'Marketplace Report': Settling Suits Is Rewarding
MADELEINE BRAND, host:
From NPR News, it's Day to Day. If you're a plaintiff in a court case looking for some relief, it is better to settle than to go trial. According to a new study, people who settle end up with more money. Marketplace's Amy Scott is here now. And Amy, tell us about the study. Who wrote it and what does it conclude?
AMY SCOTT: The study is by an attorney who analyzes litigation decisions and a couple of academics from the University of Pennsylvania. It'll be published in the September issue of the Journal of Empirical Legal Studies next week, but the New York Times reported on the findings today. And basically, what the researchers found, based on thousands of cases over the years, is that more than 60 percent of the time, plaintiffs would have been better off accepting a settlement than going to trial. That decision costs them on average 43,000 dollars. Defendants made the wrong decision to go to trial far less often, just 24 percent of the time. But the mistake was much more costly in that case, an average of more than one million dollars.
BRAND: So, why are plaintiffs - why are they getting this wrong all the time in going to trial?
SCOTT: Well, I spoke to one of the authors today, and he really wouldn't speculate much about that, but what he did say was that in many - and in many industries, people show a tendency to be over confident. Doctors, for example, and stock analysts have been accused of that. So, there maybe some of that going on. But I spoke to someone else who specializes in analyzing legal decisions. Marjorie Corman Aaron teaches negotiation and mediation at the University of Cincinnati Law School. She says in many personal injury and employment cases, plaintiffs have to pay little or nothing in legal fees. The attorney makes a percentage of any recovery from the defendant. So, she says plaintiffs potentially have a lot to gain by going to trial, but not as much to lose.
Professor MARJORIE CORMAN AARON (Alternative Dispute Resolution, University of Cincinnati College of Law): It's relatively easy for the client to say, well, you know, OK, I'm going to roll the dice, and if I don't - when I don't win, but I don't - I'm not any worse off than I am now.
SCOTT: Aaron says there's also an emotional element to many of these cases. Many plaintiffs look at what the defendant is offering in a settlement, it doesn't seem like nearly enough to compensate for their injury or their loss, and they simply can't believe that a jury wouldn't side with them. She says, by the way, that defendants often feel the same way.
BRAND: And what about the attorneys? And do they have an incentive at all to push their clients to go to trial with bigger legal fees?
SCOTT: Well, it does make sense that if attorneys are getting paid a percentage of any recovery, they might have an incentive to try to get the biggest possible award in trial. But Aaron says that in the cases she's been involved with, she doesn't see that happening. For one thing, the lawyer has every reason to be careful about going to trial, because it's the attorney who bears the burden and time and expense of preparing for trial and gets nothing if he or she doesn't win.
BRAND: Thanks, Amy. That's Amy Scott of Public Radio's daily business show, Marketplace.
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