N-Defendant Litigation and Settlement: The Impact of Joint and Several Liability
33 Pages Posted: 8 Oct 2007 Last revised: 5 Dec 2008
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Howard F. Chang and Hilary Sigman
-
Incentives to Settle Under Joint and Several Liability
By Howard F. Chang and Hilary Sigman
-
Environmental Liability and Redevelopment of Old Industrial Land
-
The Effect of Joint and Several Liability Under Superfund on Brownfields
By Howard F. Chang and Hilary Sigman
-
The Effect of Joint and Several Liability Under Superfund on Brownfields
By Howard F. Chang and Hilary Sigman
-
Explaining the Flood of Asbestos Litigation: Consolidation, Bifurcation, and Bouquet Trials
-
The Effect of Bad-Faith Laws on First-Party Insurance Claims Decisions
By Mark J. Browne, Ellen S. Pryor, ...
-
Beyond Consolidation: Post-Aggregative Procedure in Asbestos Mass Tort Litigation
-
By Howard F. Chang and Hilary Sigman