Essay law in the shadow of bargaining: The feedback effect of civil settlements

Cornell Law Review

Volumn 95, Issue 5, 2010, Pages 957-987

  Depoorter, Ben ^a  

^a NONE

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EID: 77955536330     PISSN: 00108847     EISSN: None     Source Type: Journal    
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References (187)

1. See, e.g., Robert Cooter & Lewis Kornhauser, Can Litigation Improve the Law Without the Help of Judges?, 9 J. Legal Stud. 139, 145-150 (1980) (applying mathematical models of biological evolution to judicial precedent);
2. John C. Goodman, An Economic Theory of the Evolution of Common Law, 7J. Legal Stud. 393, 395-399 (1979) (using probabilisdc analysis to demonstrate that parties will invest more resources to obtain efficient precedent);
3. Gillian K. Hadfield, Bias in the Evolution of Legal Rules, 80 Geo. L.J. 583, 588-594 (1992) (rejecting efficiency claims because judges see only biased samples of potential cases);
4. George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. Legal Stud. 65, 67 (1977) (noting that inefficient precedents generate larger stakes and are more likely to invite litigation);
5. Paul H. Rubin, Why is the Common Law Efficient?, 6 J. Legal Stud. 51, 53 (1977) (explaining how inefficient precedents create asymmetric stakes and are subject to greater selection pressure). As a result, repeat players invest heavily in obtaining favorable precedents.
6. See generally Marc Galanter, Why the "Haves" Come out Ahead: Speculation on the Limits of Legal Change, 9 Law & Soc'y. Rev. 95, 149-50 (1974) (arguing that the disparity in legal resources plays a critical role in the evolution of the law);
7. Paul H. Rubin & Martin J. Bailey, The Role of Lawyers in Changing the Law, 23 J. Legal Stud. 807, 808 (1994) (examining the influence of legal professionals on the evolution of the law).
8. According to the selection effect, disputes selected for litigation concentrate toward decisions where parties' probability estimates of victory at trial are further away from the decision standard. This observation resulted in the so-called "50 percent rule," which holds that cases selected for litigation tend toward a 50 percent success rate.
9. George L. Priest, Benjamin Kleinl, The Selection of Disputes for Litigation, 13 J. Legal Stud., 1, 17-24, 1984
10. George L. Priest, Selective Characteristics of Litigation, 9 J. Legal Stud. 399, 401-402 (1980). For empirical support and research presenting counterevidence
11. see, for example, Daniel Kessler, Thomas Meites & Geoffrey Miller, Explaining Deviations from the Fifty-Percent Rule: A Multimodal Approach to the Selection of Cases for Litigation, 25 J. Legal Stud. 233, 235 (1996) (confirming that divergent expectation models closely resemble the fifty percent win rate);
12. Peter Siegelman & John J. Donohue III, The Selection of Employment Discrimination Disputes for Litigation: Using Business Cycle Effects to Test the Priest-Klein Hypothesis, 24 J. Legal Stud. 427, 430-431 (1996) (providing empirical evidence on the basis of an examination of win rates in employment discrimination cases filed during recessions);
13. Joel Waldfogel, The Selection Hypothesis and the Relationship Between Trial and Plaintiff Victory, 103 J. Pol. Econ. 229, 229 (1995) (providing "strong evidence for the selection hypothesis in estimated relationships between trial rates and plaintiff win rates at trial across case types and judges");
14. Donald Wittman, Is the Selection of Cases for Trial Biased?, 14 J. Legal Stud. 185, 186-195 (1985) (examining a different model of the distribution of litigation estimates of outcomes that leads to contrary conclusions about the litigation process).
15. See generally Galanter, supra note 1, at 101-102 (suggesting that repeat players are more likely to settle cases in which they expect unfavorable outcomes in an effort to avoid negative precedent).
16. See infra Part II.
17. See infra Part III.
18. The leading economic models on setdements include, for example, Richard A. Posner, Economic Analysis of Law 337-343 (7th ed., 2007);
19. John P. Gould, The Economics of Legal Conflicts, 2 J. Legal Stud. 279, 283-291 (1973) (developing an economic model to measure "[t]he trading behavior of two individuals in the presence of uncertainty" and applying it in the context of a lawsuit);
20. Keith N. Hylton, Asymmetric Information and the Selection of Disputes for Litigation, 22 J. Legal Stud. 187,190 (1993) (presendng a model that attempts to "extend[ ] the standard litigation model by taking into account informational constraints and efforts to rationally predict trial outcomes");
21. William M. Landes, An Economic Analysis of the Courts, 14J.L. & Econ. 61, 99 (1971) (examining variables that influence criminal setdements);
22. Priest & Klein, supra note 2, at 17-24.
23. Steven Shavell, Suit, Settlement, and Trial: A Theoretical Analysis Under Alternative Methods for the Allocation of Legal Costs, 11 J. Legal Stud. 55, 69-73 (1982) (comparing four methods of apportioning litigation costs and describing how those methods affect parties' litigation decisions).
24. This option is especially likely if parties have asymmetric stakes in the dispute. If the defendant is a repeat player and the plaintiff is not, the former will be more likely to offer a premium to the plaintiff in order to bury the dispute in a confidential setdement agreement. For an economic model
25. see Andrew F. Daughety & Jennifer F. Reinganum, Hush Money, 30 RAND J. Econ. 661, 674-675 (1999) [hereinafter Daughety & Reinganum, Hush Money] (concluding that a party who is motivated to limit the diffusion of information surrounding setdement negotiations loses considerable bargaining power);
26. Andrew F. Daughety & Jennifer F. Reinganum, Informational Externalities in Settlement Bargaining: Confidentiality and Correlated Culpability, 33 RAND J. Econ. 587, 588 (2002) [hereinafter Daughety & Reinganum, Informational Externalities] (finding that in cases of correlated liability, the first plaintiff can free-ride off of future plaintiffs by extracting a premium in return for secrecy).
27. See, e.g., David Luban, Settlements and the Erosion of the Public Realm, 83 Geo. L.J. 2619, 2624 n.27 (1995) (presenting anecdotal evidence that "lawyer buyout" has occurred in several high profile mass tort cases including asbestos);
28. Heather Waldbeser & Heather DeGrave, Note, A Plaintiffs Lawyer's Dilemma: The Ethics of Entering a Confidential Settlement, 16 Geo. J. Legal Ethics 815, 826 (2003) (arguing that "courts should decide whether such a [secret] settlement would threaten the public interest").
29. In their landmark Essay, Robert Mnookin and Lewis Kornhauser first acknowledged the effect of nonlegal factors on negotiated outcomes. They suggest that negotiations may fail because of parties' different abilities to bear litigation costs, diverse attitudes toward risk, asymmetric information, emotions, and strategic behavior.
30. R.H. Mnookin, L. Kornhauser, Bargaining in the shadow of the law: The case of divorce, 88 Yale L.J., 950, 973, 1979, (suggesting two alternative models of bargaining: a strategic model based on threat and bluff and a norm-centered model relying on legal and social norms).
31. see also Carrie Menkel-Meadow, Toward Another View of Legal Negotiation: The Structure of Problem Solving, 31 UCLA L. Rev., 754, 801-804, 1984) (emphasizing the role of economic, legal, social, psychological, and ethical considerations in settlements).
32. On information costs as an explanation for litigation see, for example, Bruce L. Hay, Effort, Information, Settlement, Trial, 24 J. Legal Stud. 29, 42 (1995).
33. Hylton, supra note 6, at 190.
34. Kathryn E. Spier, The Dynamics of Pretrial Negotiation, 59 Rev. Econ. Stud. 93, 97-99 (1992).
35. See Robert Cooter, Stephen Marks & Robert Mnookin, Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior, 11 J. Legal Stud. 225, 227-234 (1982) (developing a strategic model for analyzing setdement negotiations).
36. A number of economic models explain the occurrence of litigation in view of diverging expectations regarding the outcome of trial. See sources cited supra note 6.
37. See also Lucian Arye Bebchuk, Litigation and Settlement Under Imperfect Information, 15 RAND J. Econ., 404, 406-409, (1984) (developing a model for measuring the effect of informational asymmetries in setdement negotiations).
38. Patricia Munch Danzon & Lee A. Lillard, Settlement Out of Court: The Disposition of Medical Malpractice Claims, 12 J. Legal Stud. 345, 347-351 (1983) (using data on individual medical malpractice claims to empirically test established theory on the setdement process).
39. For an example of a model of litigation where both parties are overly optimistic regarding the value of the claim at trial.
40. see Amy Farmer 8c Paul Pecorino, Pretrial Negotiations with Asymmetric Information on Risk Preferences, 14 Int'l Rev. L. & Econ. 273, 274-276 (1994).
41. See also Cooter, Marks & Mnookin, supra note 11, at 227-34.
42. Samuel R. Gross & Kent D. Syverud, Getting to No: A Study of Settlement Negotiations and the Selection of Cases for Trial, 90 Mich. L. Rev., 319, 341-378, (1991) (examining earlier strategic bargaining frameworks in light of data on setdement negotiations in both personal injury cases and commercial disputes).
43. James S. Kakalik Patricia A. Ebener, William L.F. Felstiner Gus W. Hagcstrom, Michael G. Shanley,Variation in Asbestos Litigation Compensation and Expenses, xvi-xix, 1984) (presenting data on average compensation in asbestos litigation and comparing claims that setded before trial with claims that went to trial).
44. Lack of information on settlements in most litigation data sets is a major obstacle to testing and measuring differences in success rates and compensation amounts between setded and tried disputes. Some studies have reported setdements below trial rates.
45. But see David S. Kaplan, Joyce Sadka & Jorge Luis Silva-Mendez, Litigation and Settlement: New Evidence from Labor Courts in Mexico, 5 J. Empirical Legal Stud., 309, 309, 2008) (finding that in labor disputes workers recover less than 30 percent of their claims but receive higher percentages of their claims in setdements than in trial judgments).
46. Note that other extralegal factors such as time and financial constraints might lead disputants to setde at terms below the value of the case at trial.
47. See Geoffrey P. Miller, An Economic Analysis of Rule 68, 15 J. Legal Stud. 93, 111 (1986) (examining the effect of Rule 68 of the Federal Rules of Civil Procedure - which requires unsuccessful plaintiffs to partially compensate defendants for litigation costs - on setdement negotiations).
48. "[I]f the lawyer is compensated according to the conventional contingent fee arrangement⋯the lawyer may have an insufficient incentive to bring the case, may spend too litde time working on it if it is brought, and may encourage a settlement when the client would be better off going to trial."
49. A. Mitchell Polinsky & Daniel L. Rubinfeld, Aligning the Interests of Lawyers and Clients, 5 Am. L. & Econ. Rev. 165, 165 (2003) (proposing a modified contingent fee system in which a third party compensates the lawyer for a certain fraction of his costs, in return for which the lawyer pays an up-front fee).
50. See Michelle J. White, Legal Complexity and Lawyers' Benefit from Litigation, 12 Int'l Rev. L. & Econ. 381, 393-395 (1992) (analyzing the level of legal complexity that attorneys prefer when selecting cases). Note that higher levels of potential liability also increase the value of the services offered by defense lawyers.
51. This applies especially if defendants are not repeat players. See Rubin & Bailey, supra note 1, at 810.
52. See infra Part V.
53. "Because most attorneys will not draft a setdement agreement without some sort of provision for confidentiality, scholars of the litigation system have come to characterize settlements as 'invisible."
54. Blanca Fromm, Bringing Settlement Out of the Shadows: Information About Settlement in an Age of Confidentiality, 48 UCLA L. Rev. 663, 664-665 (2001) (citing Gross & Syverud, supra note 13, at 340).
55. See, e.g., Kalinauskas v. Wong, 151 F.R.D. 363, 367 (D. Nev. 1993) (holding that a court can mandate individuals bound by a nondisclosure agreement as part of a setdement to release information if the disclosure may enhance discovery in subsequent lawsuits without causing substantial injury to the party opposing disclosure).
56. See infra Part V.
57. Cf. Waldbeser & DeGrave, supra note 8, at 820 ("[C]onfidential setdement agreements contain litde or no substantive information pertaining to the allegations and usually seal only the amount paid to the plaintiff." (citing Robert N. Weiner, Protective Orders and Nest-Feathering, Legal Times, Sept. 23, 1991, at 29)).
58. See discussion infra Part III.A.
59. See generally Marc Galanter & Thomas Palay, Tournament of Lawyers: The Transformation of the Big Law Firm, 77-161 (1991) (documendng changes in the American legal profession that accompany the rise of large law firms with intensive specialization).
60. See David A. Dana & Susan P. Koniak, Secret Settlements and Practice Restrictions Aid Lawyer Cartels and Cause Other Harms, 2003 U. III. L. Rev. 1217, 1229-30
61. (explaining how, in cases of correlated liability, attorneys can apply information and expertise from prior setdements when pursuing cases for other potential clients). While this Essay focuses mosdy on the role of plaintiffs' lawyers, the potential for the pooling of settlement information is, of course, also present in concentrated industries where a few large law firms represent the major defendants. This observation is in line with the pre-existing notion that repeat players, who are often defendants in major tort cases such as products liability disputes, control the direction of dispute outcomes over time. See Galanter, supra note 1, at 97-114. In this regard, the control over setdement trends is another contributing factor to the presumed control of major repeat player-defendants over the path of the law
62. id. The examples in this Essay focus mosdy on plaintiffs' influence on settlement trends.
63. See infra Part II.C.
64. For a detailed list of these publications, see Fromm, supra note 21, at 708-734
65. See id. at 684, 688.
66. See id. at 685-686
67. Cf. id. at 693 ("[PJublishers are also less interested in publishing low-end setdements.").
68. Id. at 688-689
69. See American Association for Justice, Professional Resources: Publications, http://www.justice.org/cps/rde/xchg/justice/hs.xsl/502.htm (last visited Apr. 3, 2010).
70. See American Association for Justice, Professional Resources: Conventions, http://www.justice.org/cps/rde/xchg/justice/hs.xsl/867.htm (last visited Apr. 3, 2010).
71. See American Association for Justice, Professional Resources: The AAJ Exchange, http://www.justice.org/cps/rde/xchg/justice/hs.xsl/677.htm (last visited Apr. 3, 2010).
72. See American Association for Justice, Professional Resources: Continuing Legal Education, http.'//www.justice.org/cps/rde/xchg/justice/hs.xsl/484.htm (last visited Apr. 3, 2010).
73. See American Association for Justice, Professional Resources: Litigation Groups, http://www.justice.org/cps/rde/xchg/justice/hs.xsl/1150.htm (last visited Apr. 3, 2010).
74. See American Association for Justice, Publications: Products Liability Law Reporter, http://www.justice.org/cps/rde/xchg/justice/hs.xsl/506.htm (last visited Apr. 3, 2010).
75. See Daniel S. Bailis & Robert J. MacCoun, Estimating Liability Risks with the Media as Your Guide, 80 Judicature 64, 64-67 (1996) (examining the level of objectivity exhibited by popular media coverage of tort litigation from 1980 to 1990).
76. Id., D.S. Bailis, R.J. MacCoun, Estimating liability risks with the media as your guide, 80 judicature.
77. See Robert J. MacCoun, Media Reporting of fury Verdicts: Is the Tail (of the Distribution) Wagging the Dog?, 55 DePaul L. Rev. 539, 541 (2006).
78. See, e.g., Oscar G. Chase, Helping Jurors Determine Pain and Suffering Awards, 23 Hof- stra L. Rev. 763, 771-774 (1995) (comparing data on cases and media coverage of pain and suffering);
79. Neil R. Feigenson & Daniel S. Bailis, Air Bag Safety: Media Coverage, Popular Conceptions, and Public Policy, 7 Psychol. Pub. Pol'y& L. 444, 477-478 (2001) (comparing litigation data to media reports on airbag safety);
80. Steven Garber & Anthony G. Bower, Newspaper Coverage of Automotive Product Liability Verdicts, 33 Law & Soc'y Rev. 93, 119-21 (1999) (comparing data on automotive product liability cases to media reports of these cases).
81. Laura Beth Nielsen & Aaron Beim, Media Misrepresentation: Title VII, Print Media, and Public Perceptions of Discrimination Litigation, 15 Stan. L. & Pol'yRev. 237, 263-64 (2004) (comparing litigation data to media reports on Tide VII discrimination).
82. See Michael J. Saks, Public Opinion About the Civil Jury: Can Reality Be Found in the Illusions?, 48 DePaul L. Rev. 221, 232-234 (1998);
83. see also Fromm supra note 21, at 681 ("Despite the depth of information about a particular setdement that the mass media might offer, its coverage is usually limited to high-profile cases, which tend to lie at the monetary and/or dignitary extremes. The cases covered by the media, therefore, tend not to represent most cases that eventually settle, providing a distorted foundation for case evaluation.") (footnote omitted).
84. I am grateful to Judge Guido Calabresi for suggesting the strategic aspect of settlement disclosures and press leaks.
85. Interestingly, press memos on setdement announcements usually include a disclosure that the defendant does not admit guilt or liability, suggesting that the decision to compensate stems from goodwill or other considerations that are unrelated to the legal claim or the issue of liability.
86. See, e.g., Gregg Blesch, Fla. Practice, Former Director Agree to $12 million Settlement, ModernHealthcare.com, Mar. 23, 2010, http://www.modernhealthcare.com/apps/pbcs.dll/article?AID=/20100323/NEWS/ 303239967# ("Scarbrough and the practice dispute the allegations in the agreement, which stipulates that they don't admit liability by setding.")
87. John O'Connor, Sanford Pays Fine for Ethics Breach, Admits No Wrongdoing, Miami Herald, Mar. 27, 2010, http://www.miamiherald.com/2010/03/19/1537242/ sanford-pays-fine-for-ethics-breach.html
88. Sontaya Rose, Big Fresno Fair Settles E-Coli Poisoning Lawsuit, ABC News, Mar. 26, 2010, http://abclocal.go.com/kfsn/story?section=news/local&:id= 7353475.
89. See 1 Comm. to Study Med. Prof'l Liab. & the Delivery of Obstetrical Care, Inst, of Medicine, Medical Professional Liability and the Delivery of Obstetrical Care 3 (1989) (discussing the relationship between explosive growth in medical malpractice litigation and press attention based on large jury awards and settlements)
90. Deborah L. Rhode, Essay, Frivolous Litigation and Civil Justice Reform: Miscasting the Problem, Recasting the Solution, 54 Duke L.J. 447, 463-464 (2004) (asserting that selective reporting of exceptional recoveries and frivolous suits leads to misperceptions of the likelihood of large recoveries).
91. For example, there has been an emergence of websites that post lawsuit settlements daily and provide updates on the amount of the setdement awards.
92. See, e.g., Lawyers and Settlements, http://www.lawyersandsetdements.com (last visited Apr. 3, 2010).
93. MacCoun, supra note 42, at 558. However, such campaigns may backfire "because they present[ ] descriptive normative information that conflictfs] with the stated injunctive messages." Id. at 559. Indeed, if jurors take such press releases as reality and infer community standards from such coverage, media distortion might sustain the expansion of tort awards and remedies. See discussion infra Part III.
94. The survey is on file with the Cornell Law Review.
95. The survey included twelve statements. Respondents indicated on a 7-point Likert scale the extent to which they agreed or disagreed with each statement
96. Other fields represented were corporate law (3.1%), contract law (3.1%), professional liability (10.3%), class action litigation (2.1%) and various others (58%). The high amount of products-liability lawyers in the sample is partially due to the higher representation of products-liability lawyers in the Martindale Yellow Pages and the Verizon Superpages. Roughly measured, products-liability lawyers account for almost 40 percent of areas of practice.
97. A 10 percent response rate is within the general expectation for a survey of this nature. On response rates.
98. see generally Frederick Wiseman, Methodological Bias in Public Opinion Surveys, 36 Pub. Opinion Q. 105, 106-107 (1972) (studying whether differences in the method used to collect data impacts response rates).
99. Of total respondents that agreed: 47 percent agreed strongly, 40 percent agreed and 9 percent agreed slighdy. Only one respondent disagreed (strongly).
100. I conducted a paired samples Mest for the statements "Despite confidentiality agreements, lawyers have knowledge of prior setdements in their field of practice ("when the award exceeds the expected value of a case at trial' and 'when the award is below the expected value of a case at trial')." This analysis reveals a significant effect, ((104) = 4.23, p < .001, indicating that respondents agree more strongly with this statement when the award exceeds the expected value of a case at trial (M = 1.04) in comparison to when the award is below the expected value of a case at trial (M= .47). Note that these results reflect subjective values. Therefore, the data is subject to possible biases, such as overconfidence, that lead people to think they know more than they actually do. For a collection of studies on information bias. see generally Judgment Under Uncertainty: Heuristics and Biases (Daniel Kahneman, Paul Slovic & Amos Tversky eds. 1982). see generally Judgment Under Uncertainty: Heuristics and Biases (Daniel Kahneman, Paul Slovic & Amos Tversky eds., 1982).
101. Four percent of respondents indicated that they strongly disagreed with the statement that "despite confidentiality agreements, lawyers are generally aware of the trends in setdement awards in their field of practice."
102. A paired samples Mest for the statement "Lawyers talk among themselves about setdements in their field of practice" indicates a significant effect, /(105) = 5.06, p < .001, revealing that respondents agree more with this statement when the award exceeds the expected value of a case at trial (Af = 2.08) compared to when the award is below the expected value of a case at trial (M = 1.27).
103. See Marc Galanter, The Civil Jury as Regulator of the Litigation Process, 1990 U. Chi. Legal F. 201, 234 & n.152 (1990) (citing unpublished data collected by former University of Wisconsin Law School student Christopher J. Brown).
104. M. Galanter, 1990 U. Chi. Legal F., id. at 234 n.152. The remaining responses were divided equally between "less than 30 percent" and "between 30 to 60 percent."
105. See id.
106. The spread is as follows: while 30 percent of lawyers report that they do not agree or disagree, 60 percent stated that they agree (16% agree slightly, 30% agree, 14% strongly agree).
107. See Milo Geyelin, States Agree to $206 Billion Tobacco Deal, Wall St. J., Nov. 23, 1998, at B13 (discussing various states' setdement efforts with the tobacco industry). These efforts culminated in a groundbreaking agreement between the government and the tobacco industry; however, individual lidgadon against the tobacco companies condnues.
108. M. Geyelin, Wall St. J., Nov., Id.
109. For the setdement agreement in question, see Master Setdement Agreement, available at http://www.naag.org/backpages/naag/tobacco/msa/msa-pdf/, (follow the "Master Setdement Agreement" hyperlink; then follow the "Download" hyperlink).
110. On November 6, 2001, the United States and Microsoft agreed to a revised proposed Final Judgment to resolve the United States' civil antitrust case against Microsoft.
111. See Information on the United States v. Microsoft Setdement, Antitrust Case Filings, Antitrust Division, U.S. Department of Justice, http://www.usdoj.gov/atr/cases/ms-setde.htm (last visited Apr. 3,(2010).
112. For instance, trial attorneys, working with several states on their lawsuits against the tobacco companies, coordinated the nationwide tobacco litigation.
113. See A Review of the Global Tobacco Settlement: Hearing Before the S. Comm. on the Judiciary, 105th Cong. 1 (1997) (statement of Sen. Orrin Hatch, Chairman, S. Comm. on the Judiciary).
114. See Marc Galanter & Mia Cahill, "Most Cases Settle": Judicial Promotion and Regulation of Settlements, 46 Stan. L. Rev. 1339, 1348 (1994).
115. See Judith Resnik, Managerial Judges, 96 Harv. L. Rev. 374, 379 (1982) (stadng that judges have been "persuading litigants to setde rather than try cases whenever possible").
116. Some have criticized judicial intervention in setdements as it, arguably, may result in "coerced" setdements.
117. See Menkel-Meadow supra note 9, at 775.
118. see also Maurice Rosenberg, Judicial Discretion of the Trial Court, Viewed from Above, 22 Syracuse L. Rev. 635, 657-658 (1971) (labeling judicial discretion "pervasive" in the context of the modern litigation process).
119. Several studies establish that lawyers generally approve of judicial intervention. See Wayne D. Brazil, Settling Civil Suits: Litigators' Views About Appropriate Roles and Effective Techniques for Federal Judces 1-2 (1985) (finding that 85 percent of polled attorneys believe that judicial intervention improves setdement prospects);
120. Dale E. Rude & James A. Wall, Jr., Judicial Involvement in Settlement: How Judges and Lawyers View It, 72 Judicature 175, 177 (1988) (finding that 67 percent of attorneys favored judicial intervention in setdement even if local rules did not mandate active judicial participation).
121. See Rude & Wall, supra note 68, at 177 (finding that 61 percent of polled judges reported that they inform attorneys about how similar cases have been setded).
122. See id.
123. The potential usefulness of settlement information is, of course, still higher within settlement conferences than in trial. The higher degree of informality of decision making in the former will allow more explicit references to prior setdements in similar cases.
124. See generally Melvin Aron Eisenberg, Private Ordering Through Negotiation: Dispute-Settlement and Rulemaking, 89 Harv. L. Rev. 637, 649-652 (1976) (discussing the invocadon of precedent during setdement negodadons).
125. See infra Part IV.
126. The informal nature of setdement discussions frees setdement judges to work more closely with the parties and the evidence than they otherwise could. See Brazil, supra note 68, at 10.
127. Generally, the social meaning of settlements also determines the persuasive force of prior setdements. Setdements have become a more common soludon to legal conflicts and are subject to regular media attendon. As a result, foregoing this means of dispute resoludon may be looked upon unfavorably.
128. On the rise of the acdve role of judges, see supra notes 64-66 and accompanying text.
129. See Jonathan M. Purver, Evaluation and Settlement of Personal Injury and Wrongful Death Cases, 53 Am. Jur. Trials § 240 at 228 (1995) ("In settlement conferences, experienced and skilled setdement judges will put as much pressure on both sides as they can. The judges will literally pound away with arguments and positions. They will try to get the parties closer so as to make it more difficult, from an economic standpoint, for the parties to take the case to trial.").
130. See Fromm, supra note 21, at 672 ("By referencing past setdements, an attorney can persuade the other side that his offer or demand is reasonable.").
131. During pretrial setdement conferences, parties try to obtain an estimate of what the judge considers to be a fair setdement Confidential meetings and private caucusing are the most opportune moments for a judge to explain his viewpoint on the case and to evaluate the viewpoints of both opponents. Sophisticated setdement judges and experienced trial lawyers favor such separate meetings over any other conference format because they promote candor.
132. See Purver, supra note 76, at 228.
133. See supra Part II.D and sources cited.
134. See Andrew J. Wistrich, Chris Guthrie & Jeffrey J. Rachlinski, Can Judges Ignore Inadmissible Information? The Difficulty of Deliberately Disregarding, 153 U. Pa. L. Rev. 1251, 1259 (2005) (providing experimental evidence of judges' inability to disregard inadmissible information).
135. See Amos Tversky & Daniel Kahneman, Availability: A Heuristic for Judging Frequency and Probability, 5 Cognitive Psychol. 207, 208 (1973) ("A person is said to employ the availability heuristic whenever he estimates frequency or probability by the ease with which instances or associations could be brought to mind.");
136. Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, 185 Science 1124, 1128 (1974) ("In many situations, people make estimates by starting from an initial value that is adjusted to yield the final answer.⋯[D]ifferent starting points yield different estimates, which are biased toward the initial values. We call this phenomenon anchoring.").
137. See Galanter, supra note 58, at 224 n.lll.
138. See supra note 42 and accompanying text.
139. Attention to major settlement awards might lead juries to infer that such awards are a developing practice that deserves support or, conversely, may instill a perception that the tort system is out of control. See supra Part II.D and sources cited.
140. The role of the media is pervasive here because lawyers do not make references to setdement discussions or prior setdements. Various courts have held that mentioning setdement discussions during opening statements and closing arguments is improper.
141. Kent Sinclair, Trial Handbook §§ 3:8, 5:5 (3d ed., 2009). This reduces lawyers' influence in focusing attention on outlier settlements but also restricts the opportunity of lawyers to dispel possible media distortions in court.
142. Kerri L. Pickel, Inducing Jurors to Disregard Inadmissible Evidence: A Legal Explanation Does Not Help, 19 Law & Hum. Behav. 407, 415 (1995) ("[Receiving a legal explanation did not help [mock jurors] disregard inadmissible evidence.");
143. Roselle L. Wissler, Allen J. Hart & Michael J. Saks, Decisionmaking About General Damages: A Comparison of Jurors, Judges, and Lawyers, 98 Mich. L. Rev. 751, 805 (1999) (rebutting the criticism of extreme jury awards by demonstrating how jurors, judges, and lawyers accord similar monetary awards for various types of injuries);
144. Wistrich, Gurthrie & Rachlinksi, supra note 80, at 1307 ("Exposure to the plaintiffs prior criminal conviction appears to have influenced the judges' decisions, even though most judges ruled to suppress the information."). Moreover, instructions to disregard certain evidence are often counterproductive, as they highlight that admonished information in the mind of jurors. The process by which people ultimately spend more time thinking about something they are told to suppress is referred to as the "ironic process."
145. See generally Daniel M. Wegner, Ironic Processes of Mental Control, 101 Psychol. Rev., 34, 34, 1994) (developing a theory "to account for the intentional and counterintentional effects that result from efforts at self-control of mental states").
146. Daniel M. Wegner, David J. Schneider, Samuel R. Carter HI & Terri L. White, Paradoxical Effects of Thought Suppression, 53 J. Personality & Soc. Psychol. 5, 5 (1987) (analyzing an experiment that tested the participants' preoccupation with a specific thought that they were told to suppress).
147. An adverse setdement precedent on liability issues may also increase the probability of a victory for future plaintiffs in similar disputes.
148. As argued above, a setdement concession in Dispute 1 also makes setdement negotiations more difficult in Dispute 2.
149. The informal nature of communication in legal communities and the incentives of the parties involved in releasing settlement information enhances the distribution of this information. See supra Part HA.
150. See supra Part II.D and sources cited. Also, consider that, contrary to publicly released information on judicial decisions, the informal nature of setdement information prevents public correction with objective statistical information.
151. The analysis is different in situations where only the plaintiff is concerned with precedent. In those instances, there is a real exit option because a plaintiff is, of course, in the position to drop the claim and avoid any precedent, be it a judicial precedent or a setdement precedent.
152. See Rubin & Bailey, supra note 1, at 810.
153. There is one exception in which a trial jury in Florida awarded $750,000 to a victim of lung cancer. See Carter v. Brown & Williamson Tobacco Corp., 778 So.2d 932, 935 (Fla. 2000).
154. See Milo Geyelin & Suein L. Hwang, Liggett to Settle 22 States' Tobacco Suits, Wall St. J., Mar. 21, 1997, at A3.
155. M. Geyelin, S.L. Hwang, Wall St. J., Mar., Id.
156. No tobacco company had, at the time, ever been held liable in court when Mississippi concluded the first setdement agreement.
157. See id.
158. See id.
159. See Alix M. Freedman & Suein L. Hwang, Philip Morris, RJR and Tobacco Plaintiffs Discuss a Settlement, Wall St. J., Apr. 16, 1997, at Al.
160. This is in accordance with the collective action perspective on the evolution of law, which postulates that areas of law expand more rapidly if plaintiffs are supported by the presence of long-term stakeholders in the expansion of remedies and awards. See Rubin & Bailey, supra note 1, at 808-813 Trial lawyers are repeat players with a stake in the increase of products liability lawsuits and the expansion of several areas of tort law.
161. Richard A. Epstein, The Political Economy of Product Liability Reform, 78 Am. Econ. Rev., 311, 313-314, (1988).
162. Richard A. Epstein, The Unintended Revolution in Product Liability Law, 10 Cardozo L. Rev. 2193, 2219 (1989).
163. White, supra note 18, at 385-89
164. Todd J. Zywicki, The Rise and Fall of Efficiency in the Common Law: A Supply-Side Analysis, 97 Nw. U. L. Rev. 1551, 1554-62 (2003).
165. Galanter, supra note 1, at 97-114.
166. See Galanter, supra note 1, at 97-114; George L. Priest, Reexamining the Selection Hypothesis: Learning from Wittman's Mistakes, 14 J. Legal Stud. 215, 219 (1985).
167. See, e.g., Jules Coleman & Charles Silver, Justice in Settlements, 4 Soc. Phil. & Pol'y 102, 114-119 (1986) (admonishing secret nature of setdements);
168. Leandra Lederman, Precedent Lost: Why Encourage Settlement, and Why Permit Non-Party Involvement in Settlements?, 75 Notre Dame L. Rev. 221, 256 (1999) (illustrating cases where the public benefit of obtaining confidential information might outweigh the benefits of secrecy to the parties involved in the setdement).
169. Coleman & Silver, supra note 100, at 114-119
170. See, e.g., Luban, supra note 8, at 2624 n.27 (expressing ethical concerns with regard to confidential setdements that involve valuable public information).
171. Owen M. Fiss, Against Settlement, 93 Yale L.J. 1073 (1984) (arguing that settlements deny courts the ability to expound society's values).
172. In economic terms, confidential setdements allow prior victims to free-ride off of the costs of other potential future plaintiffs if there is a potential of correlated liability.
173. Daughety & Reinganum, Hush Money, supra note 7, at 674-75; Daughety & Reinganum, Informational Externalities, supra note 7, at 588.
174. See Arthur R. Miller, Confidentiality, Protective Orders, and Public Access to the Courts, 105 Harv. L. Rev. 427, 486 (1991) (describing how mandatory disclosure statutes have a chilling effect on setdements).
175. See discussion supra Part II.
176. See MacCoun, supra note 42, at 551-559 (providing a stimulus-based explanation whereby journalists as well as audiences give disproportionate weight to extremes).
177. See Miller, supra note 105, at 486.
178. see also Stephen E. Darling, Confidential Settlements: The Defense Perspective, 55 S.C. L. Rev. 785, 786 (2004) ("[T]he potential clearly exists that elimination of confidential setdements would promote unnecessary litigation without making any more useful information available to the public").
179. gee generally Joseph F. Anderson Jr., Hidden from the Public by Order of the Court: The Case Against Government-Enforced Secrecy, 55 S.C. L. Rev. 711, 726 (2004) (finding that statistics compiled since the implementation of Local Rule 5.03(c) easily refute the purported "Deterrent to Setdements" argument)
180. James E. Rooks Jr., Settlements and Secrets: Is the Sunshine Chilly?, 867-68 (2004) (citing a string of comments describing this chilling effect when a district court judge solicited opinions about secret setdements from members of the legal profession). United States district court judges in South Carolina "actually tried two fewer cases in the twelve months following the promulgation of Local Rule 5.03(c), than they did in the immediately preceding twelve-month period."
181. C.R. Drahozal, L.J. Hines, Secret settlement restrictions and unintended consequences, 54 U. Kan. L. Rev., 1457, 1467-1469, 2006, (emphasizing the erratic decrease of the ratio of dispositions to filings in Florida, but concluding that there are far too many confounding variables for the data to support the chilled-setde- ments argument).
182. Anderson, supra, at 726 (emphasis added).
183. Overall then, the public interest in promoting setdements might outweigh the potential cost of secrecy in setdements.
184. See generally Scott A. Moss, Illuminating Secrecy: A New Economic Analysis of Confidential Settlements, 105 Mich. L. Rev. 867, 880-910 (2007) (modeling the substitution effect that results from mandatory disclosure rules).
185. See Drahozal & Hines, supra note 109, at 1483.
186. There is much to be gained from comparing data on the amount of disposidons and filings in states before and after the enactment of mandatory disclosure statutes.
187. This outcome should satisfy critics of managerial judging but frustrate those who advocate the involvement of ajudge as an impartial mediator who can balance the unequal bargaining power among litigants.