Agenda for 12th Class

1. Agenda for 12th Class • Admin • Name plates • Handouts • Slides • Polinsky • Appeals • German procedure • Introduction to Settlement & ADR

2. Assignment for Next Class • Settlement and ADR • Yeazell pp. 532-43, 550-54 • Handout (Polinsky) • If you are not quantitatively inclined, you will need to read this carefully. Polinsky is extremely clear, but it will take time. • Blackboard Questions on Settlement • Questions on last page of Polinsky handout, except Qs 1, 3 & 5 (which are the Blackboard questions) • WG1. Q2 • WG2. Q4 • WG3. Q6 • WG4. Q7 • WG5. Q8 • WG6. Q9 • WG7. Q10

3. Intro to Settlement I • Most cases settle • Roughly 2/3rds of filed cases settle • Some cases settle even before complaint filed • Roughly 5% go to trial • Roughly 20% dismissed (Rule 12) or terminated by summary judgment • Roughly 10% other – default judgment, plaintiff failed to prosecute, referred to arbitration, etc. • Settlement is contract by which plaintiff dismisses case in return for something valuable from the defendant • Usually money • Can be almost anything – job, house, letter of recommendation, apology • Often non-monetary terms -- Confidentiality/secrecy, return of discovery documents, payment of costs • Economic analysis of settlement • Settlement is attractive to parties because it enables them to save on the cost of litigation • Settlements is sometimes not possible, because parties are sometimes too optimistic about trial outcomes • Settlement is sometimes not reached, if the parties are too stubborn (strategic) in their negotiations

4. Intro to Settlement II • Economic analysis of settlement • Settlement attractive to parties because saves on litigation costs • Total litigation costs often equal net amount plaintiff recovers • Suppose plaintiff wins $90,000 • Usually pays one third to lawyer. • So plaintiff’s lawyer gets $30,000 • So plaintiff nets $60,0000 = $90,000 - $30,000 • Defendant usually pays lawyers roughly same amount: $30,000 • So lawyers get $60,000 ($30,000 + $30,000) and plaintiff gets $60,0000 • Defendant pays $120,000 = $90,000 + $30,000 • If settle early, parties can both be better off • E.g. Defendant settles with plaintiff for $80,000 • Of course, depends in part on how much parties have already invested in litigation

5. Intro to Settlement III • Economic analysis of settlement (cont.) • Settlement possible if it makes both sides better off than trial • Need to calculate outcome if case did not settle • Easy if trial outcome known with certainty • Plaintiff. Judgment minus lawyers fees. 90K -30K=60K • Defendant. Judgment plus lawyer’s fees. 90K+30K=120K • So any settlement amount between 60K and 120K would make both parties better off • Of course, may fail to settle because of hard bargaining • If trial outcome uncertain, need to calculate expected value • Expected value = probability that plaintiff will prevail x judgment amount if plaintiff prevails • Suppose 50% probability that plaintiff will get 100K • Plaintiff better off with settlement greater than: • (50% x 100K) – 30K = 50K – 30K = 20K • Defendant better off with settlement less than: • (50% x 100K) + 30K = 50K + 30K = 80K • So any settlement between 20K and 80K would make both parties better off • Of course, lots of simplifying assumptions….

6. Intro ADR • ADR = Alternative Disputes Resolution • Mediation. Settlement negotiations with assistance from neutral person • Mediator does not have power to imposed settlement • Used with increasing frequency • Arbitration. Adjudication by private judge • Settlement is sometimes classified as ADR