If you start a lawsuit, or if you defend a lawsuit, you can always settle. The courts encourage it.
Often, parties conduct settlement negotiations under the protection of "without prejudice" communications. That is, the parties agree that anything said or produced during settlement negotiations cannot be referred to in a hearing or in trial. If "without prejudice" communications did not exist, then parties would never communicate freely, honestly, and fully during settlement attempts.
A settlement during a lawsuit will require the lawyers to draft:
- a settlement agreement (describing in detail how the parties will settle the dispute);
- either a consent dismissal order or a consent to judgment (to tell the court that the lawsuit is over);
- releases (a document in which parties agree to release the other party from legal liability).