Settling Multidefendant Lawsuits: The Advantage of Conditional Setoff Rules

Daniel Klerman

The Journal of Legal Studies, 1996, vol. 25, issue 2, 445-62

Abstract: In cases involving multiple defendants, each defendant's incentive to settle is influenced by the setoff rule enforced in the relevant jurisdiction. This article suggests that the effect of a setoff rule depends on whether the setoff is conditional on a finding that the settling defendant or defendants were legally liable. Previous research, which assumed that the setoff was unconditional, found that the two principal rules applied by modern courts - the pro tanto and proportionate share rules - often discourage settlement when the plaintiff's probabilities of prevailing against each defendant are not perfectly correlated. This article shows that the disincentive to settlement can be reduced or eliminated by making the setoff conditional on the liability of the settling defendant or defendants. The conditional setoff rules are of practical as well as theoretical interest because several states currently apply them. Copyright 1996 by the University of Chicago.

Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://dx.doi.org/10.1086/467984 (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:25:y:1996:i:2:p:445-62

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().