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Tuesday, June 02, 2009

How the Economy will affect jury damage awards

I published the following as a letter to the editor in the June 1 edition of Massachusetts Lawyers Weekly. The original article to which I make reference is well worth reading.

Trial consultant: beware of current juror reasoning

Published: June 1, 2009

To the editor:

Jocelyn Cinquino published a very interesting piece ("Impact of the economic downturn on juror reasoning," May 11) on the current economic climate's likely impact on jury decision-making. It should come as no surprise that this topic has been hot in the trial consulting community. There has been a lot of chatter about this on the American Society of Trial Consultants listserv and several sessions will be devoted to the topic at our June conference.

Cinquino's remarks largely mirror those I have heard from other consultants, and I think she has given a nice survey of current thinking on the topic. That said, there are a couple of specific points absent from Cinquino's piece that deserve some mention.
While predicting damage awards is a very tricky proposition, largely because jurors' monetary calculations tend to be all over the map, we do know something about the strategies that jurors tend to employ when thinking about damage awards.
The most common technique is known as the "anchor and adjust" strategy: A juror latches onto some tangible number that seems relevant to the damages calculation (or just in the right ballpark) and then adjusts up or down, depending on the persuasiveness of various arguments. The most common and influential anchor is the plaintiff's ad damnum. Other notable anchors are statutory damage caps and awards from famous cases.

In a state such as Massachusetts, without ad damnum requests, jurors look elsewhere (and seemingly everywhere) for anchors. Commonly used anchors include housing prices, annual salaries, pension benefits and school tuitions. It is important to realize that jurors use their own subjective estimates of these values, e.g. "My aunt Martha just sold her house in Methuen for $175K."
In a depressed economy, jurors' estimates of these anchors understandably will be lower than those associated with economic prosperity. I believe that this "sunken anchor" effect is probably the most important one driving down damage awards.

The second point I'd like to make concerns securities litigation and other suits related to the financial industry. I recently worked on a case involving the aftermath of a Ponzi scheme. We ran pre-trial research on the case in the form of a multi-panel, full-day focus group study. We learned many interesting things about the public's perception of the financial sector.
Most were fairly predictable and intuitive, such as suspicion of banks or a call for more regulation. One moderately surprising result was the inability (or lack of inclination) of people to differentiate between risky investment strategies and outright theft. Our subjects perceived the actions of hedge fund managers, sub-prime mortgage lenders and investment advisors as being simply different forms of fraud.

While they were happy to crucify the person in our case who had stolen money from his clients, they considered Lehman Brothers and Citibank also to have "stolen" billions of dollars. Perhaps due to lack of sophistication about the financial services industry, most people think of the sub-prime mortgage mess as a giant Ponzi scheme. Be prepared to run into resistance if you plan to defend a bank or investment house on the grounds that what they did was "completely legal."

1 comment:

  1. One anchoring strategy I've used. Ask during jury selection if any jurors have a limit above which they could not make an award. Typically one will say they could never award more than $1 million. In a case that's worth significantly less than that, discussing the million dollar concept, and then reassuring the jury you won't be asking for that much, can have an anchoring effect.