In a previous post, we saw that litigation can be a risky proposition. It is also a costly one. Under the American rule, each party to a case is responsible for his or her own legal costs. Thus, going to trial is not only uncertain; it is also costly for both parties to a lawsuit. As such, we can compare the decision of going to trial to the act of placing a bet. In order to place a bet, you will have to risk something. The outcome of the bet may depend on external factors outside of your control or on factors within your control or both. In short, you may win or lose if you decide to place a bet or take your case to trial, but in order to go to trial in the first place, you will have to incur costly legal fees and other related trial expenses. Furthermore, because going to trial is both a risky and a costly proposition, the choice between litigation and settlement opens up the possibility of strategic behavior by both parties. We will offer some examples of strategic behavior in litigation in a future post.
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