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"Third Party Contingency" contracts in settlement and litigation

  • Kirstein, Roland
  • Rickman, Neil

We present, for the first time, a model of recent institutional developments in litigation funding across several European jurisdictions. Recognizing the financing constraints that British cost rules may impose on litigants, these new contractual arrangements combine contingency fees with third party cover for cost in the event of losing the case: we call these "Third Party Contingency" (TPC) contracts. Signing a TPC contract can make filing a suit credible and may increase settlement amounts. This does not, however, increase the likelihood of going to trial, since TPC contracts are only of mutual benefit to the plaintiff and the third party when the case settles out of court. We also find that the mere availability of TPC's may generate the above strategic effect.

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Paper provided by Berkeley Olin Program in Law & Economics in its series Berkeley Olin Program in Law & Economics, Working Paper Series with number qt6vn9877z.

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Date of creation: 23 Oct 2002
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Handle: RePEc:cdl:oplwec:qt6vn9877z
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  1. Cooter, Robert D. & Porat, Ariel, 2002. "Anti-Insurance," Berkeley Olin Program in Law & Economics, Working Paper Series qt1vw0d9sf, Berkeley Olin Program in Law & Economics.
  2. Theodore Eisenberg & Henry Farber, 2003. "The Government as Litigant: Further Tests of the Case Selection Model," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 94-133.
  3. Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 451-76, October.
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  9. Bebchuk, Lucian Arye, 1996. "A New Theory Concerning the Credibility and Success of Threats to Sue," The Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 1-25, January.
  10. Kirstein, Roland, 1999. "Risk-Neutrality and Strategic Insurance," CSLE Discussion Paper Series 99-02, Saarland University, CSLE - Center for the Study of Law and Economics.
  11. Neil Rickman & Paul Fenn & Alastair Gray, 1999. "The reform of Legal Aid in England and Wales," Fiscal Studies, Institute for Fiscal Studies, vol. 20(3), pages 261-286, September.
  12. Rickman, Neil, 1999. "Contingent fees and litigation settlement1," International Review of Law and Economics, Elsevier, vol. 19(3), pages 295-317, September.
  13. van Velthoven, Ben & van Wijck, Peter, 2001. "Legal cost insurance and social welfare," Economics Letters, Elsevier, vol. 72(3), pages 387-396, September.
  14. Rickman, Neil, 1994. "The Economics of Contingency Fees in Personal Injury Litigation," Oxford Review of Economic Policy, Oxford University Press, vol. 10(1), pages 34-50, Spring.
  15. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 93-108, January.
  16. Miceli, Thomas J, 1998. "Settlement Strategies," The Journal of Legal Studies, University of Chicago Press, vol. 27(2), pages 473-81, June.
  17. Polinsky, A. Mitchell & Rubinfeld, Daniel L., 2001. "Aligning the Interests of Lawyers and Clients," Berkeley Olin Program in Law & Economics, Working Paper Series qt2kz8r3j1, Berkeley Olin Program in Law & Economics.
  18. Gravelle, Hugh & Waterson, Michael, 1993. "No Win, No Fee: Some Economics of Contingent Legal Fees," Economic Journal, Royal Economic Society, vol. 103(420), pages 1205-20, September.
  19. A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Aligning the Interests of Lawyers and Clients," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 165-188.
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