You may be familiar with the Randall Kiser et al. study, Let’s Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations, 5 Journal of Empirical Legal Studies 551 (2008), which replicated amazing findings in prior studies by Samuel Gross and Kent Syverud, and Jeffrey Rachlinski.
The top line finding in the large-scale Kiser study was that an astounding 85% of litigants made “decision errors” by rejecting settlement offers and then getting worse results at trial.
Plaintiffs were more likely to make such errors – 61% of plaintiffs made such errors in this study compared with 24% of defendants.
When defendants erred, however, the average cost of the error was $1.14 million, compared with $43,100 for the plaintiffs.
Last week the Independent Mail newspaper reported (as linked by the ABA Journal) a story right in line with the Kiser and predecessor studies. Target Corporation was hit with a $4.6 million verdict after rejecting a $12,000 demand on behalf of a child who was stuck with a hypodermic needle in a Target parking lot. Target had offered only $750.
Of course, the verdict may be overturned or reduced on appeal. And we will never hear about all the cases in which Target made good “bets” to go to trial and got better results than the plaintiffs’ last demands. Some defendants calculate that sometimes it is better to take a hard line in negotiation to create a reputation as tough negotiators, even if they get bad results in some cases.
Even so, the verdict in this case probably caused some serious heartburn by the Target general counsel and top executives.
And it’s a cautionary tale illustrating why so many litigants and lawyers are wary about going to trial and the vast majority of lawsuits are resolved without trial.