With certain types of disputes, it is often worth the upfront investment to hire a solicitor to deal with and protect procedural litigation matters as well as a settlement solicitor who will look solely at methods of alternate dispute resolution.
In order to facilitate settlement, the use of a more focused and scientific approach to risk analysis is incumbent on the settlement solicitor as compared to the more traditional approach. Where the traditional approach is more geared towards the gut feeling of a solicitor who applies their professional judgement to decide whether the client has for example: ‘ a good chance,’ or ‘a possibility of’ winning a case, it is suggested that solicitors using methods of alternate dispute resolution use a more advanced application of professional judgement with respect to risk analysis.
Where a client is offered a settlement by the other side, in advising whether or not they should accept, the pros and cons of accepting or rejecting the offer to settle must be analyzed. One model of risk analysis that could be utilized is decision tree analysis. Using this method will allow the systematic quantification of risks and uncertainties inherent in the litigation process. Decision tree analysis involves the application of the following five step process:
1) Identifying uncertainties
2) Defining outcomes
3) Assigning probabilities
4) Doing the math
5) Interpreting the results.
When assessing each case, in addition to applying the facts, other factors must be taken into account. Legal costs, opportunity costs, and time value of money must all be assigned risks and factored directly into the outcomes. In deciding as to whether or not to accept an out of court settlement using ADR these transaction costs can play a substantial role.
Based on analysis, one may decide that it is worth paying slightly more in a settlement agreement than what they believe they might pay if the issue is litigated. The reason for this is that in an early settlement, legal costs are much lower – both in time and money; relationships are much less strained; and people can move on with their lives. If you are facing a legal issue and would like to explore the option of alternate dispute resolution, contact one of our solicitors in your area today.
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