Interpreting a Decision Tree Analysis of ... - …

1 Interpreting A Decision tree Analysis OF A LAWSUIT. by Marc B. Victor More and more attorneys are evaluating lawsuits comprising the major components of damages by performing Decision tree analyses (also known ( , compensatory damages, punitive damages). as risk analyses ). These analyses can be used in a Influencing factors are those uncertainties that will variety of ways: influence how we do on the ultimate issues ( , admissibility of a document). 1. To give other counsel and the client a clearer understanding of the key issues, uncertainties To read a Decision tree , you first need to and exposure presented by a case; understand its parts. A Decision NODE, represented by a square, identifies a strategy 2. To gain settlement authority from the client;. choice that is totally within your control (even 3. To convince the other side to accept a given though the consequences are not).

2 Your possible settlement; strategic options would be written on the 4. To persuade a mediator or settlement BRANCHES (horizontal lines) that follow the conference judge of the rationale of your node. The following are examples of possible position; Decision nodes and branches: 5. To plan a cost-effective litigation strategy. Continue to Litigate The increasing use of such analyses makes it important for you to understand how to interpret Agree to them, even if you are not personally familiar with Settle at $X. how to perform them. Otherwise, your ability to participate in planning or critiquing litigation and File settlement strategy will be hampered, as will your Counterclaim ability to negotiate favorable settlements for your clients. Do Not File Counterclaim TERMINOLOGY. One of the major products of a risk Analysis is a A CHANCE NODE, represented by a circle, Decision tree .

3 Figure 1 on the next page is an identifies an uncertainty something that is not example. The basic purpose of a Decision tree is totally within your control. The branches that to show the most important and uncertain follow a chance node show the possible ways in ULTIMATE ISSUES and INFLUENCING FACTORS which the uncertainty might be resolved. The if the case is litigated. Ultimate issues are those example Decision tree in Figure 1 shows six whose outcomes individually or in combination different chance nodes (some of which are would be dispositive of the case with respect to repeated more than once) and their possible liability ( , breach of duty), plus those outcomes. Marc B. Victor, Esq., is the developer of Litigation Risk Analysis Decision tree Analysis . For more information about consulting, training, or software, contact: Litigation Risk Analysis , Inc.

4 / Box 1085 / Kenwood, CA 95452 / 707-833-1093. or e-mail or visit our website at 1 reserved by the author. 1988 and 2001. All rights Decision tree SHOWS WAYS IN WHICH. CASE COULD BE WON OR LOST. Scenario Jury awards: Jury finds Def's $1,000K . {1}. Judge does not allow Judge denies product caused .25. a state-of-art defense Daubert motion Pltf's injury $ 500K . {2}. ( , if jury finds Def's to exclude 1 of .80 .50. product caused Pltf's Pltf's doctors $ 200K . {3}. injury, Def liable even if 2/3 .25. a jury could find product did not cause $ 0. {4}. was safe based on risks .20. known at time of sale) $ 800K . {5}..60 product caused .25. Pltf's injury $ 400K . {6}..40 .50. grants motion $ 200K . {7}. 1/3 .25. did not cause $ 0. {8}..60. $1,000K . {9}. Judge denies product caused .25. Daubert motion Pltf's injury $ 500K . {10}. to exclude 1 of.

5 80 .50. Jury finds product Pltf's doctors $ 200K . {11}. not safe, even 2/3 .25. considering only did not cause $ 0. LITIGATE? {12}. those risks known .20. at time of sale $ 800K . {13}..90 product caused .25. Current FDA Pltf's injury $ 400K . {14}. standard is .40 .50. admissible grants motion $ 200K . {15}..25 1/3 .25. did not cause $ 0. {16}..60. allows a state-of-art finds product safe $ 0. {17}. defense ( , if jury finds .10. product was safe based $1,000K . {18}. on risks known at time of Judge denies product caused .25. sale, Def not liable even Daubert motion Pltf's injury $ 500K . {19}. if caused Pltf's injury) to exclude 1 of .80 .50..40 Jury finds product Pltf's doctors $ 200K . {20}. not safe, even 2/3 .25. considering only did not cause $ 0. {21}. those risks known .20. at time of sale $ 800K . {22}..50 product caused.

6 25. Current FDA Pltf's injury $ 400K . {23}. standard not .40 .50. admissible grants motion $ 200K . {24}..75 1/3 .25. did not cause $ 0. {25}..60. finds product safe $ 0. {26}..50. SETTLE AT. $500,000? FIGURE 1. 2. Jury Believes There can be any number of branches following a Accident Was Jury Believes chance node, as long as they are mutually Accident Was Caused by C. Caused by B. exclusive and collectively exhaustive. That is, Jury Believes Accident Was Not Caused by C. the uncertainty must be capable of being resolved Caused by A. in at least one of the ways shown on the branches, Caused by C. in no more than one of the ways shown, and in no Not Caused by B. Not Caused by C. additional ways beyond those already shown. Outcomes that are direct opposites should meet Caused by C. these criteria, and represent the most frequent Caused by B.

7 Not Caused by C. type of chance node. For example: Not Caused by A. Caused by C. Not Caused by B. Claim Barred by Not Caused by C. Statute of Limitations Claim Not Barred by But make sure you understand why the following Statute of Limitations would never be correct: But three (or more) branches are also possible, a Will Jury Believe Accident Was Yes good example being: Caused by A? No Jury Believes Accident Was Will Jury Believe Caused by A Accident Was Yes Caused by B? Caused by B No Caused by C. In situations where an infinite number of outcomes are possible such as the amount of where the jury could find one and only one of the damages to be awarded mutually exclusive three to be the cause, because they conflict with outcomes are created by identifying non- each other ( , are mutually exclusive ). Note overlapping ranges. For example: that if the three causes did not conflict and the jury could conceivably believe all three, some of $1 to $100,000.

8 The three, or even none of the three, then three successive chance nodes would be necessary: $100,000 to $300,000. $300,000 or more 3. [Although the final Decision tree will approximate allowed to argue to the jury that it has no liability each of the above ranges with a single mid- because its product was safe based on the known range value so that the risk Analysis can be risks at the time it was sold); (2) if so, will the jury completed, you should remember that when you believe this defense; and (3) will the jury find that see a tree with a chance node such as: Defendant s product caused Plaintiff s injury? If Defendant succeeds on both issues (1) and (2), or $ 50,000 on (3), it will be found not liable. If Plaintiff prevails on either (1) or (2), plus on (3), she will $200,000 be able to recover some damages. The two other liability issues shown are $450,000 influencing factors: they cannot directly resolve the case, but instead influence the outcomes of some of the ultimate issues.]

9 For example, the it really represents a node like the one previously probability of the jury finding Defendant s product pictured, and thus meets the criteria of having was not safe based on the known risks at the time mutually exclusive and collectively exhaustive it was sold was assessed at 90% (.90) if evidence branches.] of the current stringent FDA standard is A SCENARIO is simply a combination of branches admissible, but only 50% (.50) if that evidence is read from left to right. In Figure 1 we see 26 not heard by the jury. possible litigation scenarios. Similarly, the Daubert motion to exclude one of PROBABILITIES represent counsel s quantitative Plaintiff s doctors from testifying is also an best guess of the relative likelihood of the influencing factor: the probability of the jury possible outcomes at each branch. They should finding Defendant s product caused Plaintiff s be shown under their respective branches.

10 Injury was assessed at 80% (.80) if the motion is Probabilities at a chance node must sum to denied and the doctor testifies, but only 40% (.40). (100%). This is logical since the branches must be if the motion is granted and the doctor s testimony mutually exclusive and collectively exhaustive. is excluded. There are no probabilities under the branches The ultimate damage issue in this example is following a Decision node, because there you simply one of how much the jury will award in select the strategy that is best. compensatory damages. In many cases there are additional ultimate damage issues, involving such things as punitive damages: READING THE tree . Jury Awards Now we can interpret the example tree in Figure Punitives of: 1. The Decision node shows that Defendant is $X . debating whether to litigate or pay a $500,000. Judge Submits settlement demand.