One of my family law clients came to me the other day with a problem. She was fighting a civil case against another legal firm where the opposing party was suing her. The lawsuit was in its eighth month and she was thinking about trying to settle, but she didn’t know if she could win her case, having little experience in the civil law arena. Her criteria for going forward was a better than fifty-fifty chance of winning.
“Can you calculate the odds that I’ll win the case if it goes to trial?”
After some research I found that calculating the odds for a civil suit, was similar to calculating odds for warfare, or gambling, but substituting evidence for weapons fire or good cards. There’s a small group of economists that have calculated evidence-based probabilities for criminal and civil cases using weighted variables. The weights were calculated using historic case data. While most civil attorneys don’t quantify the probability of winning their case, experienced attorneys can judge when a case is going south, and will try to settle before going to trial. Over 90% of civil cases settle before they get to a courtroom.
The opposing party was suing my client for services rendered. She was countersuing for damages to her firm. In December of last year, the opposing law firm filed the suit. Their main evidentiary points were that they had a contract, and that some services were rendered. At the beginning of the case, the probabilities were all in their favor.
As in warfare, or in a poker game, the odds shifted as my client’s attorneys put together her case. It came out that the opposing party had never produces a bill for services rendered. Then it came out that the opposing law firm had closed up shop and the managing attorney had left the country before the job was complete. The probability of my client winning the case began to climb.
By February the odds were fifty-fifty. After a forensic accounting report in August the odds had climbed to over 70% in her favor.
Just Winning Isn’t Enough
You can go broke winning a civil case, if it goes on long enough, and the legal fees begin to mount. You can calculate the probability of winning and the payouts vice the probability of losing and losses to determine when the best time to attempt a settlement. Although the probability of winning and losing are linked to the opposing party, the legal costs and the expected payouts were different for both parties.
In the mathematics of game theory, these types of graphs define what is known as “behavior strategies,” telling a participant the best time to make a particular move. In this case, the plaintiff who is opposing my client, has a weaker case, and should have pressed harder for a settlement right at the beginning. My client, labeled here as the defendant, should have pressed for her counterclaim settlement in February, before her legal costs started biting into the potential payout. I chose a time period of a year here, because most civil cases last 344 days, but you get the general idea. As in warfare, both parties should have had a better picture of the battlefield (in this case the evidence) as soon as possible so they can fight from a position of superior information.
John Barkai, Elizabeth Kent, Pamela Martin, A Profile of Settlement. Court Review, Vol. 42, No’s. 3-4, Fall/Winter 2006.
Robert Cooter and Daniel L. Rubinfeld. Economic Analysis of Legal Disputes and Their Resolution, 1989.
William M. Landes. An Economic Analysis of the Courts, 14 Journal of Law and Economics 61, 1971.
Richard A. Posner, Economic Analysis of Law, Little Brown and Company, 1973.