Psychological Barriers to Litigation Settlement: An Experimental Approach

Abstract

** Research Fellow, SCCN. B.A. 1989, Stanford; Ed.M. 1991, Harvard; J.D. 1994, Stanford. Ed. Research support for this project was provided by a generous grant from the SCCN. The authors thank Robert Mnookin, Janet Cooper Alexander, Ian Ayres, and Tom Lyon for their advice and comments on earlier drafts, the participants in the Harvard Law School Negotiation and Conflict Resolution Interdisciplinary Research Seminar for their comprehensive and incisive written and oral critiques, and especially Lee Ross for his consultation on social science laboratory research methodology. 1. One seminal empirical study, now over 20 years old, found that only 4.2% of automobile liability claims filed against insurance companies ultimately reach trial. See H. LAURENCE Ross, SETTLED OUT OF COURT: THE SOCIAL PROCESS OF INSURANCE CLAIMS ADJUSTMENTS 217 (1970). A more recent study found that approximately 8% of civil suits filed in state and federal courts went to trial, and another 22.5% of those cases disposed of by judges, most through dismissal, summary judgment, or default judgment. See David M. Trubek et al., The Costs of Ordinary Litigation, 31 UCLA L. REV. 72, 89 (1983). More than 50% of the claims settled out of court prior to adjudication. Id. Criminal suits also settle in overwhelming numbers through plea bargaining. See JAMES E. BOND, PLEA BARGAINING AND GUILTY PLEAS ? 1.2 (2d ed. 1983). 2. Litigants incur both psychic and financial costs. According to Marc Galanter, who cites a number of empirical studies to support his argument, trials impose substantial emotional costs on both plaintiffs and defendants. See Marc Galanter, The Day After the Litigation Explosion, 46 MD. L. REV. 3, 8-11 (1986). For plaintiffs and defendants alike, litigation proves a miserable, disruptive, painful experience. Few litigants have a good time or bask in the esteem of their fellows indeed, they may be stigmatized. Even those who prevail may find the process very costly. Id. at 9 (citations omitted). Plaintiffs and defendants also incur financial costs at trial. Trubek et al., supra note 1, at 90-93. Costs fall into two categories: out-of-pocket costs including legal fees, expert witness fees, and so on and the monetary value of the time clients spend on cases. Id. at 91. Generally speaking, the more legal actions that take place, the higher the costs incurred that is, increased legal fees, client time away from work, and trial fees, such as expert witness fees, stenographic costs, and travel expenses. Id. at 104 (finding that duration does not have a substantial effect on hours.... [T]he more motions filed and discovery conducted, the more hours spent.); see also RAND: THE INSTITUTE FOR CIVIL JUSTICE, COMPENSATION FOR ACCIDENTAL INJURIES IN THE U.S. 135-36 (1991) (finding that about one-fifth of personal injury plaintiffs were told that the fee would depend on the length of time required to resolve the claim, the ultimate amount received, or whether or not a trial was required). 3. J.S. Kakalik and R.L. Ross examined public spending on civil disputes during fiscal