Mediation Preparation: Evaluating the Settlement Value of Your Case
An important component in preparing your clients for mediation is evaluating the case value for settlement. For your clients to be able to make informed decisions about settlement figures proposed by the other side, they will need to know what to compare them against. Otherwise, they are making decisions in a vacuum.
In my law practice, I used the following simple formula when advising my clients:
Multiply the expected jury award by the percentage chance of losing (for defendants) or winning (for plaintiffs) at trial. For instance, if I represented the defendant and I thought that if the plaintiff prevailed at trial, the jury would award him between $600,000 and $700,000, and that my client had a 20% chance of losing, then the settlement value of that case is between $120,000 and $140,000. If I represented the plaintiff, I would multiply the expected jury award by the chance of success at trial and subtract the additional litigation costs between the mediation and the end of trial. For instance, if the expected jury award were between $600,000 and $700,000, and my client had an 80% chance of winning, then the settlement value of the case is between $480,000 and $560,000, minus the $60,000 in prospective costs and expert fees between the mediation and the end of trial, for a settlement range between $420,000 and $500,000.
Robert Mnookin, the director of the Harvard Negotiation Research Project and a law professor at Harvard, has a more refined analysis in his book, Beyond Winning.
He calculates the expected outcome times the chance of success at trial on each issue that will bear on the outcome. This inevitably creates a more realistic number, and for plaintiffs he includes a calculation of the time value of money.
Every jury trial contains uncertainties: in how the judge applies the law, in how the facts come in, in how well the experts will testify, in how well the other side’s lawyer tries the case, in how the jury will react, etc. Factoring in these risks in an objective, quantifiable way is helpful in understanding the settlement value of a case. Once you have this number, you can plan your negotiation strategy.