Structured Settlements as Structures of Rights

Abstract

E are all used to thinking about law in terms of the primary rights and duties that obtain in the world at large. One has a right against everyone else not to be punched in the nose or to be run over by a negligent driver. Once these primary rights are violated, a second set of rights and duties can arise out of a judgment or settlement. The victim now has a right to compensation from the tortfeasor. It is tempting to think that there is nothing interesting left to say. A judgment or settlement paid by the tortfeasor to the victim will compensate the victim according to the size of the damages in present value terms and will deter potential tortfeasors in the same proportion. Whether a settlement is paid in a lump sum or periodically should not matter because it is the amount paid that impacts the goals of tort law. This picture is, as Professor Ellen Pryor's Article in this Symposium ably demonstrates, far from adequate.1 How settlements are structured does impact the goals of deterrence and compensation, and lump-sum or "stretched-out" settlements are not equivalent for all purposes, even if they are equal in present value terms. In a lump-sum damage award, the defendant pays the damages to the plaintiff all at once, usually some time shortly after the settlement or judgment. In the three stretched-out methods of damage payout-structured settlements, settlement trusts, and periodic payments mandated by statute-the plaintiff does not receive all of the money up front, but rather in multiple payments over some period of time (measured by a fixed number of years, or the plaintiff's life, or some combination thereof). The stretching out of the payments is meant to constrain plaintiff decisionmaking over consumption of the damage award and so involves adding higher-order decisions that constrain plaintiff's consumption decisions. All of these methods involve the plaintiff and others constraining the decisions of