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Malicious litigation

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  • Guha, Brishti

Abstract

It has long been recognized that some plaintiffs sue defendants out of malice, but malicious litigation has not been previously modeled in the law and economics literature. I construct a simple model of malicious litigation, wherein malice is defined by the plaintiff's obtaining some utility whenever the defendant incurs costs. When plaintiffs are malicious, they are more likely to file even non-meritorious suits; both probability of filing and the plaintiff's settlement payoff increase in the plaintiff's malice. However, if the defendant is also malicious, obtaining utility when the plaintiff incurs litigation expenses, settlements may fail even with complete information. Two-sided malice deters filing over a certain parameter range; outside it, it raises the ratio of cases that go to trial instead of being resolved through settlement. Giving the defendant the right to call for a bar on settlement is less effective at deterring malicious lawsuits relative to non-malicious “negative-expected-value” (NEV) or “nuisance” suits. However, combining the optional settlement bar with a “commitment requirement” stipulating that the plaintiff commit to going to trial (rather than withdraw) whenever the defendant opts to defend discourages malicious litigation for a wider range of parameters.

Suggested Citation

  • Guha, Brishti, 2016. "Malicious litigation," International Review of Law and Economics, Elsevier, vol. 47(C), pages 24-32.
  • Handle: RePEc:eee:irlaec:v:47:y:2016:i:c:p:24-32
    DOI: 10.1016/j.irle.2016.04.001
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    1. repec:ebl:ecbull:eb-18-00063 is not listed on IDEAS
    2. repec:eee:matsoc:v:94:y:2018:i:c:p:82-86 is not listed on IDEAS
    3. Guha, Brishti, 2018. "Malice in the Rubinstein bargaining game," Mathematical Social Sciences, Elsevier, vol. 94(C), pages 82-86.

    More about this item

    Keywords

    Malice; Lawsuits; Settlement; Withdrawal; Trial;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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