Agenda for 14th Class Admin Name plates Handouts Slides Shavell Review Settlement ADR Intro to Fees

Assignment I Fees Shavell handout Note that Questions 11 and 12 refer back to Suit & Settlement Question 9, which was at the end of the Polinsky readings on Settlement Blackboard Question on Fee Shifting Questions / Writing Assignment for Group 6 Problems on last page of Shavell handout, except Q 11 (which is on Blackboard) Joinder FRCP 7, 13, 14, 18, 20, 21 Yeazell 785-87, 805-10 Questions to think about / Writing assignment for Group 7 Briefly summarize Price Pp. 807ff. Qs 1, 2, 3b Optional: Glannon Chapters 13-14 (Joinder)

Assignment for M 10/31 (not 10/28) Settlement and Fees in A Civil Action A Civil Action, pp. 146 to end Especially pp. 146, 154-55, 213-14, 249-51, 280, 405-10, 446-54 Questions to think about / Writing Assignment for Group 3 In what ways does A Civil Action confirm the validity of Polinsky’s economic model of settlement? In what ways does A Civil Action contradict Polinsky’s economic model of settlement or suggest that the real world is more complex than that model? Given the settlement, how did they calculate how much Schlichtmann and the other lawyers received?

Review of 1995 Exam Model answer in “Secure Documents” section of Portal Importance and application of appellate review doctrines Waiver E.g. statutory issue Harmless error Nearly all issues Standards of review E.g. Deferential on discovery and amendment, but no deference on JMOL Best notice explore rather than avoid legal ambiguity Whether work product should apply to report prepared both for safety and to prepare for litigation Whether 15(c)(1)(c) applies when adding rather than changing a party

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

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

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….

Settlement Settlement Problems

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 More when prepare for mock mediation on November 4 Arbitration. Adjudication by private judge Settlement is sometimes classified as ADR

Arbitration I Adjudication by private judge under rules agreed to by parties Must be agreed to by parties Pre-dispute. In contract, before dispute arises After dispute arises Arbitration is legally binding Party that agreed to arbitration and then changes its mind can be compelled to arbitrate Court will dismiss case Arbitrator can enter equivalent of default judgment Arbitration awards are enforceable in court Arbitration awards are not generally appealable Arbitration may be through established organizations (non-profit or for profit) American Arbitration Association, JAMS Organizations have panels of arbitrators and set rules

Arbitration II Parties to arbitration generally have control over who arbitrators are Either agree on arbitrators in advance Or agree to procedure for selecting arbitrator E.g. Start with list and each side strikes those like least, etc. Procedure may be set out in organization rules (AAA or JAMS) or may be negotiated by parties Often arbitrators are retired judges, but can be anyone E.g. Writers Guild has writers as arbitrators Parties to arbitration generally have control over procedures AAA and JAMS have rules that can choose Or can set out own rules E.g. Writers Guild. Everything in writing, no oral hearing or testimony

Arbitration III Arbitration is controversial Especially in consumer contracts Where business may put arbitration clause in form contract stipulating defendant friendly arbitrators and procedures (e.g. no class actions) Federal law promotes arbitration Federal American Arbitration Act is interpreted to require states to enforce arbitration agreements, except in rare circumstances Agreement was unconscionable or otherwise defective under ordinary state law contract principles (e.g. fraud, duress), or Procedure violative of due process (e.g. biased judges) Very hard to prove, even though probably often true, because business generally chooses arbitration procedures, including rules for selection of arbitrators Businesses are “repeat players” So arbitration providers have incentive to please business, otherwise business will choose other arbitration provider in future.

Next Class Fees = Compensation to lawyer Generally large. Approximately 1/3rd of judgment English rule. Loser pays other side’s attorney fees American rule, no reimbursement of other side’s lawyer’s fees Except when explicitly allowed or mandated by statute Costs = court fees Generally small. Loser pays, even in U.S. Expenses Expert witnesses, paralegal & secretarial time, photocopying, etc. Usually paid by client along with lawyers’ fees Not generally shifted under British rule Usually subtracted from judgment or settlement before calculating lawyer’s fee percentage under contingent fee