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

2. 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 ,
Questions to think about / Writing assignment for Group 7
Briefly summarize Price
Pp. 807ff. Qs 1, 2, 3b
Optional: Glannon Chapters (Joinder)

3. 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, , , , 280, ,
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?

4. 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

5. 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

6. 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

7. 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….

8. Settlement
Settlement Problems

9. 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

10. 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

11. 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

12. 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.

13. 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