Information and settlement: Empirical evidence on Daubert rulings and settlement rates

In 1993, the Supreme Court established a new standard for the admissibility of expert evidence with its decision in Daubert v. Merrell Dow Pharmaceuticals. Although whether Daubert actually has increased the reliability of expert evidence remains an open question, empirical research generally suggests that Daubert has increased the judicial role in expert testimony as the number of challenges has increased. An unexplored topic to date is how Daubert outcomes impact litigation outcomes. This paper aims to fill that gap by examining how Daubert outcomes in federal district court affect the likelihood and timing of settlement. This paper also fits into the larger empirical literature that explores how information flows impact settlement. The sample of 2127 Daubert motions made in 1017 private cases from 91 federal district courts, spanning from 2003–2014, and involving 57 different causes of action provides the most comprehensive overview of Daubert practice in federal courts to date. The main empirical results suggest that defendant Daubert wins (plaintiff wins) are associated with a reduction (increase) in the likelihood of settlement. Results from duration analysis suggest that longer pendency time for Daubert motions are associated with lower settlement rates (a 4–7% reduction in the rate of settlement for every month that a Daubert motion goes undecided). Decomposition finds that the indirect effect of Daubert pendency (delay due to the reduction in communication between parties while Daubert motions pend before the court) accounts for the majority (70%) of the measured reduction in the settlement rate. One way that courts might reduce the cost of litigation if they were to adopt “Lone Pine”-type procedures that structure expert discovery and concomitant Daubert motions early, especially when expert testimony is required to prove certain elements of a claim.