Although an overwhelming proportion of all legal disputes end in settlement, the determinants of the timing of settlement remain empirically underexplored. We draw on a novel dataset on the duration of commercial disputes in Slovenia to study how the timing of settlement is shaped by the stages and features of the litigation process. Using competing risk regression analysis, we find that events such as court-annexed mediation and the first court session, which enable the disputing parties to refine their respective expectations about the case outcome, in general reduce case duration to settlement. The magnitude of the respective effects, however, varies with time. Completion of subsequent court sessions, in contrast, does not affect the time to settlement. Judicial workload affects the timing of settlement indirectly, via the effect on the timing of the first court session. We also examine the effect of other case and party characteristics.
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See Grajzl et al. (2016: Sec. 2) for a discussion of exceptions.
See Galič (2014) for a critical discussion of the restrictions on late factual allegations and evidence in Slovenia.
Our access to the data was restricted in that we were not allowed access to the actual court case files. Instead, the information from the court case files that we had been approved to collect was recorded for us by court personnel. This practice ensured the preservation of anonymity of disputing parties during the process of dataset assembly. In the dataset made available to us, courts and disputing parties are identifiable as nameless codes.
The precise number of commercial cases for compensation of damages filed during this time period is unclear. We learned that, for record-keeping purposes, cases in Slovenian courts are sorted under alternative categories in a haphazard way. Any administrative errors of this type, however, should not affect the representativeness of our sample.
The proposed categorization of different modes of case disposition into the broad notions of settlement and resolution through court judgment is consistent with the existing approaches in the empirical literature on modes of case disposition (see, e.g., Galanter 2004; Hadfield 2004; Dimitrova-Grajzl et al. 2014).
We also do not know the precise timing of appointment of a court expert. This lack of information, however, should not affect our analysis since, in contrast to the event when the expert's report has been turned in, the timing of the appointment of the expert per se should not affect settlement hazard.
The precise identity of these parties is unknown to us due to the restricted-access nature of our dataset (see Sect. 3.1). Legal entities in public interest in Slovenia provide a wide range of services and include a broad set of either public or public–private organizations such as museums, theaters, schools, libraries, hospitals, zoos, providers of recreation services and sports organizations, and public institutes for compulsory social security services (health, pension, unemployment and disability insurance).
A further concern regarding sample selection, which complicates empirical analysis of the determinants of court outcomes, is that the sample of filed cases might not be a random sample of all disputes. Given the inherent lack of data about the disputes for which a legal claim was never officially asserted (see, e.g., Cooter and Rubinfeld 1989: 1082), our analysis alleviates this concern via the inclusion of a broad set of plaintiff, defendant, and case level controls, as well as fixed effects (see, e.g., Bhattacharya et al. 2007: 628, 643, 652-653).
This approach to data formatting is standard in survival analysis (see, e.g., Cleves et al. 2010). Estimation-wise, it is equivalent to an alternative approach whereby the data is split into time intervals of fixed length (e.g. months).
Detailed results are available upon request.
We also estimated other parametric specifications (such as exponential and Gompertz) and found qualitatively identical results.
Combining the modelling of shared frailty with inclusion of group fixed effects is a suitable approach (see Cleves et al. 2010: 201).
The lack of convergence of estimates is not an uncommon problem in the estimation of various frailty models (see, e.g., Boyd and Hoffman 2013: fn. 24).
We further aimed to examine the consequences of directly modeling unobserved heterogeneity by estimating an unshared frailty model, where the multiplicative effect of unobserved heterogeneity on the hazard function is modeled as observation-specific (rather than group-specific). For reasons of identifiability, unshared frailty models do not exist within the semiparametric Cox regression framework (see Cleves et al. 2010: 156). We therefore attempted to estimate parametric, Weibull unshared frailty models. These unshared frailty models, however, also failed to converge.
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For assistance in data collection and for helpful insights we are grateful to Sebastijan Potepan and Nevenka Rihar. We thank Nina Betetto, Samantha Bielen, Libor Dušek, Aleš Galič, Wim Marneffe, Margherita Saraceno, participants at the workshop Economic Analysis of Litigation in Torino, two anonymous reviewers, and editors Giovanni Ramello and Giuseppe Di Vita for valuable comments and suggestions.
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Grajzl, P., Zajc, K. Litigation and the timing of settlement: evidence from commercial disputes. Eur J Law Econ 44, 287–319 (2017). https://doi.org/10.1007/s10657-016-9540-5