HOW TO COUNTER CLIENT-THINK AND IMPROVE SETTLEMENT DECISIONS
Do we as lawyers suffer from the Lake Woebegone Effect that causes us to believe that our case assessments are all above average? In fact, studies show that more than 80 percent of lawyers believe they are in the top 10 percent when it comes to judging outcomes. (Jane Goodman-Delahunt et al, ‘Insightful or Wishful: Lawyer Ability to Predict Case Outcomes’, Psychology Public Policy and Law (May 2010)) This is important because to settle a case we have to reach some valuation of the matter – what is the likely result at trial or arbitration and the costs and fees going forward. If the parties have assigned wildly different values to the case, there is unlikely to be a settlement because they will both be convinced that going to trial will produce a better result for the client.
But how are we doing in reaching judgments and advising clients on settlement? The answer is not too well. We know from several large-scale studies undertaken by Randall Kiser and his colleagues, first on the west coast and then on the east coast, that settlement decisions are often mistaken. The results of these studies were counterintuitive because many lawyers believe that if a case proceeds to trial the parties are in equipoise. Instead, they found that in turning down settlement and going to trial, 61 percent of plaintiffs’ attorneys made a mistake because they received awards at trial that were equal to or less than the settlement proposed (the study did not count fees and costs, which would have significantly increased the error rate). Defendants made mistakes (paying as much or more than the settlement demand) in 24 percent of the cases, but their mistake was nearly 20 times more costly – in the millions of dollars instead of in the tens of thousands. Kiser’s book Beyond Right and Wrong (Springer 2010) deserves a place in every lawyer’s library because it provides critical insight to base rates lawyers so often ignore.
Apr-Jun 2014 issue
Center for the Study of Dispute Resolution