The consumer litigation industry: Chasing dragon kings in lawyer–client networks

Abstract

The community of lawyers and their clients form a scale-free bipartite network that develops naturally as the outcome of the recommendation process through which lawyers form their client base. This process is an example of preferential attachment where lawyers with more clients are more likely to be recommended to new clients. Consumer litigation is an important market for lawyers. In large consumer societies, there always a significant amount of consumption disputes that escalate to court. In this paper we analyze a dataset of thousands of lawsuits, reconstructing the lawyer–client network embedded in the data. Analyzing the degree distribution of this network we noticed that it follows that of a scale-free network built by preferential attachment, but for a few lawyers with much larger client base than could be expected by preferential attachment. Incidentally, most of these also figured on a list put together by the judiciary of lawyers which openly advertised the benefits of consumer litigation. According to the code of ethics of their profession, lawyers should not stimulate clients into litigation, but it is not strictly illegal. From a network formation point of view, this stimulation can be seen as a separate growth mechanism than preferential attachment alone. In this paper we find that this composite growth can be detected by a simple statistical test, as simulations show that lawyers which use both mechanisms quickly become the “dragon-kings” of the distribution of the number of clients per lawyer.