maintained that it committed no violations. Given the dollars paid, it is highly likely that Intel viewed the settlement as merely a "cost" of doing business. On the contrary, in conducting a "risk-benefit" analysis, the 6.5 million dollar settlement - with no admission of wrongdoing - was, no doubt a relatively easy decision for a company that recently reported a 14.3 billion dollar revenue quarter. The settlement will not materially affect the company's share price, and the cost of antitrust litigation would almost certainly have exceeded the payment. The other component of the risk analysis was the outcome of the litigation. Here, the outcome was not only reduced to both quantifiable and positive, but is now certain as well. This was simply smart business.

Obviously, not every business decision involving settlement of a case is this easy. Nevertheless, whenever settlement is a possibility in a business litigation case, it is crucial that both counsel and client undertake a painstaking analysis of all relevant factors other than simply the amount sought by the opposing side. How much are we paying? (or accepting as the case may be)--how much will I pay in litigation fees and costs going forward? What is the likelihood of success? What are the consequences and risks if I do not settle?

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