N-Defendant Litigation and Settlement: The Impact of Joint and Several Liability

33 Pages Posted: 8 Oct 2007 Last revised: 5 Dec 2008

See all articles by Lewis A. Kornhauser

Lewis A. Kornhauser

New York University School of Law

Keith T. Takeda

Private Litigation Practice

Date Written: October 1, 2007

Abstract

This article generalizes the analysis of settlement under joint and several liability from lawsuits involving one plaintiff and two defendants to those involving n≥2 defendants. We demonstrate that, depending upon the correlation of outcomes among the defendants, but regardless of the distribution of liability shares, joint and several liability may encourage plaintiffs to select some defendants for litigation while settling with those remaining. In particular, under joint and several liability, when each defendant is grouped with others sharing correlated outcomes, and the plaintiff's probability of success against any defendant is sufficiently high, we show that, in all Nash equilibrium, the plaintiff litigates against the defendant from each group with the smallest share and settles with all other defendants. There are a continuum of equilibria but they are all payoff-equivalent up to permutation. Plaintiff's payoff is identical in all equilibria; only the payoffs of the members with the smallest share within a group are permuted. We also show that, for sufficiently high plaintiff's probability of success, this result holds even when the defendants are allowed to form coalitions, and derive the set of offers in the behaviorally unique coalition proof Nash equilibrium; as before, these offers induce litigation against the defendant with the smallest share in each group and settlement with all other defendants.

Keywords: joint and several liability, settlement, litigation, tort, hazardous waste regulation

JEL Classification: K13, K41, K32, C78

Suggested Citation

Kornhauser, Lewis A. and Takeda, Keith T., N-Defendant Litigation and Settlement: The Impact of Joint and Several Liability (October 1, 2007). NYU Law and Economics Research Paper No. 07-41, Available at SSRN: https://ssrn.com/abstract=1019602 or http://dx.doi.org/10.2139/ssrn.1019602

Lewis A. Kornhauser (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
(212) 998-6175 (Phone)
(212) 995-4341 (Fax)

Keith T. Takeda

Private Litigation Practice ( email )

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
295
Abstract Views
3,452
Rank
187,308
PlumX Metrics