Signaling, Learning and Screening Prior to Trial: Informational Implications of Preliminary Injunctions
Thomas D. Jeitschko and Byung-Cheol Kim, EAG 11-2, February 2011
Published in Journal of Law, Economics and Organization, 29 (2013).
The decision to request a preliminary injunction—a court order that bans a party from certain
actions until their lawfulness are ascertained in a final court ruling at trial—is an important litigation
instrument in many areas of the law including antitrust, copyright, patents, trademarks,
employment and labor relations as well as contracts. The process of filing for a preliminary injunction
and the court's ruling on such a request generates information that can affect possible
settlement decisions. We consider these implications when there is uncertainty about both the
plaintiff's damages as well as the merits of case in the eyes of the court. Both plaintiff and
defendant revise their beliefs about the case strength in dispute once they observe the court's
ruling on preliminary injunctive relief. We study how such learning affects the likelihood of settlement.
A precursor to this analysis is the study of the strategic role of preliminary injunctions
as a means to signal the plaintiff's willingness to settle.
Keywords: preliminary injunction, learning, signaling, screening, litigation, pre-trial motion,
JEL classiffications: D8 (Information, Knowledge, and Uncertainty), K12 (Contract Law),
K21 (Antitrust Law), K41 (Litigation Process), J53 (Labor-Management Relations; Industrial
Jurisprudence), L4 (Antitrust Issues and Policies)