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REASONS TO SETTLE; REASONS TO MEDIATE

An August 8, 2008 article in the New York Times by Jonathan D. Glater caught my attention with the caption “Study Finds Settling Is Better Than Going to Trial.”  The article discusses an empirical study concerning the outcome of civil lawsuits and how trial verdicts compare to settlement offers.*  The data that was compiled (based on 2,054 cases that went to trial from 2002-2005) showed that 61% of the time plaintiffs got less money in trial than they would if they had accepted the last settlement offer.  Additionally, the study revealed that although defendants made a “wrong decision” by proceeding to trial in only 24% of the cases, it cost them an average of $1.1 million. 

Multnomah County Circuit Court Judge Kristena LaMar has, essentially, conducted a similar study of her own.  Since January 1988, she has compiled data on auto accident cases comparing jury verdicts to settlement offers and demands.**  While she does not statistically analyze the data to determine the percentage of times the plaintiff “won” (i.e., beat the last offer) versus how often the defendant “won” (kept the verdict below the offer) even a cursory review of her data reveals that it is in line with the empirical study discussed above.  In other words, defendants win more often than plaintiffs, but when they get hit, they get hit big!

The upshot of these statistics is that it generally is better from a financial standpoint to settle a case than go to trial, for both plaintiffs and defendants.   This is particularly true when you consider that the stats do not take into account the cost of going to trial.  In other words, the data simply compares the last settlement offer with the jury’s verdict; it does not reflect how much the parties paid for expert witnesses, the lawyers, court reporters and trial fees to get that jury verdict.  It does not take into account the fact that many contingent fee arrangements provide for a greater share of the recovery going to the plaintiff’s attorney if the case is tried.  It does not take into account the cost of bad faith litigation if the jury verdict exceeds the defendant’s policy limits.  When taken into consideration, these financial realities likely skew the results between settlements and verdicts even moreso.

But, perhaps most importantly, the statistics do not take into account the cost of the emotional toll that trial takes on parties.  This is particularly true, I think, in cases where the parties have had some kind of relationship (such as with dissolutions of marriages or domestic partnerships, employment claims and disputes involving neighbors or family members).  But even in casualty cases where the parties are likely to be strangers, it is common for people to experience considerable stress over going to trial.  Many folks in our community are even uncomfortable or embarrassed about bringing suit against someone and did so only because the statute of limitations was looming; these plaintiffs are often appalled at the idea of publicly displaying their lawsuit.    For others, the idea of discussing their personal affairs or medical problems in front of twelve strangers is almost too much to bear.  For defendants, when the claim seeks more than their policy limits, there is considerable worry about the financial impact of the suit.  The “value” of avoiding these kinds of stressors varies from person to person, but exists to some extent in every case.

So, between the financial and emotional toll that trial takes, settling would appear to be a better option as Kiser, Asher and McShane concluded.  But why mediate?  Certainly, lawyers and non-lawyers alike have successfully negotiated and settled disputes for millennia without the involvement of a mediator.  Mediation, however, has (again, based on statistics) been shown to increase the likelihood of settlement.  (Based on my own personal experience both representing clients in mediation, and serving as mediator, the vast majority of cases that go to mediation do resolve.)  As important, mediation as a process accomplishes many things that traditional settlement negotiations between the lawyers does not.  Specifically:

  • Participants in mediation have a voice.  They get to tell their story to an impartial third person; they have an opportunity to be heard.  Mediation is a less threatening venue than court for parties to get things off their chest.
  • Participants in mediation have control.  The mediator (unlike the arbitrator, judge, or jury) does not tell them what the outcome of their case is.  They actively take in information, weigh the pros and cons, analyze the costs and benefits, and make decisions based on what is important to them.  If elimination of risk is important, they have the power to do that.
  • Participants in mediation can be creative.  At trial or arbitration, certain procedures, regulations and statutes have to be followed.  Outcomes are limited by these rules.  In mediation, parties can “think outside the box.” 
  • Participants in mediation have greater understanding.  Communication is enhanced and more information is shared during the mediation process than during traditional negotiations. With communication comes knowledge and, hopefully, understanding.   Understanding, in turn, can lead to closure. 
For all of these reasons, the clients who are advised to mediate are well served by their lawyers.

* The authors of the study, published in the Journal of Empirical Legal Studies, are Randall L. Kiser, Martin A. Asher and Blakeley B. McShane

**Judge LaMar has kept similar data with respect to slip and fall accidents
 
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