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Coercive Settlements

Can civil settlements be coercive? Conventional wisdom suggests they generally cannot, as the inherent power dynamic of private law is accepted as inevitable. This Article challenges these conventions, arguing that some private settlements—which it labels “high-risk civil settlements”—might be coercive. Using confidential settlements as an example, this Article contends that acquiescence to a defendant’s demand for silence in exchange for forgoing a legal claim can reflect coercion when additional factors are present. The Article builds on psychological research to show how a plaintiff’s voluntariness can be negated by using subtle methods of social influence. Recognizing the coercive power that stronger parties wield in some private disputes, this Article urges the legal system to step up to assure that civil settlement agreements are in fact mutually desirable deals.

Taxing Litigation Finance

The emerging litigation finance industry has the capacity to expand access to justice but also raises important legal and ethical questions. The problem arises in classifying litigation finance contracts as either a nonrecourse loan, immediate sale, or variable prepaid forward contract, all of which discretely impact the timing and character of income. The consequences are tax uncertainty and an opportunity for taxpayers to engage in aggressive tax planning by structuring transactions to obtain favorable tax treatment without altering their economic position. This Article proposes a customized, multifactor analysis to identify the true nature of litigation finance transactions and impose proper tax treatment. The bedrock of the proposal is the concept of tax ownership, which in the litigation finance context can be streamlined into two key factors: economic risk and legal control of the claim.