Lawsuits are expensive, and large companies can afford the best lawyers, while the government often can’t.

Each lawsuit has its own reasons, of course. But here are a few common issues:

1. There aren’t enough judges.

• • There simply are not enough judges in the US to handle every lawsuit filed. Many judges encourage lawyers to settle cases that can be settled to avoid clogging up the system. Sometimes they do this reflexively or without good, er, judgement and a case is settled that probably ought be fully tried.

2. It takes a long time to receive justice.

• • A typical civil case takes months to resolve. An atypical case could take years. And then be appealed for additional months or years. Many times, the plaintiff simply can’t wait that long. If you’re broke right now, you’re not in much of a position to hold out for the big payout (and justice) you deserve.

3. Justice is expensive.

• • A personal injury lawyer would charge you at least $200 / hour to work on your behalf with an upfront retainer fee and final costs in the range of $1000 to $10000. That’s for a simple case. A more complex case will cost more per hour and end up at a higher total cost. You could have them work on contingency instead, which saves you a great deal of money during the trial but your attorney may take 50% of what you are awarded. If you are paying hourly, you may very well prefer a settlement because the longer this goes on, the more you’re likely to just break even. If you are paying a contingency, your lawyer may prefer a settlement because 50% of something right now is a lot better than 50% of maybe something a couple years from now. They got bills to pay, too.

4. A settlement might bring about more change.

• • In a quiet settlement, the defendant may agree to change their offending behavior in exchange for keeping the matter quiet. Assuming that they are true to their word (I’ll let you decide how likely that is) this may be the best justice for the plaintiff. If the whole thing goes to a public and embarrassing trial, the defendant may be willing to go scorched earth, put the plaintiff on blast and deny any wrongdoing no matter how many confidential documents were found in their shower.

In short, there are many practical reasons why legal matters are settled rather than going to trial. It may not be the kind of justice you want to see done, but it is often the best option in an imperfect system.

I mean, I agree with you. Companies that break the rules should get sued and get punished. But the reality often is that the person who files the suit often doesn’t really have the time and money to fight all the way to the end. And remember that even then, the court may not always rule in favor of the person who filed the lawsuit. So settlements end up just being a practical shortcut.

Other people have covered the main reasons, which are time and expense. I will just add:

• Lawsuits are public, and a lot of dirty laundry can get aired. They have the potential to be embarrassing for both sides.

• They are also stressful, particularly if you are cross-examined which must be an awful experience.

• Finally, they are risky: even if you think you have a very solid case, there is always a significant chance that the judge will rule against you on the day.

Basically litigation is a bad experience, whether you are plaintiff or defendant, corporate or individual, right or wrong. So both parties have a strong incentive to settle.

In civil cases all you can get is money. If the settlement is acceptable then why not? Both sides are happy to avoid court, less legal fees, less time spent, less worries, it’s the better option.

Often when you see “little guy vs big company”, the case is “little guy’s big insurance company vs big company”. That is the insurance company has already paid the little guy, they just think they can recover some money from a different company that could have done something to prevent the loss. (Think of a recent submarine incident…)

Unless the two sides significantly disagree about the chances of winning, they’re both better off avoiding the costs of trial and the risk of not being able to predict the result by settling. Also, they can have NDAs as part of the settlement and it doesn’t set a precedent, so even if it’s a large settlement other people will be less likely to sue than if they lost.

We need to distinguish between civil and criminal courts. While both have similar rates of “settlements” the reasons why they are struck are very different.
Edit: What I forgot to mention but is super important, the vast majority of lawsuits are super boring. Even in criminal court, for every rape you have 35 people committing larceny theft. You don’t need to go to trial for every single minor theft. So that 5% that go to trial would be the 1 rape and one theft. Same in civil court, most are such petty boring disputes that shouldn’t even be brought up to the court.

In criminal court, the main reason is, things only go to trial if there is sufficient evidence. Otherwise, the prosecutor would drop the case. So the defendant knows they are guilty, they know the prosecutor has a decent amount of evidence, and going to trial has little benefit. By pleading guilty they get a reduced sentence but are still found guilty. Only pleading a “no-contest” would mean they aren’t found guilty. But the court usually has a say in whether that’s an option or not. So everyone involved saves time and the “criminal” gets their fair verdict anyhow. It’s not like they go free just because of a plea bargain, well in most cases at least.
If we go further and look for example at Japan, the conviction rate there is at 99%. And that’s because prosecutors drop almost half of the cases. If US prosecutors would work under the same guidelines as Japanese prosecutors, the conviction rate in the USA would also be above 99%. By extension that also means lawyers have a really good understanding of whether or not a case has a chance during the trial. If there is no point and everyone involved just knows how this is going to end, involving a long trial is not beneficial for anyone. A judge is still involved in the verdict and is saying this is fine.

Of course, there is the issue of innocent people taking a plea bargain. Something that shouldn’t be happening but is an unfortunate reality that doesn’t relate to your question.

In civil court, the disgusting and immoral part is that so many lawsuits have to be filed in the first place. Civil court is mostly about making one party whole. Which in an ideal scenario is happening without the involvement of the court at all. But getting a verdict or judgment wouldn’t do anything. It is still just making one party whole. It just takes longer. And since a lot of cases are grey areas where both parties have reasonable arguments in their favor, finding a compromise is perfectly reasonable. A lot of time there isn’t 1 side with 100% at fault.
The USA is a little bit unique in that regard since it’s one of the few countries that award punitive damages. And whether or not punitive damages are a good thing is a whole different discussion. Most other countries only allow reimbursement for lawyer costs in addition to the actual damages. Funnily enough, in the USA that’s less common.

I’ve been called to jury duty several times in my life and each time, the case has settled before going to trial. So I guess from the perspective of an average Joe whose life/occupation would get suddenly disrupted for an indeterminate length of time, I am grateful when settlements happen?

The way it works (at least here in Ontario, Canada) is that eligible jurors are on some sort of list that rotates around, and once you’re called, you go back to the end of the list again regardless of whether there is a trial. So in other words, you can expect several years of not getting called again.

The court process is slow and lawyers have ways to make it slower. Modern corporate lawyers can drag a case out for years and drain their clients of all their personal income paying their personal lawyer.

Settlement is a chance to cash out early.

There are many good reasons to settle a lawsuit. It feels like you’re mixing up going to trial for a crime with one party suing another.

Most of the time in the US a lawsuit is seeking damages, so the primary goal of the suing party is to receive compensation. If the parties can agree on terms why go through with the lawsuit?

Sometimes the party that feels victimized does not want to testify and relive whatever trauma they suffered.

There are of course exceptions like when a lawsuit is filed for a symbolic amount like $1 or to get a civil verdict where a criminal one failed. Those are designed to either get a victory in the courtroom or compel someone to take an action unrelated to compensation.

Criminal trials are the state charging a company or an individual for a criminal offense. Those trials can end on a plea deal. It’s a mechanism to avoid a hugely expensive trial and the risk of losing altogether. Of course as a the accused party you have much better chances of a deal if you have a great defense that makes the prosecutor unsure they will get the result they want. So it’s inherently unfair to the poor.

America has the “American Rule” which is a basic rule of their court system that both parties must pay their own legal fees. That means if someone with a load of money sues you then you need to pay up to defend yourself or just settle out of court. Settling out of court is often the cheapest way forward. Just like all amazing things, this only exists in America.

As already mentioned, lawsuits are expensive. And if they don’t go your way, they can even get more expensive as you may have to pay the other side’s legal fees.

Also, lawsuits take forever. Even when you go through trial and get a verdict, there is still years worth of appeals coming. Even with a win, you maybe be waiting years.

Settling is far cheaper and sees much faster results, even if you are confident you will win.

The follow up question is why is the process to sue a corporation instead of charging them with a crime, or to make whatever nefarious action the corporations did a crime. The former seems that the intention is just to settle money out of them whereas the latter is more symbolic to seek justice which is more what op is looking for.

Just had this discussion with an attorney friend actually. As a corporation, it is reduction of risk. Spend time on a jury in a criminal case and you’ll see how variable the verdict-making process really is, sadly. Most attorneys will force the hand of corporations to settle — guaranteed small/ medium payout, or a roll the dice chance at having to make a massive payout — they’ll always go the settle route.