Implications if there is a clustering of settlement amounts in litigation

“It’s a range [of damages] of about 5 percent, one standard deviation from the mean.” That statement comes from Jeff Carr, FMC’s general counsel, whose database of litigation outcomes shows how consistently outcomes converge around a similar amount. The quote comes from Litigation 2009, Fall 2009 at 101.

It is quibbling to point out that one standard deviation on either side of a mean (average) covers about 66 percent of the figures in a standard distribution, which is much wider than five percent. Even so, assume Carr is basically correct that for most legal departments, their litigated matters end up in a relatively narrow band of payouts (See my post of Dec. 17, 2008: settlements with 26 references cited.).

If Carr is right, the bounded range of most resolutions should allow more fixed fees because the variance risk is relatively small and the data can be incorporated in the formula for the fee. Bonus arrangements ought to be easier to arrive at because outcomes don’t splatter all over. An outcome, then, can be assessed against norms. Litigation strategy, including the use of decision trees and early case assessment, ought to become somewhat more science than art. And, finally, benchmark metrics on litigation resolutions ought to be more available, since the distribution is tighter than one might otherwise expect and therefore not so confidential.