Guard Against Overconfidence. Studies show that lawyers are overly optimistic about both their chance of winning and the damages recoverable. Even very experienced lawyers make this mistake. Anything can happen at trial, and because a strong case on the merits could fail for some reason no one considered, your best estimate for success should be around 50%. Also keep in mind that experience may boost confidence, but it does not necessarily improve ability. Some lawyers have been making the same mistakes for 30 years of practice, and one of those mistakes is being overly confident of an outcome at trial.
Make a True Case Valuation. A true valuation of a case is the present value of a future outcome. To make an accurate valuation of a case, you should first estimate the likelihood of recovering different amounts if you won the case (for example, 30% at $1M, 40% at $500k, and 30% at $250k). As stated above, guard against overconfidence. Take the average, and then multiply by chance of actually winning the case (say, 50%). Finally, deduct the anticipated future litigation expenses including legal fees and costs from the date of mediation through trial (say, $75,000). You will find that your $1M case is more accurately worth around $175,000, not $500,000. Never lowball the fees and costs, and be sure both the lawyer and client have previously discussed the anticipated future legal expenses; it should not come as a shock to the client on the date of mediation. Also remember the value of a case may change significantly over time. New testimony and court rulings can substantially affect all three variables – your estimate of the recovery percentages, the chances of winning on liability, and the legal expenses required to get through trial. The value to use at mediation is the value of the case on that day.