Incentives to settle under joint and several liability: An empirical analysis of superfund litigation

Congress may soon restrict joint and several Liability for cleanup of conta minated sites under Superfund. We explore whether this change would discour age settlements and is therefore Likely to increase the program's already h igh litigation costs per site. Recent theoretical research by Kornhauser an d Revesz finds that joint and several liability may either encourage or dis courage settlement, depending on the correlation of outcomes at trial acros s defendants. We extend their two-defendant model to a richer framework wit h N defendants. This extension allows us to test the theoretical model empi rically using data on Superfund litigation. We find that joint and several liability does not discourage settlements and may even encourage them. Our results support the model's predictions about the effects of several variab les, such as the degree of correlation in trial outcomes.