(H/t Indiana Law Blog) I am a decent lawyer, but perhaps not a great businessman. I routinely tell clients and potential clients that they’re probably best off if they can reach an agreement with the other guy they can live with, even if they aren’t entirely happy. Once litigation gets cooking, I and the opposing counsel, are probably the only ones who are going to “win.”
A study reported in the New York Times seems to support this advice. The study looked at pre-trial settlement offers that were not accepted in cases that ultimately went to trial. Plaintiffs made the wrong decision by going to trial in 61% of those cases — the final settlement offer by the defendant was higher than the verdict for the plaintiff. Defendants made the wrong decision by going to trial in 24% of the cases — the final settlement demand by the plaintiff was lower than the verdict against the defendant. In 15% of the cases, both made the right decision — the verdict came in somewhere between the final plaintiff’s demand and the final defendant’s offer.
Plaintiffs getting it wrong were off by an average of $43,000. By contrast, Defendants getting it wrong were off by $1.1 million. That might be why Defendants are more likely to settle — their downside for getting it wrong is potentially a lot greater.
â€œMost clients think they are completely right,â€ Michael Shepard, a lawyer at Heller Ehrman in San Francisco. A good lawyer has to be able to tell clients that a judge or jury might see them differently, he continued. â€œPart of it is judgment and part of it is diplomacy.â€