MOST CASES SETTLE, BUT . . .
Most people have heard that personal injury cases usually get resolved by settlement rather than by trial. Yes, that is true. But you may wonder: “What happens if the other side will not agree to a settlement?”
If you are wondering about this question, then let me first say: “Congratulations! You are asking the right question, and you are now on the path to understanding!” On a superficial level, the answer to this question is fairly simple. If Defendants won't agree to a reasonable settlement, then we sue them. But the unspoken question behind the question deserves some further explanation here. The unspoken question behind the question is: “How much negotiating power do I have?”
ASSESSING YOUR NEGOTIATING POWER
To answer the question, you need to understand the source of your negotiating power. In a personal injury case, most of the Plaintiff's negotiating power comes from the Plaintiff's right to force the Defendant into a jury trial, where both parties will be stuck with whatever result the jury decides upon. If Plaintiffs were not armed with the metaphorical sword of trial by jury, then Defendants would never pay a dime in settlement because Plaintiffs would be powerless to do anything about it — except for maybe arming themselves with literal swords. (This is why we have a civil justice system, by the way.) Understanding that most of your negotiating power arises out of your right to force the Defendant into a jury trial, you can begin to credibly assess your negotiating power.
In short, your negotiating power is directly related to the Defendant's assessment of its own risk associated with a case proceeding to a jury trial. In the next section, we will look at some of the factors that frequently play an important role in a Defendant's assessment of its risk.
JURY TRIAL RISK FACTORS FOR DEFENDANTS
- RISK OF A BIG PLAINTIFF'S VERDICT
“What would a jury do with this case?” In most cases, this is by far the most important factor in the Defendant's risk assessment. You can click here to to learn more about the possible outcomes in a jury trial. And, you can click here to learn about how to calculate the expected value of a case based out on outcome forecasting. But for now, it is important to realize that the Defendant's assessment of the risk of a big Plaintiff's verdict is not static — it changes throughout the case.
If the Defendant can see that the Plaintiff is not prepared to try the case, then the Defendant will naturally discount the risk of a big plaintiff's verdict. On the other hand, if the Plaintiff is able to obliterate the Defendant's defenses with some devastating depositions, then the Defendant will naturally magnify the risk of a big Plaintiff's verdict.
- COSTS OF DEFENSE
Defendants usually factor their projected costs of defending the case into their case evaluation. Defendants know that even if they win the case outright at trial that their victory will probably come at a substantial cost. Unlike plaintiff's lawyers, defense lawyers do not work on contingent fee arrangements. Win or lose, the defense lawyer is going to get paid. Generally, the longer the case goes, the more the defense lawyer is going to get paid. Defendants know this. Therefore, they are generally willing to allocate some portion of money towards settlement that they would have otherwise paid towards defense costs.
The costs of defense will depend upon the specific facts of the case. A simple personal injury case arising out of a motor vehicle collision involving minor injuries and undisputed fault might entail costs of defense as low as $35,000.00 to litigate the case all the way through a jury trial. On the opposite side of the spectrum, a higher-stakes case could entail costs of defense totalling millions of dollars.
There is substantial variation among defendants as to how much weight they give to costs of defense in their risk analysis. Most defenses are paid for by insurance companies. I have noticed — and most of my colleagues in the plaintiffs bar seem to agree — that if the insurance company that is paying for the defense is using its own in-house lawyers to litigate the case, then the insurance company seems to assign very little weight to the cost of defense in its case evaluation.
- COLLATERAL DAMAGE (ESPECIALLY TO REPUTATION)
By “collateral damage,” I mean damage that could be done to the Defendant outside of the strict confines of the lawsuit. For example, a Plaintiff's personal injury claim could do tremendous harm to a Defendant's reputation. In some cases the potential collateral damage could far exceed the potential verdict.
Sometimes defendants find themselves in a position they could potentially win the battle, but lose the war. Large corporations that own prominent valuable brands spend billions of dollars every year in advertising to enhance their public image. In many cases, the “goodwill” associated with a company's brand is its most valuable asset. I have had many cases in which I have represented Plaintiffs against these kinds of organizations. In some of those cases, the defendants felt that they had some reasonably good defenses to our claims. However, we had discovered proof of such reprehensible conduct on the part of certain members of these organizations that the organizations were still motivated to settle these cases so that they could negotiate for confidentiality agreements. In these cases, the defendant organizations realized that even though they might be able to win the lawsuits, but that if we ever took the cases to trial that the evidence we would introduce would be devastating to the value of their respective brands.
WILD CARDS
Most of my previous discussion regarding negotiations in this article presupposes that the parties will act rationally. It is rational for the parties to act in their own best interests. Therefore, the underlying assumption of my previous discussion is that the parties will act (that would include negotiating) in a way that is consistent with their own best interests. Of course, the reality is that people do not always act rationally — in fact, irrational behavior is quite common.
In addition to irrational behavior, you can expect to encounter perfectly rational behavior on the part of various individuals, which is inconsistent with the best interests of the organizations these individuals represent. (This is known as an agency problem.) For example, I have had many cases against organizations where the best thing for the organization would have been to pay up and settle. But since this would not have been in the best interests of a decision-making individual within the organization, settlement gets delayed or sometimes the case goes all the way to trial.
In every case, you've got to expect to be dealt a few wild cards. The prosecution of a personal injury case is more art than science. Your strategy should include enough flexibility to be able to deal with the wild cards that will almost always emerge at some point.
The philosophies, strategies, and tactics I've outlined above are the principles that guide our actions at Cluff Injury Lawyers. I've outlined them pedagogically to help anyone who wants to better understand these principles or improve their skills in utilizing them.
Author: Brigham Cluff