Psychology, Economics, and Settlement: A New Look at the Role of the Lawyer (original) (raw)
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European Journal of Law and Economics, 2007
In this paper, we explore the possibility that the percentage of litigations settled before getting to court is affected 1) by the degree of contingency of lawyers' fees and 2) by the possibility of shifting lawyers' fees to the losing counterpart. In our view, a litigation is a game where not only the plaintiff and the defendant, but also their lawyers are independent players. The main consequence of this assumption is that the authority to settle is allocated endogenously to either the clients or their lawyers, depending on the value of the relevant parameters. In this game theoretical setup, 1) we show that only the degree of contingency of lawyers' fees affects pretrial settlement rates, while cost shifting rules have no effect, and 2) we state the conditions under which non-contingent lawyers' fees provide better incentives to settle than contingent ones. JEL Classification Code: K0, K4
Plaintiffs and defendants are unrealistically optimistic with regard to the probability of prevailing at trial. This systematic bias is well documented, and has been often invoked to explain breakdowns in pre-trial settlement negotiations. How can a systematic bias towards optimism prevail in a competitive world, which usually punishes inaccurate assessments of reality ? The systematic optimism of lawyers is even more of a puzzle. A lawyer suffering from a persistent problem of inaccurate assessments will surely be driven out of the market. The present analysis challenges these conventional allegations. Using evolutionary game theory, we demonstrate that "market pressure", or an alternative imitation process, favor cautiously optimistic litigants. The pre-trial environment, inspired by the legal system, fosters optimism through the mechanism of settlement negotiations. We study a dynamic model, which allows us to derive the evolutionary stable level of optimism, under different legal regimes. Our analysis emphasizes the major role of the prevailing legal rule in determining the equilibrium level of optimism. By doing so we hope to shed new light on the ongoing debate regarding the effects of legal rules on the probability of settlement. Specifically, the evolutionary analysis qualifies the classical argument, that the American rule is superior to the British fee-shifting rule in fostering settlements.
Some Important Causes for Settlement in American Civil Litigation
2013
All rational man-made systems are concerned with efficiency. That is an undeniable truth. The question, thus, is when a system can be deemed efficient. In order to measure the efficiency of a civil justice system an accepted framework is cost-minimization. 1 Through this perspective, as synthetized by Kevin Clermont, civil procedure should maximize society's wealth minimizing social costs. 2 In other words, "you cannot reasonably overlook the price of pursuing justice, no matter how you wish to define justice." 3 This analysis of efficiency through decreasing economic costs and increasing social gains is reflected in Federal Rule of Civil Procedure 1, which provides that the Federal Rules of Civil Procedure (FRCP) "should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding." 4 By affirming justice as a goal as important as speed and cost, the drafters made it clear that these three aims are equally important for the FRCP. The acceptance of an economic efficiency model is easier in civil litigation than criminal prosecution because of the nature of the interests at stake, usually economic and private
Settlements out of Court: Efficiency and Equity
1998
This paper considers a model of out-of-court settlement negotiations in which rational individuals hold potentially differing beliefs about the merits of the case. The following results pertain in equilibrium. First, under incomplete information, self-interested disputants will fail to attain negotiated settlements (at least some of the time). Second, there is a fundamental tradeoff between settlement efficiency and equity. Increasing the frequency of out-ofcourt settlements inevitably means adopting settlements that are less responsive to the true merits of the case. Third, the frequency of litigation increases as court costs decline. Moreover, this response can be so great that average court expenditures rise with the decline in legal costs. Fourth, a shift from the American system to the British system of allocating court costs results in a fall in the frequency of litigation.
Plaintiffs' Lawyers: Dealing with the Possible but Not Certain
Depaul Law Review, 2011
The methodology of the 2006 survey was the same except that it used a current list of plaintiffs' lawyers rather than the one used in 2000, and it included new questions asking about referral practices. The 2000 survey had a response rate of 27.3% and the 2006 survey had a response rate of 25.7%. Id. at 1827. For both surveys, the number of responses fell within a confidence interval of plus or minus four percentage points at the 95% confidence level. Survey responses are confidential and on file with the authors. 2. This, of course, would make some critics quite happy. See generally Piniue K. HOWARD, LiiE Wrrtiou-r LAWYERS: LIBERATING AMERICANS FROM Too Mucii LAw (2009). 5. Again looking to the ATRA Web site, we find the following statement: Aggressive personal injury lawyers target certain professions, industries, and individual companies as profit centers. They systematically recruit clients who may never have suffered a real illness or injury and use scare tactics, combined with the promise of awards, to bring these people into massive class action suits. They effectively tap the media to rally sentiment for multi-million-dollar punitive damage awards. ... ... The personal injury lawyers who benefit from the status quo use their fees to perpetuate the cycle of lawsuit abuse. They have reinvested millions of dollars into the political process and in more litigation that acts as a drag on our economy. Id. 6. See infra notes 12-34 and accompanying text. 7. See infra notes 35-60 and accompanying text. 8. See generally HERBERT M. KRIEI'ZER, RISKS, REPUTATIONS, AND REWARDS: CONTINGENCY FEE LEGAL PRACrICE IN THE UNIfED STATEs (2004). 9. See infra notes 61-67 and accompanying text. 2011] 10. See infra notes 68-73 and accompanying text. 11. See infra notes 74-86 and accompanying text.
2021
Ideally, the law acts like an algoritm producing a fair and just outcome. If this is not respected, a party who feels disadvantaged can submit the case to court. The court will follow the rules of procedural law and apply material law on the case, and produce a fair outcome. Unfortunately, being right is in many cases not the same as getting right, and procedures can be manipulated. Economic considerations are key in these manipulations. This paper seeks to find which are the economic factors behind litigation, and how can they be applied by parties in their favour.
2005
EXPERIMENTS ON THE EFFECTS OF COST- SHIFTING, COURT COSTS, AND DISCOVERY ON THE EFFICIENT SETTLEMENT OF TORT CLAIMS Laura Inglis, Kevin McCabe, Steve Rassenti, Daniel Simmons, and Erik Tallroth* I. Introduction 89 II. Legal Background 91 A Cost-Shifting 91 B. Court Costs 94 C. Discovery 96 III. Experimental Design 98 A The Economic Environment 98 B. The Legal Process �� 99 C. Experimental Treatments 100 D. Experimental Procedures 102 IV. Results 104 A Measurement 104 B. Data Analysis 105 1.