July 9, 2012
Two by Sebok
Tony Sebok (Cardozo) has posted two pieces to SSRN. First up is Betting on Tort Suits after the Event: From Champerty to Insurance. The abstract provides:
Litigation financing is investment by a stranger into a lawsuit in which she has no interest other than the investment. The common law prohibitions on champerty and maintenance rendered litigation finance illegal for centuries, but today it is permissible in England, Europe, Australia and many U.S. jurisdictions. This article, which was prepared for a symposium on “Uncertainty in the Law” at DePaul Law School, examines one argument against litigation finance, which is that it allows strangers to impermissibly bet on the outcome of litigation.
The article first briefly reviews the handful of modern courts that have embraced the “Betting Argument” and their reasoning. It next looks at other examples in law where the risk of a party betting on an outcome provided the grounds (whether pretextual or not) for the prohibition of a contract between two persons. Thus, late Nineteenth Century courts were initially inclined to prohibit commodity futures contracts on the ground that they were a form of gambling. Similarly, life and fire insurance was viewed skeptically as a form of gambling until courts developed a moralized concept of “insurable interest.” The concept of the insurable interest provided rationale for courts to uphold insurance when it preserved what the insured already had and to strike down “bets” that allowed strangers to gain as a result of other’s misfortune.
The article concludes by noting that the instability of the tests invoked by earlier courts in the commodities and insurance context suggests that it may be impossible to identify and employ an a priori test for when third party investment in litigation is permissible. However, the article notes that many of the same policy concerns which led courts to accept commodities contracts and insurance contracts should lead courts to allow litigation finance. While the article does not rebut other arguments against litigation finance based on other moral or prudential concerns, it does attempt to quiet concerns based on the Betting Argument.
Second is The U.S. Supreme Court's Theory of Common Law Punitive Damages: An Inauspicious Start. The abstract provides:
This essay, which was written for a book on whether European tort law ought to incorporate punitive damages, asks whether the United States Supreme Court has a “theory” of punitive damages and if so, how well does it explain and justify punitive damages. The essay first reviews the Supreme Court’s various constitutional theories of punitive damages, that is, whether and how state punitive damages awards are limited by the Due Process Clause. It then looks at the Supreme Court’s efforts to articulate a theory of punitive damages under federal common law in Exxon Shipping Co. v. Baker. It concludes that the theory expressed in Exxon Shipping overstated the need for its doctrine to provide defendants (and plaintiffs) with predictable awards and ignored (or rejected without engaging) arguments for punitive damages provided by efficient deterrence theorists in the academy.
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