Thursday, November 3, 2011
Kathryn E. Spier (Harvard Law School, NBER) and David Rosenberg (Harvard Law School) have posted On Structural Bias in the Litigation of Common Question Claims to SSRN.
This essay focuses on civil litigation that involves multiple plaintiffs suing a single defendant for damages or equitable remedies on causes of action that raise the same or similar legal and factual claims and / or defenses. Such common question claims comprise a large fraction of U.S. civil actions, ranging from the relatively simple traffic accident involving personal injury claims by two or more occupants of one car charging the driver of the other car with negligence to large-scale litigation consisting of numerous plaintiffs suing a business or government defendant on costly and complex claims. Examples of large-scale common question litigations include claims of products liability, securities fraud, deceptive consumer practices, corporate misgovernance, environmental pollution, employment discrimination, and unconstitutional state action. All common question litigation proceeds either by plaintiffs prosecuting their claims respectively in separate, individual actions or collectively in joint actions, voluntarily formed or judicially mandated such as by class action.
Using an analytical model, we explore the effects of the mode of action – separate versus joint – on the plaintiffs’ and the defendant’s respective incentives to invest in litigating outcome-determinative common questions. We demonstrate a general and heretofore largely unrecognized correlation between separate actions and litigants’ investment incentives that implies the existence of a structural bias favoring defendants in common question litigation. Essentially, in a given separate action the defendant spends to defeat all plaintiffs, while each individual plaintiff spends only to win for himself; in a joint action, both sides have equivalent aggregate investment incentives and hence there is no structural bias. Analytical demonstration of why and how such asymmetric investment incentives arise and structurally bias outcomes in separate but not joint actions sets the stage for consideration of the public policy implications. In particular, we discuss the potentially adverse consequences of vesting defendants with such superior litigation power over plaintiffs in separate actions for achieving the primary social objective of civil liability, deterrence of unreasonably risky behavior.