Let’s Not Make a Deal

The game show version of mediation.  This was the title of a paper published by Randall L. Kiser, Martin A. Asher, and Blakeley B. McShane in the Journal of Empirical Legal Studies in September 2008.   The paper discussed a study in California of 2,054 litigated cases wherein settlement was an opportunity but the matter proceeded to trial anyway. While the paper was written 6 years ago, the principals apply today.

The cases were studied in depth to determine what factors came into play that caused the matters to proceed to trial after being given the chance to settle at mediation, settlement conference and otherwise.   The study determined that there were decisional errors that contributed to the decision to try the case by both plaintiff and defendant.  
One result of the study was to find that plaintiffs made decisional errors more frequently than did defendants. Plaintiffs made decisional errors in 61.2% of the cases, as compared to decisional errors by the defendant in 24.3% of the cases.   

However (and more startling), the cost of the decisional errors for defendants was much higher than those of the plaintiff.   The study found that the mean cost of the error for the plaintiff was $43,100.00 as compared to $1,140,000.00 for the defendant.

Stated another way, while Plaintiffs made the mistake in not settling the case more often, when the Defendant made the mistake, the cost of the mistake was astronomical.  

Kiser’s paper attributes this to the fact that normally Plaintiffs are risk averse, with the Defendants being more risk seeking. That is also my experience in both litigating cases as well as in mediation.  Most Plaintiffs want to be done with the process, while most Defendants and insurance companies appear to be more risk takers.  

This information is helpful to both litigants who are considering mediation but also to mediators who are charged with attempting to resolve disputes. I use these studies in my mediation practice to point out the potential risk in proceeding with the litigation beyond the mediation.  

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