What happens when settlement fails? A law professor/mediator has reviewed the numbers.
Vivian Berger has written in the past on the success rate for trials in the Southern and Eastern District of New York. This time around, she looks at the cases she has mediated over the last 35+ years.
Parties who file employment cases in the Southern and Northern Districts of New York are ordered to mediation. The courts do this because they know that early mediation can save everyone a lot of time and aggravation and, since most cases settle at some or another anyway, why not try to resolve the case early?
Mediation is difficult for all parties. The plaintiff may enter the process in a state of anger over her unfair treatment. She may or may not listen to her lawyer's advice about the value of the case and whether to put the conflict behind her. The defendant is enraged that it's even being sued; no defendant will ever admit to breaking the law or discriminating against anyone, and the employer probably sees the entire exercise as extortion. The mediator, meanwhile, is handling the proceeding without charge (or for a small fee under the district court rules) and the process is tedious as he tries to bring all sides to a middle number. That can take hours and even multiple mediation sessions. Of course, when you're talking about money, emotions, and anger, it is hard to resolve the case.
Yet, most cases wind up settling, if they are not dismissed on a motion for summary judgment. This is why we have so few civil trials. Berger's research shows that, of the 435 discrimination and wage & hour cases that she has mediated, most of them did settle at some point or another, if not with Berger than later on with assistance from the court or through the parties' attorneys working it out themselves. Berger was able to track 29 of the cases that were resolved on the merits. In 25 of those cases, it ended badly for the plaintiff, with 19 grants of summary judgment for the employer, two sui generis dismissals with prejudice, three defense verdicts following trial, and one defense victory following an EEOC hearing. The employee prevailed at trial four times, three times in federal court and once in arbitration.
Berger does not conclude that the best course for the plaintiff is to always settle at mediation, partly because he may get a better deal later on through independent settlement discussions. She also notes there are reasons a case does not settle, not only because the employer may not offer any money (or offers a nuisance amount) but because plaintiffs may "seek even an improbable victory in order to teach the employer a
lesson and, it is hoped, prevent others from suffering discrimination in
the future. Or they may wish to inflict pain on their adversary by
forcing it to spend a lot of money in mounting a defense." When that happens, "if a claimant understands the risks she confronts and is
conscious of the basis for her decision — rather than, say, so blinded
by emotion that she is not really making a knowing choice among options —
she is acting in her own interests, whether or not these appear rational in strictly economic terms." (Emphasis is Berger's).
Having said that, Berger concludes that "if, for whatever reason, she decides to prosecute her case till adjudication by a judge or a jury, she is extremely likely to lose." (Berger's emphasis). Here are the sobering numbers:
plaintiffs have a roughly 38.9% chance of surviving a summary judgment motion (at least, in our local federal courts) and a 30.0% chance of obtaining a favorable verdict at trial. In other words, the combined overall rate of success is a mere 11.7% (.389 times .330), even less than the 13.8% probability revealed in this account of my failed mediations. In addition, focusing just on summary judgment, the 65.5% rate of loss experienced by my claimants — which can be inversely expressed as a 34.5% survival rate — comes close to the 38.9% rate documented in my earlier study of the subject.
Citations to this research are found in the mediation article.
Why do cases fail to settle? Berger suggests the following:
Although each matter presented its own peculiar dynamics, more often than not actions taken by the claimant’s side scotched resolution. When impasse occurred, it was frequently because either the employee started “too high” — at times, so much so that the employer declined to respond, thereby depriving the plaintiff of the chance to elicit a potentially acceptable offer — or, in the end, held out for “too much.” I use the quoted normative terms not just because 20-20 hindsight revealed that the game was not worth the candle, but also because my evaluation of the case at the time indicated that I believed the plaintiff was taking a very big gamble and making a mistake (at least, if she hoped to maximize her monetary gain).
Sometimes, the lawyer overvalued the case; often the client did, disregarding the mediator’s cautions and, I suspect, her attorney’s advice. Occasionally, both client and counsel had drunk the same Koolaid, or the latter may have feared losing the former’s confidence by pushing too hard. In no small number of instances, however, defendants created the barrier to settlement by taking a no-pay position or offering only nuisance value. While later events (often in the form of summary judgment) may have validated their view of the complaint’s absence of merit, usually any consideration of their prospective attorneys’ fees would have justified offering more.