The famous value investor, Warren Buffett, once said that "writing a check separates a commitment from a conversation." In a certain way, those of us who work on a contingency fee basis are value investors just like Warren Buffett. We examine investment opportunities (potential cases) and gauge whether our investment (projected case expense and attorney time) would be worthwhile in light of potential profits (attorney fees). The key for value investors, as with litigators, is knowing when one's investment has maximized its value.
Attached is a 2008 New York Times article which discusses an empirical study of 2,054 civil lawsuits that went to trial between 2002 and 2005. The purpose of the study was to determine whether parties made an appropriate settlement decision before trial.
According to Randall L. Kiser, a co-author of the study, "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." Plaintiffs were wrong to proceed to trial 61 percent of the time. Defendants were wrong 24 percent. In 15 percent of the cases, both sides made the correct decision to try the case.
The study also notes that 80 to 92 percent of civil lawsuits result in a settlement. This is consistent with my experience - most cases settle. Many times when they do not, parties and/or their lawyers are attempting to camouflage hurt feelings as principled objection. This is generally a formula for disaster. The important thing to always remember is this: Just as with your other investments, check your ego and emotions at the door. Most cases should settle. Some cases should not. It is far easier to make a fair appraisal of where any particular case should fall without anger, disgust or hurt feelings getting in the way.
