Deciding whether to settle a case or proceed to trial is one of the most significant strategic decisions a lawyer and their client will make. While the client ultimately has the final say, lawyers conduct a rigorous risk-reward analysis based on several key pillars.
1. Strength of the Evidence (Liability)
The most fundamental factor is whether the lawyer believes they can actually win.
- The "Smoking Gun": If there is undeniable physical evidence (e.g., clear video footage or a signed admission of guilt), a lawyer may push for a higher settlement or be more willing to go to trial.
- Witness Credibility: A case that relies on a witness who might be easily discredited under cross-examination is a high-risk case, making settlement more attractive.
- Legal Precedent: Lawyers look at how similar cases have been decided in the past in that specific jurisdiction.
2. Economic Realities
Litigation is a business decision. A lawyer must weigh the potential payout against the guaranteed costs.
- Litigation Costs: Trials are incredibly expensive. Costs include expert witness fees, court reporters, travel, and hundreds of hours of attorney time.
- Collectability: There is no point in winning a verdict if the defendant is broke or has no insurance. Lawyers often settle for the maximum amount of an insurance policy rather than risk a trial for a judgment they can never collect.
- The "Time Value" of Money: A settlement provides money today. A trial might provide more money in three years, but after inflation and the cost of waiting, the immediate settlement might be more valuable.
3. The "Jury Wildcard" (Risk Tolerance)
Even the strongest case can be lost in front of a jury.
- Unpredictability: Juries are human and can be influenced by emotions, biases, or simple misunderstandings of complex law.
- Venue Matters: Some jurisdictions are known for being "plaintiff-friendly," while others are "defense-friendly." Lawyers factor the local culture into their decision.
- All-or-Nothing Risk: In many trials, there is a risk of walking away with $0. A settlement eliminates that "catastrophic loss" scenario.
Comparison: Settlement vs. Trial
| Factor |
Settlement |
Trial |
| Speed |
Relatively fast (weeks/months) |
Slow (years) |
| Cost |
Lower |
Very high |
| Privacy |
Usually confidential |
Public record |
| Outcome |
Guaranteed and certain |
Unpredictable "wildcard" |
4. Client-Specific Goals
Sometimes the decision isn't just about the money; it's about the client's personal needs.
- Privacy: Many corporate clients settle specifically to keep sensitive business practices out of the public record.
- Emotional Toll: Trials are grueling. A lawyer might recommend settling if they believe the client cannot handle the stress of a trial.
Pro Tip: Lawyers often use a "Risk-Adjusted Value" formula. For example, if there is a 50% chance of winning $100,000 at trial, the "value" of the case is $50,000. If the opponent offers $60,000 to settle, the lawyer will almost certainly recommend taking it.