Title: Offer-of-Judgment Rules and Civil Litigation: An Empirical Study of Automobile Insurance Litigation in the East
Abstract: Legal scholars have long debated the efficacy of offer-of-judgment rules in promoting the resolution of civil disputes. Unfortunately, measuring the rules' effect in actual litigation has proven difficult because federal and most state courts adopted a version that has long been in place and is generally regarded as toothless and inconsequential. This Article overcomes this measurement obstacle by studying the recent experience of New Jersey, which in 1994 allowed bilateral pre-trial offers with uncapped attorneys' fees as a cost-shifting measure. Using individual-level data from a large national insurer, we analyze insurance-based suits filed in New Jersey and neighboring states between 1992 and 1997. We find that in the aftermath of the rule revision damage awards did not significantly change, but litigants took systematically less time to resolve their disputes and markedly lowered their attorneys' fees for the insurer. These findings suggest that offer-of-judgment rules, if properly designed, can provide an effective and arguably social welfare-enhancing mechanism for resolving civil disputes. I. INTRODUCTION Although their express purpose is to adjudicate disputes, courts by their institutional design encourage civil litigants to settle their differences without resorting to trial. Most civil systems impose filing fees, pleading requirements, and a highly formalized presentation of evidence; also, because of crowded civil dockets, courts typically require litigants to wait months, or even years, for their trial date.1 For these reasons, and because of the increasing costs of legal representation,2 it is not surprising that the majority of litigants settle before trial.3 Notwithstanding these measures, federal courts and most state courts have an additional mechanism to encourage settlement, generally known as an offer-of-judgment rule. Following the leads of Minnesota, Montana, and New York, the Supreme Court promulgated Federal of Civil Procedure 68 (hereinafter Rule 68) in 1937.4 Briefly stated,5 the rule allows a defending party-at her discretion-to submit a formal settlement offer to the court6 as well as to the claimant. If the plaintiff does not accept the offer and does not ultimately recover an amount greater than the proposed settlement,7 then she is required to pay the defendant's post-offer court costs. Although the original Advisory Committee Note said nothing about the purpose of the rule, it is generally understood that it was designed to promote settlements and avoid protracted litigation8 and, in so doing, provide a secondary benefit of reducing the caseload burden present in most jurisdictions.9 Most states subsequently adopted their own offer-of-judgment rules; the vast majority of these rules were modeled after the federal version.10 At their core, offer-of-judgment rules are about influencing the quantity and quality of cases that go to trial, an issue that scholars have spiritedly debated.11 In examining offer-of-judgment rules, economists and legal scholars have focused on 68, not surprisingly given the rule's primacy at both the state and federal level. The scholarship has been primarily theoretical,12 with considerable debate as to the rule's efficacy. The few scholars who have examined the rule from an empirical perspective have done so through experimental data,13 finding only modest effects.14 This Article extends the existing scholarship in two significant ways. First, we direct our focus on an offer-of-judgment rule other than 68. The federal rule, notwithstanding the scholarly attention, has long been regarded by practitioners and jurists as largely inconsequential. The cost-shifting mechanism of 68 and the state rules modeled thereafter are usually limited to post-offer court costs (e.g., docket and printing fees15), which, in most cases, are trivial, thereby diminishing the rules' potency.16 As a result, plaintiff and defense attorneys have reported these rules had little effect on how they approached their cases. …
Publication Year: 2006
Publication Date: 2006-01-01
Language: en
Type: article
Access and Citation
Cited By Count: 7
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