Doug NollI'm called in when human dynamics are getting in the way of strategic leadership execution.

ADVANCED MEDIATION ADVOCACY LEGAL NEGOTIATION SKILLS TRAINING

23 Jan 2013 · 3 min

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This content was created by Doug Noll. This content was uploaded by Doug Noll. This is a YouTube training video titled "ADVANCED MEDIATION ADVOCACY LEGAL NEGOTIATION SKILLS TRAINING" (created 2013-01-23). The excerpt is an English instructional monologue by a single presenter (labeled SPEAKER A) explaining how to value a case for settlement using expected-value calculations. The speaker walks through a slip-and-fall hypothetical (Bob at Vons), outlines plaintiff and defendant perspectives, shows probability-weighted outcomes, and computes example expected values (about $14,450 for the plaintiff view and about $4,200 for the defendant), concluding that typical settlements will fall between those ranges. Metadata includes a thumbnail URL for the YouTube video.

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How do we value a case for settlement? Trials provide a sense of market value in routine cases and a decision process in non-routine cases. But most cases don't go to trial. So how do we think about the settlement value of a case? One technique is called expected value calculations. It works like this. Say Bob slipped and fell on a lettuce leaf at the Von supermarket. His medical bills were $5,000 and he had a wage loss claim of $2,500. Bob is okay, but he suffered from debilitating back pain for about a month. First, let's say that you represent Bob. The first thing you want to ask is, what is Bob's worst outcome? Then you want to think about, well, considering the case and the damages and everything else, what is Bob's best outcome? Then ask, what's the percentage chance of a zero verdict, and what's the percentage chance of getting that $25,000 verdict? Now say that the jury likes Bob, but not that much. What could be the award? And if the jury doesn't like Bob, but thinks that Vons was somehow at fault, what could be an even lower award? Now, what do you think the chance of a $20,000 verdict is? And it's going to be somewhere between 0 and 35%. And what's the chance of a $5,000 verdict? Putting it all in a table looks like this, and we take the $25,000 outcome, multiply it times the 40%, and come up with $10,000, and we do that all the way across. Then we add up the right-hand column and we get an expected value of $14,450. Now suppose you represent Vaughn's. Your best result is going to be a 0 verdict. You agree that your worst result is going to be around $25,000. You think the middle high result could be $15,000. The middle low could be around $7,500. And if you take a table and put it all together, your numbers are going to look like this, and you're going to end up with an expected value of around $4,200. So what all this tells us is that the settlement will most likely occur somewhere between $14,400 and $4,200. What you will find is that varying the probabilities or the outcomes will shift the expected value, but not by much until you become extreme in your numbers and probabilities. So accurate forecasting isn't necessary to get a ballpark range of settlement values. Want more?