The False Allure of Settlement Pressure

The threat of “blackmail” or “in terrorem” settlements have shaped the law, leading courts to conclude that if the plaintiff does not appear likely to win the case, then the litigation should be halted at an early stage. This Article questions the established logic of settlement pressure. After clarifying the concept and presenting the strongest case for it, I show that it cannot serve as the basis for wide-ranging civil procedure doctrines. Doing so has perverse results, such as privileging the defendant’s idiosyncratic tastes and helping corporate managers hide important facts from their shareholders.

In addition, settlement pressure is not the serious problem that it has been characterized as: rather than being blackmail, it is more analogous to litigation insurance or hiring expensive attorneys. The doctrines based on settlement pressure, therefore, lack a sound justification, and settlement pressure is not a dire threat that the law must step in to counteract. Even in the context of class actions, the most favorable circumstances for settlement pressure arguments, a case where the plaintiffs seem unlikely to prevail should be allowed to proceed, provided it sets out a coherent, bona fide class claim. A number of prominent decisions, such as Wal-Mart Stores, Inc. v. Dukes, ultimately depend on settlement pressure, and therefore ought to be reconsidered.