Found Money? Split-Award Statutes and Settlement of Punitive Damages Cases

We examine the effect of "split-award" statutes (wherein the state shares a punitive damages award) on equilibrium settlements and the incentives to go to trial. Splitaward statutes lower settlement amounts and the likelihood of trial, as both parties act to cut out the state. We analyze the revenue that split-award statutes generate; the revenue-maximizing share is robust to variations in economic parameters and to whether the state's share is gross or net of the plaintiff's attorney's fee. Moreover, these statutes need not deter filings, and their use can encourage plaintiffs' attorneys to pursue weaker cases than would otherwise be brought. Copyright 2003, Oxford University Press.