Thursday, July 30, 2015

Prescott & Spier on Civil Settlement


"A Comprehensive Theory of Civil Settlement" Free Download 
Forthcoming, NYU Law Review, April 2016

J.J. PRESCOTTUniversity of Michigan Law School
KATHRYN E. SPIERHarvard University - Law School - Faculty, National Bureau of Economic Research (NBER)

A settlement is an agreement between parties to a dispute [...] in reality virtually every dispute is “partially” settled. The same forces that often lead parties to fully settle — joint value maximization, cost minimization, and risk reduction — will under certain conditions lead them to enter into many other forms of Pareto-improving agreements while continuing to actively litigate against one another. We identify three primary categories of these partial settlements: award-modification agreements, issue-modification agreements, and procedure-modification agreements. We provide real-world examples of each and rigorously link them to the underlying incentives facing litigants. [...] Finally, we study partial settlements and how they interact with each other in real-world adjudication using new and unique data from New York’s summary jury trial program. Patterns in the data are consistent with parties using partial settlement terms both as substitutes and as complements for other terms, depending on the context, and suggest that entering into a partial settlement can reduce the attractiveness of full settlement. We conclude by briefly discussing the distinctive welfare implications of partial settlements.

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