While lawyers are widely considered professional negotiators who negotiate a wide range of issues for their clients, a recent study casts some doubt on the negotiation effectiveness of some litigators, especially those representing plaintiffs.
According to a recent New York Times article, “a soon-to-be-released study of civil lawsuits … has 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.”
Interestingly, though, while the lawyers representing plaintiffs got it wrong more often – 61% of the time to 24% for defense lawyers – the defense lawyers’ mistakes on average were much more costly to their clients (an average loss of $1.1 million vs. $43,000).
So what’s going on here? Are these litigators really messing up?
Yes and no.
First, it’s extremely difficult for litigators in many cases to determine their actual negotiation leverage as it requires an accurate evaluation of what the judge or jury would do if the case went through trial. The better their predicted result at trial, the stronger their negotiation leverage. And the worse the predicted result at trial, the weaker their leverage.
Unfortunately, even the most experienced litigators often have a very hard time predicting these outcomes with any degree of relative certainty. No one has a crystal ball. And judges and juries are notoriously difficult to accurately evaluate, especially in atypical cases where little precedent exists.
This would suggest, of course, that litigators may be doing a decent job in extremely difficult negotiation circumstances.
On the other hand, I have literally trained thousands of litigators in how to more effectively negotiate – some very experienced – and have found that only a small percentage regularly engage in a detailed strategic analysis of their leverage before trying to negotiate a settlement.
Instead, most make relatively off-the-cuff evaluations of what they think the case is worth and what will happen if the case were to go through trial. They rely more on their instinct and experience than on a comprehensive break down of the strategic factors impacting the likely result of their case were it to go through trial.
At the end of the day, instinct and experience are no substitute for strategic analysis and evidence. Plus, when litigators rely on instinct it’s particularly difficult to factor out their financial self interest in taking cases through trial (assuming they are paid hourly).
So what should you do if you’re in business and sue or get sued? Before empowering your lawyer to engage in settlement discussions, make sure they do more than tell you what they think the case is worth. Ask them to justify their opinion and break down the possible outcomes into percentage likelihoods.
It will help you – and your lawyer – negotiate a better result before trial.