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    3-

plaintiffs litigate.

who rejected the schedule, Bayer announced While Bayer did not actively publicize the

that they would settlements, it

only

sought

confidentiality

agreements

in

a

handful

of

unusual

cases.

According

to

George

Lykos,

Bayer

Corporation’s

Chief

Legal

Officer

in

the U.S., part of the appeal of this every claimant would know that he or other claimants.

strategy was its transparency: she was being treated the same

as

The cerivastatin litigation provides an instructive example

of a

real-world litigation voluntarily adopted a

context in which non-confidential

a private-sector defendant

settlement

strategy.

What

were

the incentives that led Bayer to pursue this strategy? what conditions will lead a defendant to eschew secret

More generally, settlements?

In order to answer these questions, I interviewed defense and

plaintiff’s and medical

lawyers involved

literature.

The

in the litigation and structured interviews

reviewed the economic helped explain both

the current prevalence of confidential settlement agreements

motivation behind the theoretic models from

cerivastatin the economic

settlement literature

strategy. The on settlements

and the game explain

the

incentives that lead to this result.

3

The story that emerges is somewhat unexpected.

The conventional

wisdom is that confidential settlement agreements aid defendants. Confidentiality minimizes bad publicity for the corporate defendant

which is minimize

important to the defendant both for its own sake and to

additional

claims.

In

this

case,

however,

openness

actually

aided Bayer in reducing its overall costs.

Limited transparency

permitted Bayer plaintiffs than

to credibly adopt a tougher bargaining would have been possible had it sought

strategy with confidential

settlements. to plaintiffs

It allowed Bayer which allowed it

to to

commit to keep more

a take-it-or-leave it of the surplus in the

offer

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