In an end to an illustrious career, Miss Cleo and her Psychic Readers Network came to a landmark settlement with the Federal Trade Commission where the company sacrificed $500 million dollars in fees and paid a $5 million fine for deceptive business practices. This result brought three questions to my mind:
- A $500 million settlement! How much money was Miss Cleo Making? How much did she “psychically predict” a jury would award?
- This is just one example in a sea of settlements based on predictions of trial outcomes, I must ask: How accurate are these predictions?
- If I wore a turban and spoke in Jamaican accent, could I be a successful psychic litigation consultant? (Seriously. I cannot get over that $500,000,000 figure for a psychic hotline.)
A recent analysis out of Cornell Law School attempted to explore the meaning of “jury predictability” in the United States and if such a thing even exists. They utilized a national comparison of jury verdicts via the 2005 National Center for State Courts Civil Justice Survey (an amazing study I have cited before) and the 2005 and 2006 U.S. Chamber of Commerce State Liability Ranking Studies. Through a process I won’t go into here, Valerie Hans and Theodore Eisenberg established a creative method of analyzing the relationship between corporate and insurance attorneys’ assessments of juror predictability and the actual verdicts that were eventually rendered in various States.
Their results demonstrated that predictability ratings had little relation to jury compensatory damage awards, but were surprisingly in synch with punitive damage awards. It suggests that the outcomes of cases with punitive damages (awarded in only 5% of judge or jury civil plaintiff verdicts nationally) are dominating defense attorney assessments of jury predictability.
In 2008, a paper published in the Journal of Empirical Legal Studies entitled "Let's Not Make a Deal" analyzed 9,064 decisions in contested litigation cases to examine the number and magnitude of errors made by attorneys and clients in failed settlement negotiations that ended in jury verdicts. The results reconfirmed the findings of three prior empirical studies: both plaintiff’s counsel and defendant’s counsel frequently make dramatic miscalculations when predicting trial outcomes. Interestingly, plaintiffs had a high rate of miscalculations (61.2%) with mid-level financial magnitudes, while defendants had a lower rate of miscalculations (24.3%) that resulted in very high financial magnitudes. In other words, the plaintiffs guessed wrong regularly but only took a medium hit to the pocketbook, while defendants miscalculated less often but it cost them tremendous amounts of money. (I call it a tie.)
So, what does this mean? I would suggest that there could be several factors at play:
- Current methods of predicting potential case outcomes may be lacking due to an over-reliance on a small sample of similar jury trial outcomes.
- The stronger side may be sacrificing too much during mediation and settlement negotiation due to an unrealistic fear of loss or a lack of preparation towards fully establishing the power of the case.
- The idea of what a case is worth may be too heavily based on what similar cases have settled for, furthering a vicious cycle of faulty settlements.
- There is an over-dependence on Jamaican mystics and psychic hotlines.
Predicting jury outcomes is tremendously difficult task and every situation is different. The best insurance against faulty guessing is to spend significant time learning one’s case and developing the strongest possible strategy prior to negotiation. Just remember, that attorney who just had the embarrassing loss on a similar case down the road may have been depending on a very questionable strategy that began with 1-900…
Blogger: Matt McCusker