Coase-Sandor Working Paper Series in Law and Economics
Settlement is more likely if parties are free to set its terms, including a promise that these terms will remain secret between them. State sunshine-in-litigation laws work to defeat this incentive for confidentiality in order to protect third parties from otherwise unknown hazards. The intuition is that a wrongdoer should not be able to pay one plaintiff for silence at the expense of other victims. This Article begins by showing that the intuition is often wrong or overstated. A plaintiff who can assess defendant’s vulnerability to future claims can extract a large enough settlement to provide substantial deterrence, and at much lower cost to the legal system. The argument does not transfer well to most criminal cases, where the defendant might pay not to avoid other claims but to avoid incarceration, which offers no direct benefit to the settling victim. It is further complicated in sexual assault cases, where the plaintiff might settle too quickly in order to protect her privacy. The discussion works toward the idea that in some settings semi-confidentiality – the disclosure of the substance of settlement but not the magnitude of monetary payments – is superior to both secrecy and transparency. The right amount of confidentiality is a function of the parties’ interest in privacy, the likelihood that the wrongdoing is part of a pattern unknown to the settling plaintiff, and the accuracy of the litigation process that settlement seeks to bypass. We are able to identify cases where law ought to allow (even) criminal cases to be settled privately and confidentially, and also cases where even sexual assault victims should be steered away from confidential settlement and toward translucency.
Saul Levmore & Frank Fagan, "Semi-Confidential Settlements in Civil, Criminal, and Sexual Assault Cases," Coase-Sandor Working Paper Series in Law and Economics, No. 796 (2017).