Legal complexity and lawyers' benefit from litigation

Abstract

This paper examines the interest of lawyers as a group in the level of legal complexity, assuming that lawyers prefer the level of legal complexity that maximizes their total income. I focus on aspects of the law that are the same across all cases in a particular legal field, such as the rule determining whether the defendant is liable or guilty, the rules of procedure, and the scope of damages. The main result of the paper is that lawyers representing both plaintiffs and defendants prefer an intermediate level of legal complexity in a wide range of circumstances. Their preferences are determined by a tradeoff between the increase in income from legal fees when the law becomes more complex versus the drop in income because the amount of litigation falls-either because fewer legal cases are filed or because more cases are settled rather than tried in court or both. The level of legal complexity preferred by lawyers is shown to vary across legal fields depending on such factors as the size of a typical case and whether punitive damages are an important consideration. I also consider whether and when plaintiffs’ and defendants’ lawyers’ interests in the level of legal complexity are identical. The paper proceeds as follows. In section 2, I consider how legal complexity affects plaintiffs’ and defendants’ predictions of the outcome of legal cases. In section 3, a model determining lawyers’ preferred level of legal complexity is presented in a simplified setting, where all legal cases in a particular field are assumed to be identical and the number of legal cases is fixed. In section 4, the model is extended to consider heterogeneous legal cases and variable demand for legal services. The result of both models is that lawyers prefer an intermediate level of legal complexity under a quite general set of assumptions, although the exact tradeoff in the two models differs. The last section contains some speculations on two topics: the socially preferred level