Today, the New York Times had an article on a soon to be released study which analyzes the decision to settle of go to trial. The study, which will be published in the Journal of Empirical Legal Studies, is based on over 2,000 cases which have recently gone to trial. It found that plaintiffs made the wrong decision to proceed to trial in 61% of the cases and that the average difference between the rejected pre-trial offer and the final award averaged $43,000. On the other hand, the study found that the defendant was wrong to go to trial in 24% of the cases, but the consequences were much worse, as the difference between the rejected offer and the final award averaged $1,140,000. The study found that in 15% of the cases both sides were right to go to trial, which means the defendant paid less than the plaintiff wanted but the plaintiff was awarded more than the amount of money offered by the defendant.
So, what does this study tell us? In my opinion, very little. First of all, each case is different and to base a settlement decision on a study is flawed reasoning. Each litigant must rely in large part on the advice of their attorney. The parties have to hope they have retained an experienced litigator who fully understands their case. The attorney must understand the good and the bad parts of the particular case, and believe me: all cases have strengths and weaknesses. Many factors go into a case evaluation: witness credibility, evidentiary evaluation, venue considerations (how do juries in your locale look at your particular case) and the tendencies of the particular judge hearing the case. These are just a few of the many, many things an experienced litigator must take into account in coming up with his or her recommendation on whether to settle the case or to pitch it to a jury.
Another problem with studies such as this is they do not take into consideration the settlement discussions of the parties. Sometimes one side or the other makes no reasonable attempt to get the matter resolved. If the plaintiff hangs the fruit too high, so to speak, then the defendant is not inclined to make a reasonable offer as it will be thought of as useless. Or if the defendant only is offering a token amount when the case is worth much more, then the plaintiff will not be inclined to make a demand in the “range of value.” So how does a case get productive negotiations going? Usually it takes lawyers on both sides who understand the case and it usually takes a good mediator who will take the time to understand the case and help the parties see if a settlement can be reached. The statistics here in Texas show that most cases settle at mediation or soon thereafter.
This study reinforces two things I already knew. One, the parties must make sure they hire the right kind of lawyer for their case, which usually means an experienced specialist in the field that their case involves. The other thing that this study reinforces is that the lawyer needs to make sure he or she does everything they can to properly evaluate the case and prepare it for trial. If the attorney does their job properly, then there is a good chance the value of the case will be properly targeted. And if it settles and that is what the client wants, then that is good—and if it goes to trial, the attorney will be ready to put on the best case possible