The document discusses the legal case of Larry Hillblom's alleged illegitimate son, Larry Junior, who seeks a share of a $750 million estate following Hillblom's death. It outlines the complexities and probabilities involved in deciding whether to accept a settlement offer of $12 million or pursue legal action, as well as the potential outcomes based on various scenarios. The recommendation is for Larry Junior to reject the initial settlement and accept a second settlement of $40 million, provided that certain legal hurdles are navigated successfully.

1. Table of Contents
Table of Contents ............................................................................................................................... 1
Overview of Facts: ............................................................................................................................. 3
Simple decision tree ........................................................................................................................... 5
Simple decision tree ........................................................................................................................... 5
Statement of the Model ...................................................................................................................... 6
Results of Modeling ......................................................................................................................... 11
Conclusions/Recommendations ....................................................................................................... 12
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2. Executive Summary
The case of Larry Hillblom, founder of the multi-million dollar DHL Company started in 1994 when he died after his small seaplane crashed near his
home island of Saipan. His body never was recovered. He left a fortune worth an estimated $750 million before taxes in a Trust. The primary
beneficiaries were the medical schools of the University of California. He had never married and had no legitimate children. His will did not include
a clause disinheriting any illegitimate children. The problem started when a one alleged illegitimate child, Junior Larry Hillblom, born in 1984 filed a
lawsuit claiming a share of the estate. With $750 million at stake, Junior Larry aged 12 years old at that time, faced some intimidating obstacles to
get a piece of the pie. First Larry Junior must await for the outcome of a proposed law called the Hillblom Law pending in the local legislature that
would, in effect disinherit him because he is illegitimate child. Second Larry junior need to prove that he is the son of the deceased using DNA
matching, however Larry Hillblom body was never found and there was no physical trace in his house or anywhere else. The only way to get his
DNA is through a mole that was removed from his face in a previous surgery, to make the circumstance worst the mole is in the possession of the
primary beneficiary which was the medical schools of the University of California. If Larry Junior’s lawyer is able to challenge the law and get
access to the DNA and prove than Larry Junior is Hillblom’s son, then in one hand they will face a decision to either accept a settlement or to go to
court. On the other hand using the worst case scenario they could lose the case. The question is should Larry Junior settle or go to court?
As the advisor of Larry Junior and his lawyers, based on a Simple Decision Tree analysis, we advice them to reject the settlement and go to court,
this resolution would yield the best outcome possible from this case as we will show in figure1.
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3. Overview of Facts:
The case of Larry Junior is complicated and substantial. His case is full of challenges and irregularities. While vehemently denying that Larry junior
was Mr. Hillblom’s son in early 1996 and before the outcome of the Hillblom law, the trustees of the Hillblom estate offered Larry Junior a
settlement worth approximately $12 million if he would abandon his entire claim to the estate. Larry Junior and his legal team should weight their
chances if they go to court against accepting the settlement.
If the reject the settlement and decide to go to court, first his legal team needs to await the outcome of the proposed Hillblom law, which was written
under a serious financial pressure from attorneys for the Hillblom estate. On one hand if the law fails to pass, it would be a positive outcome for
them, and then they could move to the next challenge. The chances that this would happen are 40%. On the other hand if the law is passed, their
remedy is challenge its constitutionality, their chances to win the challenge are 30% against losing with a 70%.
If the law fail to pass or if they success to challenge it, their next step is to find a DNA source to use it to prove that Larry Junior is the son of the
deceased. Their chance to get a DNA source is 80% against 20% not to get it. If they get the DNA source, the come to the most important and most
crucial step in the case, which is showing that the DNA is a match, which prove that Larry Junior is the son of the deceased; Their chance to prove
that the DNA match is 70%.
So far there are many probabilities where Larry Junior would lose his case:
The Hillblom Law pass and they fail to challenge its constitutionality.
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4. They fail to get a DNA source.
They fail to prove that the DNA is a match.
If the DNA matches, Larry Junior attorneys believe the Hillblom estate will offer a settlement of approximately $40 million to avoid going to court.
If they reject the settlement they face an unsure outcome in court. They believe there is 20% chance that they would lose their case, 4% chance that
they would win and receive $338 million, 16% chance they would win and receive $68 million, 40% chance they would win and receive $34 million,
and a 20% chance they would win and receive $17 million.
Larry Junior and his attorneys face a very difficult decision. Should they accept the settlement or hope that the Hillblom law does not pass, they
would find a DNA source, and they establish Larry Junior’s rightful claim to the Hillblom estate?
Our first step is to draw a simple decision tree representation of the uncertainties and decisions Junior Larry faced. As we describe and fill in this tree,
we will provide details of background information describe the alternatives and explain the thinking behind our estimates.
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5. Simple decision tree
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6. Statement of the Model
The initial decision in this case is whether or not to accept the estate’s settlement. In order for this decision to be made, Larry Junior must also
consider the effects of the Hillblom Law if he rejects the offer. This tree is referred to as a multistage decision tree. The decision tree shows that the
first decision that Larry Junior faces is whether or not to accept the offer. If the offer is accepted, we know that he will receive 12 million dollars, and
if the offer is rejected, we have to consider the Hillblom Law possible effects.
When considering the effects of the Hillblom Law, we know that there is a .60 possibility that the law will be passed, which means there is a
.40 possibility that it will not be passed. If the proposed law is passed, Larry will receive $0 and his attorneys would then have to consider the
constitutionality of the law. If the law fails, Larry would then have to try to obtain the DNA sample.
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7. We show this on the branches because it illustrates the risk profile. A risk profile is the part of the tree that shows the chances associated with
the possible outcomes. They are used in business when giving proposals because the numbers are easily read and readers can quickly identify the
risk.
There is an estimated 80% probability of Larry’s attorneys being able to obtain the DNA. This means that there is a 20% chance that Larry
will receive $0 if the DNA is not available.
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8. If the DNA is available, we have to consider whether or not the DNA will be a match. There is a 70% chance that the DNA does match and
Larry is the son, which means that there is a 30% chance that it doesn’t. If the DNA doesn’t match, Larry will receive $0.
If the DNA does match, it is believed that there will be a 2nd settlement offered in the amount of $40 million. Larry is then faced with another
decision, whether to accept the 2nd settlement offer or to continue to go to court.
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9. If Larry decides to go to court however, there is a 20% chance that he will lose his case in court resulting in $0. But that does leave him with
an 80% probability of winning. We divided the possible amounts he could win into 4 wins. We illustrated them in the last branches on the tree.
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10. On the other hand, there is a .70 possibility that the challenge will succeed; therefore there is only a .30 possibility that it will not. If the law is
deemed constitutional, Larry will receive $0. If the law is deemed unconstitutional then the DNA issue will arise again. This part of the tree is the
same sub-tree as above.
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11. Results of Modeling
Both sides of the decision tree could result the same depending on outcomes of the unknown events. There is a .04 probability that he will receive
$338 million, a .16 probability that he will receive $68 million, a .40 probability that he will receive $34 million and a .20 that he will receive $17
million
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12. Conclusions/Recommendations
Junior Larry faces an immediate decision to either settle for $12 million, or continue his suit. QDM Pros recommends that Larry Junior rejects the
settlement and go to file a law suit in court. The reason behind our decision is a follow: assuming the Hillblom law does not pass or it is challenged to
be unconstitutional, he is able to get the DNA and prove he is the son of the deceased, if we look at the outcome of the tree there are five results,
there is a 20% probability that his claim could be dismissed by the court, in which case Larry would receive nothing at all. However if he is
successful in court he would receive payments following the probabilities outcome as follow, 4% chance to get $338 million, 16% chance to get $68
million, 40% to get $34 million, and 20% chance to get $17 million. If we calculate the expected result we get the following:
Optimal Choice Probability Amount Benefit
Decision 1 Lose 20% $0.00 $0.00
Decision 2 Win 4% $338,000,000.00 $13,520,000.00
Decision 3 Win 16% $68,000,000.00 $10,880,000.00
Decision 4 Win 40% $34,000,000.00 $13,600,000.00
Decision 5 Win 20% $17,000,000.00 $3,400,000.00
$41,400,000.00
The EMV of the whole case as showed in the Simple decision tree is $19,010,880.00 which a higher value than the initial settlement offered by the
Hillblom estates which is $12 million, but less than the second settlement, which is $40 million, so based on the analysis of the tree, the best decision
for Larry Junior is to accept the second settlement of $40 million. Larry Junior should not accept a settlement less than $ 19 million, which is the
EMV of the case; however there are other issues that Larry Junior needs to consider in making his decision, such as time, present value of the
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13. settlement, discount rates, and the inflation or level consumption. All these concerns have enormous effects on decision making when it comes to
accepting or rejecting a settlement.
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