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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.

28

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.

29

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

for

tactical

reasons?

Why

take-it-or-leave-it-offer,

not claim

that

the

company

was

going

to

try

every

case

that

doesn’t

settle,

but

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

to be

verify this claim.

Nonetheless, Bayer’s

damaged

substantially

by

the

discovery

of

many high-valuation plaintiffs or the expected outcome at trial is sufficiently negative for the defendant.

28

As a practical matter, it might be difficult to discover a

breach

of

this

sort

depending

on

the

litigation

context.

The

examples

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.

settlement

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.

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