More Than a Feelin': Using Small Group Research to Inform Settlement Decisions in Civil Lawsuits

• Citation: Vol. 31 No. 4
• Publication year: 2015

More Than a Feelin': Using Small Group Research to Inform Settlement Decisions in Civil Lawsuits

Alexis Knutson
Tsongas Litigation Consulting, Inc., alexis.knutson@tsongas.com

Edith Greene
University of Colorado, Colorado Springs, egreene@uccs.edu

Natalie Gordon

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MORE THAN A FEELIN': USING SMALL GROUP RESEARCH TO INFORM SETTLEMENT DECISIONS IN CIVIL LAWSUITS

Alexis Knutson, Natalie Gordon, and Edie Greene^*

INTRODUCTION

We should have seen it coming. Years before the string of recent allegations came to light, Bill Cosby—everyone's favorite TV dad—quietly settled a civil lawsuit brought by a Philadelphia woman and friend of Cosby's who claimed that the entertainer drugged and sexually assaulted her in his home in early 2004.¹ Although the terms of the settlement remain confidential, the 2006 lawsuit revealed the names of at least a dozen other women who claimed that Cosby assaulted them.²

Undoubtedly, this lawsuit followed the chronology of most civil cases: the filing of a complaint, process of discovery, pretrial conferencing, and eventual settlement. Indeed, the vast majority of civil lawsuits are settled outside of court via mutual agreement between the parties³ because engaging in arbitration or going to trial can be costly and time-consuming, and can involve enormous uncertainty about opponents' evidence, jurors' perceptions, and judges' predilections.⁴ So settling cases is a commonplace practice that benefits attorneys and their clients as well as the courts.

Yet settlement can also be fraught with complexity and uncertainty because it requires attorneys to calibrate, that is, assess the strengths and weaknesses of their case, evaluate various settlement proposals,

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and forecast the likely trial outcome.⁵ Attorneys are not particularly skilled at these tasks.⁶ They make predictable reasoning errors—many of which we describe in this article—that impair their ability to gauge when it is in their clients' interest to resolve the dispute prior to trial and for how much.⁷ Broadly speaking, allegiance to clients, immersion in the minutiae of the law, and attorneys' own risk behaviors can blind them to the weaknesses in their case, the strengths of their adversaries' evidence, and the likelihood of winning, thus resulting in difficulties settling lawsuits.⁸ These lapses in logic serve as barriers to settlement.

There are significant costs associated with the unwillingness to accept an adversary's settlement proposal.⁹ Across several studies that compared final settlement offers with jury awards,¹⁰ researchers have shown that both plaintiffs and defendants err when deciding to proceed to litigation, though their errors are not symmetric: plaintiffs are more likely than defendants to make poor decisions, but the average cost to defendants exceeds the cost to plaintiffs.¹¹

In the most recent study, Kiser, Asher, and McShane analyzed 2,054 California cases in which the parties had engaged, unsuccessfully, in settlement negotiations and proceeded to arbitration or trial between 2002 and 2005.¹² Researchers compared the ultimate verdicts and awards to the parties' settlement positions to assess whether attorney/client judgments of likely trial outcomes were accurate.¹³ There was a high incidence of decisional errors:

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sixty-one percent of plaintiffs who passed up a settlement offer and proceeded to trial were awarded less than they had been offered—their average loss was $43,100.¹⁴ Although defendants were less likely to err (only twenty-four percent would have been better off settling than litigating), they lost considerably more—an average of $1,140,000—by failing to settle.¹⁵

There are probably several explanations for these poor decisions. It may be that lawyers are not explaining the odds to their clients with sufficient detail or urgency. It may be that clients are unwilling or unable to consider the odds in a rational way. Structural incentives to collect fees and accrue billable hours may play a role. But we focus on a more fundamental behavioral aspect of this decision calculus: we argue that attorneys, given their partisan positions, lack the ability to accurately forecast the probabilities of future outcomes. Lacking clarity on likely resolutions and the realistic odds of success, they may be providing sub-optimal advice to their clients, effectively misguiding them toward the courthouse when settlements would be the better option.

Can these problems be remedied and attorneys' forecasting skills improved? The answer is yes. By procuring feedback from colleagues, considering verdicts in similar cases and most importantly, seeking research-based input from unbiased sources prior to trial, attorneys can begin to combat their forecasting foibles.¹⁶ In particular, by engaging in small group research, including mock trials, focus groups, and shadow juries, attorneys can get valuable insights about their interpretations of the evidence and feedback on the narratives they have constructed and the legal arguments they intend to make.¹⁷

In this article, we explain why attorneys need help in forecasting the outcomes of their cases, including what psychologists have

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learned about why attorneys are poor forecasters.¹⁸ In doing so, we focus more on damage award determinations than liability assessments because the former have more inherent variability and uncertainty than the latter and thus, have captured researchers' interest. We also describe the value of conducting small group research to address forecasting errors, reveal the real worth of clients' claims, and pave the road to settlement.¹⁹

I. WHY ATTORNEYS ARE POOR FORECASTERS

A. Partisan Distortion

Attorneys are hired to vigorously represent their clients, regardless of their personally held beliefs and intuitions and, as famed defense attorney Alan Dershowitz has said, "right up to the edge of what's ethical."²⁰ This level of partisanship provides ample incentive for attorneys to favor their own perspectives, and is likely to lead to distorted beliefs about the virtues of their case. Psychological concepts can explain why attorneys are partial to the parties they represent and how these biases may have lasting and untoward effects on their work.

1. Role-Induced Bias

To the extent that attorneys feel optimistic about their side of the case, they will put increased weight on the evidence in their favor.²¹ People show partisan distortion solely because of the role they are fulfilling—namely, as plaintiffs or defendants.²² This fact extends beyond attorneys to others involved in litigation, and even experts in human behavior are not immune to the effects of role-induced

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biases.²³ For example, given the same case facts, psychological experts who believe they have been hired by the prosecution will assign higher risk scores to criminal defendants than those who believe they have been hired by the defense.²⁴

One study nicely illustrates how role-induced bias can affect attorneys' choices.²⁵ Researchers Eigen and Listoken randomly assigned law students in moot court competitions to represent either the respondent or the petitioner in an appellate court case.²⁶ Eigen and Listoken found that even with random assignment, role-induced bias caused participants to judge the evidence and moral value of their arguments as strongly supporting their assigned side.²⁷ Furthermore, when they compared participants' legal writing and moot court scores as evaluated by law professors, they found that the participants who received lower grades had overestimated the strength of the evidence in their favor, suggesting that overestimation leads to diminished performance on behalf of the client.²⁸

In a related study, researchers Engel and Glockner explored the effects of role-induced bias by asking students attending a graduate research institute to assume the part of either defense counsel or prosecutor in a criminal case.²⁹ They reviewed the case facts from their assigned perspectives, and they were then asked to disentangle themselves from that role and imagine how a judge would decide the case.³⁰ But even when attempting to view the case in a neutral fashion, participants upheld role-induced biases: those previously assigned to act as prosecutors deemed the defendant guilty sixteen percent more often than those previously assigned to act as defense

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counsel.³¹ They retained these biases even when they had a medium (€5 or U.S.D. $7) or high (€100 or U.S.D. $140) financial incentive to review the case in an unbiased way.³² And biases remained even when participants were asked to consider the strength of evidence in preparation for a plea bargain, as demonstrated by the fact that they continued to perceive their own arguments as stronger than their opponents'.³³ So even when the sole objective was to attempt to settle the case in a fair way, participants continued to over-value the evidence in support of their initially-assigned role.³⁴

These findings convincingly show that the degree of bias toward one's own side of a case can be considerable. The biases created by assuming a role in a case, whether as defense counsel, prosecutor, or plaintiffs' attorney, can result in a barrier to settlement as each side's evaluation of the evidence and the law favors their clients.

2. Confirmation Bias

Not only are attorneys likely to display biases consistent with the parties they represent, but they are also prone to seek out information which supports their position while ignoring evidence to the contrary.³⁵ Renowned scientists Amos Tversky and Daniel Kahneman initially explored these sorts of distortions in decision making in the mid-1970s to challenge the commonly held belief that human decision making is rational and predictable.³⁶ Tversky and Kahneman coined the term heuristics to represent various mental shortcuts that people undertake when making decisions that involve uncertainty.³⁷

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One such heuristic, the...