Litigation

Trask on Mearshimer on class actions

By Ted Frank

Andrew Trask has an interesting post suggesting that John Mearshimer's theory of "offensive realism" can inform our thinking of class action practice.

Perhaps it's my bias as an economics major against political theory, but I'm not sure I buy it. Simple economic rationality explains everything Mearshimer does and more.

Relatively meritless cases are filed because it's potentially profitable to do so under existing de jure and de facto legal rules.

Plaintiffs' lawyers have every incentive (as do defense lawyers) to portray their internal value of the case as higher quality than they actually believe because it gives them additional leverage in settlement negotiations.

Sunk costs combined with the American Rule mean that it's usually more profitable to keep litigating a case that turns out to be relatively meritless than to drop the case before the eve of trial. This "dollar auction" aspect of litigation deserves more thought, but I offer it to Marie Gryphon as a paper idea for another reason why loser-pays would prevent socially inefficient litigation at the margin.

And finally, in a world of imperfect information, we would expect the attorneys who bring cases to be overconfident on average and overestimate the ex ante value of a case, because the underconfident ones are going to refrain more often. The winners' curse comes into play here, and it's a subject I've discussed before including in my paper with Marie on the game theory of medical malpractice.

(Relatedly: Brian Anderson's and Andrew Trask's new book, The Class Action Playbook, arrived in the mail yesterday, and instantly became the best practitioners' guide to class actions out there: I would definitely go to Anderson-Trask now before I go to the often sloppy Newberg treatise. My major complaint is that it wasn't out a month ago when I could have cited it in my Ninth Circuit briefing.)

Full post as published by Point of Law on September 24, 2010 (boomark / email).