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The Litigious Plaintiff Hypothesis: Case Selection and Resolution

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  • Theodore Eisenberg
  • Henry S. Farber

Abstract

A central feature of the litigation process that affects case outcomes is the selection of cases for litigation. In this study, we present a theoretical framework for understanding the operation of this suit selection process and its relationship to the underlying distribution of potential claims and claimants. We implement the model empirically by assuming that individuals vary more in their litigiousness (inverse costs of litigation) than do corporations. This assumption, coupled with the case selection process we present, yields clear predictions on trial rates as a function of whether the plaintiff and defendant were individuals or corporations. The model also yields a prediction on the plaintiff's win rate in lawsuits as a function of the plaintiff's identity. Our empirical analysis, using data on over 200,000 federal civil litigations, yields results that are generally consistent with the theory. Lawsuits where the plaintiff is an individual are found to have higher trial rates and lower plaintiff win rates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5649.

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Date of creation: Jul 1996
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Publication status: published as RAND Journal of Economics, 1997, Vol. 28 (Spec): S92-S112.
Handle: RePEc:nbr:nberwo:5649

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  1. Eisenberg, Theodore, 1990. "Testing the Selection Effect: A New Theoretical Framework with Empirical Tests," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 337-58, June.
  2. Farber, Henry S & White, Michelle J, 1994. "A Comparison of Formal and Informal Dispute Resolution in Medical Malpractice," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 777-806, June.
  3. Henry S. Farber & Harry C. Katz, 1979. "Interest arbitration, outcomes, and the incentive to bargain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(1), pages 55-63, October.
  4. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
  5. Hylton, Keith N, 1993. "Asymmetric Information and the Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 187-210, January.
  6. Henry S. Farber & Michelle J. White, 1991. "Medical Malpractice: An Empirical Examination of the Litigation Process," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 199-217, Summer.
  7. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-97, September.
  8. Hay, Bruce L, 1995. "Effort, Information, Settlement, Trial," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 29-62, January.
  9. Daughety, A. & Reinganum, J., 1991. "Endogenous Sequencing in Models of Settlement and Litigation," Working Papers 91-23, University of Iowa, Department of Economics.
  10. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
  11. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 93-108, January.
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Cited by:
  1. Marco, Alan C. & Rausser, Gordon C, 2002. "Complementarities and spill-overs in mergers: an empirical investigation using patent data," CUDARE Working Paper Series 930R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  2. Kaplan, David S. & Sadka, Joyce, 2008. "Enforceability of labor law : evidence from a labor court in Mexico," Policy Research Working Paper Series 4483, The World Bank.
  3. Zhou, J., 2007. "In Litigation: How Far do the "Haves" Come Out Ahead?," Discussion Paper 2007-002, Tilburg University, Tilburg Law and Economic Center.
  4. Gonzalo Ruiz, 2014. "Understanding the Pro-plaintiff Bias in Consumer Protection Legal Processes," Journal of Consumer Policy, Springer, vol. 37(1), pages 113-141, March.
  5. Howard F. Chang & Hilary Sigman, 1999. "Incentives to Settle Under Joint and Several Liability," NBER Working Papers 7096, National Bureau of Economic Research, Inc.
  6. Bertrand Chopard & Thomas Cortade & Eric Langlais, 2008. "Trial and settlement negotiations between asymmetrically skilled parties," EconomiX Working Papers 2008-32, University of Paris West - Nanterre la Défense, EconomiX.
  7. Helge Berger & Michael Neugart, 2006. "Labor Courts, Nomination Bias, and Unemployment in Germany," CESifo Working Paper Series 1752, CESifo Group Munich.
  8. Davis S. Kaplan & Joyce Sadka & Jorge Luis Silva-Mendez, 2006. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Working Papers 0606, Centro de Investigacion Economica, ITAM.
  9. Eric Helland & Jonathan Klick & Alexander Tabarrok, 2005. "Data Watch: Tort-uring the Data," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 207-220, Spring.
  10. Zhou, Jun, 2010. "Jackpot Justice: The Value of Inefficient Litigation," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 346, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  11. Marco, Alan C., 2005. "Learning by Suing: Structural Estimates of Court Errors in Patent Litigation," Vassar College Department of Economics Working Paper Series 68, Vassar College Department of Economics.
  12. Daniel P. Kessler & Daniel L. Rubinfeld, 2004. "Empirical Study of the Civil Justice System," NBER Working Papers 10825, National Bureau of Economic Research, Inc.
  13. Keith N. Hylton & Haizhen Lin, 2009. "Trial Selection Theory: A Unified Model," Working Papers 2009-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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