Victoria Pynchon has responded to my question about getting parties to the settlement table pre-trial, although she hasn’t had a chance to answer it fully since she apparently has a real job outside of blogging.
While we’re waiting, I do want to address the study (to be published in the Journal of Empirical Legal Studies, covered by the New York Times) that originally prompted her post.
Here’s the punchline:
Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.
On average, getting it wrong cost plaintiffs at about $43,000; the total could be more because information on legal costs was not available in every case. For defendants, who were less often wrong about going to trial, the cost was much greater: $1.1 million.
First, a caveat: I haven’t seen the study, and I am always wary of commenting on the way a study was reported, which usually differs greatly from the study and its results, even with the best of reporting. Further, based on what I can gleam from the article, the authors may have conflated too many types of disparate cases together — few trial lawyers would say that soft-tissue automobile accident cases are litigated, tried or settled the same way as wrongful death medical malpractice suits — so the data may not be as useful as the article claims.
That said, I think many of the conclusions around the blogosphere (e.g., "Settlement is Better than Trial") are off the mark, given what we know.
Based on those numbers before, plaintiffs should always take big cases to trial. Here’s why:
The numbers show that, 61% of the time, plaintiffs get less at trial than they were offered. 24% of the time, they get more. Ergo, if you take a case to trial, the odds roughly 3 to 1 that you’ll do worse for it.
But look at the difference in the money! 3 out of 4 times, a plaintiff loses on average $43,000 by going to trial. 1 out of 4 times, a plaintiff gains on average $1.14 million!
Thus, every single "win" cancels out a whopping 26.5 "losses!" Yet, based on the data above, as a plaintiff you don’t "lose" 25 out of 26 cases, you "lose" 3 out of 4 (keep in mind that we’ve excluded the 15% of cases were both sides were right to go to trial).
The expected value / expected return for choosing trial over settlement is a whopping $1.01 million!
Based on those numbers, why on earth would I ever settle anything again?
Let me conclude: I’m assuming, as noted above, the study was either misreported or in fact jumbled disparate or outlying data together. Based on what we have, though, settlement is never the right choice unless you get every penny you’ve demanded.