class-action settlement
How do lawyers decide how much to settle on during lawsuits?
<p>Please excuse my severe lack of knowledge in the world of law, as I am brand new, and am happy to edit my question should it not be correct in any fashion.</p>

<p>This is a rather broad question. Suppose I am suing my employer for mistreatment at work (no lunch break, poor treatment, not fulfilling conditions of employment contract, etc.). How does my lawyer calculate a monetary amount on which to settle in the lawsuit? I saw a case recently of this variety, and the plaintiffs reached a settlement $1.3mil. How did the parties involved calculate $1.3mil exactly?</p>

<p>I know this question is rather broad. <em>I am not asking for the correct amount to ask for when suing someone, for that is subjective and different for each case.</em> Rather, I am asking about the process. How do lawyers calculate how much to ask for in a lawsuit, and do they take into account just the prices of physical damage and money lost (e.g. damage to property, money lost from opportunities missed, etc.), or do they also factor in an amount to compensate for other factors? In the above example, I seriously doubt it cost a group of employees working for minimum wage $1.3mil to be mistreated at work, so how did they settle on $1.3mil?</p>

<p>Settlements are brought about by an analysis of the relevant <a href="https://en.wikipedia.org/wiki/Litigation_risk_analysis" rel="nofollow">litigation risks.</a></p>

<p>To take a simple example, suppose both sets of lawyers agree that the plaintiff will likely collect about $2.6 million if s/he wins the lawsuit, and that the chances of prevailing are about 50-50. That would produce a settlement figure of $1.3 million (0.5 x $2.6 million).</p>

<p>The main reason that settlements fail is because the two sides don't agree on the above parameters. For instance, if the defense felt that the plaintiff would be awarded no more than $1 million, it would not settle for $1.3 million. Or it may agree with $2.6 million as the potential liability figure, but feel that the plaintiff's chances of winning are only one in three.</p>

<p>If a civil claim settles this means that the parties negotiated an agreement and the court did not make a ruling.</p>

<p>You agree on a figure by ... agreeing on a figure. Just like you and the used car dealer negotiate a price for the car you want to buy. </p>

<p>However, unlike this sort of negotiation where either party can walk away with no consequences, a civil claim usually has the threat of a lawsuit up ahead which will cost both parties a lot of money to run and will cost the loser <em>heaps</em> more than a negotiated settlement. Therefore each party's BATNA (best alternative to a negotiated agreement) is coloured by the risk of fighting and losing a lawsuit.</p>
