Dispute Resolution

Dispute Resolution

Bridging the Settlement Gap

Conditions for SettlementFull Information and

AgreementThere is agreement over the expected judgment at trial, the savings from not going to trial, and the portion of the savings that each party should receive.

Differing but Compatible Perspectives

There are differing perceptions on trial outcomes or appropriate divisions but relative optimism in some areas is sufficiently balanced by relative pessimism in others to produce an acceptable solution.

Conditions for SettlementBrute Force or ComplianceThe parties can agree on, or be forced to submit to, a decision rule or process of division.

The Ability to Make Final Offers One party is capable and willing to make a credible take-it-or-leave-it offer that is preferable to the other party over the trial outcome.

Alternative Dispute Resolution 3rd-Party perspectives bring both parties down to earth

Summary Jury TrialHighly abbreviated trial that provides litigants with an advisory verdict from a judge and jurors for guidance in their settlement negotiations

Arbitration Informal, binding or non-binding hearing before a panel of attorneys or retired judges.

MediationNo third-party judgment, but one or more mediators talk with the parties to help them come to settlement

Alternative Dispute Resolution Early Neutral Evaluation Brings the lawyers together with a neutral party shortly after the claim is filed to talk through the strengths and weaknesses of their cases and clarify possible outcomes. Mini-TrialLawyers from each side present the strongest aspects of their case to a neutral advisor or judge for non-binding, party-controlled input Judicial Settlement Conference Brings the lawyers together with a judge or magistrate to try to resolve the case short of trial Rent-a-JudgeA private court offering relatively inexpensive and fast settlement conferences and hearings

Fair Division

Divide and Choose

Say “Stop”

Non-Uniform ResourceSame Preferences

• Divide and Choose works• Say Stop works• Surveyor won’t work

Non-Uniform ResourceDifferent Preferences

• Divide and Choose: Advantage to the Divider• Say Stop: Advantage to person who prefers side where moving line starts.• May call for 3rd-party involvement

200 100 0

0 100 200

Fee and Judgment Expectations

Suppose the expected judgment is 100 for each side.

200 100 0

0 100 200

If they go to trial …

Artemis will pay 30 in fees and end up with 70.

Brutus will pay 40 in fees and end up with 60.


200 100 60 0

What A keeps after trial

What B keeps after trial

Cost of going to trial

Artemis’s fees = 30

Brutus’s fees = 40

0 70 100 140 200


200 70 100 60 0




If Artemis is able to make the last settlement offer:

Artemis will receive _____ and Brutus will receive _____.

If Brutus is able to make the last settlement offer:Artemis will receive _____ and Brutus will receive

_____.

0 70 100 140 200


200 100 60 0




If Artemis is able to make the last settlement offer:

Artemis will receive 139.9 and Brutus will receive 60.1.

If Brutus is able to make the last settlement offer:

Artemis will receive 70.1 and Brutus will receive 129.9.

0 70 100 140 200

200 100 0

0 100 200

Efforts to achieve fair outcomes without trial when parties won’t cooperate

The Sincerity Rule

1)Either side makes an offer.

2) The other side either accepts, or rejects, in which case they will proceed to court and the offeror will pay the offeree's fees.

The Sincerity Rule

1)Either side makes an offer.

2) The other side either accepts, or rejects, in which case they will proceed to court and the offeror will pay the offeree's fees.

Suppose Artemis makes the offer:By rejecting, Brutus expects to receive 100 at trail with his fees paid.

What will Artemis offer?

The Sincerity RuleAn offer for Brutus to keep 100.1 is preferred over

100 at trial by Brutus, and is preferred over 100 minus trial costs and attorney fees at trial by Artemis.

Options for Artemis:Offer less than 100 Brutus will reject in favor of an

expected 100 at trialOffer 100 Brutus is indifferent between accepting

and going to trialOffer more than 100 Brutus will accept rather than

going to trial expecting less

The Sincerity RuleAdvantages:* Removes the effects or differing bargaining

power* Encourages settlement near the expected

judgment

Disadvantages:* Prohibits further bargaining if it fails* Inflicts large costs on offeror if it fails

Final Offer Auctions1) The two sides bid for the right to

make the final offer.

2) The side that makes the winning bid gives the amount of the bid to the side that receives the final offer.

Final Offer AuctionsRemember: The expected judgment is 100 for

each side.If they go to trial:Artemis will pay 30 in fees and end up with

70.Brutus will pay 40 in fees and end up with 60.If Artemis is able to make the last offer:Artemis will receive 139.9 and Brutus will

receive 60.1.If Brutus is able to make the last offer:Artemis will receive 70.1 and Brutus will

receive 129.9.That is: With the ability to make the last

offer, you capture virtually all of the combined savings from avoiding trial (70).

200 130 100 60 0

0 70 100 140 200




Brutus’s offer to Artemis = 70.1

Artemis’s offer to Brutus= 60.1

Bid up to ½ the Bargaining Rent

If A’s Bid is Accepted If B’s Higher Bid is AcceptedA Bids A Receives B Receives A Receives B Receives

30 139.9 - 30 = 109.9

60.1 + 30 = 90.1

70.1 + 31 = 101.1

129.9 - 31 = 98.9

32 139.9 - 32 = 107.9

60.1 + 32 = 92.1

70.1 + 33 = 103.1

129.9 - 33 = 96.9

34 139.9 - 34 = 105.9

60.1 + 34 = 94.1

70.1 + 35 = 105.1

129.9 - 35 = 94.9

36 139.9 - 36 = 103.9

60.1 + 36 = 96.1

70.1 + 37 = 107.1

129.9 - 37 = 92.9

So with Final Offer Auctions, a settlement that splits the bargaining rent is expected.

Dispute Resolution

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