Friday, March 04, 2005

Reverse Bifurcation at Work in the Fen-Phen Cases

Click on the post title to read an interesting article about reverse bifurcation, which is also the subject of my current writing project (thanks to research assistant Jay Clendenin for helping me find this). Reverse bifurcation is where the damages phase of the trial occurs first (for non-lawyers, this means how much money the plaintiff gets to win), and then the question of liability is determined second (for non-lawyer readers, this is the question of whether the defendant has to pay anything in the first place). This innovative procedure has been in use for over twenty years, originating in the Philadelphia complex litigation courts during the asbestos cases of the early 1980's. The most common justification for it is that the reversed order fosters quick settlements and saves time and court costs. Once the parties know how much money the case is really worth, they almost always settle (often for the amount the jury suggested, interestingly). If you read the article closely, it appears to say that 350 Fen-Phen cases went to trial in Philadelphia last year (most or all using reserve bifurcation), and only two of the 350 went past the first phase to reach the liability question. One interesting feature of reverse bifurcation is that originally defendants seemed resistant to it - they were afraid that putting evidence about damages to the jury first would be too prejudicial to their case - but now they have come to favor it, and it is plaintiff's lawyers who seem the most critical (because they like to mix the evidence about liability and the plaintiff's injuries together to make the jury really upset). "Read more" has more for this one....

There have been no academic articles devoted to the subject to date (I am working on one now), just practitioner pieces. I advocate a more widespread use for the procedure, not only because of fostering settlement, but because I think the settlements themselves will more accurately reflect the true value of the case. In most lawsuits, it seems, the primary area of uncertainty or unpredictability is the amount of damages (and perhaps the causation question, which reverse bifurcation often includes at the damages phase), if for no other reason than it can span such a large continuum. The liability question is a simple yes-or-no matter, making it easier for the parities to assign reasonable guesses at the odds. Eliminating the main area of uncertainty for the parties is the most efficient way to foster settlement. Also, the traditional order of the trial puts the defendant in the position of having to deny their wrongdoing insistently in hopes of avoiding damages completely. Once the jury has decided liability exists, these denials become annoying, possibly resulting in disproportionately higher damage awards as a punishment. Aware of this, the case takes on even more value for the defendant, who is tempted to deny liability in the first round even more stridently, creating a vicious cycle. In response to this increased front-end investment by the defense, the plaintiff has an increased incentive to "cheat" a little by mixing in prejudicial evidence about the victim's injuries during the liability question. In other words, the traditional order provides incentives for both parties to invest disproportionate resources in the beginning of the trial, manipulating the jury, and making the stakes higher and higher (and settlement agreements more and more difficult). Reverse bifurcation solves this problem.