Winning at Litigation through Decision Analysis
Creating and Executing Winning Strategies in any Litigation or Dispute
John Celona
San Carlos, CA, USA
ISSN 1431-8598
ISSN 2197-1773 (electronic)
Springer Series in Operations Research and Financial Engineering
ISBN 978-3-319-30038-2 ISBN 978-3-319-30040-5 (eBook)
DOI 10.1007/978-3-319-30040-5
Library of Congress Control Number: 2016940906
© Springer International Publishing Switzerland 2016
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This book is dedicated to Professor Ronald A. Howard and Dr. Peter McNamee, who taught me decision analysis and how to write about it; to our son Trey, whose love lights up our lives in ways we never could have predicted; and to my spouse and partner in life Bubba Gong, without whose constant love, support, belief and counsel this work would never have come to fruition.
Foreword
Over the course of more than half a century, my main professional concern has been improving decision making. The importance of decisions should be self-evident: Decisions are the only means you have to change your future life.
Most of us consider ourselves pretty good at making decisions despite having little or no formal training in the subject. Yet the principles of good decision making have been known for generations. Unfortunately, it is all too easy to demonstrate how frequently people make decisions that seem unwise to them upon more careful review. Hence my personal commitment in spreading decision analysis is to provide anyone who wishes the competence to attain clarity of action in any decision they face. My latest book with Ali Abbas, Foundations of Decision Analysis, presents the field at levels that progress from novice to professional.
In this work John Celona applies decision analysis to decisions in litigation or, more generally, to disputes of all sorts: an area in which improved decision competence can greatly help people to clarify what they want, what it is worth to them, and how best to achieve it. Litigation decisions are especially difficult because they involve high stakes, great uncertainty, and because they require close cooperation between the principal (a client) and a highly trained professional (the attorney). Decision analysis should be a part of every attorney’s training. Unfortunately, it is not. Further, among the many works on decisions in litigation, none tackle in depth the application of decision analysis to litigation. This book will help to fill that gap.
A further challenge arises when an analyst (possibly trained in decision analysis, management science, or operations research) is called in to support the legal decision-making process. Legal terminology, issues, and how to structure and analyze them are critical, yet foreign to an analyst—and most attorneys are not trained to provide what the analyst needs to know about legal proceedings. This book will be of great assistance.
For over three decades, I have known, taught, and worked with the author at Stanford University, at Strategic Decisions Group, and during his subsequent independent consulting practice. I have always found him to be an exceptionally clear thinker and commend his contributions to the field of decision analysis. His first book on decision analysis, Decision Analysis for the Professional (coauthored with
Peter McNamee), played a key role in developing the professional practice of decision analysis. This work, first published in 1986 and presently in its fourth edition, continues in use at Stanford University and around the world.
The author’s combination of clear thought, acumen, ability, training, and experience in both the law and decision analysis make him uniquely qualified to author this work. I applaud his newest contribution to wider decision competence and recommend it highly.
Stanford, CA
Ronald A. Howard
1.2 Decision Analysis: Conceptual Technology to Make Better Use of Your Brain
Over the years, I have noted a number of typical reactions when people are first introduced to the theory, methods, and tools of Decision Analysis. Occasionally someone gobbles up the message whole, wondering why he or she hasn’t already been doing something as intuitively sensible as Decision Analysis. Others listen and suspend their judgment until they’ve seen all the pieces laid out before them and then put together. Others balk and reject it outright, sometimes with an almost instinctive negative reaction to structuring a decision and a refusal to use numbers instead of words to think about possibilities.
The last reaction is perhaps most unfortunate because I believe that Decision Analysis offers a unique way to make better use of the two modes of thinking all people innately possess, in the process creating powerful and defensible insights as to which course of action is best and why.
All people possess a fast, intuitive mode of thinking which I like to call the intuitive supercomputer. It’s the one people naturally use most of the time to make decisions. It’s fast, easy, intuitive, and works well most of the time. It uses subtle and complex reasoning processes that are difficult to trace. It governs emotions, empathy, trust, and—most importantly—action. It is highly developed for dealing with other people. Daniel Kahneman refers to this mode of thinking as the Affective Decision System or Type 1 thinking.
Unfortunately, the fast, easy, and intuitive heuristics and methods employed by the Intuitive Supercomputer reliably go astray when dealing with complexity and uncertainty. They are further subject to motivations, willpower, emotions and stress which all too predictably drive demonstrably unreasonable action. These failure modes are discussed in further detail in Chapter 1.
Thankfully, we are equipped with a second mode of thinking which I call the Logical Co-Processor or slow thinking. It is indeed slower and literally more effort to invoke (measurable in calories burned). It requires concentration and focus, and uses transparent and logical reasoning methods.
For example, consider the purchase of a car. Whether you like a car or not is an instant, intuitive determination. Whether you actually purchase that particular car or another (or particular options on that car) brings in slow thinking. What’s the cost of a particular configuration? Does it have enough power, gas efficiency, or room? Here one typically begins to logically puzzle out the alternatives and their respective costs and benefits.
Your logical co-processor likewise isn’t omniscient. It requires considerable concentration and focus—at the risk narrowing the focus to where you try to solve the wrong problem. In Decision Analysis terms, we call this Frame Blindness: setting up the wrong framework for the decision. Going back to our car example, are you considering a car for every day use for yourself, your entire family, or for taking to the race track? Each different frame for the problem drives a different preferred choice. Further, a logical argument by itself doesn’t lead to action unless trusted and persuasive. This is self-evident to people trained in formal logic. Change the premises or the conditional (“if-then”) and the conclusion changes. It is very easy to manipulate a logical argument or a quantitative analysis to lead to the desired conclusion. Attorneys, in particular, are trained to put forth the best possible arguments for their clients regardless of their own thoughts as to the intuitive merits of the case. Decision analysis frames the interchange between your intuitive supercomputer and your logical co-processor to develop solid and defensible insights as to which course of action is best and why. Intuition creates the alternatives and your judgments on the possibilities for uncertainties that affect which alternative will turn out to be best in the end. Logic structures these into a quantitative model to generate results and create insight as to which course of action is best and why. This interchange is illustrated in Figure 1.1.
Done well, the insight created by the interchange framed by Decision Analysis creates insights—a qualitative synthesis—which can indeed drive well-considered action.
The process is similar to the one Einstein used to develop the theory of relativity. When he first published it, he was asked “Where is your lab work?” He had none. He used the now-famous thought experiments documented in his book on relativity to develop the theory (the trains traveling toward each other and so forth).
In the same way, decision analysis creates thought experiments expressed in quantitative models to explore which alternative might be best in various conditions and why.
These thought experiments and they insight they create furnish a very robust and defensible basis for action. The insights and synthesis yield the two- or threesentence description of what should be done and why that senior decision makers seek. The analysis behind it elaborates the rationale for the decision. Done well, it addresses pretty much any “Yeah but,” “What if,” or “Did you consider…”
In summary, Decision Analysis provides:
• A philosophy for how to make decisions employing your intuitive and logical thinking modes;
• A framework for breaking decisions down into components: alternatives, information, preferences, and logic;
• A language for communicating clearly about the decision and its possible consequences;
• A systematic process for making decisions;
• A methodology employing specific tools and analyses.
This book is neither a complete exposition on Decision Analysis nor on the law. For the former, please see Decision Analysis for the Professional. Rather, it aims to equip people with some analytical background (e.g., management science and operations research) with methods and examples to tackle legal problems effectively, and people with legal training with enough analytical methods and guidance to do the same.
1.3 Graphical Presentation of Theory
The selections from Decision Analysis theory, philosophy, and methods in this book are presented with largely graphical means, omitting possible accompanying derivations and representations with mathematical formulas.
For example, in Chapter 5, we present graphically the equal-areas method for discretizing a continuous probability distribution. A presentation on this same topic in Foundations of Decision Analysis concludes with the following formula:
Our aim with employing graphical rather than formula presentations is twofold:
• For those with a technical background (e.g., mathematics, operations research, or management science), to present a complete set of methods and calculations and how they apply to analyzing complex and uncertain legal situations.
• For those with a legal background (e.g., law students and attorneys) to likewise introduce them to applying these methods to legal situations without needing to learn the underlying mathematical representations.
For those desiring to supplement this book with a formula presentation, we refer you to Foundations of Decision Analysis.
1.4 A Note on Ethics
Decision Analysis works regardless of the motives of a party. It can be used to plan the best strategy to prosecute or defend a meritorious suit as well as a frivolous one. Naturally, we hope that, as in all matters in life, parties act ethically. What one considers “ethical” could obviously be the subject of many books and a lifetime of study. In the interest of keeping the length of this book finite, we omit a discussion.
1.5 How to Use This Book
• Read Part I for a qualitative explanation of Decision Analysis.
– For the novice, Chapter 2 provides a minimally quantitative first pass through the analysis.
• Read Part II for a complete explanation of the rules and procedures of a Decision Analysis.
• Refer to Part III as you confront the advanced topics discussed there (or as curiosity moves you). It is, however, worthwhile at least to skim through the Advanced Topics to acquaint yourself with the material discovered there—otherwise, you may find it difficult even to recognize when you’re faced with one of those situations or problems.
• You may read this book without doing any of the problems at the end of each chapter. However, the problems do range from simple to complex and thereby provide a way to test and develop your comprehension and skills before being confronted with the unstructured complexity of a case of your own.
• Use the Index to find any of the example trees used throughout the book (such as the tree for Two Arguments to Recover a Single Loss), as well as for a more detailed topic breakdown than is presented in the table of contents.
• Refer to the References for more advanced discussions of various topics, and for other applications and more general discussions of decision analysis.
• Refer to the Note on Software (below) for information on the decision analyis software used in this book.
1.6 How Not to Use This Book
• This book is not a guide to the substantive law used in examples throughout it. Much of the law will be generally applicable to your jurisdiction, but you should not use this book as a legal reference to either the substantive law or to legal terminology.
• Nor does this book present such complete examples of sample analysis that you should merely pick the one closest to your problem and use it. Certainly, many Relevance Diagrams and trees illustrate commonly encountered types of cases and occasionally one may almost exactly capture your particular problem. However, your analysis would be far more illuminating and valuable if you used the illustrated diagrams and trees as ideas for structuring your own representation of your case, rather than simply copying a diagram that may not reveal the important uncertainties and relationships in your case.
• Don’t put this book away after a first reading. It contains a distillation of years of experience in decision analysis, and the importance of many hints and discussions in it won’t be apparent to you after a first reading. Use the Contents and Index and keep referring back to it. You’ll be surprised at how you continually find helpful new ideas and information as you analyze your own cases.
1.7 How to Use the Problems in this Book
Each chapter concludes with a variety of problems organized by chapter section. It is not intended that an instructor would assign students every problem to complete or that a reader would complete them all. A variety is included so that instructors and readers can select which ones to assign or complete. Depending on the class focus, different instructors may choose different problems to assign, or different ones each time a class is offered. To test understanding, tackling one or more problem in each section would be recommended.
The problems in each section progress from simple discussion or calculation problems to case studies. Though the case studies may appear complex, they are far simpler than real-world situations in which one of the major challenges is to define the problem framework, as opposed the frameworks defined for each case study. As such, they hopefully furnish an appropriate intermediate exercise between a simple calculation and tackling a real world problem.
Likewise, the verbal response questions are intended to provoke thought rather than directing the reader to repeat something stated in the text. As an example, we offer an answer to question 1.1 below as follows:
• The amounts and types of the damages at issue (general, special, and punitive damages at a broad level, each of which has many types under it).
• The theories of liability and the prospects for the plaintiff prevailing on each one.
• Whether the trier-of-fact is a judge or a jury, and whether they are known to be favorable or unfavorable to plaintiffs in the venue in question.
• Evidentiary issues bearing on the ability to demonstrate particular assertions.
• Factors driving whether the plaintiff or defendant would be particular appealing/ unappealing or credible/not credible to the trier-of-fact.
• Whether the dispute involves well-settled or novel legal theories.
• The cost and duration of litigation in terms of legal fees, experts, discovery expenses, etc.
This list is more extensive than what might be expected from a typical student, and could easily be even longer. The objective of teaching is creating learning and understanding in the student. These questions aim to test what has been achieved.
In sum, it is hoped that the combination of reading the text and working some of the problems in fact equips the student or reader to successfully tackle real cases and disputes.
1.8 A Note on the Use of Software
Use of software to evaluate decision trees is critical to making decision analysis practical for real-world problems. Nonetheless, when learning decision analysis, it is best to take a “paper and pencil” approach and structure and evaluate problems on paper and maybe with a simple calculator (your phone or Excel). This is the approach taken in this text.
All too often, people dive into using software and literally can’t see the forest for the tree. They make the analysis too complex and can’t tell if it’s correct, what it means, or explain it to someone else—much less it being a compelling basis for a particular course of action. Best to start simple and only add complexity as your ability and the problem merit it. As Einstein said, “Everything should be made as simple as possible, but not simpler.”
Software is introduced when the complications become too cumbersome for paper-and-pencil methods.
The software used in this text is Supertree for three reasons: (1) a student version of it is available for free at www.supertree.net; (2) it does everything you need it to do; (3) it does a lot of things few other programs do and almost none do everything that Supertree does.
There are many other decision analysis and decision tree program available. OR/MS Today regularly publishes a survey of them.
1.9 Problems
1. Given your present knowledge and experience, consider how you would formulate a recommendation on settling or continuing a case, and for how much.
1.1. What matters would you consider?
1.2. How would you relate them to each other?
1.3. How would you create and support a specific recommendation?
2. Prior to reading this chapter, how would you define “winning at litigation?” Would you now define it differently, and, if so, how?
3. In each of the following cases, list at least two or three of the roles or responsibilities of the analyst or attorney, whether any formal analysis would be useful in performing that role (whether tax analysis, decision analysis, etc.) and why.
3.1. Defending a corporate client in an antitrust suit.
3.2. Prosecuting a patent infringement case against a particular defendant.
3.3. Estate planning for a client, including preparing a will and an inter vivos trust.
3.4. Representing one spouse in a contested divorce suit.
3.5. Representing both spouses in an uncontested, no-fault divorce.
3.6. Mediating a labor contract dispute.
3.7. Working as a US prosecutor with the responsibility of deciding whether a particular narcotics trafficking case would be suitable for testing the use of the R.I.C.O. statute to impound the defendant attorney’s fees.
3.8. Rendering an opinion on whether a two clients should form their business as a partnership or as a corporation.
3.9. Advising a client on whether to accept a particular settlement offer in a case you’re prosecuting for him, and in which you are being paid hourly.
3.10. Working as a public defender with the responsibility of advising a client on whether to accept a plea bargain for 6 months of jail plus probation.
3.11. Considering how resolution of a particular case might affect future cases (either in terms of setting a precedent or the perceived attractiveness of future cases).
4. Consider how you presently use your affective and deliberative systems on a case.
4.1. What do you use intuition for?
4.2. What do you use logical reasoning for?
4.3. How do you relate them together, if at all?
4.4. Where do you consider any gaps to be?
5. Consider how you’ve faced other unfamiliar decisions in the past, like buying your first car or house, or accepting your first career-oriented job (or even the summer job at Burger King). How did you handle the decision, and were you satisfied with it? Would you feel comfortable facing the same decision again? In what respects do you feel your decision making fell short?
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