Bargaining with the judge: exploding terms in pre-trial settlements

Shay Lavie (Tel Aviv University)
Avraham Tabbach (Tel Aviv University)

Abstract

Can parties who settle bargain that settlement with the judge? In the class action context, for instance, there is a legal question as to the capacity of the parties to condition the entire settlement on the agree fees. Settling parties could declare that they cannot settle unless the judge approves their desired (and socially undesirable) fee. Should the judge accept such an “exploding” demand? On the one hand, if the judge accepts the party’s terms, it surely advances more settlements. On the other hand, it invites mimicking by parties who would have settled regardless of that term. We explore the bargain between the parties and the judge, under three possible legal regimes. We conclude that such a bargain could be socially valuable, but only under certain conditions. Otherwise, it should be banned. The current, discretionary legal regime seems to be the worst.


[This is a work-in-progress. We submitted a file with a long abstract (~1000 words) in which we present our preliminary results. We will provide a full analysis by the time of the presentation]

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