Mediation vs. Litigation

As a trial lawyer, I frequently counsel my clients about when it makes sense to settle a law suit. At some point most cases are referred to mediation, which is a nonbinding opportunity for the parties, with their lawyers, to try to reach a settlement agreement. Mediation is often helpful because it forces everyone focus at the same time on the case – review the evidence and consider the legal issues – and it give the client and opportunity to really think about the costs and benefits of settling versus further litigation.

Every case is different and there are often non-economic issues that drive a settlement decision; but for most litigation, settlement decisions come down to the dollar value of the probable outcome and the cost of getting there.

Most clients have a personal stake in litigation – they feel that they have been wronged and they want to justice or they feel they have been wrongfully sued and they believe the opponent should be punished. Although understandable, these feelings detract from making a reasoned business decision. Evaluating settlement in terms of financial costs and benefit helps focus the inquiry on measurable factors that can aid in settlement decisions.

The financial calculation requires two pieces of information: How much are my lawyer and this lawsuit costing me and what are the chances of a financial recovery in excess of that cost? There are a variety of factors that should be considered in determining the total cost of litigation such as time away from other pursuits, impacts to yourself and your employees and the effect on other opportunities.

To prepare for mediation, you should perform calculations of the case from the opposing party’s perspective. What are their costs? What is their likelihood of a financial recovery in excess of their costs? Even following these guidelines, the settlement calculus on a simple case can be burdensome. Estimating the costs and probable verdict is a difficult business and I enjoy helping clients work through these questions.