An Analysis of the Rules of Contribution and No Contribution for Joint and Several Liability in Conspiracy Cases

Timothy James Stanley

Copyright 1994-95 by the Santa Clara Law Review

This article is published in November, 1994 issue of the Santa Clara Law Review. This html edition of this article includes many grammatical changes since the Olin/SCCN working series papers. This html version is nearly the same as the one published by the Santa Clara Law Review, however, there have been a few grammatical changes from my second edit of the final page proofs and the technical appendix is not included in this html version. If you cite the article please cite to the Santa Clara Law Review version if possible.

An Analysis of the Rules of Contribution and Joint Contribution for Joint and Several Liability in Conspiracy Cases was awarded the 1994 Richard S. Goldsmith Award from the Stanford Center for Conflict and Negotiation at Stanford Law School. A previous version of this article is available in the SCCN working paper series as well as in the John M. Olin Program in Law and Economics, Stanford Law School, working paper series . This html version supersedes the working paper versions but is a beta release of the final published version.

A much more formal and more mathematical version of this paper will be one chapter in my Ph. D. dissertation in Engineering-Economic Systems. At some point in time I will upload the dissertation version, especially if html starts allowing subscripts, superscripts and mathematical equations. The dissertation version also contains additional analysis on sequential bargaining and judgment proof problems not fully addressed in this article.

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This paper includes links to recent U.S. Supreme Court cases and U.S. Code sections via Cornell University.

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Below is a quick index of the paper and the paper's abstract. Click on the table of contents for more detailed divisions and subdivisions of the paper.

Table Of Contents

+I. Introduction

+II. Definitions and Assumptions

+III. Deterrence

+IV. Settlement

+V. Extensions

+VI. Allocating Damages Under the Contribution Rules

+VII. Conclusions and Recommendations

+VIII. Technical Appendix (not contained in this html version)

ABSTRACT

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.

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