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publicly funded court system to resolve their disputes. On the other hand, proponents of confidential settlements emphasize the private character of most disputes and parties’ freedom to come to whatever agreement best serves them.

Suppose, however, that under certain conditions, defendants might

have incentives not to seek

settlements.

In

this

case,

confidentiality agreements about the difficult question of whether

formal

restrictions should be put be avoided. This chapter will themselves rationally

on confidential settlement agreements might explores the conditions under which parties choose not to seek confidential settlement

agreements

and

uses

cerivastatin

litigation

as

a

real-world

example

of

this that

situation.

By understanding these conditions and the

parties

face,

policymakers

may

be

able

to

effectively

incentives discourage

confidential settlement agreements without coercion or controversial

changes to contract law.

At the very least, policymakers should

understand the agreements are contributes to

legal ecologies in which confidential settlement

most and least the settlement

likely to thrive.

The chapter also

literature

by

informally

showing

how

limited transparency can operate as a commitment strategy similar most-favored nation agreement and providing a real-world example.

to

a

In order to understand the incentives for confidential settlements, I use a recent high-profile pharmaceutical litigation

as a

case study settlement

to explore why a defendant might not seek confidential

agreements.

In

2001,

the

US

pharmaceutical

division

of

Bayer

A.G. faced a serious problem.

cerivastatin,

marketed

under

Its new

the

trade

cholesterol-lowering drug, name Baycol, sometimes caused

potentially fatal muscle damage, rhabdomyolysis.

After withdrawing

Baycol from the

claims.

Rather

market, Bayer faced over 12,000 products liability than seek confidentiality agreements, Bayer created

a

schedule of payments for rhabdomyolysis based on the

particular

injury.

For

non-rhabdomyolysis

claims

of

plaintiff’s injury or for

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