Litigating Toward Settlement

What is the relationship between litigation and settlement?  In a new working paper, Christina Boyd and I explore that question using data from federal trial dockets.  Our basic intuition is that motion practice propels cases toward faster settlements, as it unlocks information about the facts, the parties’ strategies, the resources they will spend on the case, and (sometimes) what the judge thinks of the merits.  Our results essentially support such hypotheses: the mere filing of a motion speeds case settlement. Moreover, “motions which are granted are more immediately important to the settlement rate than motions denied, plaintiff victories are more important than defendant victories, motions about unclear areas of law are more important than motions about settled law, and motions later in cases are more important that motions earlier in cases.”  These findings are suggestive.  Though motion practice is often thought of as parasitic, driven by agency costs, and part the problem of litigation, our results imply that it has significant pro-social consequences.  Indeed, paying homage to Gilson, why not re-imagine lawyers as canny litigation costs engineers?

We also found some nifty case effects.  Women judges were on average (as Boyd had previously established) better at encouraging settlement than men: “the likelihood of a case settling in any given month is, on average, 25% larger when a female judge presides than when a male judge does.” Also, imbalance between the size of the firms representing the plaintiff and the defendant had a significant influence on compromise’s timing, as the figure below illustrates:

The figure illustrates our finding that a case “with a large plaintiff attorney facing a small defendant counsel settles 80% faster than when the firms are evenly sized . . . when those roles are reversed, the decrease in settlement’s timing is as high as 65%.”

The data in this project is the same as that which led to Disputing Limited Liability, our project on veil piercing.  So there are caveats on the generalizability of our findings which we expand on in the paper.  To read about them, and to get a learn about our hypotheses & results, click through here.  We welcome your comments.

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