Suit, Settlement, and Forum Selection

Abstract

An underappreciated consequence of diversity jurisdiction is that it can promote forum shopping within the federal court system. I develop a general model of forum shopping, which I then test with 532,097 federal diversity cases terminating between 1988 and 2011. Confirming a testable prediction of my model, I find that parties (particularly corporations) who litigate outside of their home state settle cases more often than parties who litigate at home. My results are robust under a variety of specifications, including ones with fixed effects for plaintiff home state, years of suit filing and termination, forum, and case type.