2 PerspectivesJanuary 21, 2009

Why Should You Try a Decision Tree in Your Next Dispute?

We recently explored what decision trees are and how to create them in Decision Tree Analysis: The Basics. While it’s important to revisit the basics on occasion, it seems the biggest hurdle for decision trees isn’t teaching people that this tool is out there — it’s convincing mediators, lawyers and their clients to actually try them in the first place. Why should you?

From the client’s perspective there are two good reasons to use decision trees: better decisions and happier clients.

Do we take the case to trial, do we settle it, or do we do something in between? And what makes you think so? Clients have always looked to their lawyers for settlement advice but, as Ron Friedmann reminds us, too often the best answer their lawyers can offer is “Trust me, I’m the expert.” Today’s clients — and their accountants and other stakeholders — want deeper analysis and better decisions, and Decision Tree Analysis is a great way to get there.

Decision Trees Drive Better Settlement Decisions

Geoff Sharp, who always has a good quote, tells us that “[g]ut instinct, sloppy guesswork and grey hair no longer seem to be enough in complex, high stakes mediation.” Sharp and others highlight how case evaluation today requires more discipline, with tools like decision trees.

Decision Tree Analysis requires more than experience and intuition — Paul Remus tells us that a decision tree “forces a lawyer to think carefully and systematically about his case.” This discipline doesn’t come by accident; Montreal’s Brian Daley reminds us in a recent article that, as client and counsel explore each branch of the tree, the diagram requires them to “deconstruct a complex lawsuit into discrete steps and possible outcomes that can pave the way for appropriate decision-making.”

So is there room for grey hair and gut instinct? Absolutely. By definition, the value of the decision tree exercise hinges on the professional legal expertise we came to in the first place — as Ron Friedmann and David Post put it almost 20 years ago:

The key inputs to a decision tree — estimates of probabilities of the key events and of the dollar values of final outcomes — reflect the experience and judgment of the lawyer making the estimate.

As I think about my last decision tree, it’s clear that it drove a better decision than my initial take on the case. Common sense said my client had agreed to a new deal, but did we really have agreement on that contract amendment? What evidence would show it? Was that evidence admissible? Without an agreement, what would my client’s damages be?

As we have discussed before in a different context, careful, systematic consideration of a case by counsel is worth the investment, whether you settle your case or not. But better decisions aren’t the only reason to use decision trees.

The Client Ridealong

As the client in more than a few disputes over the years, I have seen at least three ways decision trees can make for happier clients.

Clients Want More Information than Intuition. Although we talked about this perspective more fully in my first post, I’m fortunate to have been behind closed doors with the people who really decide when cases settle — CEOs, CFOs, board members and more — and I don’t get to say “Trust me, I’m the expert.” Before they make the decision to settle, real decisionmakers ask the tough questions: Will my letter get into evidence? What would drive a low verdict here? What would it cost to pursue a fraud claim? Decision Tree Analysis is one way I get the answers to these questions — before they are asked.

Everyone Understands More After the Client Ridealong. The step-by-step walkthrough required by a decision tree gives the client input into, and understanding of, the path the case may take — whether it settles or not.  Marjorie Corman Aaron tells us why that’s important in The Handbook of Dispute Resolution:

A decision tree approach requires candid discussion between lawyer and client about the likelihood of each branch on the tree, each twist in the litigation path. That discussion is always worth having. Even if the decision tree is used for nothing more than adding clarity in the conversation of trial alternatives and the client’s comfort with attendant levels of risk, the tree has added value.

This client ridealong usually draws new information from the client, and the client often gains a new perspective on the case that can change where the dispute is headed. A plaintiff who wants his day in court but now truly understands that he’s only 60% likely to see that day may decide to explore settlement, as may a defendant who learns that his insurance carrier is only 60% likely to pay.

Decision Trees Can Add Intellectual Legitimacy. So you have the answers and you truly understand where the case is going. Sometimes even that’s not quite enough. Many of us have decisionmakers who are driven more by numbers than rhetoric, like insurers, risk managers, and accountants, and quantitative analysis is often their language. Decision Tree Analysis can help here, too; Marc B. Victor tells us at litigationrisk.com that decision trees “demonstrate to the client that each case has been rigorously evaluated. They document the rationale underlying your recommendations, and clearly show the effect of varying any assumptions.” I don’t know about you, but this would have helped convince a few of the accountants I have worked with in the past.

So are better decisions and happier clients reason enough to try decision trees? I hope so. I’ll post more on how you might use decision trees here soon.  But you don’t need to wait for that post to start using Decision Tree Analysis — just give it a try.  You’ll be glad you did.

[UPDATE:  For for more on Decision Tree Analysis, Settlement Perspectives' series on decision trees includes:

1. Decision Tree Analysis in Litigation:  The Basics;
   
2. Why Should You Try a Decision Tree in Your Next Dispute? (this post);
3. Advanced Decision Tree Analysis in Litigation:  An Interview with Marc Victor, Part I;
   
4. Advanced Decision Tree Analysis in Litigation:  An Interview With Marc Victor, Part II;
   
5. Decision Trees in Mediation:  A Few Examples; and
6. Avoiding the Limitations of Decision Trees:  A Few Tips from Mediators Who Use Them.]

Categories: Communication,Decision Trees,Miscellaneous,Settlement

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