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A Decision Tree Case Study, Part 2 – LexSemble

In a previous post, we discussed the benefits of decision tree analysis in contract dispute litigation. By breaking the matter apart into key issues and constructing a decision tree diagram, we created a visual aid that adds an entirely new perspective. For anyone who is analytically and structurally-inclined, the decision tree introduced a new level of understanding. The decision tree highlights some key benefits, acting as a process map, visual timeline, strategy guide, and diligence tracker.

Attorneys are slow to adapt to using decision trees at the expense of their client. They may be worried about crafting a decision tree. Perhaps they do not think that far ahead and do not want to be held accountable. But for whatever reason, clients nowadays (especially business clients) demand visual aids, transparency in process, improved budgeting and benchmarking, and accountability. Clients want a more accurate assessment of risk. This allows for more informed decision making, proper planning, and hedging.

We built LexSemble to help attorneys and legal departments perform this complex risk analysis and construct decision trees with no excuses. LexSemble automatically generates decision trees from attorney feedback, eliminating any need for hand-crafting, coding, or special software. Furthermore, LexSemble produces reliable risk analysis results through crowd-sourcing, machine learning, and scoreboards.

Consider again the hypothetical facts in the contract litigation from our last post, which can be condensed as follows:

Plaintiff and defendant entered into a business agreement. Defendant made payments as required under the agreement, but failed to remit the final payment to Plaintiff. Defendant claimed that plaintiff violated a non-compete covenant contained within the agreement. Plaintiff filed a complaint against Defendant for breach of contract. Defendant denied liability and counterclaimed for damages due to Plaintiff’s alleged violation of the non-compete covenant. Defendant conceded that it failed to remit the final payment, but argued that it was relieved of its contractual duty to make the final installment payment because Plaintiff violated the non-compete covenant.

Counsel for Defendant might use LexSemble to build a decision tree model as follows:

1. Construct a survey containing questions designed to gather expert predictions.

survey questions

Survey Questions

2. Send the survey to a team of experts in the organization.

team of experts

Team of Experts

3. Compare the data and determine the best outcome, using statistical analysis and expert ranking.

data comparison

data comparison 2

Data Comparison

4. Construct a decision tree based on the survey outcome.

decision tree

Decision Tree

This decision tree tells us that four expert attorneys believe there is a 58% chance that Plaintiff did not breach the non-compete covenant. As previously explained, if Plaintiff did not breach the non-compete covenant, then Defendant does not have any other defense. Defendant already stipulated that they did not remit payment as required under the contract. If Defendant is found guilty of breach of contract, the experts determine Defendant will likely have to pay $20k in damages. Therefore, there is a 58% chance Defendant will have to pay $20k.

On the other hand, if Plaintiff did breach the non-compete, Defendant has a legitimate excuse (under Delaware law) for not remitting payment because the contract became voidable. If this occurred, Defendant would pay $0 in damages to Plaintiff. We can say there is a 42% chance that Defendant will pay $0 to Plaintiff.

LexSemble tells us that our overall expected value is $12k. Assuming the final payment under the contract is $10k and that Defendant will be required to pay Plaintiff’s attorney fees if in violation (thus, the estimated amount of $20k), Defendant should not proceed with litigation. They should remit payment as required in order to save $2k [(expected value if litigate) – (option to settle)].

This decision tree now confirms the presumption made in our last post. Defendant is better off remitting final payment in this situation. Showing this analysis to Defendant would allow them to make this strategic determination. In addition, this analysis would show that you, the attorney, did everything to ensure the best interests of the client were met.

In our next post on this topic, we will explain how building decision trees and keeping score with LexSemble can help you improve the quality of your decision-making. To learn more about LexSemble features and use cases, check out our Explainer Video or visit the LexSemble site.

This post was authored by Christopher Groh.