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Legal ‘Gut Feelings’ Can Lead to Hiccups

Lawyers are as susceptible to errors in decision-making, and in giving advice to clients, as lay people… and this has a significant impact on the timing and quality of settlement of disputes. So we are told in a thought-provoking article in the Southern California Law Review, How Lawyers’ Intuitions Prolong Litigation.

Before we react and say this could never happen here, it is worth acknowledging that research into decision-making is providing more and more information to enable us to understand better what we do.

The thrust is that most litigation settles but sometimes later than it should, with the attendant cost, time and dissatisfaction.

The authors discount the often-voiced concern that this is driven by economic considerations on the part of lawyers.

They point to what are known as “cognitive illusions” which act on the intuitions of lawyers and can induce them to postpone serious settlement negotiations or reject settlement proposals that should, objectively, be accepted. The tendency of lawyers (especially experienced ones) to rely excessively on intuition can exacerbate this trend.

While there is a temporal sweet spot for settlements, the authors suggest that late settlements are more of a problem than early resolution. They cite a wealth of research to explain that client choices about whether, when and on what terms to settle are often distorted.

They point out that one of the accepted roles of lawyers is to help clients overcome these decision-making – or cognitive – shortcomings. But, it turns out, lawyers (including judges) do not consistently make better judgments than lay people and are prone to serious cognitive errors of judgment themselves.

Just like other human beings, they make overly optimistic assessments of the value and prospects of cases, stubbornly ignore suggestions of other experienced lawyers when assessing cases, and can make overly risky decisions to avoid significant losses.

All of this can prolong litigation – or lead to inappropriate settlements.

The authors identify a number of particular cognitive strategies that can lead lawyers (and others) into error and prolong disputes unnecessarily. For example, excessive reliance on intuition can impede our thinking if we let our gut instincts (or “system one” thinking) tell us what to do rather than stepping back deliberately and checking, assessing rationally all of the available evidence (“system two”).

“Confirmation bias” exacerbates this tendency when we reach a conclusion or form a view quickly and then seek to find material to support it, discounting or ignoring the contrary evidence, even if that is logical, clear, credible and independent.

To challenge our initial beliefs dispassionately takes conscious effort, so we tend to rely on the easier “system one”. The adversarial system of building one’s case can reinforce this and make resolution more difficult – and result in a quest to seek more supportive evidence than is needed and to become over-confident as a result.

One of the traps is collecting as much information as possible before assessing its value, leading to over-reliance on irrelevant material. “We have it, so we must use it.”

The “framing effect” operates when we present economically equivalent options (such as offers or counter-offers) either as potential gains or as losses, measured against the status quo.

This choice affects how people view risks, so that a pursuer may become risk-averse or cautious when faced with a settlement offer, whereas an insurer may be more risk-prone and disinclined to settle when faced with a perceived loss. This can lead to failure to settle even though resolution would be rational and advisable. Lawyers are affected in the same way as lay people.

The “sunk-cost fallacy” is also familiar in negotiations when, with the main issues being capable of rational settlement, the deal falters on the question of recovering costs incurred in the past.

We are unable to let bygones be bygones and, if not careful, end up throwing good (client) money after bad, seeking somehow to recover that which is gone even if logic would tell us to abandon that quest.

The authors observe that, while objectively we should base our decisions on expectations about the future rather than regrets about the past, lawyers as well as clients are often trapped by what has been expended to date.

Pointing out that all of this can prolong costly litigation, waste court time and drain resources which could more productively be used elsewhere, the authors propose a number of remedies including more deliberative thinking, better training, more use of impartial third parties, enhanced initial disclosure and more active case management. Shades of the civil courts review?

Of course, these concerns are applicable to all decision-making. We might reflect on the current debate about corroboration and ask to what extent these illusions are at play? The difficulty is magnified in a political context where there is little room to acknowledge that a conclusion reached may be wrong. In such a situation, enabling a decision-maker to back down and still save face may require further lateral thinking.

But that’s another story…


John Sturrock

John Sturrock is the founder and senior mediator at Core Solutions, Scotland's pre-eminent provider of commercial mediation services. As a pioneer of mediation throughout the UK and elsewhere, his work extends to the commercial, professional, sports, public sector, policy and political fields. He is a Distinguished Fellow of the international… MORE >

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