Litigation is risky

In a previous post, we noted that going to trial can be like rolling dice. Because litigation is such a risky activity, this might be why so many lawsuits (even non-frivolous ones) often end up settling out of court. To see this, imagine you are a plaintiff suing someone for damages. If you decide to settle out of court instead of going to trial, you may receive an amount less than what you think your case is worth. If you decide to go to trial, however, you may get nothing at all. In other words, you could win it big if you take your case to trial, but there is always a risk of recovering nothing if you do go to trial. Now, imagine that you are the defendant, that you are the one being sued for damages. To settle out of court, you may have to pay the plaintiff more than what you think is fair, but if you go to trial, you might get hit with an even larger judgment against you. But going to trial is not only a risky proposition; it is also a costly one. We will explore this aspect of litigation in a future post.

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2 Responses to Litigation is risky

  1. Pingback: “Roll the dice and take your chances” | prior probability

  2. Pingback: Litigation is costly | prior probability

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