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10 Ohio St. J. on Disp. Resol. 1 (1994-1995)
Opening Offers and Out-of-Court Settlement: A Little Moderation May Not Go a Long Way

handle is hein.journals/ohjdpr10 and id is 45 raw text is: THE OHIO STATE JOURNAL ON DISPUTE RESOLUTION VOLUME 10 1994 NUMBER 1 Opening Offers and Out-of-Court Settlement: A Little Moderation May Not Go a Long Way RUSSELL KOROBKIN* CHRIS GUTHRIE** I. A BARGAINING MODEL OF LITIGATION SETILEMENT When two litigants resolve a dispute through out-of-court settlement rather than trial, they realize joint gains of trade equal to the sum of the costs both parties would have incurred had they obtained a trial judgment minus the costs they incur reaching settlement.1 This opportunity for mutual gain causes most civil lawsuits to settle out-of-court.2 Yet, in spite of the * Research Fellow, Stanford Center on Conflict and Negotiation (SCCN). B.A. 1989; J.D. 1994, Stanford. ** Research Fellow, Stanford Center on Conflict and Negotiation (SCCN). B.A. 1989; J.D. 1994, Stanford; M.Ed. 1991, Harvard. The authors extend special thanks to Robert Mnookin, Janet Cooper Alexander, Lee Ross, Robert MWlson, and seminar participants at Harvard Law School and the SCCN for helpful comments and criticisms. Generous funding from the SCCN is gratefully acknowledged. 1 For clear descriptions of this standard economic account of the value of settlement in civil litigation, see George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1, 4-6 (1984). See also Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. LEGAL STUD. 399, 417-20 (1974). For a similar analysis in the context of criminal cases, see William M. Landes, An Economic Analysis of the Courts, 14 J. L. & ECON. 61, 66 (1971). 2 The exact percentage of lawsuits that settle out of court varies by jurisdiction and type of lawsuiL One seminal study, now 20 years old, found that only 4.2% of claims filed against insurance companies ultimately reached trial. See H. LAURENCE Ross, SETrLED OUT OF COURT: THE SOCIAL PRoCESS OF INsURANCE CLAIMS ADJusTmENTs 179 (1970). A 1980 study found 6.5% of suits in federal district courts reached a trial. DIRECTOR OF THE ADMINISTRATIvE OFFICE OF THE U.S. COURTS, ANNUAL REPORT OF THE DIRECTOR, A-28 (1980). A more recent study found that approximately 8% of civil suits filed in state and federal courts went to trial. David M. Trubek et al., The Costs of Ordinary Litigation, 31 UCLA L. REV. 72, 89 (1983).

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