When Is Settling Better Than Going To Trial?

Settling A Lawsuit May Be The Smart Move

The simple fact is that most cases settle. There are a number reasons that this is true, but at least one study suggests that settling is often the smart move. On August 7, 2008, the New York Times published an article entitled Study Finds Settling Is Better Than Going to Trial.  The findings are consistent with the observations of many litigators who advise their clients that eliminating the risks and costs of trial can frequently be a smart move.

Plaintiffs Are Statistically Better Off Settling Before Trial

One of the more interesting parts of the study is that plaintiffs are better off settling much more frequently than defendants:

.... most of the plaintiffs who decided to pass up a settlement offer and went to trial ended up getting less money than if they had taken that offer. 

"The lesson for plaintiffs is, in the vast majority of cases, they are perceiving the defendant’s offer to be half a loaf when in fact it is an entire loaf or more," said Randall L. Kiser, a co-author of the study and principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions.

Defendants Should Opt For Trial More Often

Defendants - often large companies and insurers, were typically better off when deciding to proceed to trial:

Defendants made the wrong decision by proceeding to trial far less often, in 24 percent of cases, according to the study; plaintiffs were wrong in 61 percent of cases. In just 15 percent of cases, both sides were right to go to trial — meaning that the defendant paid less than the plaintiff had wanted but the plaintiff got more than the defendant had offered.

At the end of the day, the authors pointed out that the vast majority of cases do settle.  For the estimated 80 to 92 percent of the cases that do settle there is no way to know whether either side could have done better at trial.  Nonetheless, the statistics are thought provoking and should help lawyers and clients make decisions when considering settlement options before trial.