Upcoming Study Based On 2002-2005 Trials Concludes Settlement Is the
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As we have seen from past posts, attorney’s fees can “make or break” a litigant, either in prevailing, in not prevailing, or in having the trial court determine there was no “prevailing party.” This result occurs because the fees and costs frequently outstrip the compensatory recovery by several multipliers.
This raises the risk assessment question of whether it is better to settle or go to trial. A recent study, to be published in the September 2008 issue of the Journal of Empirical Legal Studies, examined 2,054 civil cases going to trial from 2002 to 2005, concluding that it is better to settle. The New York Times has reported on the study and received many comments from its readers.
Here are highlights from the upcoming study:
· Plaintiffs—who have far more to lose—made the wrong decision in 61% of the cases by proceeding to trial rather than settling;
· Defendants only made the wrong decision of going to trial rather than settling in 24% of cases;
· Only in 15% of cases were both sides correct in going to trial (i.e., the plaintiff recovered less than plaintiff’s settlement demand and plaintiff recovered more than the defense had offered);
· From an averaged perspective, the wrong decision in not settling cost plaintiffs about $43,000 while it was much more expensive for defendants to the tune of $1.1 million (which may account for why defendants are less “wrong” in the settlement/trial decision making process);
· Poor decisions of proceeding to trial have actually increased over time based on a study of trial outcomes over 40 years through 2004; and
· Plaintiffs in contingency cases made increased “poor” decisions on going to trial (because they had nothing to lose), while higher error rates were noted by defendants where insurance coverage was generally unavailable (which means the defendants may have been judgment proof or there was less to gain when the risk was uninsured).
This study may give empirical support to such clichés as “a good settlement is better than a bad judgment” or “a good settlement is a ‘grumbling’ one (i.e., both sides go away unhappy).”