Mediation Message No. 71

MICHAEL MARCUS’S MEDIATION MESSAGE NO. 71

THE LOCATION OF THE TRIAL, SECTION 998 OFFERS AND DAMAGES

Last month, I discussed a study in the Journal of Empirical Legal Studies which found that there is a high incidence of decision-making error by both plaintiffs and defendants in rejecting settlement proposals and going to trial or arbitration. Other interesting findings in that study are the impact of the type of trial and statutory C.C.P. sec. 998 offers on decision-making error and the tendency of juries to more likely award present rather than future and punitive damages.
Jury trials, court trials and arbitrations: Defendants committed substantially less decision error in jury trials than in court trials (22.1 v. 42.6 percent) whereas plaintiff error was considerably higher in jury trials than court trials (64.0 v. 42.6 percent). Thus, the chance of a plaintiff obtaining a higher award from a jury is offset by the risk that the jury will find for the defendant. Surprisingly, plaintiffs were much better off arbitrating their cases than trying them to a jury or judge (compare the 28.9 percent arbitration rate to that of 42.6 and 64.0 percent for court and jury trials) whereas defendants were slightly better off trying their cases before a court as opposed to an arbitrator (45.4 v. 42.6 percent for court trials).
Section 998 offers: The study found that the existence of a statutory offer by either side reduced decision error and the mean cost of error for the party making the offer but increased the error and costs for the recipient party. The study also found slight decreases in error and costs for plaintiffs when both sides served 998 offers but a substantial decrease in mean cost ($294,500 as compared to $1,299,400) for defendants when joint offers had been made. Although the purpose of 998 offers is to encourage settlements by imposing financial penalties on parties who take unreasonable settlement positions, the study thought that such offers may actually induce risk taking. The authors acknowledged that their findings are somewhat skewed because the data did not show how many cases settled because of 998 offers.
Damages: The study confirmed the anecdotal view that jurors and judges are reluctant to award both damages actually incurred and those yet to be sustained. Plaintiffs seeking only future damages faired poorly, recovering a net award 32.4 percent of the time. In contrast, they prevailed 45.2 percent when seeking only current damages. Plaintiffs seeking both present and future damages recovered a net award 47.9 percent of the time. Punitive damages claims also had an impact with juries less likely to award general or special damages when a punitive damages claim had been made.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, August 2011

Please visit my website at www.marcusmediation.com for information about my mediation and arbitration background and experience. Copies of my previous Mediation Messages and Arbitration Insights are available by going to the articles link on the website.

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