Speir & Che on the “Divide and Conquer” Strategy in Multi-Plaintiff Litigation

Katheryn Speir (Harvard Law) and Yeon-Koo Che (Columbia) just posted an article on modeling the behavior of defendants and plaintiffs in multi-plaintiff litigation.  The paper, called “Exploiting Plaintiffs Through Settlement: Divide and Conquer” is available on here on SSRN and the abstract is below.   

This paper considers settlementnegotiations between a single defendant and N plaintiffs when there areFixed costs of litigation. When making simultaneous take-it-or-leave-itoffers to the plaintiffs, the defendant adopts a divide and conquerstrategy. Plaintiffs settle their claims for less than they are jointlyworth. The problem is worse when N is larger, the offers aresequential, and the plaintiffs make offers instead. Although divide andconquer strategies dilute the defendant’s incentives, they increase thesettlement rate and reduce litigation spending. Plaintiffs can raisetheir joint payoff through transfer payments, voting rules, andcovenants not to accept discriminatory offers.

ADL