ABSTRACT
When plaintiffs seek preliminary injunctions, courts provide early signals about case merits that shape settlement negotiations. I analyze how the accuracy of these signals affects litigation outcomes. Denial and grant both affect settlement, but asymmetrically. Denial weakens the plaintiff’s bargaining position and increases settlement – the plaintiff accepts less favorable terms. Grant strengthens the plaintiff’s position and decreases settlement – the plaintiff rejects settlement. The denial effect dominates, so more informative preliminary rulings promote settlement overall. This creates a tension with social welfare, however. False denials are locked in by settlement; false grants are self-corrected at trial. Courts focused on clearing dockets may deny preliminary injunctions too often, accepting higher error costs to achieve marginal gains in settlement. When defendant care is endogenous, denial-heavy standards also undermine deterrence. The framework provides guidance for ongoing debates about preliminary injunction standards in patent, antitrust, and other areas.
Kim, Byung-Cheol, Preliminary Injunctions, Settlement, and Error-Locking (January 8, 2026), University of Alabama Legal Studies Research Paper Forthcoming.
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