Settlement Pressure

Posted: 18 Apr 2004 Last revised: 22 Nov 2020

Date Written: 2005

Abstract

Chief Judge Posner's 1995 opinion, In the Matter of Rhone-Poulenc Rorer, Inc. has generated considerable concern with settlement pressure on the part of both courts and commentators. This paper cautions against extrapolation of traditional economic analysis of litigation to the problem of settlement pressure. Existing economic models can explain the existence of settlement pressure by relying on notions of defendant risk aversion. But risk aversion is a concept appropriate to explain the behavior of natural persons, not the large public corporations that face class action settlement pressure in the real world. Deeper insights into complex civil litigation involving corporations require taking more seriously what we know (and do not know) about corporate - not individual - behavior and decision-making.

Keywords: Class certification, settlement, civil procedure, economic analysis of litigation

JEL Classification: K41

Suggested Citation

Heaton, J.B., Settlement Pressure (2005). International Review of Law and Economics, Vol. 25, pp. 264-275 (2005), Available at SSRN: https://ssrn.com/abstract=531922

J.B. Heaton (Contact Author)

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