Litigation Notes

Litigation

Definition: Litigation is a structured dispute resolution process using state power or a private decision-maker to adjudicate disputes.

Key Theoretical Issues

Rights: Focus on access to litigation.
Procedures: The processes used (adversarial vs. investigatory).
Incentives: What can be achieved and how costs are determined.
Uncertainty: The strategic nature of litigation.
The frequency of litigation varies by country, but precise estimates are difficult to determine.
Litigation is typically conducted through agents (lawyers) with their own incentives.
Litigants can be one-shot or repeat players, with repeat players having advantages in resources, experience, and time.
Litigation procedures are often criticized as costly and slow, leading to regular reforms.
Resolutions are often reached without completing the full process through:
- Voluntary settlement.
- Abandonment by one party.
- Intermediate authoritative decision.
Many disputes are resolved outside the formal litigation process, anticipating likely litigation results.
Most litigation involves disputes among private parties (individuals or organizations).
Some cases involve the government as a party often in federal systems.

Adjudication

Adjudication involves:
- Authoritative dispute resolution.
- A neutral third party.
- Application of preexisting norms or rules.
Private adjudication systems are common, not limited to courts.
Adjudication can rely on any agreed norms or rules, including custom or religious texts (not just official law).
Litigation is a formalized adjudication process.
Formalization varies; examples of less formal adjudication include small claims courts or community-based courts.
No clear line separates litigation from other forms of adjudication.

Governmental Entities in Adjudication

Governmental adjudicators are usually labeled 'court,' but other labels such as 'commission,' 'tribunal,' 'board,' or 'ombudsman' may appear.
Courts may be independent of other government branches or integrated into the executive.
Specialized adjudicatory forums exist within the executive with varying independence degrees.
Labels vary across systems; e.g., labor courts in Germany are similar to Industrial Tribunals in Britain or Labor Relations Commissions in the U.S.
Entities may be labeled differently (e.g., U.S. Tax Court vs. Tax Appeals Commission) but perform similar activities.
Litigation requires adjudication and a formalized, structured process.
Cases range from routine to mega-disputes with large numbers of people and money.
Generalizations are difficult, and it is best to consider multiple worlds of litigation reflecting different scales and issues.

Rights in Litigation

Rights determine who has access to litigation.
In the U.S. and Canada, complex rules govern who has standing to bring an action.
Federal court jurisdiction is limited to 'cases and controversies' affecting those bringing the action.
Other countries (e.g., Israel, Germany) allow actions by those with only a tangential connection to the harm.
litigation can be used to obtain advisory opinions without an immediate case or controversy.
Legal rules and norms control which substantive issues are subject to litigation.
In England, tenants' property interests in their tenancy can lead to litigation.
The U.S. has employee protections that leads to litigation, while England has fewer specific protections, but broader limitations on employer's ability to discharge employees.
Avenues of redress other than litigation are important.
In England, consumers can pursue criminal laws against sellers of defective goods.
Auto accident tort litigation is lower in the Netherlands than Germany because Dutch insurance companies have mechanisms for resolving claims without litigation.
Available remedies affect whether litigation is invoked.
Mass disasters in the U.S. typically result in litigation due to substantial remedies.
In 1987, an English ferry capsized due to negligence, but limited damages led to quick resolution of claims.
Until the early 1990s, U.S. job discrimination laws limited remedies to lost wages, making litigation unattractive.
1991 legislation permitted punitive damages in intentional discrimination cases, making litigation more feasible.

Procedures in Litigation

Procedural rules govern litigation in courts, tribunals, or private settings.
These rules determine how claims are initiated, establish jurisdiction over defendants, set procedures for gathering information, and establish decision-making rules.
Rules also determine the availability of aggregation procedures (e.g., class actions), who bears the costs, and who serves as the adjudicator (judges, juries, or mixed).
Specific rules may be set by the forum, parties, or a combination.
Two broad procedural approaches:
- Common law systems: adversarial, with the adjudicator as umpire.
- Civil law systems: inquisitorial/investigatory, with the adjudicator responsible for gathering information.
Common law systems emphasize a 'trial' event, while civil law systems have more episodic proceedings.
Common law traditionally involves a heavier oral component, while civil law emphasizes written materials.
Recent developments have moved the systems closer together.

Analysis of Litigation

Specific rules create a basis for social scientists to analyze litigation.
One approach models litigation as a series of stages and transitions.
Other analyses use game theory and economic modeling to predict advantages and disadvantages created by the rules.
These models predict behavior under economic rationality and uncertainty.

Incentives in Litigation

Litigation has significant financial implications, creating incentives for parties and agents.
Key incentives:
- Likelihood of success.
- Size of potential remedies.
- Costs associated with litigation.
- Fee regime.
Fee regime elements:
- Who pays fees and costs.
- How fees and costs are computed.
- How fees and costs are regulated/reviewed.
Recent changes to litigation incentive structures include:
- Limitations on damages ('damage caps').
- No win, no pay fees.
- Reduction of government-funded legal aid.
- Movement away from 'loser pays' rules.
- New insurance forms to cover costs payable to the winning party.
- Third-party litigation finance companies.
Incentive structures lend themselves to economic analyses.
Formal analyses have been made of cost allocation rules, decisions to litigate/settle, frivolous litigation, and attorney fee arrangements.
In addition to theoretical analyses, procedural rules and incentives have been the subject of extensive empirical analyses.

Uncertainty in Litigation

Uncertainty is a central feature of litigation; decisions must be made in light of it.
Key elements of uncertainty:
- Which side the adjudicator will favor.
- The size/nature of the remedy.
- The length of the process.
- Costs incurred.
Uncertainty reflects the strategic nature of conflict + formal adjudication.
Uncertainty creates risk; parties differ in their ability/willingness to bear risk.

Empirical Results Concerning Litigation

Most extensive empirical research in the U.S., but growing literature in other countries.
There are multiple worlds of litigation divided by:
- Amount at issue.
- Types/numbers of parties involved.
- Substance of the dispute.
Some studies focus on specific litigation types, while others speak broadly.
Some studies look at prominent cases, while others focus on routine litigation or small claims.
One must note the case types examined and avoid generalizing based on a single slice of litigation.

Likelihood of Disputants Turning to Litigation

Research shows that small proportions of disputes involve formal litigation procedures.
Exceptions: cases requiring formal court action (e.g., dissolution of marriage).
The 'Disputing Pyramid' model has injuries at the base and final adjudication at the top.
Variation occurs in the middle regions due to incentive structures and alternative avenues of redress.
Initiating litigation requires:
- Perceiving an injury.
- Externalizing responsibility.
- Seeking redress.
Most research shows attrition from potential claims to actual claims.
Reasons: parties are unaware of injury, do not attribute responsibility, or believe redress is impractical.
Even if litigation is initiated, most cases end before final adjudication through settlements.
Settlements occur in the 'shadow of the law,' reflecting anticipations of judicial decisions.
Common law emphasizes party-provided proof; civil law emphasizes judicial reasoning.
Civil law countries have more adjudicators and multilevel review.
The initial judge qualtiy is lower in civil law countries compared to common law countries.
It’s easier to get an initial court decision in civil law countries, but obtaining decision is more difficult and costly in common law countries because the parties can fight each other every step of the way.
Appeals are more common in civil law countries, making economic advantages unclear.

Cross-National Patterns in Litigiousness

The United States has a reputation for being particularly litigious.
One study attempted to generate litigation rates c.1990 across a range of countries cast doubt on that reputation.
The study shows substantial variation in litigation use but the U.S. is not an outlier.
Caution should be exercised when interpreting litigation rates across countries due to methodological issues

Problems comparing litigation rates

Comparable information is difficult to obtain across countries.
Countries differ in institutional arrangements.
Germany uses labor courts for workplace issues, while England uses industrial tribunals.
Workplace injury claims go to administrative tribunals in most U.S. states, but some have workers’ compensation courts.
Tax disputes may go to administrative bodies, specialized tax courts, or general jurisdiction courts.
In some countries, many civil matters that come to court are not litigious.
The European Commission for the Efficiency of Justice has issued reports providing estimated litigation rates for numerous European countries.
There is a notable variation among European countries.
Another problem with comparing litigiousness is determining the baseline.
Most studies rely on per capita litigation rates.
However, litigation arises out of specific events, not simply population size.
A higher rate of material consumption in a country may lead to a higher product liability rate.
The problem of using baselines other than simple population is almost never addressed because of the difficulties of developing workable alternatives.

Explanations

Many explanations exist for the variation in the litigation rate.
Japan is cited as a country with a very low litigation rate.
One explanation is that Japanese culture avoids conflict.
Another explanation is that events such as automobile accidents are dealt with in a way that avoids the need for litigation.
A third is that Japanese elites have intentionally restricted access to litigation, which is starting to change by increasing number of lawyers.

Role of Litigants and Lawyers

Decisions to initiate litigation are made by litigants with legal advisors.
Two key elements:
- Financing litigation.
- Likelihood of success and enforceability.
A key element in obtaining redress in tort cases is payment source availability (wealthy defendant/insurance).
If the potential litigant must directly finance the litigation, the decision will lie almost entirely with the potential litigant.
Lawyers may dissuade potential litigants due to financial, time, and emotional costs, and uncertainty.
If the cost is borne by some other actor (insurance company, legal aid, or a trade union, for example), these actors will typically be more involved in the decision to proceed.
In the United Stated, where litigation is funded by plaintiffs’ lawyers based on a contingency fee, the lawyer’s decision to accept a case is crucial.
Decisions are determined by likelihood of success and amount at stake.

Nature of Litigants

The nature of litigants varies depending on the case type.
Tort cases are dominated by individuals as plaintiffs, while contract cases more often involve businesses.
Defendants in tort cases are often nominally individuals, but the insurance company becomes the effective defendant.
Defendants in contract cases are distributed among individuals and organizations.
Litigants are not created equal; resource and expertise convey an advantage to the wealthy.
Galanter distinguished between 'one-shot' and 'repeat players,' with repeat players expected to win more.
Advantages of repeat players include resources and a long-run view.
Repeat players can 'play the odds' and 'play for rules.'
Galanter’s distinction has been examined across countries.
The one-shot versus repeat player distinction is enhanced by dividing the repeat player into the 'government player' and the 'routine player.'
Another repeat player is the political interest group, using litigation for explicitly political purposes.
This is more common as politics becomes more judicialized; the European Court of Justice encourages these changes.
Interest group involvement does not consistently increase the likelihood of success or achievement of ultimate goals.

Litigation Process

Research on the litigation process is generally nation-specific due to its tie to the rules governing it.
Some research focuses on specific case types, such as injury or divorce cases.
Much research focuses on the lawyer's role and lawyer-client relationships, disagreeing over lawyer dominance in decision-making.
Other studies focus on specific aspects, including:
- Discovery.
- Summary judgment.
- Declining incidence of trials.
- Expert testimony rules.
- the judge's role in settlement processes
- procedures and problems in aggregating claims
There is no theoretical framework tying together this disparate, U.S.-based research.
One area for cross-national research is the impact of fee regimes, given that there is more variation in those regimes across countries than within a country.
Successful research has relied upon internal variation in fee regimes or natural experiments arising from changes in fee regimes.
England and Wales are fertile grounds for research given the changes since 1995 when conditional fees were first permitted.

Winning and Losing in Litigation

A natural issue in the study of litigation concerns the outcome: who wins, who loses, and why?
The definition of winning and losing is problematic; should outcomes be measured in absolute terms or relative terms?
If a plaintiff obtains some redress from the court, has the plaintiff 'won'?
A second problem is that the final resolution of litigation is most often a private agreement among the parties.
Those cases resolved through formal, final adjudication tend to be a small, nonrepresentative subset.
Some scholars argue that the cases resolved through trial are those where uncertainty is high or where there are strongly conflicting views of the likely outcome.
Others argue that some types of parties avoid adjudicatory outcomes intentionally when the result will produce unfavorable results, and concentrate their adjudicatory efforts on cases that will produce favorable precedential outcomes.
Many studies have looked at the relative success of different types of litigants, and while the majority of studies have found that repeat players are more successful than one-shot players, the patterns reveal major complications.
First, the largest gaps tend to come not between repeat players and one-shot players but between government litigants and nongovernmental litigants.
Second, few researchers ask the question of whether one- shotters are better off with or without litigation as a means of dispute resolution; that is, litigation must be assessed not just internally but externally vis-à-vis its alternatives.
In the United States, there has been substantial research on the outcomes of civil trials, particularly those trials decided by juries.
Typically, these studies show a large proportion of verdicts or decisions involving modest amounts of money, but with a distribution showing an extreme tail consisting of a small number of very large verdicts.
Although over the broad range of cases plaintiffs win about half of the time and defendants win about half of the time, the studies also show a range of plaintiff success depending on the nature of the case, reflecting in part whether the uncertainty is over liability or the amount of damages.
One specialized theme has been the frequency and nature of punitive (exemplary) damage awards.
Research consistently shows that such awards are infrequent, that they tend to be relatively modest, and that there is a strong correlation between compensatory damages and punitive damages when the latter are awarded.
Variability in punitive damage awards is greatest for cases with small compensatory awards.
Moreover, the likelihood of a punitive damage award varies depending on the type of case, with such awards most likely in intentional torts and financial injury cases.
Research looking at decisions of American trial judges vis- à-vis questions such as liability and damages is much less common.
Research there shows that judges are more likely to find for the plaintiff, although the typical judge’s award is about 20% less than the typical jury’s.
A danger in all of these comparisons of decisions by judges and decisions by juries is that the cases decided by judges and juries are probably not comparable, because litigants themselves choose between the two types of trials.
Another line of research in the United States focuses on the substantive decisions of judges in civil cases.
This research typically relies upon examination of published decisions by federal trial judges, and distinguishes between decisions labeled as ‘liberal’ and those labeled ‘conservative’ (using contemporary American notions of this continuum).
The core results of the research demonstrate that there are measurable differences in outcomes depending on whether judges are identified with the Republican or Democratic parties based on either their own affiliation prior to appointment or the affiliation of the President who appointed them.
One recognized problem with this research is that published decisions differ from the full population of decisions made by federal district judges in civil cases, and results differ when unpublished decisions are included in the analysis, reducing or eliminating the relationship between decisions and partisanship.
While substantial attention has focused on formal adjudi- cation by judges and juries, less attention has been directed at the outcomes of cases resolved short of adjudication.
Part of the reason for this is that determining outcomes is more difficult because they are not part of the public records.
A number of empirical studies have focused on the settlement process, both in the United States and elsewhere, generally showing that economic considerations (likelihood of success, who is bearing costs, the magnitude of costs both absolutely and relative to stakes) combined with risk preference are central to understanding settlement.
Cases will tend to settle when the plaintiffs net expected gain (recovery discounted by probability of success minus expected costs) is less than or equal to the defendants’ expected loss (payout discounted by probability of plaintiff success plus costs).
When stakes are relatively small, this is almost always true, and it is frequently true for larger cases even when there is substantial disagreement about the likely outcome.
It is less clear to what degree the intervention of court officials can influence the settlement process, in no small part because such a large proportion of cases settle regardless.

Litigation Reform

How to improve the litigation process is a perennial issue.
Although the term ‘reform’ suggests improvements, whether the changes proposed or implemented constitute improvements is a matter of debate.
‘Reform’ is used here to refer to change brought about through legislative or administrative action rather than changes resulting from decisions by courts in particular cases.
One thread examines the politics of litigation reform including changes that create new opportunities for litigation.
A second thread of research provides empirically based assessments of some aspect of the litigation system in order to determine what changes might be called for.
In England, there have been a series of procedural reforms in recent years.
A third thread of research has examined the impact of various reforms.
In the UK, several studies have sought to assess the impact of the Woolf reforms and whether those changes have encouraged the development of what critics have termed a ‘compensation culture’.
In the United States, there has been extensive research seeking to assess the impact of various changes regarding the handling of medical malpractice claims as well as research on the impact of tort reform more generally.
One major US study sought to assess the impact of the federal Civil Justice Reform Act, which included the introduction of a variety of procedural changes with an emphasis on increased use of intensive case management.
A final thread of research linked to litigation reform considers the rise of alternative dispute resolution either as a part of the litigation process (e.g., the use of mediation in aid of settlement) or as a replacement for court-based litigation.
Arbitration has a long history but has come to particular prominence in recent years as a means of dealing with everything from large complex international commercial disputes to routine consumer problems and a range of issues in between.
Mediation has become extremely popular in recent years, both in the United States and elsewhere, and a substantial body of research concerning mediation now exists.