A client’s tolerance for uncertainty is a consideration in settlement negotiations

There’s a theory that our modern world offers us so little exposure to pathogens that our autoimmune systems overreact to things like pollen and peanuts, causing a massive increase in allergic reactions to relatively benign substances. On a level of culture I see something similar playing out with the human ability to tolerate risk. Evolved for an era in which predators lived among us and unknown humans often meant us harm, our flight-or-fight system overreacts to minor stressors. Just in my adulthood Americans have become much more risk adverse. Helicopter parenting is one symptom of this. The decline in Americans starting small businesses or relocating is another. Some even think that the reluctance of Millennials to marry or have children is a symptom of American’s increasing intolerance for risk.

In my practice this fear of risk often manifests itself in client anxiety. Anxiety is a normal reaction to the loss of control that litigation entails. I assume that as long as there have been attorney-client relationships, clients have always wanted their attorneys to assuage their anxiety over that uncertainty and loss of control. “Good” bedside manner requires attorneys to counsel clients that they shouldn’t worry and that everything will be fine. Accurate advise requires just the opposite–litigation involves risk and risk is anxiety provoking.

It’s been my experience in twenty-five years of practice that this anxiety is getting worse and many litigants are less able to handle the uncertainty and stress of litigation. Attorneys need to take a client’s tolerance for uncertainty and stress into consideration in settlement negotiations. One can think of any litigation as having a range of potential outcomes. When all parties to litigation are represented by competent counsel, the case will likely settle within the range of likely possible outcomes. However, within that range there is some variability–this is what makes litigation unsettling for many folks. Ironically the folks who handle such stress least well are those who do worse on the range of likely possible outcomes.

There’s two reasons for this. The first is those who are unconcerned with that risk won’t discount the value of the claim to avoid that risk. Imagine a simple scenario in which a litigant can flip a coin and get $100,000 if it lands tails but nothing if it lands heads. That litigant is also offered a sum of money to avoid the coin flip. Someone who truly isn’t bothered by risk will want $50,000 to forgo the coin flip. Anyone who is risk adverse will certainly accept less than $50,000. Someone truly bothered by risk will accept substantially less than $50,000 to avoid the risk of heads.

Further an anxious client is more likely to do poorly during the stress of trial. Anxious litigants are more likely to answer inaccurately during cross examination. Inaccurate testimony hurts one’s credibility with the factfinder. Further anxious clients often appear fidgety or “off” during court proceedings. The factfinder may confuse this nervousness with other, negative, attributes. This can have adverse consequents on the court’s ultimate decision.

For the purposes of settlement negotiations, an ideal client is one who can control his or her anxious feelings and has good tolerance for risk. For such clients one doesn’t need to discount the value of the claim in order to avoid trial. However not all clients meet this ideal. Clients with limited or no tolerance for risk need to understand that their feelings reduce the value of their case. They can either work on developing better control of their anxiety or understand that, in settlement negotiations, there is a cost to avoiding trial if the other party is less frightened.

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