Why lawyers misjudge trial outcomes in mediation

Fundamentally, mediation of litigated cases should lead the parties to a point where they must decide whether the proposed settlement terms are good enough to end (or avoid) litigation. The way in which the parties bargain up to that point will influence how they feel about accepting the other side’s terms. Yet how they feel about how the future also matters (i.e., “Will a jury see it my way?”). The steady drumbeats of what each side has promised “will” or “will not” happen at trial are revisited yet again as the parties face the task of deciding which course of action is the right one.

When a case settles, it’s impossible to know what would have happened had the case gone forward. But when parties choose to reject the last set of terms on the table and opt for a jury verdict instead, they can measure their decision: did it result in a better outcome or not? Of course, “no offer” cases, along with demands that exceed what’s recoverable, and the like, leave litigators no other option but to try the case — unless the plaintiff dismisses it or the court does. Even then, someone’s assessment may be way off. Plenty of no offer cases result in a sizeable verdict for plaintiffs, and plenty of good offers are traded for less or a defense verdict in court. And when trial outcomes are better than expected, congratulations! That makes my point: trials are unpredictable and that’s why predicting them in mediation has limited utility.

Believe it or not, objective, empirical data exists on this very subject and it spans about 50 years. Here’s the takeaway: lawyers have not been good at predicting trial outcomes. On average, plaintiffs do worse by going to trial in about 60% of those cases that could have settled (i.e., the verdict is less than what was offered). Defendants do worse only 27% of the time. But the average cost of these decision errors is drastically different. For the plaintiffs, the average cost is less than $100,000. But when the defense gets it wrong, it usually hits seven-figures, or more.

Another study asked lawyers to state how confident they were in achieving an outcome before trial and compared those predictions to actual outcomes. Here’s the takeaway: lawyers were overconfident in their predictions. Years of legal experience had no measurable effect on improving the accuracy of their predictions. Female lawyers were slightly better at predicting outcomes than their male counterparts and exhibited less overconfidence. Even when lawyers were asked to articulate reasons why they might not achieve their goals, raising awareness of how the outcome might not turn out as predicted, accuracy did not improve.

Experienced lawyers may be skeptical of these findings. They know a good case when they see it (i.e., solid witnesses, documented evidence, and a great story to tell). But as practitioners, we should try to improve in all areas of our field, including the ability to predict the future since that drives the “value” of cases.

How can anyone improve their ability to predict the future? When lawyers talk to me about “getting full value” or not “overpaying,” I ask them to clarify whether they are talking about full litigated value or something short of it. Maybe your theory of the case will resonate. Maybe the other side’s story, and perhaps more consequentially, their presentation, will resonate more – especially these days when attention spans are fleeting and multimedia demonstrations are the norm. Walk your mediator through the math, including your estimates of rulings that may go your way and those that may not. Are you relying on evidence that will be contested such that its admissibility and persuasiveness rest more reliably on a coin flip?

Here are some suggestions that you and your team might consider when trying to determine the accuracy of your valuation.

Solicit multiple opinions and don’t identify one person on your team with a particular point of view. You don’t want to write off an insightful opinion as “biased” or from someone who appears to be less than committed to your client’s cause.

Distribute leadership tasks among different team members at different times. This gives an opportunity for individual team members to show you how they think across a wider spectrum of challenges.

Have team members play the role of devil’s advocate and rotate those roles.

Build a safe and trusting environment so people don’t fear retribution for speaking up. Think of it as a form of “peer review” as practiced in the fields of medicine, engineering and accountancy.

Do what you can to get information from outside of your bubble. You owe it to your client and your practice.

Jeff Trueman, Esq., is an independent mediator and arbitrator and adjunct professor at the University of Maryland Francis King Carey School of Law. He can be reached at [email protected].