Last week’s mail brought a Los Angeles County Superior Court Jury Summons by which I am ordered to be available in March for civil jury trials at the main civil courthouse in downtown Los Angeles ….in the middle of a pandemic. Needless to say, due to the surge of the Covid-19 virus in Los Angeles County, no civil jury trials are being conducted as the courtrooms simply are not large enough for socially distanced jurors to gather and the county does not have the technology to attempt jury trials by video conference. In fact, the presiding judge’s most recent emergency order has pushed criminal trials back to February 26, 2021. And I will not be surprised if a new order is issued pushing such trials even further into spring/summer.
This summons, while oxymoronic, got me thinking about the role a trial plays in a mediation. Because the case is in litigation, many lawyers and their clients evaluate a proposed settlement during a mediation in terms of a potential jury verdict; is the proposed settlement better or worse than the plaintiff/defendant will do at trial? Sometimes a decision tree is used by which a plaintiff’s lawyer will guess estimate a potential verdict amount ( let’s say $100,000), guess estimate the percentage chance of winning (let’s say 80%), deduct the upcoming costs of discovery, experts , trial preparation and trial (let’s say $10,000) and use that amount ($100,000 x 80% =$80,000 -$10,000 =$70,000) to assess if the offer from defendant is worthwhile. If the offer is less than $70,000, the plaintiff is liable to reject it, thinking she can do better at trial.
But can she do better at trial? Is this a fair comparison? Or is it a fallacy to use such a comparison? Is the plaintiff, in fact, comparing apples to oranges?
I suggest it to be a fallacious comparison because most cases involve a lot more than the exchange of money or a request that a party do or not do something. At trial, the only remedies a judge/jury can award are either money or an injunction to do something or to refrain from doing something. A dispute involves a lot more than just these remedies. It involves needs, interests, values, principles and even relationships. In a partnership dispute , the parties may be more concerned about trying to preserve the relationship than about who owes whom money. The same is true for many sales transactions gone awry; often the parties settle by agreeing to a discount on future business transactions. Many matters settle at mediation on non-monetary, non-injunction terms. Rather, the settlement is geared towards what the parties (not a judge, not a jury) think to be substantively fair, taking into account their own particular values and norms. Thus, their settlement may often NOT mirror what a judge/jury may award.
In truth, to try to compare a potential settlement amount with a potential jury/judge verdict is speculative at best and a waste of time, at worst. It is simply unknowable what will happen at trial. If anything, it demonstrates an overconfidence bias- or a tendency to be more confident in our abilities than is objectively reasonable. This was demonstrated in a study conducted by Randall Kiser, Martin A. Asher, and Blakely B. McShane entitled Let’s Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations, 5 J. Empirical Legal Studies 551 (2008). The researchers analyzed 2054 contested cases of all types filed in the California Superior Courts between November 2002 and December 2005, comparing the last and best settlement demands and offers made in those cases with what happened at trial, that is, the judge/ jury verdicts. What they found is that in 61.2% percent of the cases, plaintiffs received less at trial than the last settlement offer made. The average difference or loss was $43,100. With respect to defendants, they made the wrong decision about 24.3% of the time but it cost them a lot more- $1.140,000! (Id. at p. 566 of study)
If nothing else, this study highlights that comparing a settlement offer with what might happen at trial is indeed, speculative. Rather, in deciding whether to accept/make a settlement offer, isn’t it simply wiser to consider the interests, needs, values and principles at stake for the parties and nothing else?
… Just something to think about.
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