Preliminary judgments

University of Illinois Law Review

Volumn 2010, Issue 1, 2010, Pages 165-204

  Miller, Geoffrey P ^a,b  

^a HARVARD LAW SCHOOL   (United States)

^b NEW YORK UNIVERSITY   (United States)

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EID: 78649380389     PISSN: 02769948     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (325)

1. For general accounts of settlements, see Andrew F. Daughety, Settlement, in 5 ENCYCLOPEDIA OF LAW AND ECONOMICS 95, 154-55 (Boudewijn & Gerrit De Geest eds., 2000);
2. Bruce Hay & Kathryn Spier, Settlement of Litigation, in 3 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 442, 442-51 (Peter Newman ed., 1998);
3. Geoffrey P. Miller, Settlement of Litigation: A Critical Retrospective, in REFORMING THE CIVIL JUSTICE SYSTEM 13, 13-14 (Larry Kramer ed., 1996).
4. See H. LAURENCE ROSS, SETTLED OUT OF COURT: THE SOCIAL PROCESS OF INSURANCE CLAIMS ADJUSTMENTS 179 (1970) (only about 4 percent of claims against insurance companies reached trial);
5. Marc Galanter, The Vanishing Trial: An Examination of Trials and Related Matters in Federal and State Courts, 1 J. EMPIRICAL LEGAL STUD. 459, 459 (2004) (percentage of federal civil cases tried dropped from 11.5 percent to 1.8 percent between 1962 and 2002);
6. David M. Trubek et al, The Costs of Ordinary Litigation, 31 UCLA L. REV. 72, 89 (1983) (about 8 percent of civil suits filed in state and federal courts went to trial).
7. See Ronald J. Gilson & Robert H. Mnookin, Disputing Through Agents: Cooperation and Conflict Between Lawyers in Litigation, 94 COLUM. L. REV. 509, 528 (1994) (settlements often do not occur "until years of contention run up large legal fees");
8. Herbert M. Kritzer, Adjudication to Settlement: Shading in the Gray, 70 JUDICATURE 161, 162-64 (1986) (substantial number of cases that are resolved short of trial but after substantive judicial determinations such as dismissal or other pretrial rulings).
9. See, e.g., Robert Cooter et al, Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior, 11 J. LEGAL. STUD. 225, 225 (1982) (trials represent a "breakdown");
10. Samuel R. Gross & Kent D. Syverud, Getting to No: A Study of Settlement Negotiations and the Selection of Cases for Trial, 90 MlCH. L. REV. 319, 320 (1991) ("A trial is a failure.").
11. Courts also view settlements as preferable to litigation. See, e.g., Marek v. Chesney, 473 U.S. 1, 10 (1985) ("In short, settlements rather than litigation will serve the interests of plaintiffs as well as defendants.") For challenges to the conventional wisdom,
12. see Owen Fiss, Against Settlement, 93 YALE LJ. 1073, 1076 (1984) (criticizing settlements on the ground that, inter alia, they favor wealthier litigants);
13. Robert J. Rhee, A Price Theory of Legal Bargaining: An Inquiry into the Selection of Settlement and Litigation Under Uncertainty, 56 EMORY LJ. 619, 620 (2006) (presenting litigation and settlement as alternative mechanisms for resolution of disputes).
14. See infra notes 72-78 and accompanying text.
15. See infra notes 79-85 and accompanying text.
16. See infra notes 86-90 and accompanying text.
17. See Geoffrey P. Miller, Some Agency Problems in Settlement, 16 J. LEGAL STUD. 189, 197203 (1987).
18. See infra notes 104-09 and accompanying text.
19. See infra notes 91-103 and accompanying text.
20. RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT (2007);
21. Michael Moffitt, Pleadings in the Age of Settlement, 80 IND. LJ. 727, 728 (2005).
22. See, e.g., Leonard L. Riskin & Nancy A. Welsh, Is That All There Is?: "The Problem" in Court-Oriented Mediation, 15 GEO. MASON L. REV. 863, 864 (2008) (describing court-oriented mediation and calling for enhanced attention by mediators to the real concerns of the parties).
23. See infra notes 190-94 and accompanying text.
24. See Danielle M. Shelton, Rewriting Rule 68: Realizing the Benefits of the Federal Settlement Rule by Injecting Certainty into Offers of Judgment, 91 MlNN. L. REV. 865, 869-70 (2007);
25. Edward F. Sherman, From "Loser Pays" to Modified Offer of Judgment Rules: Reconciling Incentives to Settle with Access to Justice, 76 TEX. L. REV. 1863,1874-75 (1998).
26. E.g., FED. R. ClV. P. 11.
27. See, e.g., Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-53 (2009);
28. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-34 (2007);
29. Bell AtI. Corp. v. Twombly, 550 U.S. 544, 554-58 (2007).
30. See infra note 144 and accompanying text (showing that summary judgment may not help achieve settlement).
31. FED. R. ClV. P. 23.1 (derivative litigation);
32. see Aronson v. Lewis, 473 A.2d 805, 814-16 (Del. 1984) (providing Delaware rules on when demand on directors is excused).
33. FED. R. Crv. P. 23(a)-(b) (class action certification requirements).
34. This Article compares preliminary judgments with other procedures in litigation. I do not consider strategies for resolving disputes outside of litigation, such as administrative proceedings. See, e.g., NAGAREDA, supra note 11, at viii;
35. Richard A. Nagareda, Turning from Tort to Administration, 94 MICH. L. REV. 899, 901 (1996). Nor do I consider whether market-based approaches to litigation, such as the auctioning of litigation claims, could present advantages compared with preliminary judgments.
36. See Robert Cooter, Towards a Market in Unmatured Tort Claims, 75 VA. L. REV. 383, 383 (1989);
37. Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform, 58 U. CHI. L. REV. 1,105-16 (1991) (calling for auctions of class action claims);
38. Marc J. Shukaitis, A Market in Personal Injury Tort Claims, 16 J. LEGAL STUD. 329, 329 (1987).
39. See, e.g., Sole v. Wyner, 551 U.S. 74, 83-84 (2007).
40. Preliminary judgments thus implement Robert Bone's suggestion that the judge should "inform the parties of her tentative views about the merits as the case progresses" to help counteract "irrational optimism." Robert G. Bone, Who Decides? A Critical Look at Procedural Discretion, 28 CARDOZO L. REV. 1961, 2015 (2007).
41. FED. R. Crv. P. 56.
42. See id. 56(c).
43. Idbf. 56(f) (a party opposing a motion for summary judgment may submit an affidavit stating that the decision should be postponed to permit it to develop more material);
44. see also Paddington Partners v. Bouchard, 34 F.3d 1132,1138 (2d Cir. 1994) (outlining required contents of affidavit).
45. Preliminary judgments are clearly within the judicial power of Article III of the Constitution. The parties subject to such judgments would be involved in a genuine dispute satisfying the "case or controversy" requirement (if not, the case should be dismissed for reasons having nothing to do with preliminary judgments). U.S. CONST, art. Ill, S 2, cl. 1. The judicial task, on motion for preliminary judgment, would be well within the competence and authority of judges. See Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 774 (2000) (stating that Article III power extends to resolving disputes that are "traditionally amenable to, and resolved by, the judicial process"). The judge on a preliminary judgment motion would be called on to interpret governing law on the basis of a factual record-the very essence of the judicial function. Similarly, preliminary judgments would not be advisory opinions. They would involve concrete rights of the parties in actual disputes; once issued, they would become final judgments unless objected to by the losing party.
46. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 242 (1937) (federal courts have no power to issue opinions based on hypothetical facts, but may adjudicate present rights based upon facts established in the litigation). Judges do not go beyond their constitutional authority when they communicate provisional assessments of the merits of cases properly pending before them.
47. See infra Part III.
48. STEVEN SHAVELL, FOUNDATIONS OF ECONOMIC ANALYSIS OF LAW 405 (2004);
49. John P. Gould, The Economics of Legal Conflicts, 2 J. LEGAL STUD. 279, 289-91 (1973);
50. George S. Lowenstein et al., Self-Serving Assessments of Fairness and Pre-Trial Bargaining, 22 J. LEGAL STUD. 135, 136-37 (1993);
51. Robert Mnookin, Why Negotiations Fail: An Exploration of Barriers to the Resolution of Conflict, 8 OHIO ST. J. ON DISP. RESOL. 243-46 (1993);
52. Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. LEGAL STUD. 399, 417-18 (1974).
53. See SHAVELL, supra note 27, at 401-02;
54. Gould, supra note 27, at 285-86;
55. Leandra Lederman, Precedent Lost: Why Encourage Settlement, and Why Permit Non-Party Involvement in Settlements?, 75 NOTRE DAME L. REV. 221, 225 (1999).
56. See Samuel R. Gross & Kent D. Syverud, Don't Try: Civil Jury Verdicts in a System Geared to Settlement, 44 UCLA L. REV. 1, 63 (1996) (individual cases are "high-risk," "unpredictable, and sometimes bizarre"). The uncertainty of litigation is especially pronounced where the law is unclear, or where the judgment requires discretionary fact-finding.
57. See, e.g., Mark Geistfeld, Placing a Price on Pain and Suffering: A Method for Helping Juries Determine Tort Damages for Nonmonetary Injuries, 83 CAL. L. REV. 773, 777, 781 (1995) (stressing uncertainty of jury awards for pain and suffering).
58. See Lucían Arye Bebchuk, Litigation and Settlement Under Imperfect Information, 15 RAND J. ECON. 404, 409 (1984);
59. Keith N. Hylton, Asymmetric Information and the Selection of Disputes for Litigation, 22 J. LEGAL STUD. 187,189 (1993). Optimism may be in each party's interest given the possibility that the other party will also be optimistic.
60. See Oren Bar-Gill, The Evolution and Persistence of Optimism in Litigation, 22 J.L. ECON. & ORG. 490 (2005) (providing a game-theoretic account under which optimism supports credible threats to take the case to trial). Both parties, however, would be still better off if the effects of optimism could be muted sufficiently to make settlement possible. See id. at 492.
61. On judicial error, see Chris Guthrie et al, Inside the Judicial Mind, 86 CORNELL L. REV. 777 (2001).
62. See FED. R. EVID. 802.
63. See infra Part III (cataloguing examples under current practice where judges make preliminary merits determinations).
64. See, e.g., Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981) (explaining that preliminary injunctions employ more relaxed procedures and a less developed evidentiary base because of the need for haste and the fact that such injunctions are not binding at trial).
65. At the beginning of the discovery process, parties are obligated to disclose, inter alia, "the name ... of each individual likely to have discoverable information-along with the subjects of that information-that the disclosing party may use to support its claims or defenses." FED. R. Crv. P. 26(a)(l)(c)(I).
66. Empirical studies report reasonably high rates of agreement between judges and juries. See, e.g., HARRY KALVEN, JR. & HANS ZEISEL, THE AMERICAN JURY 58,63 (1966) (78 percent judge-jury agreement found in criminal cases and 78 percent agreement in civil cases);
67. Theodore Eisenberg et al., Judge-Jury Agreement in Criminal Cases: A Partial Replication of Kalven & Zeisel's The American Jury, 2 J. EMPIRICAL LEGAL STUD. 171,183 (2005);
68. Valerie P. Hans, Judges, Juries, and Scientific Evidence, 16 J.L. & POL'Y 19, 43 (2007) (finding a basic similarity of judge-jury decision making in cases with scientific evidence).
69. Where judge-jury disagreement exists, it sometimes defies conventional wisdom. See Kevin M. Clermont & Theodore Eisenberg, Trial by Jury or Judge: Transcending Empiricism, 11 CORNELL L. REV. 1124,1125-26 (1992) (finding that plaintiffs in product-liability and medical malpractice cases tend to do better in bench trials than in jury trials).
70. See, e.g., Peter David Blanek, Calibrating the Scales of Justice: Studying Judges' Behavior in Bench Trials, 68 IND. LJ. 1119, 1126 (1993) ("In a criminal trial, a trial judge's beliefs or expectations for a defendant's guilt may be manifested either verbally or nonverbally (by facial gestures, body movements, or tone of voice) and can be reflected in a judge's comments on evidence, responses to witness testimony, reactions to counsels' actions, or in rulings on objections.").
71. Judges, like everyone else, are prone to human foibles and weaknesses. See Geoffrey P. Miller, Bad Judges, 83 TEX. L. REV. 431, 431-32 (2004) (chronicling varieties of judicial error and misconduct);
72. Richard A. Posner, What Do Judges and Justices Maximize? (The Same Thing Everybody Else Does), 3 SUP. CT. ECON. REV. 1, 39 (1993) (judges take factors such as income, leisure, and job satisfaction into account in how they perform their tasks).
73. See Jonathan R. Macey, Judicial Preferences, Public Choice, and the Rules of Procedure, 23 J. LEGAL STUD. 627, 631 (1994) (judges' decisions may reflect desires such as the wish to avoid work and the desire to obtain interesting cases and to avoid boring ones).
74. There is some evidence that decision makers, given an initial anchor, will fail to make rational adjustments in the face of later-obtained evidence. See, e.g., MAX H. BAZERMAN & MARGARET A. NEALE, NEGOTIATING RATIONALLY 27 (1992) (real estate agent evaluations of house values anchored by list price);
75. Edward J. Joyce & Gary C. Biddle, Anchoring and Adjustment in Probabilistic Inference in Auditing, 19 J. Acer. RES. 123, 141-43 (1981) (accountants' evaluation of probability of fraud found to be influenced by initial anchoring question).
76. For discussion of the analogous problem with merits-related rulings on motions to certify a class, see Geoffrey P. Miller, Review of the Merits in Class Action Certification, 33 HOFSTRA L. REV. 51, 68-69 (2004).
77. See Guthrie et al., supra note 31, at 791-95 (reporting on experiment finding anchoring effects among judges).
78. Such as when they make a final judgment after having previously evaluated a party's probability of success on motion for preliminary injunction. See, e.g., Sole v. Wyner, 551 U.S. 74, 78-81 (2007) (plaintiffs obtained preliminary injunction but lost on merits);
79. Sierra Club v. U.S. Army Corps of Eng'rs, 464 F. Supp. 2d 1171,1191-92, 1228 (M.D. FIa. 2006) (court took a "fresh, deeper" look at the issue after additional briefing and argument, and reversed its preliminary judgment that federal agency had violated the Clean Water Act).
80. A large literature on strategic bargaining and settlement traces to Cooter et al., supra note 4.
81. See, e.g., Jonathan T. Molot, An Old Judicial Role for a New Litigation Era, 113 YALE LJ. 27, 44 (2003) ("By forcing parties to focus on the merits of their positions, and by educating parties regarding a suit's likely value, summary judgment opinions can serve some of the same purposes as the settlement conference.");
82. Sanford F. Young, Feasible Strategies for Successful Discovery and Winning Dispositive Motions, 78 N.Y. ST. BJ. 10,16 (2006) (summary judgment motions are "useful devices for stirring up the pot, to induce parties to come to the table and engage in settlement negotiations").
83. See Bone, supra note 22, at 2015.
84. For an argument that attorneys, as repeat players, can facilitate settlements that clients acting alone would be unable to achieve, see Gilson & Mnookin, supra note 3, at 538.
85. Stephen McG. Bundy, The Policy in Favor of Settlement in an Adversary System, 44 HASTINGS LJ. 1, 62 (1992);
86. see Robert H. Gertner & Geoffrey P. Miller, Settlement Escrows, 24 J. LEGAL STUD. 87, 89-90 (1995)
87. ; cf. Russell Korobkin & Chris Guthrie, Opening Offers and Out-ofCourt Settlement: A Little Moderation May Not Go a Long Way, 10 OHIO ST. J. ON DlSP. RESOL. 1, 3-4 (1994) (low initial settlement offer is less likely to result in settlement than no settlement offer);
88. Mnookin, supra note 27, at 246-47 (proposing that offerees tend to devalue settlement offers because the offers originate with an opponent).
89. A substantial body of research suggests that extreme opening offers are, in fact, a successful litigation strategy. See Korobkin & Guthrie, supra note 47, at 16.
90. See Bundy, supra note 47, at 41.
91. See RICHARD H. THALER, THE WINNER'S CURSE: PARADOXES AND ANOMALIES OF ECONOMIC LIFE 50-51 (1992).
92. See Michael Abramowicz, On the Alienability of Legal Claims, 114 YALE LJ. 697, 756 (2005).
93. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 567 (6th ed. 2003).
94. See generally Miller, supra note 8.
95. See, e.g., Douglas J. Cumming, Settlement Disputes: Evidence from a Legal Practice Perspective, 11 EUR. J.L. & ECON. 249, 253-58 (2001) (identifying incentive effects of different fee structures).
96. See Miller, supra note 8, at 203.
97. Id. at 198-202.
98. Id. at 200-01.
99. But see Neil Rickman, Contingent Fees and Litigation Settlement, 19 INT'L REV. L. & ECON. 295, 304-05 (1999) (early settlement incentive may be offset by attorney's incentives to engage in hard settlement bargaining).
100. See Howard M. Erichson, Beyond the Class Action: Lawyer Loyalty and Client Autonomy in Non-Class Collective Representation, 2003 U. CHI. LEGAL F. 519, 572.
101. See John C. P. Goldberg, Lecture, Ten Half-Truths About Tort Law, 42 VAL. U. L. REV. 1221,1266 (2008) ("Suppose it turns out to be the case that lawyers who recommend settlement to tort plaintiffs consistently do so irresponsibly (for example, only to maximize the profitability of their practices) and thereby deprive clients of opportunities for more substantial and meaningful redress. Then there would be reason to suppose that the dominance of settlement as the mode for resolving tort claims is threatening the point of having tort law.").
102. See Russell Korobkin & Chris Guthrie, Psychological Barriers to Litigation Settlement: An Experimental Approach, 93 MICH. L. REV. 107,109-10 (1994).
103. See Lee Ross & Constance Stillinger, Barriers to Conflict Resolution, 1 NEGOTIATION J. 389, 394-95 (1991).
104. Empirical research suggests that people tend to evaluate decisions based on "anchors" against which they evaluate gains and losses. See Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, 185 SCIENCE 1124, 1128-30 (1974) (describing the anchoring effect).
105. See Korobkin & Guthrie, supra note 61, at 137 ("Disputants may reject a settlement offer economically sufficient to produce a negotiated settlement if they view it in relation to a reference point that suggests accepting the offer would mean accepting a net loss on the transaction.").
106. See Korobkin & Guthrie, supra note 47, at 18-19 (applying anchoring theory to negotiation setting).
107. See Sally Engle Merry & Susan S. Silbey, What Do Plaintiffs Want? Reexamining the Concept of Dispute, 9 JUST. SYS. J. 151, 153 (1984) (individual plaintiffs seek "vindication" from the litigation process).
108. See Korobkin & Guthrie, supra note 61, at 143-44 ("Individuals seeking to restore equity may allow personal feelings to overcome economically rational calculations when resolving disputes.").
109. With a common focal point in place, framing ought to encourage rather than discourage settlements because the parties, being risk-averse with respect to losses, will find it mutually advantageous to agree to a settlement close to the value suggested by the court's opinion.
110. See Julie Macfarlane, Why Do People Settle?, 46 McGILL LJ. 663, 698 (2001) (noting that procedural fairness might be more important to litigants than distributive justice);
111. John Thibaut et al, Procedural Justice as Fairness, 26 STAN. L. REV. 1271,1287-88 (1974);
112. Tom R. Tyler, The Role of Perceived Injustice in Defendants' Evaluations of Their Courtroom Experience, 18 LAW & SOC'Y REV. 51, 51 (1984).
113. See Bar-Gill, supra note 30, at 491.
114. See id. at 491-92.
115. See, e.g., Randy J. Kozel & David Rosenberg, Solving the Nuisance-Value Settlement Problem: Mandatory Summary Judgment, 90 VA. L. REV. 1849,1850 n.l (2004) ("The problem of litigation aimed at obtaining a nuisance-value settlement has long concerned legal policymakers and analysts, though seemingly never more so than in recent years.");
116. Lance P. McMillian, The Nuisance Settlement "Problem": The Elusive Truth and a Clarifying Proposal, 31 AM. J. TRIAL ADVOC 221, 221 (2007) (characterizing popular view).
117. Models of nuisance suits are provided in Lucian Arye Bebchuk, Suing Solely to Extract a Settlement Offer, 17 J. LEGAL STUD. 437, 437 (1988);
118. Robert G. Bone, Modeling Frivolous Suits, 145 U. PA. L. REV. 519, 520-25 (1997).
119. See, e.g., McMillian, supra note 72, at 520.
120. See Joseph A. Grundfest & Peter H. Huang, The Unexpected Value of Litigation: A Real Options Perspective, 58 STAN. L. REV. 1267, 1276-77 (2006) (explaining the credibility of nuisance lawsuits as a function of the large variance of information revealed during litigation).
121. Under federal notice pleading, the plaintiff merely needs to provide a "short and plain statement of the claim showing the pleader is entitled to relief." FED. R. Crv. P. 8(a)(2). Notice pleadings, however, may be changing as will be discussed infra Part III.A.2.
122. See, e.g., John K. Setear, The Barrister and the Bomb: The Dynamics of Cooperation, Nuclear Deterrence, and Discovery Abuse, 69 B.U. L. REV. 569, 581-82 (1989).
123. These include procedures for dismissal of complaints at the pleading stage or on summary judgment, FED. R. Crv. P. 12(b), 56;
124. sanctions for frivolous litigation, id. 11;
125. awards of attorneys' fees against offending parties, see Alyeska Pipeline Servs. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59 (1975) (describing inherent judicial power to award attorneys' fees as a sanction for bad-faith litigation tactics);
126. and creative suggestions from academic commentators, see Kozel & Rosenberg, supra note 72, at 1853 (proposing nonenforcement of settlements before relevant claims and defenses are subject to summary judgment review);
127. David Rosenberg & Steven Shavell, A Solution to the Problem of Nuisance SuiLs: The Option to Have the Court Bar Settlement, 26 INT'L REV. L. & ECON. 42, 42 (2006) (suggesting that defendants be allowed to make binding precommitments not to settle nuisance suits).
128. For a discussion of the similarities between sanctions and preliminary judgments, see infra Section III.B.4.
129. See FED. R. Crv. P. 23.
130. See, e.g., Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 834 (7th Cir. 1999) ("Many corporate executives are unwilling to bet their company that they are in the right in big-stakes litigation, and a grant of class status can propel the stakes of a case into the stratosphere.").
131. See, e.g., In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293,1298-99 (7th Cir. 1995). The risk of overwhelming liability exposure was one reason for the adoption of Rule 23(f), authorizing discretionary appeals from grants or denials of class certification. See Blair, 181 F.3d at 834. For discussion of the merits of the argument that certification compels defendants to settle, see Bruce Hay & David Rosenberg, "Sweetheart" and " Blackmail" Settlements in Class Actions: Reality and Remedy, 75 NOTRE DAME L. REV. 1377, 1378-81 (2000) (criticizing Rhone-Poulenc);
132. Richard A. Nagareda, Aggregation and its Discontents: Class Settlement Pressure, Class-Wide Arbitration and CAFA, 106 COLUM. L. REV. 1872,1879-95 (2006);
133. Charles Silver, "WeVe Scared to Death": Class Certification and Blackmail, 78 N.Y.U. L. REV. 1357,1369-80 (2003) (critiquing the analysis in Rhone-Poulenc).
134. Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 STAN. L. REV. 497, 499-500 (1991). Alexander's study has been criticized as well as defended by later work.
135. See, e.g., Tom Baker & Sean J. Griffith, How the Merits Matter: Directors' and Officers' Insurance and Securities Settlements, 157 U. PA. L. REV. 755, 757-63 (2009) (concluding that while the merits are considered by liability insurers when evaluating settlement offers in securities cases, nonmerits considerations are also important);
136. Joel Seligman, The Merits Do Matter: A Comment on Professor Grundfest's "Disimplying Private Rights of Action Under the Federal Securities Laws: The Commission's Authority," 108 HARV. L. REV. 438, 453-55 (1994) (disagreeing with Alexander because courts dismiss many nonmeritorious claims before settlement and subsequent studies have shown that securities settlement amounts vary greatly);
137. Elliott J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE LJ. 2053, 2080-84 (1995) (criticizing Alexander's claim that merits do not matter in securities class action cases and adding that certain features of securities laws make similar settlements likely). Much of the contemporary debate focuses on whether the Private Securities Litigation Reform Act, enacted in part to address concerns identified in Alexander's article, has successfully weeded out frivolous suits without also excluding meritorious ones.
138. See Stephen J. Choi, Do the Merits Matter Less After the Private Securities Litigation Reform Act?, 23 J.L. ECON. & ORG. 598, 600-02 (2007) (finding evidence that meritorious suits have been weeded out).
139. Class certification is not the only context in which differential stakes might distort settlement bargaining. Any time the defendant is subject to the risk of repetitive litigation, the defendant's stakes are likely to exceed those of the plaintiff. Defendants in such cases are exposed to the risk that an unfavorable judgment will induce many more plaintiffs with similar cases to file suit. See Milton Heumann & Jonathan M. Hyman, Negotiation Methods and Litigation Settlement Methods in New Jersey: "You Can't Always Get What You Want," 12 OHIO ST. J. ON DlSP. RESOL. 253, 291 (1997). The problem is exacerbated if the defendant faces a risk of offensive nonmutual collateral estoppel, under which he may be precluded from contesting the findings essential to a judgment against him in an earlier case.
140. See In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 145 (2d Cir. 2001) ("The effect of certification on parties' leverage in settlement negotiations is a fact of life for class action litigants. While the sheer size of the class in this case may enhance this effect, this alone cannot defeat an otherwise proper certification.").
141. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331-32 (1979) (endorsing the use of offensive nonmutual collateral estoppel in federal court).
142. Rhone-Poulenc is the poster child here. Rhone-Poulenc, 51 F.3d at 1298. But see Hay & Rosenberg, supra note 81, at 1378-81.
143. The canonical citation is Marc Galanter, Why the "Haves" Come Out Ahead: Speculations on the Limits of Legal Change, 9 LAW & SOC'Y REV. 95, 95 (1974).
144. See Gillian K. Hadfield, Exploring Economic and Democratic Theories of Civil Litigation: Differences Between Individual and Organizational Litigants in the Disposition of Federal Civil Cases, 57 STAN. L. REV. 1275,1322 (2005) (empirical study of federal court litigation).
145. See Fiss, supra note 4, at 1076-78;
146. Note, Settling for Less: Applying Law and Economics to Poor People, 107 HARV. L. REV. 442, 444-51 (1993).
147. Cf. Fiss, supra note 4, at 1076 ("[T]he poorer party may be less able to amass and analyze the information needed to predict the outcome of the litigation, and thus be disadvantaged in the bargaining process.").
148. Cf. id. at 1077 (explaining how the judge can reduce distributional inequities by "asking questions, calling his own witnesses, and inviting other persons and institutions to participate as amici").
149. See Minna J. Kotkin, Invisible Settlements, Invisible Discrimination, 84 N.C L. REV. 927, 927 (2006) ("Invisibility [of settlement terms] defeats the intent of the discrimination statutes; skews empirical studies of discrimination litigation ... ; and hampers lawyers' ability to counsel and negotiate on behalf of discrimination claimants.").
150. See, e.g., Fiss, supra note 4, at 1085 ("[Settlements] deprive a court of the occasion, and perhaps even the ability, to render an interpretation.").
151. Louis Kaplow, The Value of Accuracy in Adjudication: An Economic Analysis, 23 J. LEGAL STUD. 307, 338 n.86 (1994);
152. William M. Landes & Richard A. Posner, Adjudication as a Private Good, 8 J. LEGAL STUD. 235, 261 (1979).
153. See Macey, supra note 39, at 642. Litigation may serve other public values as well.
154. See Janet Cooper Alexander, Judges' Self-Interest and Procedural Rules: Comment on Macey, 23 J. LEGAL STUD. 647, 650 (1994).
155. See Marc Galanter & Mia Cahill, "Most Cases Settle": Judicial Promotion and Regulation of Settlements, 46 STAN. L. REV. 1339, 1387 (1994);
156. Lederman, supra note 28, at 256;
157. Jack B. Weinstein, Some Benefits and Risks of Privatization of Justice Through ADR, 11 OHIO ST. J. ON DISP. RESOL. 241, 246 (1996).
158. See Weinstein, supra note 95, at 248-50.
159. See Judith Resnik, Uncovering, Disclosing, and Discovering How the Public Dimensions of Court-Based Processes Are at Risk, 81 CHI.-KENT L. REV. 521, 521 (2006) (arguing for enhanced public disclosure of out-of-court settlements).
160. The well-worn phrase is from Robert H. Mnookin & Lewis Kornhauser, Bargaining in the Shadow of the Law: The Case of Divorce, 88 YALE LJ. 950, 950 (1979).
161. For investigations of class action settlements, see generally James D. Cox & Randall S. Thomas, Letting Billions Slip Through Your Fingers: Empirical Evidence and Legal Implications of the Failure of Financial Institutions to Participate in Securities Class Action Settlements, 58 STAN. L. REV. 411 (2005);
162. Theodore Eisenberg & Geoffrey P. Miller, Attorney Fees in Class Action Settlements: An Empirical Study, 1 J. EMPIRICAL LEGAL STUD. 27 (2004)
163. ; Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 UCLA L. REV. 1303 (2006);
164. Theodore Eisenberg & Geoffrey Miller, The Role of Opt-Outs and Objectors in Class Action Litigation: Theoretical and Empirical Issues, 57 VAND. L. REV. 1529 (2004);
165. Eric Heiland & Alexander Tabarrok, Contingency Fees, Settlement Delay, and Low-Quality Litigation: Empirical Evidence from Two Dataseis, 19 J.L. ECON. & ORG. 517 (2003).
166. Traditionally settlements have not been reported, although information on some categories of settlements is now available. See, e.g., Kathryn Zeiler et al, Physicians' Insurance Limits and Malpractice Payments: Evidence from Texas Closed Claims, 1990-2003, 36 J. LEGAL. STUD. S9 (2007) (reporting on closed claim data from Texas malpractice insurers).
167. See Kotkin, supra note 91, at 929 (confidentiality agreements "have become the norm" in employment discrimination cases);
168. Scott A. Moss, Illuminating Secrecy: A New Economic Analysis of Confidential Settlements, 105 MICH. L. REV. 867, 869-70 (2007);
169. Blanca Fromm, Comment, Bringing Settlement Out of the Shadows: Information About Settlement in an Age of Confidentiality, 48 UCLA L. REV. 663, 675-76 (2001).
170. See Christopher R. Drahozal & Laura J. Hines, Secret Settlement Restrictions and Unintended Consequences, 54 U. KAN. L. REV. 1457, 1458-59 (2006) ("The defendant has an incentive to settle secretly because it does not want information about the dispute to be publicized. The early claimant has an incentive to settle secretly because it can extract a higher settlement payment from the defendant to keep the dispute secret.");
171. Arthur R. Miller, Confidentiality, Protective Orders, and Public Access to the Courts, 105 HARV. L. REV. 427, 485 (1991) ("[C]onfidentiality ensures that the settlement amount will not be used to encourage the commencement of other lawsuits that never would have been brought....").
172. Although preliminary judgments would not have precedential effect, they could still disclose valuable information about how the courts analyze legal and factual issues.
173. See, e.g., E. Allan Lind et al., In the Eye of the Beholder: Tort Litigants' Evaluations of Their Experiences in the Civil Justice System, 24 LAW & SOC'Y REV. 953, 953 (1990) (personal injury litigants reported experiencing trial and arbitration procedures as fairer than settlement, apparently because they believed that trials and arbitration hearings gave their case more respectful treatment).
174. See Rebecca Hollander-Blumoff & Tom R. Tyler, Procedural Justice in Negotiation: Procedural Fairness, Outcome Acceptance, and Integrative Potential, 33 LAW & Soc INQUIRY 473, 477 (2008).
175. See Chad M. Oldfather, Writing, Cognition, and the Nature of the Judicial Function, 96 GEO. L.J. 1283, 1336-39 (2008) (written opinions help to foster the "public perception that courts are addressing conflicts in an appropriate manner").
176. See Brian H. Bornstein & Susan Poser, Perceptions of Procedural and Distributive Justice in the September 11th Victim Compensation Fund, 17 CORNELL J.L. & PUB. POL'Y 75, 82 (2007) ("[P]rocedural fairness is enhanced by giving disputants an opportunity to voice their side of the story.").
177. See, e.g., Tom R. Tyler & Robert J. Bies, Beyond Formal Procedures: The Interpersonal Context of Procedural Justice, in APPLIED SOCIAL PSYCHOLOGY AND ORGANIZATIONAL SETTINGS 77, 86-88 (John S. Carroll ed., 1990).
178. See Leslie Gielow Jacobs, Even More Honest than Ever Before: Abandoning Pretense and Recreating Legitimacy in Constitutional Interpretation, 1995 U. ILL. L. REV. 363, 384; Oldfather, supra note 106, at 1336-38 ("By providing a reasoned explanation for its decision, a court will, at a minimum, give the parties a basis for concluding that, whether they won or lost, each side received an appropriate hearing of their grievances.").
179. In at least one context-patent claim construction-federal courts engage in a procedure with close similarities to the one proposed here-the Markman hearing in patent cases. A Markman hearing, named after a leading Supreme Court case, Markman v. Westview Instruments, 517 U.S. 370 (1996), is a procedure under which a court construes a patent claim in the context of litigation over infringement or validity of patent rights. Many courts issue "tentative" rulings prior to holding the Markman hearing on claim construction. This strategy informs the parties about the issues that the court considers most important, and thus effectively channels the parties' presentation of the background science and other evidence. The procedure also allows the judge to "confirm [his or her] understanding of the record and the governing authorities in a direct dialogue with the attorneys" and to "clear up any misperceptions that might otherwise result in reversible error."
180. PETER S. MENELL ET AL., FED. JUDICIAL CTR., PATENT CASE MANAGEMENT JUDICIAL GUIDE 1, 5.1.4.5 (draft of September 16, 2008) (on file with author). I thank Rochelle Dreyfuss for bringing this parallel to my attention. An analogous procedure at the state level is found in California Court Rule 3.1590, which requires judges of that state to issue tentative decisions that become final "unless within ten days either party specifies controverted issues or makes proposals not covered in the tentative decision." CAL. CT. R. 3.1590(c). A key difference between the California tentative judgment procedure and the one discussed here is that the former applies only after the judge has heard all the evidence. The California procedure thus operates more as a means for preventing judicial error than as a settlement-inducing mechanism.
181. Although the parties could settle pending proceedings challenging the grant of the motion, such as appeals or motions to reconsider.
182. For a wholesale attack on dispositive pretrial rulings, on the ground they exceed the constitutional authority of courts, see Suja A. Thomas, The Fallacy of Dispositive Procedure, 50 B.C. L. REV. 759, 760-61 (2009).
183. See Kevin M. Clermont, Jurisdictional Fact, 91 CORNELL L. REV. 973, 976-77 (2006);
184. Lonny Sheinkopf Hoffman, Burdens of Jurisdictional Proof, 59 ALA. L. REV. 409, 441 (2008). The court's analysis of these motions will often involve review of evidence beyond the pleadings.
185. See, e.g., Patterson v. FBI, 893 F.2d 595, 603-04 (3d Cir. 1990) (once the defendant has raised the defense of lack of personal jurisdiction, the plaintiff "must respond with actual proofs, not mere allegations").
186. See Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 108-16 (1987);
187. Int'l Shoe Co. v. Washington, 326 U.S. 310, 312-15 (1945).
188. Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982) ("[T]he jurisdictional question involves some of the same issues as the merits of the case.");
189. see Nelson v. Miller, 143 N.E.2d 673, 675, 682 (111. 1957),
190. abrogated by Green v. Advance Ross Elees. Corp., 427 N.E.2d 1203,1206-08 (1981) (interpreting requirement of jurisdictional proof under "tortious act" long-arm statute).
191. The party asserting subject matter jurisdiction has the burden of establishing its existence. McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178,189 (1936).
192. See 28 U.S.C. S 1332(a) (2006).
193. See Bell v. Hood, 327 U.S. 678, 682-83 (1946) (complaint invoking federal subject matter jurisdiction may be dismissed on jurisdictional grounds if the federal claim is found to be "wholly insubstantial and frivolous").
194. The Supreme Court has indicated, in this regard, that it intends to limit the overlap between jurisdiction and the substantive merits in federal question cases to the analysis of whether the federal claim is frivolous or pretextual. See Arbaugh v. Y & H Corp., 546 U.S. 500, 515-16 (2006) (requirement that employers have a certain number of employees in order to be subject to Title VII held not to be jurisdictional in nature, and thus could not be raised at any time in the litigation).
195. See FED. R. CIV. P. 12(b)(1)-(2), (h)(3).
196. See Clermont, supra note 113, at 978 (courts require only prima facie showing of jurisdictional facts that overlap the merits).
197. FED. R. CIV. P. 12(b)(6).
198. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957),
199. overruled by Bell AtI. Corp. v. Twombly, 550 U.S. 544 (2007).
200. See id. at 47-48 ("The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits.").
201. FED. R. CIV. P. 9(b).
202. 551 U.S. 308 (2007).
203. Id. at 314. For analysis of this standard, see Geoffrey P. Miller, Pleading after Tellabs, 2009 WIS. L. REV. 507, 510-12.
204. See Christopher M. Fairman, Heightened Pleading, 81 TEX. L. REV. 551, 551-52 (2002);
205. Christopher M. Fairman, The Myth of Notice Pleading, 45 ARIZ. L. REV. 987, 988 (2003).
206. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007);
207. Ashcroft v. Iqbal, 129 S. Ct. 1927 (2009).
208. See Kevin M. Clermont, Litigation Realities Redux 11 (Cornell Law Sch. Legal Studies Research Paper Series, Research Paper No. 08-006, 2008), available at http://ssrn.com/abstract=1112274 (characterizing Twombly as the Court's "first unmistakable step backward from the modern conception of notice pleading").
209. Twombly, 550 U.S. at 570. Earlier attempts to enhance pleading requirements in federal courts had been unavailing. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13 (2002);
210. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163,168 (1993).
211. Suppose, for example, that the court concludes that the particularized pleading requirement is satisfied by averments that the defendant sold the issuer's stock at the time he was making false statements to the market. This conclusion, while it does not formally address any merits issue, still provides valuable information that the parties can process in considering the value of the claim for settlement purposes. See, e.g., Nursing Home Pension Fund, Local 144 v. Oracle Corp., 380 F.3d 1226, 1228-29,1235 (9th Cir. 2004) (reversing earlier dismissal partly because CEO and CFO sold very large share blocks for significant profits at the time excessively optimistic statements about the company were made).
212. E.g., Aldridge v. A.T. Cross Corp., 284 F.3d 72, 78 (1st Cir. 2002);
213. Helwig v. Vencor, Inc., 251 F.3d 540, 553 (6th Cir. 2001);
214. Chu v. Sabratek Corp., 100 F. Supp. 2d 815, 819-20 (N.D. 111. 2000).
215. Twombly, 550 U.S. at 555-56.
216. This is, in fact, a common practice under the Private Securities Litigation Reform Act. See Miller, supra note 127, at 523-24.
217. See ROBERT G. BONE, CIVIL PROCEDURE: THE ECONOMICS OF CIVIL PROCEDURE 155 (2003);
218. Posner, supra note 27, at 437;
219. Hillary A. Sale, Judging Heuristics, 35 U.C. DAVIS L. REV. 903, 950-51, 1854-55 (2002).
220. Suja A. Thomas, Why the Motion to Dismiss Is Now Unconstitutional, 92 MINN. L. REV. 1851, 1854-55 (2008).
221. See The Supreme Court, 2006 Term-Leading Cases, 121 HARV. L. REV. 185, 314 (2007).
222. See supra text accompanying notes 72-85.
223. See FED. R. CIV. P. 56.
224. Cf. Molot, supra note 44, at 91 (summary judgment can be a means for "educating" parties about the merits).
225. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986) (judge's inquiry on motion for summary judgment "asks whether reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict").
226. See Molot, supra note 44, at 45-46 ("The summary judgment mechanism is capable of terminating only the meritless case. In the vast majority of cases where some factual dispute remains, the summary judgment mechanism is significantly less valuable.").
227. Suppose, for example, that the court denies the defendant's motion for summary judgment on liability. Although, as noted, the parties can learn much from this decision, a wide range of inferences as to case value remains open. Observing the denial of summary judgment, the plaintiff may conclude, optimistically, that the case is very strong and the jury is highly likely to rule in his favor at trial. The defendant, observing the same ruling, can conclude, equally optimistically although in the opposite direction, that although a reasonable jury might render a verdict for the plaintiff, the large majority of juries would conclude that liability had not been established. Given these mutually optimistic assessments, the parties may be unable to reach a settlement despite the information that can be gleaned from the summary judgment ruling.
228. Dispositions through summary judgment have greatly increased in recent years. See, e.g., Stephen B. Burbank, Vanishing Trials and Summary Judgment in Federal Civil Cases: Drifting Toward Bethlehem or Gomorrah?, 1 J. EMPIRICAL LEGAL STUD. 591, 592-94 (2004) (documenting enhanced importance of summary judgments as case disposition devices);
229. Arthur R. Miller, The Pretrial Rush to Judgment: Are the "Litigation Explosion," "Liability Crisis," and Efficiency Clichés Eroding Our Day in Court and Jury Trial Commitments?, 78 N.Y.U. L. REV. 982, 984 (2003) (aptly characterizing summary judgments as the "focal point" of modern litigation);
230. Paul W. Mollica, Federal Summary Judgment at High Tide, 84 MARO. L. REV. 141, 144 (2000) (finding that summary judgments were much more common in the late 1990s than in the early 1970s).
231. See Miller, supra note 145, at 1044-45;
232. William W. Schwarzer, Summary Judgment and Case Management, 56 ANTITRUST L.J. 213, 213-14 (1987).
233. See supra Parts II.A, II.B.2.
234. See, e.g., Richard L. Marcus, Completing Equity's Conquest? Reflections on the Future of Trial Under the Federal Rules of Civil Procedure, 50 U. PITT. L. REV. 725, 755-74 (1989) (addressing accuracy concerns);
235. Patricia M. Wald, Summary Judgment at Sixty, 76 TEX. L. REV. 1897, 1941 (1998) ("[S]ummary judgment has spread swiftly through the underbrush of undesirable cases, taking down some healthy trees as it goes.").
236. See John Bronsteen, Against Summary Judgment, 75 GEO. WASH. L. REV. 522, 522, 547-50 (2007) (pointing to "strong evidence" that summary judgment violates the Seventh Amendment right to jury trial);
237. Miller, supra note 145, at 1077-1134 (exploring the interaction between summary judgment motions and the right to jury trial);
238. Suja A. Thomas, Why Summary Judgment Is Unconstitutional, 93 VA. L. REV. 139 (2007) (arguing that the current standards for summary judgment violate both the text and purpose of the Seventh Amendment right to a jury trial).
239. See Bronsteen, supra note 149, at 541-43 (docket pressure encourages judges to dismiss cases on summary judgment motions);
240. Miller, supra note 145, at 1041-42 (calling for appellate review of summary judgment dispositions in order to prevent their use as an "inappropriate docket-clearing mechanism").
241. Hidden pro-defendant bias is another possibility, because defendants are the principal beneficiaries of the enhanced use of summary judgments. See Theresa M. Beiner, The Misuse of Summary Judgment in Hostile Environment Cases, 34 WAKE FOREST L. REV. 71, 72 (1999) (claiming that judges misuse summary judgment to dismiss hostile work environment claims);
242. Samuel Issacharoff & George Loewenstein, Second Thoughts About Summary Judgment, 100 YALE L.J. 73, 92 (1990) (survey of 140 contested summary judgment motions found that 122 were made by defendants and only 18 were made by plaintiffs).
243. See FED. R. CIV. P. 65 (authorizing federal district courts to issue preliminary injunctions pending trial on the merits). For discussions of the standards for preliminary relief, see generally Thomas R. Lee, Preliminary Injunctions and the Status Quo, 58 WASH. & LEE L. REV. 109 (2001);
244. John Leubsdorf, The Standard for Preliminary Injunctions, 91 HARV. L. REV. 525 (1978);
245. Douglas Lichtman, Uncertainty and the Standard for Preliminary Relief, 70 U. CHI. L. REV. 197 (2003). The record reviewed on motion for preliminary injunction is less developed but also broader than the formal record of admissible evidence at trial.
246. See Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981) ("[A] preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits.").
247. E.g., Ashcroft v. ACLU, 542 U.S. 656, 666 (2004);
248. Doran v. Salem Inn, Inc., 422 U.S. 922, 931 (1975).
249. An example is Port City Properties v. Union Pacific Railroad Co., 518 F.3d 1186, 1190-91 (10th Cir. 2008). The plaintiff sought a preliminary injunction requiring the defendant railroad to continue serving the track servicing the plaintiff's warehouse. The appeals court upheld the denial of the preliminary injunction on the ground that the plaintiff had failed to establish irreparable harm if the injunction were denied. The court pointed to testimony that rail deliveries were only a small part of the warehouse's business, that loss of those deliveries was not going to cause the company to fail, and that the defendant had made efforts to mitigate the loss of direct deliveries to the warehouse. This testimony, which went to irreparable harm at the preliminary injunction stage, would have been equally relevant to the question of damages if the plaintiff prevailed on his claim of breach of contract.
250. See, e.g., Sammartano v. First Judicial Dist. Court, 303 F.3d 959, 970 (9th Cir. 2002) (appellants established a probability of success on challenge to court rule prohibiting displays of biker gang insignia);
251. Nw. Airlines v. IAM, Dist. Lodge 143, 712 F. Supp. 732, 739 (D. Minn. 1989) (enjoining sympathy strike on the ground that the moving party had a "high probability of success on the merits");
252. Stratton Group, Ltd. v. Chelsea Nat'l Bank, 54 F.R.D. 227, 228 (S.D.N.Y. 1972) (noting the "paucity of evidence" to support the allegations in the complaint);
253. In re Advanced Mktg. Servs. Inc., 360 B.R. 421, 426 (Bankr. D. Del. 2007) (creditor failed to demonstrate probability of success on the merits because the goods in question were subject to senior security interests). This benefit would be lost if the courts adopted the proposal of Professors Brooks and Schwartz that the grant or denial of a preliminary injunction should be based on the moving party's willingness to post a bond to cover the counterparty's costs. See Richard R.W. Brooks & Warren F. Schwartz, Legal Uncertainty, Economic Efficiency, and the Preliminary Injunction Doctrine, 58 STAN. L. REV. 381, 408 (2005).
254. See, e.g., Allegheny Energy, Inc. v. DQE, Inc., 171 F.3d 153,158 (3d Cir. 1999) (relevant factors on motion for summary judgment are "(1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest").
255. See, e.g., Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189, 195 (4th Cir. 1977) ("The importance of probability of success increases as the probability of irreparable injury diminishes ....").
256. The interference with the signal is especially strong in jurisdictions that do not require an explicit balancing between likelihood of success on the merits and other factors. See, e.g., In re FortyEight Insulations, Inc., 115 F.3d 1294,1300-01 (7th Cir. 1997);
257. Int'l Kennel Club of Chi., Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1084 (7th Cir. 1988) (requiring only that the moving party establish that the chance of success on the merits is better than negligible).
258. The inquiry at class certification is discretionary and can involve examination of materials available at summary judgment, including the pleadings, answers to interrogatories, depositions, representations of counsel, documents as to which the court can take judicial notice, affidavits, and expert witness testimony. See DeMarco v. Robertson Stephens Inc., 228 F.R.D. 468, 470, 474 (S.D.N.Y. 2005) (accepting expert witness testimony on motion for class certification).
259. See Robert G. Bone & David S. Evans, Class Certification and the Substantive Merits, 51 DUKE L.J. 1251,1266 (2002);
260. Miller, supra note 40, at 68-69.
261. FED. R. CIV. P. 23(b)(3) ("A class action maybe be maintained if ... questions of law or fact common to class members predominate over any questions affecting only individual remembers ....").
262. Basic Inc. v. Levinson, 485 U.S. 224, 246-48 & n.27 (1988).
263. See In re Initial Pub. Offering Sec. Litig., 471 F.3d 24, 41-42 (2d Cir. 2006) (holding that the court must look into the merits-related issue of the efficiency of the market at the time of class certification). Or a court may require that to obtain the benefit of the presumption of reliance, the plaintiff must establish that the defendant's statement actually moved the market, again a showing that directly overlaps merits issues. See Oscar Private Equity Invs. v. Allegiance Telecom, Inc., 487 F.3d 261, 26670 (5th Cir. 2007).
264. Decisions from 2001 established this point in the Third and Seventh Circuits. Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 168-69 (3d Cir. 2001);
265. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 677 (7th Cir. 2001).
266. FED. R. CIV. P. 23(a).
267. Other attempts to address merits issues at the stage of class certification are worth noting, even though none has held up over time. In Eisen v. Carlisle & Jacquelin, 54 F.R.D. 565, 567 (S.D.N.Y. 1972), rev'd, 479 F.2d 1005 (2d Cir. 1973), vacated by 417 U.S. 156 (1974), the district court apportioned the costs of notice among the parties according to its assessment of the probable outcome. This approach, had it held up, would have functioned nearly as the equivalent of a preliminary judgment rule in the class action context. The Supreme Court, however, rejected the idea. Eisen, 417 U.S. at 177 ("[N]othing in either the language or history of Rule 23 . . . gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action."). In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995), presented a similar concept, although one adopted for very different reasons. The Seventh Circuit in that case rejected the trial court's plan for adjudicating a class action brought by hemophiliacs who had contracted HIV/AIDS from blood transfusions, in part because of the "demonstrated great likelihood that the plaintiffs' claims, despite their human appeal, lack legal merit."
268. Id. at 1299.
269. A broad reading of the opinion would suggest that a court should consider the substantive merits of a case at the time it decides whether to certify a class-a rule which again would have instituted the effect of a preliminary judgment procedure for class action litigation. The Rhone-Poulenc decision, however, has not been so interpreted, and probably should be considered, with respect to its admonition to inquire into the substantive merits, as a function of the mandamus procedure used to obtain appellate jurisdiction in that case, a procedure no longer needed given the availability of discretionary appellate review of certification orders under Rule 23(f). See Lee H. Rosenthal, Back in the Court's Court, 74 UMKC L. REV. 687, 704 (2006);
270. Michael E. Solimine & Christine Oliver Hines, Deciding to Decide: Class Action Certification and Interlocutory Review by the United States Courts of Appeals Under Rule 23(f), 41 WM. & MARY L. REV. 1531, 1557-61 (2000);
271. Stephen D. Susman, Class Actions: Consumer Sword Turned Corporate Shield?, 2003 U. CHI. LEGAL F. 1,1-2.
272. See, e.g., Haines v. Liggett Group, Inc., 975 F.2d 81, 95-96 (3d Cir. 1992) (trial court had to inquire into the merits in order to ascertain whether counsel for defendant had been involved in alleged fraud).
273. The trial court, however, must not become so involved in the merits as to raise doubts about its objectivity. See id. at 97-98.
274. In Haines, the trial court made the necessary assessments but "expressed them in such an intemperate way that no litigant who was the target of them could feel that anything approaching a fair trial was coming." Patrick E. Longan, Civil Trial Reform and the Appearance of Fairness, 79 MARO. L. REV. 295, 317 (1995).
275. Melzer v. Bd. of Educ., 176 F.R.D. 71, 73 (E.D.N.Y. 1997).
276. See FED. R. CIV. P. 26(b)(3) (work-product privilege); Hickman v. Taylor, 329 U.S. 495, 511-14 (1947) (setting forth standards for work-product privilege).
277. FED. R. CIV. P. 26(b)(1). For good cause shown, the court may order broader discovery into any matter "relevant to the subject matter" involved in the action.
278. Id.
279. Chenoweth v. Schaaf, 98 F.R.D. 587, 588 (W.D. Pa. 1983) (mem.).
280. Id. at 589-90.
281. See, e.g., McDougal-Wilson v. Goodyear Tire & Rubber Co., 232 F.R.D. 246, 252 (E.D.N.C 2005) (refusing, in employment discrimination case, to order production of documents pertinent to disciplinary actions for all employees under supervision of plaintiff's supervisors);
282. Miller v. Pancucci, 141 F.R.D. 292, 296 (C.D. Cal. 1992) (in case alleging that the police had exercised excessive force in arresting the plaintiff, the court declined the discovery of documents relating to misuse of firearms or equipment, racism, or prejudice).
283. See FED. R. CIV. P. 11(b) (providing, inter alia, that parties filing pleadings in court must certify, to the best of their "knowledge, information, and belief, formed after an inquiry reasonable under the circumstances," that "the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery" and that "the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information"). Unlike the standards for motions to dismiss or motions for summary judgment, which are designed to ensure that judicial factfinding does not usurp the province of the jury, the inquiry under Rule 11 is free-flowing and discretionary, and judges use varying standards to determine whether a violation has occurred.
284. See, e.g., Beverly Dyer, A Genuine Ground in Summary Judgment for Rule 11, 99 YALE L.J. 411, 421-25 (1989).
285. Although federal courts are sometimes reluctant to penalize attorneys and parties under the rule, see Robert Mednick & Jeffrey J. Peck, Proportionality: A Much-Needed Solution to the Accountants' Legal Liability Crisis, 28 VAL. U. L. REV. 867, 914 n.163 (1994), it is available as a litigation threat, especially for defendants who claim that the complaint is frivolous.
286. Kimberly Jade Norwood, Shopping for a Venue: The Need for More Limits on Choice, 50 U. MIAMI L. REV. 267, 328 n.297 (1996).
287. Congress, in the Private Securities Litigation Reform Act, nudged the courts to exercise their Rule 11 authority more vigorously in securities fraud cases, requiring the district courts to make specific findings of compliance with the rule at the time of any final adjudication or settlement and impose sanctions if violations are found. 15 U.S.C. S 78u-4(c) (l)-(2) (2006); see Simon DeBartolo Group, L.P. v. Richard E. Jacobs Group, Inc., 186 F.3d 157, 166-67 (2d Cir. 1999) (PSLRA "put 'teeth' in Rule 11").
288. E.g., DE Techs., Inc. v. Dell Inc., No. Civ.A. 7:04CV00628, 2006 WL 467984, at *4 (W.D. Va. Feb. 28, 2006).
289. See, e.g., Hill v. Norfolk & W. Ry. Co., 814 F.2d 1192, 1201-02 (7th Cir. 1987)
290. ("All the relevant 'conduct' is laid out in the briefs themselves; neither the mental state of the attorney nor any other factual issue is pertinent to the imposition of sanctions for such conduct."); Zaldivar v. City of L.A., 780 F.2d 823, 831 (9th Cir. 1986) ("Of course, the conclusion drawn from the research undertaken must itself be defensible. Extended research alone will not save a claim that is without legal or factual merit from the penalty of sanctions.").
291. See Georgene Vairo, Rule 11 and the Profession, 67 FORDHAM L. REV. 589, 627-28, 647 (1998) (describing the "Rambo-like use of Rule 11 by too many lawyers").
292. See, e.g., Brubaker v. City of Richmond, 943 F.2d 1363, 1374 (4th Cir. 1991).
293. But see Vairo, supra note 179, at 598 (finding overuse of Rule 11 led to an "avalanche of 'satellite litigation'").
294. See, e.g., Brubaker, 943 F.2d at 1377.
295. See, e.g., id.
296. See Kamen v. AT&T Co., 791 F.2d 1006, 1014 (2d Cir. 1986) (reversing sanctions on the ground that the district court had improperly used the sanction motion as a vehicle for ruling on the merits).
297. See Rita Lowery Gitchell & Andrew Plattner, Mediation: A Viable Alternative to Litigation for Medical Malpractice Cases, 2 DEPAUL J. HEALTH CARE L. 421, 433-34 (1999);
298. Florence Yee, Note, Mandatory Mediation: The Extra Dose Needed to Cure the Medical Malpractice Crisis, 1 CARDOZO J. CONFLICT RESOL. 393, 416-17 n.120 (2006).
299. See Gitchell & Plattner, supra note 184, at 430-31;
300. Yee, supra note 184, at 416-17 n.120.
301. See Carrie Menkel-Meadow, When Dispute Resolution Begets Disputes of Its Own: Conflicts Among Dispute Professionals, 44 UCLA L. REV. 1871, 1887 n.88 (1997) (explaining how parties often inquire into the "going rate" of torts and contract cases).
302. Orna Rabinovich-Einy, Technology's Impact: The Quest for a New Paradigm for Accountability in Mediation, 11 HARV. NEGOT. L. REV. 253, 281 (2006);
303. Jeffrey W. Stempel, The Inevitability of the Eclectic: Liberating ADR from Ideology, 2000 J. DlSP. RESOL. 247, 264 ("Each day in the field, many mediators do engage in what might be termed evaluative behavior, and evaluative-style mediators, particularly former judges, appear in strong demand as mediators.").
304. See Ellen E. Deason, Predictable Mediation Confidentiality in the U.S. Federal System, 17 OHIO ST. J. ON DISP. RESOL. 239, 240-43 (2002) ("The importance of confidentiality is axiomatic in mediation.");
305. Ellen E. Deason, The Quest for Uniformity in Mediation Confidentiality: Foolish Consistency or Crucial Predictability?, 85 MARO. L. REV. 79, 83-84 (2001) ("[T]he challenge of communicating with an adversary, the presence of a neutral intermediary, and the potential for information informally reaching a judge all make confidentiality especially important for mediation.").
306. See Julie Macfarlane, Culture Change? A Tale of Two Cities and Mandatory Court-Connected Mediation, 2002 J. DISP. RESOL. 241, 244-45;
307. Rosselle L. Wissler, Court-Connected Mediation in General Civil Cases: What We Know from Empirical Research, 17 OHIO ST. J. ON DISP. RESOL. 641, 650-51 (2002) (revealing that 73 percent of surveyed counsel had commenced discovery by the time they entered mediation).
308. On pretrial conferences, see generally Robert F. Peckham, The Federal Judge as a Case Manager: The New Role in Guiding a Case from Filing to Disposition, 69 CAL. L. REV. 770 (1981);
309. Judith Resnik, Procedure as Contract, 80 NOTRE DAME L. REV. 593, 613 (2005) (discussing the evolution of pretrial conference into important venue for settling disputes).
310. FED. R. CIV. P. 16(a)(5).
311. JOHN PAUL RYAN ET AL., AMERICAN TRIAL JUDGES: THEIR WORK STYLES AND PERFORMANCE 177 (1980).
312. An example is the Agent Orange case, in which the trial judge forcefully expressed his belief during settlement negotiations that plaintiffs could not make out their case for liability. See PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS TOXIC DISASTERS IN THE COURTS 160-61 (1987).
313. See Helen W. Gunnarsson, Making the Most of Settlement Conferences, 94 ILL. B.J. 178, 180 (2006) ("[S]ome judges employ an evaluative approach to mediation [at settlement conferences], giving the parties the opinion that a case should settle for certain terms").
314. See Pauline H. Tesler, Collaborative Law: A New Paradigm for Divorce Lawyers, 5 PSYCHOL. PUB. POL'Y & L. 967, 968 n.8 (1999) ("[A] court-based settlement conference ordinarily takes place after preparations for trial are complete, frequently with trial only a week or two away.").
315. See Molot, supra note 44, at 90-94 (critiquing settlement conferences on the ground they require judges to engage in managerial activities far removed from the traditional judicial function).
316. See id. at 93 ("Although a litigant certainly is free to refuse to settle on terms he or she knows to be unfair, a litigant asked by a judge to settle a case has strong incentives to agree to a settlement and thereby avoid trying the case-or proceeding with discovery-before a potentially hostile judge.");
317. Todd D. Peterson, Restoring Structural Checks on Judicial Power in the Era of Managerial Judging, 29 U.C. DAVIS L. REV. 41, 63-64 (1995) (criticizing judicial discretion in pretrial case management for creating a risk of arbitrary power).
318. Molot, supra note 44, at 93.
319. See Lind et al, supra note 104, at 980-86 (presenting empirical evidence suggesting that people are not as satisfied with resolutions achieved through settlement conferences as when the case is resolved by other means);
320. Longan, supra note 168, at 320 ("[A] plaintiff at trial is not likely to feel that the trial will be fair if the presiding judge has already told that party, face to face, that the case is worthless.").
321. See, e.g., Kenneth B. Germain, The Use of Subject-Savvy Early Neutral Evaluators to Suggest Solutions to Significant Trademark/Trade Dress Disputes in Ex Parte and Inter Partes Situations (ALIABA Course of Study 2008), available at SN053 ALI-ABA 75 (Westlaw) (describing early neutral evaluation procedures).
322. See Kathleen M. McKenna, Jury Trial Issues, in CURRENT DEVELOPMENTS IN FEDERAL CIVIL PRACTICE 2008, at 293, 326-29 (2008), available at 772 PLI/Lit 293 (Westlaw) (full-blown mock trial can cost between ten and fifteen thousand dollars a day).
323. See, e.g., In re Cincinnati Enquirer, 94 F.3d 198, 199 (6th Cir. 1996) (describing how the summary jury trial functions to facilitate settlement).
324. See generally Franklin Strier & Donna Shestowsky, Profiling the Profilers: A Study of the Trial Consulting Profession, Its Impact on Trial Justice and What, if Anything, to Do About It, 1999 WIS. L. REV. 441 (documenting impact of trial consultants).
325. Presumably such authorization would take the form, at the federal level, of a rule adopted pursuant to the Rules Enabling Act, 28 U.S.C. §§ 2072-2074 (2006).