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A Decision Tree Case Study

The use of decision trees in law practice enhances informed decision making, forecasting, strategizing, and showing diligence. These benefits of decision trees can be obtained through other methods of case assessment and planning, but the use of decision trees adds an unparalleled perspective. A decision tree provides a map of uncertainties and potential outcomes that clients and corporate departments can read just as easily as attorneys. With this decision tree map, clients can participate in strategizing and decision making, while attorneys can more easily maintain a detailed record of decision paths and why those paths were chosen.

Consider the following set of facts surrounding a contract dispute litigation:

Plaintiff and defendant entered into a business agreement. Defendant bought certain business assets and property owned by plaintiff. Defendant agreed to make installment payments toward that purchase, made most of them as required, but failed to make the final payment. They then claimed that plaintiff had violated a non-compete covenant contained within the agreement. Plaintiff filed a complaint against defendant for breach of contract. In its answer, defendant denied liability and counterclaimed for the amount of damages it incurred as a result of plaintiffs’ alleged violation of a non-compete covenant. Defendant conceded that it failed to remit the final payment. However, defendant argued that it was relieved of its contractual duty to make the final installment payment because plaintiffs violated the non-compete covenant.

We can break down this situation in the following way:

A. Plaintiff’s Claim

1. Material breach by defendant for failing to remit final payment

B. Defendant’s Claim

1. Plaintiff breached non-compete covenant;

2. Breach was material;

3. Material breach discharged defendant’s duty to make final payment

4. Damages resulted due to Plaintiff’s breach

We can place all these issues into a decision tree. If we simplify, and do not account for summary judgment, settlement options, evidentiary burdens, etc., then our decision tree looks like this:

Decision Tree Example

The first two branches face the issue of defendant’s counterclaim. If plaintiff breached the non-compete, and this breach is material, then defendant may have a valid excuse for withholding payment. On the other branch, our tree shows what happens if defendant’s counterclaim fails and plaintiff did not breach the non-compete. Defendant already stated that they failed to remit final payment under the contract, so plaintiff has an easy victory. At least, their award of damages in the amount of the final payment is easy.

The decision tree puts this claim into perspective; the client can visualize the overview of the litigation and see all potentials. Without assigning probability, consequence values, or expected outcomes, we can already see that it is in the defendant’s interest to place more resources into proving plaintiff breached the non-compete. Failing that, it may be in defendant’s best interest to consider remitting final payment as required under the contract in order to save legal fees. In either case, this visual aid – even before a probability breakdown – can help client and counsel strategize more effectively and ultimately lead to the most satisfactory and least wasteful outcomes.

This contribution to our blog provided by Christopher Groh.

To find out more about how we use decision trees, check out LexSemble. LexSemble is a service that turns your organization’s experience into explicit knowledge and actionable guidance through crowd-sourcing, gamification, and machine learning.