I have just done you a big favor! I mean BIG!

I just digested a 40-page research article with some very interesting findings into this email. I am not kidding—for you to read this, you would have had to deal with the “Multinomial Logistic Regression Results” and other “chi Square” kinds of statistical issues.

An article by Kiser, Asher, and McShane (Journal of Legal Studies, Vol. 5, Issue 3, pages 551-591, September, 2008) examined 2,054 California cases in which arbitration failed and offers were made by one side or the other, but the case went to trial. The study compared the offer to the verdict and calculated the rates of decision errors made by plaintiffs and defendants. Here are some of those results in capsule form for you:

  1. There were more decision errors made by plaintiffs than defendants (plaintiffs got equal to or less than the defendant’s offer 61% of the time, while defendants got hit harder by the verdict than the plaintiff offer only 24% of the time).
  2. However, the average cost of the plaintiff error was only $43,100, while the average cost of the defendant’s error was $1,140,000.
  3. For those of you on my list trying cases in California, making a 998 offer significantly decreased decision errors for the serving party and correspondingly increased the error rate for the receiving party.
  4. Check this table below for the types of cases and their corresponding error rates (numbers have been rounded):

 

 

Case type

Win

Rate

(%)

Average

Award

($1,000s)

Average

Demand

($1,000s)

Average

Offer

($1,000s)

Average cost

of Plaintiff error

($1,000s)

Average cost of

Defendant error

($1,000s)

Eminent Domain

100

5,231

5,249

3,588

72

523

Contract

63

1,326

1,323

98

145

1,528

Fraud

61

2,731

1,474

132

135

4,086

Personal Injury

61

346

368

102

32

622

Employment

51

704

900

87

65

1,417

Negligence (non-PI)

43

824

1,072

93

82

1,597

Premises Liability

37

628

743

134

46

2,378

Intentional Tort

35

315

737

51

43

859

Product Liability

30

495

1,174

132

73

1,327

Medical Malpractice

20

235

506

31

15

986

 

Interesting data.

How do you reduce error rates in decision-making? Pre-trial research (focus groups/mock trials). Sufficient sample sizes in pre-trial research can assist in making reasonable trial outcome predictions, giving you the edge in the decision-making process.

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