Dispute Resolution

4. Dispute Resolution Bridging the Settlement Gap

7. Conditions for Settlement • Full Information and Agreement • There is agreement over the expected judgment at trial, the savings from not going to trial, and the portion of the savings that each party should receive. • Differing but Compatible Perspectives • There are differing perceptions on trial outcomes or appropriate divisions but relative optimism in some areas is sufficiently balanced by relative pessimism in others to produce an acceptable solution.

8. Conditions for Settlement • Brute Force or Compliance • The parties can agree on, or be forced to submit to, a decision rule or process of division. • The Ability to Make Final Offers • One party is capable and willing to make a credible take-it-or-leave-it offer that is preferable to the other party over the trial outcome.

9. Alternative Dispute Resolution 3rd-Party perspectives bring both parties down to earth • Summary Jury Trial • Highly abbreviated trial that provides litigants with an advisory verdict from a judge and jurors for guidance in their settlement negotiations • Arbitration • Informal, binding or non-binding hearing before a panel of attorneys or retired judges. • Mediation • No third-party judgment, but one or more mediators talk with the parties to help them come to settlement

10. Alternative Dispute Resolution • Early Neutral Evaluation • Brings the lawyers together with a neutral party shortly after the claim is filed to talk through the strengths and weaknesses of their cases and clarify possible outcomes. • Mini-Trial • Lawyers from each side present the strongest aspects of their case to a neutral advisor or judge for non-binding, party-controlled input • Judicial Settlement Conference • Brings the lawyers together with a judge or magistrate to try to resolve the case short of trial • Rent-a-Judge • A private court offering relatively inexpensive and fast settlement conferences and hearings

11. Fair Division

14. Divide and Choose

15. Say “Stop”

16. Say “Stop”

17. Say “Stop”

18. Say “Stop”

19. Non-Uniform ResourceSame Preferences • Divide and Choose works • Say Stop works • Surveyor won’t work

20. Non-Uniform ResourceSame Preferences • Divide and Choose works • Say Stop works • Surveyor won’t work

21. Non-Uniform ResourceDifferent Preferences • Divide and Choose: Advantage to the Divider • Say Stop: Advantage to person who prefers side where moving line starts. • May call for 3rd-party involvement

22. 0 100 200 200 100 0

23. Fee and Judgment Expectations 0 100 200 200 100 0 • Suppose the expected judgment is 100 for each side.

24. If they go to trial … • Artemis will pay 30 in fees and end up with 70. • Brutus will pay 40 in fees and end up with 60.

25. Fee and Judgment Expectations Artemis’s fees = 30 0 70 100 140 200 What A keeps after trial What B keeps after trial Cost of going to trial 200 100 60 0 Brutus’s fees = 40

26. Fee and Judgment Expectations 0 70 100 140 200 What A keeps after trial What B keeps after trial Cost of going to trial 200 70 100 60 0 • If Artemis is able to make the last settlement offer: • Artemis will receive _____ and Brutus will receive _____. • If Brutus is able to make the last settlement offer: • Artemis will receive _____ and Brutus will receive _____.

27. Fee and Judgment Expectations 0 70 100 140 200 What A keeps after trial What B keeps after trial Cost of going to trial 200 100 60 0 • If Artemis is able to make the last settlement offer: • Artemis will receive 139.9 and Brutus will receive 60.1. • If Brutus is able to make the last settlement offer: • Artemis will receive 70.1 and Brutus will receive 129.9.

28. Efforts to achieve fair outcomes without trial when parties won’t cooperate 0 100 200 200 100 0

29. The Sincerity Rule • Either side makes an offer. • 2) The other side either accepts, or rejects, in which case they will proceed to court and the offerorwill pay the offeree's fees.

30. The Sincerity Rule • Either side makes an offer. • 2) The other side either accepts, or rejects, in which case they will proceed to court and the offerorwill pay the offeree's fees. • Suppose Artemis makes the offer: • By rejecting, Brutus expects to receive 100 at trail with his fees paid. • What will Artemis offer?

31. The Sincerity Rule • An offer for Brutus to keep 100.1 is preferred over 100 at trial by Brutus, and is preferred over 100 minus trial costs and attorney fees at trial by Artemis. • Options for Artemis: • Offer less than 100  Brutus will reject in favor of an expected 100 at trial • Offer 100  Brutus is indifferent between accepting and going to trial • Offer more than 100  Brutus will accept rather than going to trial expecting less

32. The Sincerity Rule • Advantages: • * Removes the effects or differing bargaining power • * Encourages settlement near the expected judgment • Disadvantages: • * Prohibits further bargaining if it fails • * Inflicts large costs on offeror if it fails

33. Final Offer Auctions • 1) The two sides bid for the right to make the final offer. • 2) The side that makes the winning bid gives the amount of the bid to the side that receives the final offer.

34. Final Offer Auctions • Remember: The expected judgment is 100 for each side. • If they go to trial: • Artemis will pay 30 in fees and end up with 70. • Brutus will pay 40 in fees and end up with 60. • If Artemis is able to make the last offer: • Artemis will receive 139.9 and Brutus will receive 60.1. • If Brutus is able to make the last offer: • Artemis will receive 70.1 and Brutus will receive 129.9. • That is: With the ability to make the last offer, you capture virtually all of the combined savings from avoiding trial (70).

35. Brutus’s offer to Artemis = 70.1 0 70 100 140 200 What A keeps after trial What B keeps after trial Cost of going to trial 200 130 100 60 0 Artemis’s offer to Brutus= 60.1

36. Bid up to ½ the Bargaining Rent So with Final Offer Auctions, a settlement that splits the bargaining rent is expected.