following its commitments has an analogous effect as the MFN agreement. In the MFN context, offering a higher settlement amount to some plaintiffs than others would require a payment to all the other
plaintiffs, or be a breach of contract.
In the cerivastatin context,
Bayer credibly committed to not making higher settlement payments to subsequent plaintiffs by its policy of not seeking confidentiality agreements, Bayer’s reputation, and the level of communication among plaintiffs’ counsel.
For the settlement strategy to work, plaintiffs had to believe that Bayer would not “cheat” and offer settlement amounts different from
those in the announced schedule.
Otherwise, plaintiffs would not have
agreed to settle for the schedule amount with the knowledge that the defendant would later make a higher offer to avoid a trial.
But with some publicize
what was to prevent Bayer from reaching secret settlements
fraction of the plaintiffs a settlement schedule as a
then secretly Bayer insists
settle the cases for that they did not do
higher amounts to avert trials? this, but, of course, if a settlement
is secret, there is no way long-term reputation would
verify this claim.
many high-valuation plaintiffs or the expected outcome at trial is sufficiently negative for the defendant.
As a practical matter, it might be difficult to discover a
that Spier litigation chances of settlement
uses of MFN clauses in settlements are all very high profile (e.g. state tobacco litigation, MP3 litigation) in which the
a first settling seem very high.
plaintiff discovering a subsequent higher In other legal contexts, even a formal MFN
clause may not serve as a credible commitment device if there is a risk
of cheating by defendants.
Since it may be
interest to keep cheat may not be
a higher second credible.
in the second plaintiff’s secret, a commitment not to
29 In fact, Bayer did reach off-schedule settlements in a handful of cases in which it felt the facts were unique enough that the schedule was not appropriate.