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Lawsuit Abandonment Options in Possibly Frivolous Litigation Games


  • Peter Huang

    (University of Pennsylvania Law School)


This paper develops a new theory of possibly frivolous litigation by focusing on a plaintiff's options to unilaterally abandon a lawsuit. Federal Rule of Civil Procedure 41(a)(1)(i) and its various state law counterparts permit, under certain circumstances, a plaintiff to voluntarily dismiss her lawsuit without prejudice. This paper's options approach to litigation, including quite possibly, frivolous litigation is placed in the context of the literature of economic models about litigation in general and frivolous litigation in particular. This paper demonstrates that possibly frivolous lawsuits will be filed and settled when the values of a plaintiff's options to unilaterally abandon litigation exceed the costs of purchasing those litigation-abandonment options by continuing the litigation. This paper also addresses some of the limitations of an abandonment options game-theoretic model of litigation. In particular, there is reason to believe that people have cognitive limitations in their abilities to reason backwards in sequential interactions. Empirical and experimental evidence also exists that indicates that emotions affect how people make decisions. Finally, recent psychological experiments indicate that decision makers often overvalue options and over-invest in keeping options alive, even if those options present little intrinsic value. This paper briefly explains how and why many laws and judicial doctrines effectively preclude specific legal options. Appendix A provides an accessible, non-technical, self-contained, and user-friendly primer about options for those unfamiliar with options. Appendix B contains a formal, mathematical game-theoretic analysis of a plaintiff's options to unilaterally abandon a lawsuit.

Suggested Citation

  • Peter Huang, "undated". "Lawsuit Abandonment Options in Possibly Frivolous Litigation Games," Scholarship at Penn Law upenn_wps-1017, University of Pennsylvania Law School.
  • Handle: RePEc:bep:upennl:upenn_wps-1017

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    References listed on IDEAS

    1. Daughety, Andrew F & Reinganum, Jennifer F, 1995. "Product Safety: Liability, R&D, and Signaling," American Economic Review, American Economic Association, vol. 85(5), pages 1187-1206, December.
    2. Jerry R. Green & Jean-Jacques Laffont, 1986. "Partially Verifiable Information and Mechanism Design," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 447-456.
    3. Polinsky, A Mitchell & Rubinfeld, Daniel L, 1988. "The Welfare Implications of Costly Litigation for the Level of Liability," The Journal of Legal Studies, University of Chicago Press, vol. 17(1), pages 151-164, January.
    4. Craswell, Richard & Calfee, John E, 1986. "Deterrence and Uncertain Legal Standards," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 279-303, Fall.
    5. Spier, Kathryn E, 1994. "Settlement Bargaining and the Design of Damage Awards," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 84-95, April.
    6. Schwartz, Alan, 1992. "Relational Contracts in the Courts: An Analysis of Incomplete Agreements and Judicial Strategies," The Journal of Legal Studies, University of Chicago Press, vol. 21(2), pages 271-318, June.
    7. Kaplow, Louis, 1994. "The Value of Accuracy in Adjudication: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 307-401, January.
    8. Bull Jesse, 2008. "Costly Evidence Production and the Limits of Verifiability," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-28, July.
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    Civil procedure; litigation; game-theoretic model; real options;

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