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Study Finds Settling Lawsuits Often More Cost Effective Than Litigating Them Through Trial

A 2008 study by the Journal of Empirical Legal Studies, as reported last year in a New York Times article, Study Finds Settling Is Better Than Going to Trial, found that -

.... most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer.

"The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant?s offer to be half a loaf when in fact it is an entire loaf or more," said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial ? meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

The vast majority of cases do settle ? from 80 to 92 percent by some estimates, Mr. Kiser said ? and there is no way to know whether either side in those cases could have done better at trial. But the findings, based on a study of 2,054 cases that went to trial from 2002 to 2005, raise provocative questions about how lawyers and clients make decisions, the quality of legal advice and lawyers' motives....

Full post as published by California Business Law Blog on January 30, 2009 (boomark / email).