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68 N.Y.U. L. Rev. 427 (1993)
Settlements under Joint and Several Liability

handle is hein.journals/nylr68 and id is 445 raw text is: NEW YORK UNIVERSITY LAW REVIEW VOLUME 68 JUNE 1993 NUMBER 3 SETTLEMENTS UNDER JOINT AND SEVERAL LIABILITY LEWIS A. KORNHAUSER* RICHARD L. REvEsz** In this Article, Professors Kornhauser and Revesz study the settlement-inducing properties of the rules governing the litigation of claims involving multiple defendant& Most importantly, they show that the effects ofjoint and several liability on the choice between settlement and litigation depend on the correlation of the plaintiff's probabili- ties of success against the defendants. In the case of two defendants, these probabilities are independent if the outcome of the plaintiff s claim against one defendant does not depend upon whether the plaintiff prevails against, loses to, or settles with the other defendant. In contrast, these probabilities are perfectly correlated if when the plaintiff litigates against both defendants, it either has to prevail against both or lose to both. Joint and several liability coupled with a pro tanto set-off rule (under which, when the plaintiff settles with one defendant and litigates against the other, its claim against the non-settling defendant is reduced by the amount of the settlement), discourages settle- ment with both defendants if the plaintiff's probabilities of success are independent. In turn, joint and several liability encourages settlement with at least one defendant if these probabilities are perfectly correlated. The authors also analyze the arguments raised by the courts concerning the relative settlement-inducing properties of the pro tanto set-off rule and the apportioned share set-off rule (under which, when the plain- tiff settles with one defendant and litigates against the other, its claim against the non- settling defendant is reduced by the apportioned share of the settling defendant). They show that essentially all of these arguments are based on an incomplete or incorrect understanding of the incentives faced by the respective parties. * Professor of Law, New York University. ** Professor of Law, New York University. We acknowledge the generous financial sup- port of the Filomen D'Agostino and Max E. Greenberg Research Fund at the New York University School of Law. We are grateful for the comments of Vicki Been, Samuel Es- treicher, Mark Geistfeld, Marcel Kahan, and A. Mitchell Polinsky, and for the research assist- ance of Munish Rametra. A prior version of this Article was presented at the Institute of Judicial Administration's Research Conference on Civil Justice Reform in the 1990s at the New York University School of Law, and at law and economics workshops at the University of Michigan Law School and the University of Pennsylvania Law School. 427 Imaged with the Permission of N.Y.U. Law Review

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