What do settlement-bargaining models tell us about revelation or suppression of private information about parties’ valuations? The law-and-economics literature uses concepts from information economics, and tools from game theory, to characterize economic aspects of settlement bargaining. In this Article we examine which parties (both those directly interested and those more distantly interested) become informed about bargainers’ private valuations, recognizing that the rules of civil procedure in legal proceedings sometimes provide for different degrees of secrecy and purposeful information suppression.
Revelation or suppression of information about private valuations is not relevant in a vacuum, so we will refer to a variety of “audiences” whose presence or absence can matter. For example, in a simple suit involving a defendant facing a plaintiff, the litigants are part of what we will refer to as “immediate parties,” as are the litigants’ lawyers, any litigation funders (that is, third parties making loans either to the plaintiff or to one of the law firms), expert witnesses, and the court to which the litigants would proceed for trial in the absence of a settlement agreement. At a greater distance would be “related parties,” including potential litigants. These potential litigants may be either currently aware of a case—such as a potential plaintiff who might sue the same defendant, but has not yet done so—or currently unaware that they should contemplate bringing suit, but who might become aware due to information from the original case. Of course, associated attorneys for these potential litigants are also related parties. We will reserve the category “distant parties” to refer to agents in possible future suits (litigants, attorneys, funders, judges, etc.) who learn from the outcomes of previous cases and use this information to form beliefs about the likelihood of various litigation outcomes so as to inform their actions in future cases not directly related to the instant case. Also in the set of distant parties are neutral observers, such as academics, legislators, and journalists (among others) whose primary interest is the functioning of the legal system.