DecisionTreeAnalysisinLitigation:TheBasics

AsampleDecisionTree,availablein

\o"ASampleDecisionTree,WithSupportingDataatPageTwo"

.pdfformathere

.

Iremembermyfirstmediationdecisiontree.Itwaslateintheday,justbeforeimpasse,andourmediatorwasdesperatetoshowmyclientandmethatwehadmisvaluedthecase.

Ashesketcheditforustheapproachmadesense,butthatwasnotimetopickupanewtechnique.

Hiseffortendednodifferentthanmostattemptstolearnaboutdecisiontreesonthefly—withaconfusedclient,afrustratedmediatorandalawyerabouttochangethesubject.

FifteenyearslaterIknowthevalueofadecisiontreeand,justasimportant,howtoreallyuseone—inconnectionwithsettlementdiscussionsandasapartofan

\o"SettlementPerspectives'"TheEarlyCaseAssessmentChecklist:EarlyCaseAssessmentsPartII""

EarlyCaseAssessment

beforesettlementtalksbegin.Admittedlytheytakealittleeffortandsomepractice,butwhetheryou’realawyeroramediatorortheirclient,you’llseeonesoon.Knowingwhatadecisiontreeisandhowtodiagramyourswillbeworththeinvestment.

WhatIsaDecisionTreeAnyway?

Oftenusedinthe

\o"'s"DecisionTreeAnalysisChoosingBetweenOptionsbyProjectingLikelyOutcomes""

businessworld

,decisiontreesare“tree-shapedmodelsof[a]decisiontobemadeandtheuncertaintiesitencompasses,”accordingto

\o"SuffolkUniversityLawSchool'sBioforDwightGolann"

DwightGolann

in

\o"A'sListingforDwightGolann's1995Book"MediatingLegalDisputes""

MediatingLegalDisputes

.Adecisiontree“showsthevariouspossibleoutcomesinalawsuitandhelpsthepartiesevaluatethecosts,risksandbenefitsofeachoutcome,”as

\o"DanKlein'sBioat"

DanielKlein

discussesmorefullyinhisarticle

\o"DanKlein's"DecisionTrees&TheArboretum"at"

DecisionTrees&TheArboretum

.

Statedsimply,thedecisiontreeisatoolusedtovaluethemultiplefinancialoutcomespossibleinanylitigation—whethersummaryjudgmentisgranted,theplaintiff“wins”asmallamount,orsomethingelsehappens.

Justasimportant,decisiontreesarriveatthesevaluesbytranslatingthesubjectivejudgmentoftrialcounselintomonetaryterms—as

\o""SpeakClearlyAndUnderstandably"byPatrickJ.Lamb"

PatrickLamb

and

\o""SoftwareMakesDecisionAnalysisEasy"byRonFriedmannandDavidPost"

RonFriedmannandDavidPost

havepointedoutbefore,yourtriallawyer’sinterpretationof“agoodchanceofwinning”mightbevery,verydifferentfromyours.Adecisiontreecaneliminatethislatentdisconnect.

TheFourStepsinCreatingaDecisionTree

\o"BioforKathleenM.ScanlononHerWebsite"

KathleenM.Scanlon’s

conciseandhelpful

\o"CPR'sLinktothe"Mediator'sDeskbook""

Mediator’sDeskbook

,publishedby

\o"LinktotheFAQPageforCPR,theInternationalInstituteforConflictPrevention&Resolution"

CPR

,tellsusthatdecisiontreesinvolvefoursteps:

Listingthevariouspossibleeventswhichmightoccurinthecourseoflitigation(orbeyond);

Consideringthecostsorgainsassociatedwitheachpossibility;

Discountingeachpossibilitybyitsprobability-estimatedlikelihoodthatitwilloccur;and

Evaluatingtheoverallpicturebymultiplyingeachpossibilitybyitsprobability.

MakeDecisionTreesWorkforYou

Youdon’tneedtowaituntilyournextmediationtolearnaboutdecisiontreeanalysis,becauseputtingthesefourstepsintoactionisn’thard:

IdentifyOutcomes.Considereveryoutcomeinyourcasethat’sarealisticpossibility—theplaintifftakesyourinitial

\o"SettlementPerspectives'"Rule68andOffersofJudgment:HowTheyWorkandWhyYouShouldCare""

Rule68

offer,thecourtgrantssummaryjudgment,youlosebecauseyoucan’tgetthatvideotapeintoevidence,orwhatever.Onceyoulisteverywherethecasecouldpossiblygo,sketchthoseoutcomesona“tree”similartotheoneabove,reproducedina.pdfformat(withadditionalexplanationifyouscrolltopagetwo)

\o"ASampleDecisionTree,WithSupportingDataatPageTwo"

here

.

ConsidertheCostsofEachPossibleOutcome.Onceyouknoweverypathyourcasecouldrealisticallytake,considerwhatitwillcosttogetdowneachpathandwhatyou’llhavetopaywhenyougetthere—andaddthosesumstoyourtree.Summaryjudgmentmaybethecheapestwayoutofthecaseforadefendant,butit’llcostsomething(say,$40,000intheexampleabove)evenifyouwin.Ittakesmoneytogettomediation,trialorappeal,andmoremoneyoftenchangeshandsonceyou’rethere.Addtheseamountstogetherforeachbranch,andlistthemonthetree.

ListtheChancesThatEachPossibleOutcomeWillOccur.Onceyouknoweverywhereyoucouldgoandhowmuchitshouldcosttogetthere,you’llneedtoapplyalittlejudgmenttodeterminethechancesyou’llgodowneachroute.Youhavea10%chanceofa“high”verdictof$500,000ifaplaintiff’sverdictcomesinanditwillcost$150,000togetthere?Writeitdown.

DoaLittleMath.Ultimatelyyou’lladduptheprobability-adjustedvaluesofallthebranchesonyourdecisiontreetoachievethe

\o"'s"DecisionMakingTools:DecisionTreeAnalysisandEMV""

expectedmonetaryvalue,orEMV

,ofyourcase.Simplycalculatethevalueofeachultimateoutcome,whichisthecostofthatparticularresulttimesthechancesthatitwilloccur,andaddupallthesefigurestoarriveatafinalvalue.

Intheexampleabovewithadditionaldetailsappearingonpagetwoof

\o"ASampleDecisionTree,WithSupportingDataatPageTwo"

thislink

,its$124,000EMVisnowherenearthe$500,000numbertheplaintiffmayhavefocusedonsincehefiledthecase(shownaboveas$650,000sincetheillustrationincludesattorneys’fees),butit’smuchhigherthanthe$40,000itwilltakethedefendanttogetthroughsummaryjudgment,too.

Theabilityofdecisiontreestoobjectivelyhighlighttherealmonetaryvalueofthecase,ratherthanthenumbereachpartymayhavefocusedonpreviously,isoneofthekeyattributesofthetool,andI’llwritemoreabouthowtoleveragethatvaluehere.

AGreat—andFree—TooltoTryDecisionTreesonYourOwn

\o"DanKlein'sBioat"

DanKlein’s

article

\o"DanKlein's"DecisionTrees&TheArboretum"at"

DecisionTrees&TheArboretum

,mentionedabove,isoneofthebestpracticaldiscussionsofdecisiontreesoutthere,andhiswebsitealsohasafreetooltocomputesimpledecisiontreescalled

\o""TheArboretum"--TheDecisionTreeToolfromDanKlein"

TheArboretum

,whereyoucan“create,save,andmodifyyourownconfidentialdecisiontrees”;heevenhasanexpressoptionwhereyoucancreateasingletreewithoutalogin

\o"Single-TreeDecisionTreeToolfromDanKlein"

here

.ThedecisiontreeatthetopofthispostwascreatedusingDan’sonlinetool,andI’llbepointingtoitagainsoon.

Bytheway,thatmediatorwhointroducedmetomyfirstdecisiontreehadapoint—apointthatwouldhavebeenbetterunderstoodonmediationdayifIhadreallyknownhowtoleveragedecisiontreesinsettlementdiscussionsbeforeIgotthere.

Tryadecisiontreeinyournextcase.You’llbegladyoudid.

2Perspectives

January21,2009

WhyShouldYouTryaDecisionTreeinYourNextDispute?

Werecentlyexploredwhatdecisiontreesareandhowtocreatethemin

\o"SettlementPerspectives'"DecisionTreeAnalysis:TheBasics""

DecisionTreeAnalysis:TheBasics

.Whileit’simportanttorevisitthebasicsonoccasion,itseemsthebiggesthurdlefordecisiontreesisn’tteachingpeoplethatthistoolisoutthere—it’sconvincingmediators,lawyersandtheirclientstoactuallytrytheminthefirstplace.Whyshouldyou?

Fromtheclient’sperspectivetherearetwogoodreasonstousedecisiontrees:betterdecisionsandhappierclients.

Dowetakethecasetotrial,dowesettleit,ordowedo

\o"SettlementPerspectives'CategoryonSettlementStructures"

somethinginbetween

?Andwhatmakesyouthinkso?Clientshavealwayslookedtotheirlawyersforsettlementadvicebut,as

\o""LitigatorsGetaBadReportCard+WaystoDoBetter"onPrismLegal,RonFriedmann'sProfessionalWebSite"

RonFriedmann

remindsus,toooftenthebestanswertheirlawyerscanofferis“Trustme,I’mtheexpert.”Today’sclients—andtheiraccountantsandotherstakeholders—wantdeeperanalysisandbetterdecisions,andDecisionTreeAnalysisisagreatwaytogetthere.

DecisionTreesDriveBetterSettlementDecisions

\o""RiskAnalysisinMediation"onGeoffSharp's"MediatorBlah...Blah...""

GeoffSharp

,whoalwayshasagoodquote,tellsusthat“[g]utinstinct,sloppyguessworkandgreyhairnolongerseemtobeenoughincomplex,highstakesmediation.”Sharpandothershighlighthowcaseevaluationtodayrequiresmorediscipline,withtoolslikedecisiontrees.

DecisionTreeAnalysisrequiresmorethanexperienceandintuition—

\o""UsingDecisionTreesinMediation"ontheNewHampshireBar'sWebSite"

PaulRemus

tellsusthatadecisiontree“forcesalawyertothinkcarefullyandsystematicallyabouthiscase.”Thisdisciplinedoesn’tcomebyaccident;Montreal’s

\o"BrianDaley'sBioonOgilvyRenaultLLP'sWebSite"

BrianDaley

remindsusin

\o".pdfCopyofBrianDaley's"MakingInformedDecisions.DecisionTreeAnalysis:Aneffectivemethodtomanagelitigationinabusinesssetting""

arecentarticle

that,asclientandcounselexploreeachbranchofthetree,thediagramrequiresthemto“deconstructacomplexlawsuitintodiscretestepsandpossibleoutcomesthatcanpavethewayforappropriatedecision-making.”

Soisthereroomforgreyhairandgutinstinct?Absolutely.Bydefinition,thevalueofthedecisiontreeexercisehingesontheprofessionallegalexpertisewecametointhefirstplace—as

\o""LitigationRiskAnalysis,"a1990ArticlebyRonFriedmannandDavidPost"

RonFriedmannandDavidPost

putitalmost20yearsago:

Thekeyinputstoadecisiontree—estimatesofprobabilitiesofthekeyeventsandofthedollarvaluesoffinaloutcomes—reflecttheexperienceandjudgmentofthelawyermakingtheestimate.

AsIthinkaboutmylastdecisiontree,it’sclearthatitdroveabetterdecisionthanmyinitialtakeonthecase.Commonsensesaidmyclienthadagreedtoanewdeal,butdidwereallyhaveagreementonthatcontractamendment?Whatevidencewouldshowit?Wasthatevidenceadmissible?Withoutanagreement,whatwouldmyclient’sdamagesbe?

Aswehavediscussedbeforeina

\o"SettlementPerspectives'PostonEarlyCaseAssessment"EasierSaidThanDone:EarlyCaseAssessmentsPartI""

differentcontext

,careful,systematicconsiderationofacasebycounselisworththeinvestment,whetheryou

\o"SettlementPerspectives'PostonEarlyCaseAssessment"BetterSettlementsFromBetterInformation:EarlyCaseAssessmentsIV""

settleyourcase

or

\o"SettlementPerspectives'PostonEarlyCaseAssessment"BetterDocketManagementThroughEarlyCaseAssessments:ECAsPartV""

not

.Butbetterdecisionsaren’ttheonlyreasontousedecisiontrees.

TheClientRidealong

Astheclientinmorethanafewdisputesovertheyears,Ihaveseenatleastthreewaysdecisiontreescanmakeforhappierclients.

ClientsWantMoreInformationthanIntuition.Althoughwetalkedaboutthisperspectivemorefullyin

\o"SettlementPerspectives'Post"WhyAreWeHere?""

myfirstpost

,I’mfortunatetohavebeenbehindcloseddoorswiththepeoplewhoreallydecidewhencasessettle—CEOs,CFOs,boardmembersandmore—andIdon’tgettosay“Trustme,I’mtheexpert.”Beforetheymakethedecisiontosettle,realdecisionmakersaskthetoughquestions:Willmylettergetintoevidence?Whatwoulddrivealowverdicthere?Whatwoulditcosttopursueafraudclaim?DecisionTreeAnalysisisonewayIgettheanswerstothesequestions—beforetheyareasked.

EveryoneUnderstandsMoreAftertheClientRidealong.Thestep-by-stepwalkthroughrequiredbyadecisiontreegivestheclientinputinto,andunderstandingof,thepaththecasemaytake—whetheritsettlesornot.

\o"BioforMarjorieCormanAaronontheUniversityofCincinnatiCollegeofLawWebSite"

MarjorieCormanAaron

tellsuswhythat’simportantin

\o"APagefor"TheHandbookofDisputeResolution""

TheHandbookofDisputeResolution

:

Adecisiontreeapproachrequirescandiddiscussionbetweenlawyerandclientaboutthelikelihoodofeachbranchonthetree,eachtwistinthelitigationpath.Thatdiscussionisalwaysworthhaving.Evenifthedecisiontreeisusedfornothingmorethanaddingclarityintheconversationoftrialalternativesandtheclient’scomfortwithattendantlevelsofrisk,thetreehasaddedvalue.

Thisclientridealongusuallydrawsnewinformationfromtheclient,andtheclientoftengainsanewperspectiveonthecasethatcanchangewherethedisputeisheaded.Aplaintiffwhowantshisdayincourtbutnowtrulyunderstandsthathe’sonly60%likelytoseethatdaymaydecidetoexploresettlement,asmayadefendantwholearnsthathisinsurancecarrierisonly60%likelytopay.

DecisionTreesCanAddIntellectualLegitimacy.Soyouhavetheanswersandyoutrulyunderstandwherethecaseisgoing.Sometimeseventhat’snotquiteenough.Manyofushavedecisionmakerswhoaredrivenmorebynumbersthanrhetoric,likeinsurers,riskmanagers,andaccountants,andquantitativeanalysisisoftentheirlanguage.DecisionTreeAnalysiscanhelphere,too;

\o"BioPageforMarcB.Victoron"

MarcB.Victor

tellsusat

\o"IntroductionPageforMarcB.Victor'sLitigationRiskAnalysisWebSite"

thatdecisiontrees“demonstratetotheclientthateachcasehasbeenrigorouslyevaluated.Theydocumenttherationaleunderlyingyourrecommendations,andclearlyshowtheeffectofvaryinganyassumptions.”Idon’tknowaboutyou,butthiswouldhavehelpedconvinceafewoftheaccountantsIhaveworkedwithinthepast.

Soarebetterdecisionsandhappierclientsreasonenoughtotrydecisiontrees?Ihopeso.I’llpostmoreonhowyoumightusedecisiontreesheresoon.

Butyoudon’tneedtowaitforthatposttostartusingDecisionTreeAnalysis—just

\o"KleinMediation'sSingleDecisionTreeTool"

giveitatry

.

You’llbegladyoudid.

AdvancedDecisionTreeAnalysisinLitigation:AnInterviewWithMarcVictor,PartI

A.pdfversionofthisadvanceddecisiontreeisavailable

here

.

DecisionTreeAnalysisisn’tnewtolitigation,anditisn’tnewtothissiteeither—wediscussed

\o"SettlementPerspectives'"DecisionTreeAnalysisinLitigation:TheBasics""

thebasics

and

\o"SettlementPerspectives'"WhyShouldYouTryaDecisionTreeinYourNextDispute?""

more

afewmonthsago.

Butwhenyou’rereadyforanadvancedtakeonthesubject,wheredoyouturn?

Allroadsleadto

\o"BioforMarcB.Victor,Esq.,ontheLitigationRiskWebsite"

MarcB.Victor,Esq.

,whopioneeredtheapplicationofdecisiontreeanalysistolitigationinthe1970s.

Throughhiscompany,

\o"TheLitigationRiskWebsite"

LitigationRiskAnalysis,Inc.

,Marchastaughtdecisiontreeanalysisinthelitigationcontexttoover10,000seniorlegalprofessionals,someofwhomnodoubthadahandinthe

\o"TheAmericanCollegeofCivilTrialMediators"

AmericanCollegeofCivilTrialMediators

awardingMarctheir

\o"TheACCTM'sAwardsPage"

EducationAwardofExcellence

in2003.

Marcwaskindenoughtoguidemeabitwhenwebeganour

\o"SettlementPerspectives'SeriesonDecisionTrees"

seriesondecisiontrees

afewmonthsago,andIhavewantedtofleshoutsomeofthedetailswithhimsincethoseinitialdiscussions.

TheQ&Abelowistheresultofourrecentfollow-upinterview.

Howdidyoufirstputtogetherlitigationmanagementandthedecisiontreeconcept?

Itwastrulyfortuitous.

IwasajointJD/MBAstudentatStanfordinthemid-1970sandhadasummerjobforacompanybringinganantitrustsuitagainstIBM.

Ihappenedtohavelunchwithoneofourlawyersthesamedaythepresidenthadaskedhimif$10millionwouldbeareasonablesettlement.

Asourlawyerwalkedmethroughwhatmighthappenifwewenttotrial—“ifthejudgerulesforusonissue1,andthejurythenfindsforusonissues2and3,andthenbelievesourexpertonissues4and5,we’llwinalotofmoney;ontheotherhand,if...”—myDecisionAnalysiscourseatStanfordcametomind.

Istartedsketchingthetreethatfithisdescriptionofthetwistsandturnsthecasecouldtake.

Overthenextfewweeks,weworkedwithoutsidecounseltofinishtheevaluation,presentedthetreeandtheresultstothepresident,andthemattersettledsoonthereafter.

Whataretheprimarywayslawyersandclientsareusingdecisiontreeanalysisinlitigation?

Ibelievethereareafewways:

(i)tobesurethelawyershaveaclearerunderstandingofthekeyissues,uncertaintiesandexposurepresentedbyacase;(ii)togainsettlementauthorityfromtheclient;(iii)toconvincetheothersidetoacceptagivensettlement;(iv)topersuadeamediatororsettlementconferencejudgeoftherationaleoftheirposition;and(v)toplanacost-effectivelitigationstrategy.

Haveyouseendecisiontreesusedeffectivelyinmediation?

Ihavebeenaskedtopresentdecisiontreesasanadvocateinmediation,anditcertainlyhelpsshowthemediatorthatmyclientandIhaveareasonedbasisforoursettlementposition.Ihavealsobeenretainedbymediatorsonseveraloccasionsinlargecasestohelpthemediationprocessbygettingthepartiestoagreeontheappropriatedecisiontrees,discussarguments,andassessprobabilitiesandverdictranges.

Thesecaseshavetypicallyinvolvedhundredsofmillionsofdollars,andbywayofexampleincludethe$1.1billionclassactionsettlementoftheMicrosoftantitrustclaimsinCaliforniaafewyearsago.

Whatisthemistakelawyersandclientsmostoftenmakeastheylearntousedecisiontreesinlitigation?

Thefirstismakingjustaone-node“wewinoverall/weloseoverall”tree,andanotherisfailingtodothorough“ListsofReasons”beforecomingupwithprobabilitiesinthecase.

Let’stakeeachofthoseinturn.

What’stheissuewitha“onenode”tree?

Somepeoplelimittheirtreetoasimple“wewin/welose,”despitethefactthattheremaybemultipleunderlyingquestionsthejuryorjudgewilldealwiththatwillinfluencetheultimateoutcomeofthecase—evidentiaryrulings,alternativecausesofaction,potentialdefenses,andotheruncertainties.

Thepartiesandtheirlawyerswouldendupwithabetterevaluationoftheiroverallchancesofwinningandlosingiftheywouldmodeltheseunderlyingissuesandinfluencesinalargertreeandthenuseprobabilityarithmetictoarriveattheoverallresult.

[Editor'sNote:

MoreontheprocesscanbefoundinMarc'sarticle,"InterpretingaDecisionTreeAnalysisofaLawsuit,"availableonthe

\o"'sArticlesPage"

articlespage

at

\o"HomePagefor"

.]

Andwhatdoyoumeanwhenyousaythatsomeusersfailtogenerate“ListsofReasons”?

Toomanynoviceusersofdecisiontreesjumpimmediatelyfrombuildingthetreetofillingintheirprobabilities.

Butaprobabilitythat’sthrownontothetreewithoutfirstthinkingrigorouslyaboutwhatthejudgeorjurywillbeweighingattrialwon’tbeasgoodasonemadeafterdoingso.

The“ListofReasons”isasummaryoffactors—proandcon—thatthejudgeorjurywillconsiderindecidingwhoshouldwineachoftheuncertaintiesrepresentedonthedecisiontree.

Thismightbeinformationonhand,suchaskeydocumentsalreadyinthefile,butitmightalsoincludefactsthatcouldbeuncoveredindiscovery,aswellaswitnessstrength,sympathyoftheparties,andmore.

[Editor'sNote:

FormoreonListsofReasons,seepages12-8to12-9in"EvaluatingLegalRisksandCostswithDecisionTreeAnalysis,"whichisreprintedavailableonthe

\o"'sArticlesPage"

articlespage

at

\o"HomePagefor"

;italsoappearsintheACC's

\o"TheACC's"SuccessfulPartneringBetweenInsideandOutsideCounsel""

SuccessfulPartneringBetweenInsideandOutsideCounsel

.]

Asacaseprogresses,howoftenshouldthepartiesupdatetheirdecisiontrees?

Thedecisiontreeshouldbeupdatedwhenevertherearenewdevelopmentsthatwouldcauseasignificantchangeeithertothestructureofthetreeitself(suchaswhenanewcauseofactionisplead)ortotheprobabilities(becauseofwhat’slearnedasdiscoveryprogresses,forexample).

Inaddition,it’susuallyagoodideatoreviewandupdateyouranalysispriortomakingasettlementdecisionorpriortoamediation.

WherecanIfindagoodexampleofanadvanceddecisiontree?

Thosearealmostalwaysprivilegedandhighlyconfidential,buttheoneonpage2ofmypaper“InterpretingaDecisionTreeAnalysisofaLawsuit”isagoodstart.

[Editor'snote:

Thisarticleisavailable

\o"'sArticlesPage"

here

anda.pdfofthatanalysisisavailableonSettlementPerspectivesbyclicking

here

.]

Andwhatisthemistakepeoplemostoftenmakeastheirdecisiontreeskillsadvance?

Asusersbecomemoreadvanced,Ioftenseethemputtingmultiplecausesofactioninseparatetreeswhentheyshouldbeinonetreeor,iftheyknowtheyshouldbeinonetree,linkingthecausesofactiontogetherincorrectly.

Eitherofthesemistakeswillcausethecalculationofcasevaluetobewrong.

Ialsosometimesseethemmakingtreesmorecomplicated—moreacademic—thantheyshouldbe,forgettingthataneffectivedecisiontreeshouldmirrorthemorestreamlined,simplerapproachjuriesoftentakewhenpresentedwithcomplicatedcases.

IfIhaveaworkingknowledgeoflitigationdecisiontrees,doyouhaveanytipsonhowtoadvancemyskillset?

Ilinkto

\o"'sArticlesPage"

7articles

onmywebsite,andcontinuetooffer

\o"TheTrainingPageat"

training

byappointment.

Inaddition,Iworkasaconsultanttocounselandtheirclientsonsignificantlitigationmatters.

Isthereasoftwareproductoutthereyourecommend?

Iuse

\o"TreeAgeSoftware'sTreeAgeProProductPage"

TreeAgePro

exclusively.

Itwasco-foundedby

\o"BiosforTreeAgeSoftware'sManagementTeam"

MorrisRaker

,aBostonlawyer,afterattendingoneofmyseminarsinthe1980s,anditcanshipwithamanualIwroteforlitigators.

[Editor'sNote:

Additionalprovidersofdecisionanalysissoftwarearelistedwithinthe

\o"TheCommentstoSettlementPerspectives'"DecisionTreeAnalysisinLitigation:TheBasics""

comments

toour

\o"SettlementPerspectives'DecisionTreeAnalysisinLitigation:TheBasics"

firstpost

ondecisiontreeanalysisinlitigation.]

AdvancedDecisionTreeAnalysisinLitigation:AnInterviewWithMarcVictor,PartII

Foradvanceddecisionanalysisinlitigation,wheredowestart?

Lastweekwebegantotakeour

\o"SettlementPerspectives'SeriesonDecisionTrees"

seriesondecisiontrees

tothenextlevelwith

\o"SettlementPerspectives'"AdvancedDecisionTreeAnalysisinLitigation:AnInterviewwithMarcVictor,PartI""

PartI

ofourinterviewwithMarcVictorof

\o"HomePagefor"

LitigationRiskAnalysis,Inc.

,whopioneeredtheuseofdecisiontreesindisputeresolutionandlitigationinthe1970s.

ThispostisPartIIofthattwo-partinterview,inQ&Aformat.

Marc,peopleoftensaythatthe“inputs”onadecisiontree—theprobabilitiesofvariousoutcomes—areimprecise.

Oneofthethe

\o"TheCommentstoSettlementPerspectives'"DecisionTreeAnalysisinLitigation:TheBasics""

comments

toour

\o"SettlementPerspectives'DecisionTreeAnalysisinLitigation:TheBasics"

firstpostondecisiontrees

putitthisway:

Thetheoreticalproblemiswiththeassignmentofprobabilitiesandtheirmeaning.Unlessyouarejustgoofingaroundwithnumbers,theassignmentofaprobabilitytoaneventpresupposesthatthereisafrequencyofsimilareventstocount.Thisishardlyevertrueinlitigation,unlessrestrictedtosomethinglikeemploymentdismissalcases.Eventhen,Ihavetroubleinterpretingthenumbersasanythingmorethansubjectiveprobabilities,i.e.justgoofingaroundwithnumbers.

Isthisafaircriticism?

Idon’tthinkso.

First,it’snotaquestionofprobabilitiesbeing“precise”or“imprecise”—theideaisforthemtobe“realistic.”

Second,assignmentofaprobabilitydoesnotpresuppose“afrequencyofsimilareventstocount.”

Aprobabilityissimplyareflectionofsomeone’sopinionofthelikelihoodofsuccessinaparticularsituation.

Lawyershavealwaysgivenopinionslikethese,eveninone-of-a-kindcases—they’vesimplyusedphrases(suchas“prettygoodchance”)muchmoreoftenthanthey’veusednumbers.

Butbecauseit’sveryeasytoshowthatthephrasesaremoreambiguousthanthepercentages,andbecausecenturies-oldprobabilitytheorytellsushowtocombinea60%chanceofsuccessononeissueanda25%chanceofsuccessonanotherissuetodeterminetheoverallchanceofsuccess(butdoesn’thelpustocombinea“prettygoodchance”ononeissueanda“definitepossibility”onanother),therearetremendousadvantagesinusingthe0to100scaleratherthanthe“nochance”to“surething”scale.

Ican’thelpbutthinkthatifthepersonwhowrotetheearliercommentheardhisorherdoctorsay“I’m‘reasonablyconfident’you’llcomethroughthisprocedurewithoutanycomplications,”theywouldimmediatelyaskforclarification:

“Whatdoyoumeanby‘reasonablyconfident’?

95%?80%?65%?”

Whyshouldclientsexpectlessfromtheirattorneys?

Anythingelse?

Definitely.

Thecommentersuggeststhereissomethingwrongwithsubjectiveprobabilities—thattheyarenothingmorethan“goofingaround.”

IhaveaveryhardtimeequatingtherigorousprocessofdevelopingathoroughListofReasons(asdiscussedin

\o"SettlementPerspectives'"AdvancedDecisionTreeAnalysisinLitigation:AnInterviewwithMarcVictor,PartI""

PartI

ofthisinterview),andthenexpressinganunambiguousopinionregardingthechanceofwinningversuslosinganissue,as“goofingaround.”

Well-reasoned“subjective”probabilitiesarequitehelpful—andareexactlywhatlawyers(anddoctorsandseniorbusinessexecutivesandothers)havealwaysbeenhiredfor:

“Basedonall