By Dr. Ken Broda-Bahm:
On the path from the initial dispute to the ultimate disposition of a case, there are many forks in the road. In choosing whether to take the path of settlement or to continue on to trial, one of the most trusted advisors is, and should be, the trial lawyer. After all, that is the person with the courtroom chops to provide a solid and realistic appraisal to clients, insurers, and aligned parties. But how good are trial lawyers at making those estimates? Some research seems to point to the conclusion that they’re not good. And experience doesn’t even appear to play a strong role in improving that predictive judgment.
That raises the question of whether attorneys and their clients are ultimately making good decisions on whether to settle or proceed to trial. The subject has been under-studied, in my view, but there are some reasons to believe that the assessment is not as systematic as it could be. Canadian law professor Michaela Keet (2017) recently conducted a study focusing on lawyers and law students to look at the way attorneys think about litigation risks as well as the effects of developing a more comprehensive framework for risk assessment. Taking a look at that research, this post will share some thoughts about the problem as well as the proposed solution.
The Need: A Rational Basis for Settlement or Trial
It shouldn’t be simple combativeness and vengeance that takes you to trial. And it shouldn’t be simple exhaustion or fear that takes you to a settlement. Lawyers obviously give careful and extensive thought to that question. But litigators will also give significant weight to their own gut evaluation, without always saying (or necessarily knowing) what exactly is going into that “gut” assessment. As professor Keet writes, “Lawyers may be assessing and communicating litigation risks, but often — and often enough to be a concern — use informal approaches and vague language, and fail to factor a full range of risks into the analysis.” This can limit the potential success of a negotiation, as Keet notes, or it can cause parties to turn to settlement as a safe harbor, even when a more comprehensive weather report might say that trial is the better course. Given the events that lead to litigation, the financial values at stake, and the emotional investments the parties often make, the stakes are high. An analysis of the best path forward should be as rational and as systematic as possible.
The Problem: ‘BATNA’ Breaks Down in Litigation
When students of negotiation want to emphasize that rationality, they’ll talk about the “BATNA,” or the Best Alternative to a Negotiated Agreement. That is, we should gauge the success of a negotiation based on whether it produces a result that is as good as or better than the best available alternative. The problem is that in litigation, it isn’t always clear what that alternative is. “When litigation is underway,” professor Keet notes, “the best option short of a settlement agreement is usually to continue to litigate.” And when the alternative is seen as just continued movement toward an uncertain outcome, then the concept of the BATNA breaks down. The problem is that this alternative of continuing to litigate is process, not outcome. Keet continues, “General assessments of BATNA may be empowering (‘If we don’t get the deal we want, then we will litigate’), but can still leave the negotiator rudderless inside the negotiation, and therefore open to being buffeted toward misguided decisions.”
The Other Problem: Litigators Take Refuge in Imprecision
The reason the alternative is often left uncertain is often a direct result of the kind of advice that lawyers will often give. I can’t count the number of times I’ve heard, “a jury can do anything” and, yes, it is true at a certain level. But when that becomes a substitute for making one’s assessment as solid as possible, it reduces the chances for a rational resolution. As professor Keet explains, “informal and vague discussions of litigation risk are prevalent, leaving troubling gaps in what clients hear and understand.”
Based on her interviews, lawyers “use vague terms such as ‘no guarantees,’ ‘who knows what a judge will do,’ and rarely set out risks in precise, one-page written form, relying instead on long opinions which are difficult to understand, or anecdotal predictions in passing conversation with the client.” One lawyer she spoke with, for example noted that most lawyers, “don’t actually believe that there’s any scientific principle that will help. They actually believe that their case is unique…which then justifies a gut response to their case.” When there isn’t a clear projection about where a case is headed, that can leave clients alternately anchoring on their optimistic hopes or magnifying the likelihood of a worst-case outcome.
The Solution: An Informed Litigation Risk Assessment
There will inevitably be unknowns in the litigation process. Whether your ultimate fact finder is a judge, a jury, or an arbitrator, you don’t have a crystal ball on what that person or panel will do. At the same time, rational decision making requires that you identify some reasonable likelihoods and parameters around that decision. Professor Keet recommends a practical framework for litigation risk assessment that includes three steps:
1. Projecting Litigation Outcome (including the likelihood of both liability and damages results)
2. Projecting Litigation Costs (including not only financial costs, but also disruption, opportunity costs and emotional costs)
3. Calculating the Expected Value (calculating the outcome in step one minus the costs in step two).
Sharing the results of experiments involving second- and third-year law students, she notes that those who did not follow that process tended to stick with inflated demands and to retreat to advocacy and posturing, while those who completed good risk analyses made more progress and ended up with better results.
In Keet’s experiments, however, the litigation risk analysis seemed to be a purely logical exercise: Students assigned likelihoods and values based on their judgment. In actual litigation, the attorneys, who are also advocates, might be more prone to view these judgments through the adversary lens of a persuader, which is likely to bias the estimate.
The better course is to add the key ingredient of independent information. Invite noncommitted colleagues to weigh in, research the results of similar cases in your venue, or best of all, conduct a simulation: a mock judge or jury trial.
Obviously, a prediction is never going to be perfect. But at the same time, if you let the thought of, “I could be wrong” stop you from doing a risk analysis, then you’re pretty much guaranteed to be wrong. The goal post is not a perfect prediction, but an assessment that is better, more grounded, and more realistic than your adversary’s assessment. Professor Keet concludes her article, “If more accurate predictions of risk enable better communication, advice-giving by the lawyer to the client, and better deliberate management of the negotiation process then client interests — and lawyers’ professional obligations — are better served.”
Other Posts on Case Assessment:
- Beware the Bias for the “Safe” Call in Case Assessment
- Predict With Care: Adapt to Overconfidence in Case Assessment
- Add Another Pair of Eyes to Your Case Assessment
Keet, M. (2017). Litigation Risk Assessment: A Tool to Enhance Negotiation. Cardozo J. Conflict Resol., 19, 17.