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Settle Your Case Without Setting the Dominoes in Motion: Research on the Demonstration Effect

By: Dr. Ken Broda Bahm –

Dominos
The role of a positive example in creating a “demonstration effect” has long been noted in the fields of political science and international relations, with one of the classic examples being the American Revolution that was closely followed by the French revolution.  We’re seeing it now on a near daily basis in the Middle East and North Africa.  From Egypt to Bahrain, Morocco, Yemen, Algeria and Libya, people who spent generations under autocratic rule are suddenly finding the will to mount massive demonstrations to challenge their respective regimes.  From a single successful example (Tunisia went first), the idea spread outward like a drop of ink in a glass of water.  One day, a revolution seems impossible, and the next day it has a chance: “if the Tunisians and Egyptians can throw off a dictator, then so can we!” and the dominoes fall.  So if you are an autocratic ruler, situated in the North of Africa or the Middle East, chances are you have some concerns about anything that could prompt the citizenry to follow that example. 

I don’t want to overwork the analogy, just to bring the topic back to litigation…but I will:  If you are a defendant corporation in the pre-trial phase, you may be thinking along similar lines:  “We can’t settle this case, because once we take that first step, there will be so much blood in the water that we’ll be settling other cases for decades…”  There is, of course, some practical truth to that.  But the question is – for both Middle East unrest and the demonstration effect of potential settlements:  What is it about a positive example that motivates folks to think it could apply to them as well?

Answering that question can help remove an important barrier to settling the kinds of cases that probably should be settled.  If defendants are sometimes driven away from the settlement table by the fear of establishing a norm for future plaintiffs, then it will help to think specifically about what it is that drives the decision to file suit.

One fitting case study may be found in the on-going challenges that Toyota and other companies have been having on the issue of unintended acceleration.  Recently, the U.S. Department of Transportation released the results of a comprehensive study finding “no electronics-based cause for unintended high-speed acceleration in Toyotas” – a move that we might expect would carry a negative demonstration effect for would-be plaintiffs.  Just a few weeks later, however, Toyota’s first settlement stemming from unintended acceleration was approved in California Superior Court at a level of $10 million – a clear positive demonstration effect.  Time will tell, but at this stage analysts don’t expect a substantial change in the numerous lawsuits headed for multi-district litigation in 2013 and motivation among plaintiffs appears to remain strong.  Why?  Because the bandwagon is already on the road and is, if you’ll forgive the expression, unstoppable.  In the U.S. system in particular, where time to disposition can be very long, it is the number of people filing suit that drives future suits, not necessarily outcomes.  Or, as every street performer knows, nothing attracts a crowd like a crowd.

An arena where the effect of positive expectation has been studied is the business context.  One study (Townsend, Busenitz & Arthurs, 2010), for example, looked at the business decision to start a new venture, a move that has some parallels with a plaintiff’s decision – particularly a plaintiff lawyer’s decision – to pursue a case.  In the entrepreneurial context, the study found for those deciding whether to take the plunge or not, expectations of success played only a marginal role.  Instead, the most important predictor was confidence in one’s ability to perform the tasks at issue.  Drawing from this study, the important fact in deciding whether any given settlement amounts to too much “blood in the water” would not be whether it adds to a plaintiff’s motivation – because the motivation for a large award will always be there.  Instead, the question is whether the settlement in some way adds to plaintiffs’ capability.  In other words, does the settlement in some way pave the way for future suits – for example, by highlighting the information, the documents, or the legal strategies that led to some level of success.  In practice, though, we know settlements can often accomplish the opposite by keeping documents secret and former plaintiffs silent.  In that way, a smart settlement could play an important role in keeping the dominoes upright.

To briefly return to the international events that I mentioned at the start of this post, the demonstrations underway in the Middle East and North Africa are naturally more important than our interest in litigation.  But even there, the same principles of the demonstration affect apply:  it is capability that motivates, not always ultimate success.  People demonstrate in Saudi Arabia, and are put down, with similar stories in Iran, China, and other places.  But the public demonstrations show a capability.

It is like watching a spring snow.  For awhile the flakes hit the ground and immediately melt.  But at some point the ground is ready.  And then they start to stick.

ResearchBlogging.org Townsend, D.; Busenitz, L.; & Arthurs, J. (2010). To start or not to start: Outcome and ability expectations in the decision to start a new venture☆ Journal of Business Venturing, 25(2), 192-202 DOI: 10.1016/j.jbusvent.2008.05.003

Photo Credit:  Greg Westfall, Flickr Creative Commons