Lemos on Fee Shifting and Litigation Incentives

Margaret H. Lemos of Cardozo School of Law has posted Do Litigation Incentives Work? How Attorneys’ Fee Shifts and Damage Enhancements Affect Litigants and the Law to SSRN.

Abstract:     
Congress regularly uses procedural mechanisms like one-way attorneys’ fee shifts and damage enhancements to strengthen private enforcement of federal law. According to standard economic theory, both devices should increase the number of suits by private parties seeking to enforce the substantive terms of the relevant statutes. Commentators have considered such litigation incentives through the lens of longstanding debates about the optimal level of enforcement, with many arguing that fee shifts and enhanced damages are likely to produce too much litigation-and thus too much deterrence-in certain contexts. Far less attention has been paid to how litigation incentives actually work. Few scholars have investigated how existing statutory fee shifts and damage enhancements have affected the behavior of litigants, and no study to date has explored how those mechanisms might influence judges and the law.

This Article is the first to assess the efficacy of litigation incentives as part of an enforcement boosting strategy. I argue that one-way attorneys’ fee shifts and damage enhancements may not, in fact, result in stronger enforcement. First, the available empirical evidence suggests that litigation incentives-particularly fee shifts-do not always work in the sense of generating more litigation. Second, when litigation incentives do work, they may trigger a judicial backlash against the very rights that Congress sought to promote. I show that caseload pressures are likely to make judges-especially those who are not naturally inclined to favor the claims in question-hostile to any notable increases in the number of suits filed under a given statute. In an effort to counteract what they see as excessive litigation, judges may adopt procedural rules that dampen the effects of fee shifts and damage enhancements. Most importantly, judges may react to litigation incentives by narrowly interpreting the substantive provisions of the relevant statutes.

RJE