This paper examines deterrence and settlement effects of three rules that have been applied in joint and several liability conspiracy cases. These rules are the no contribution rule, the contribution with claim reduction rule and the contribution with settlement reduction rule.
It is shown that where conspirators have asymmetric information that the no contribution rule could lead to less deterrence than the contribution rules for all conspirators. This contrasts to the conclusions of previous authors that relied upon the assumption of symmetric information to show that the no contribution rule would lead to at least the same, if not more, deterrence than the contribution rules. However, even where conspirators have asymmetric information, the no contribution rule will lead to a greater aggregate damage award for the plaintiff.
While the no contribution rule is more likely to lead to partial settlement than the contribution with claim reduction rule, in some situations the contribution with claim reduction rule will lead to a higher likelihood of complete settlement. The contribution with settlement reduction rule will discourage the defendants from settling with the plaintiff.
Under the contribution rules it is shown that liability should be allocated per capita where conspirators are able to cheaply bargain over the allocation of the benefit of the conspiracy. The paper also investigates the defendants' incentives to give and the plaintiff's incentive to receive information in lieu of a monetary settlement, Mary Carter Agreements and extensions of the basic model.
The paper concludes that the contribution with claim reduction rule with liability allocated per capita or the no contribution rule should be applied to joint and several liability in conspiracy situations. The one rule that is disfavored is the contribution with settlement reduction rule. More importantly this paper encourages greater focus on whether the joint harm is caused by defendants acting in concert or independently.