Incentives For Litigation Research Articles

Do Cases Generate Bad AI Law?

There’s an AI governance problem, but it’s not (just) the one you think. The problem is that our judicial system is already regulating the deployment of AI systems—yet we are not coding what is happening in the courts as privately driven AI regulation. That’s a mistake. AI lawsuits here and now are determining who gets to seek redress for AI injuries; when and where emerging claims are resolved; what is understood as a cognizable AI harm (and what is not), and why that is so. This Essay exposes how our judicial system is regulating AI today and critically assesses the governance stakes. When we do not adequately recognize how the generative AI cases being decided by today’s judges are already operating as a type of AI regulation, we fail to consider which emerging tendencies of adjudication about AI are likely to make good or bad AI law. For instance, litigation may do good agenda-setting and deliberative work as well as surface important information about the operation of private AI systems. But adjudication of AI issues can be bad too, given the risk of overgeneralization from particularized facts; the potential for too much homogeneity in the location of lawsuits and the kinds of litigants; and the existence of fundamental tensions between social concerns and current legal precedents. If we overlook these dynamics, we risk missing a vital lesson: AI governance requires better accounting for the interactive relationship between regulation of AI through the judicial system and more traditional public regulation of AI. Shifting our perspective creates space to consider new AI governance possibilities. For instance, litigation incentives (such as motivations for bringing a lawsuit or motivations to settle) or the types of remedies available may open up or close down further regulatory development. This shift in perspective also allows us to see how considerations that on their face have nothing to do with AI—such as access to justice measures and the role of judicial minimalism—in fact shape the path of AI regulation through the courts. Today’s AI lawsuits provide an early opportunity to expand AI governance toolkits and to understand AI adjudication and public regulation as complementary regulatory approaches. We should not throw away our shot.

ECONOMIC ANALYSIS OF SMALL VALUE DISPUTES IN THE REPUBLIC OF SERBIA

Small value disputes in the Republic of Serbia represent a great burden on the efficient working of the civil courts. Based on the setting of different expectations model, the economic analysis of small value claims shows tendency to initiate frivolous litigation, large disproportion between litigation costs and the value of a small claim, uneconomical litigation, excessive incentives for litigation and too established high threshold value. The paper analyses the economic effects of the planned changes in civil procedural rules of small value disputes. Based on the proposed changes, it is expected: the reduction of litigation costs, especially the attorney's fees the more economical litigation procedure and that lowering the threshold value of small dispute, will be more harmonized with the average monthly salary and GDP. Based on the set model of settlement, it's expected that the lowering the threshold value of a small dispute should lead to a higher settlement rate, as well as that any increase in court fees and reduction of the opposing party’s optimism can lead to higher probability of settlement. The paper presents concrete proposals for improving the efficiency of resolving small value disputes.

Research on Subject Qualification of Anti-Monopoly Civil Public Interest Litigation

In recent years, with the development of the market economy, the number of illegal monopoly cases is increasing. The new Anti-Monopoly Law of the People's Republic of China (hereinafter referred to as the New Anti-Monopoly Law) was amended on June 24, 2022, in order to better maintain the order of the market economy, crack down on monopolistic behaviors and improve the legal system in the anti-monopoly field. Since then, the anti-monopoly civil public interest litigation system has formally entered the field of anti-monopoly law as a new system. However, the revised Law does not make detailed provisions on the civil public interest litigation system. In terms of the provisions on the subject of public interest litigation, the current law only stipulates that the procuratorial organ is the subject that can initiate public interest litigation, which makes it difficult for some cases infringing on social public interests to be well resolved through public interest litigation. Therefore, this paper will take Article 55 of the Civil Procedure Law and Article 47 of the Protection of Consumer Rights and Interests as the basis point, and briefly introduce the relevant provisions on the subject qualification of the anti-monopoly civil public interest procedure law in foreign jurisdictions. Based on this view, it is necessary for the main body of anti-monopoly public litigation to become more diversified to ensure that the main body of litigation can play substantial effect in judicial practice.At the same time, it is necessary to improve the existing procedures and improve the related supporting subjects' difficulties in providing evidence and the lack of litigation incentives , so as to provide ideas for the improvement of the subject qualification of public litigation in the field of anti-monopoly law.

TARGETING CIVIL LEGAL NEEDS: MATCHING SERVICES TO NEEDS

The cost of administering and funding legal aid in England and Wales is in excess of two billion pounds. A recent study of private law family cases highlights how the current scheme tends to focus narrowly on particular legal issues and creates incentives for litigation rather than informal negotiation. Survey findings of legal need help to highlight that people experience a wide range of problems and often fail to receive proper help and support. Innovations taking place in both the developing and developed world can help to illustrate how legal services can expand and develop to reach out to those most vulnerable in society. To target civil legal needs and to match services to needs, it is argued that the legal aid scheme needs to broaden out and effectively link in with other forms of advice and support in order to provide joined up solutions to legal problems.

Audit quality, political connections and information asymmetry: evidence from banks in gulf co-operation council countries

PurposeThe purpose of this paper is to investigate the impact of audit quality on information asymmetry for a sample of leading listed local banks in the Gulf Cooperation Council (GCC). In addition, the paper examines whether a firm's political connections moderate the association between audit quality and information asymmetry.Design/methodology/approachThe author employs country fixed effects to examine the impact of audit quality on information asymmetry. The paper uses a sample of 49 leading listed local banks across the GCC and 236 bank-year observations, over the period of 2012–2016.FindingsUsing trading volume, trade value and stock return volatility as proxies for information asymmetry and audit quality through auditors' opinion and audit size, the paper documents that audit quality plays an important role in improving the quality of financial information reporting by providing greater independent assurance of the credibility of financial reports. The paper also documents that a firm's political connections have no effect on the association between audit quality and information asymmetry, indicating that the beneficial effects of audit quality are no greater for politically connected firms than for similar but politically unconnected firms.Practical implicationsThe findings of the study help policymakers, standard-setters and regulators to understand the potential adverse effect of political connections on the role of audit quality on information asymmetry. The study also provides important insights for audit regulators to better identify and understand the benefits of audit quality and to take policy matters that influence audit quality seriously.Originality/valueThe study increases our understanding of the impact of audit quality on the level of information asymmetry in different economic, legal and political institutions, regulatory and litigation incentives and social contexts compared to that of research conducted using data collected from developed and other emerging countries. This will help to widen our knowledge on the role of audit quality on information asymmetry across the globe.

Libel Bullies, Defamation Victims, and Litigation Incentives

In the context of defamation law, we analyze a public figure’s incentives to bring negativevalue defamation suits in order to appear litigious, and how this affects her incentives to do wrong in the first place and the media’s incentives to expose this wrongdoing. In equilibrium, the public figure’s litigation incentives depend both on her own direct costs and benefits of doing so, and on journalists’ costs and benefits from litigation and publication. Furthermore, equilibrium wrongdoing and publication choices depend on an otherwise non-litigious public figure’s litigation payoffs. Potential effects of legal reform are briefly discussed.

Patent pools, litigation, and innovation

This article analyzes patent pools and their effects on litigation incentives, overall royalty rates, and social welfare when patent rights are probabilistic and can be invalidated in court. With probabilistic patents, the license fees reflect the strength of the patents. We show that patent pools of complementary patents can be used to discourage infringement by depriving potential licensees of the ability to selectively challenge patents and making them committed to a proposition of all‐or‐nothing in patent litigation. If patents are sufficiently weak, patent pools with complementary patents reduce social welfare as they charge higher licensing fees and chill subsequent innovation incentives.

A Theory of Patent Portfolios

This paper develops a theory of patent portfolios in which firms accumulate an enormous amount of related patents in diverse technology fields such that it becomes impractical to develop a new product that with certainty does not inadvertently infringe on other firms’ patent portfolios. We investigate how litigation incentives for the holders of patent portfolios impact the incentives to introduce new products and draw welfare implications. We also consider a patent portfolio acquisition game in which a third party’s patent portfolio is up for sale.

The Unexpected Value of Litigation

In this article suggest that litigation can be analyzed as though it is a competitive research and development project. Developing this analogy, we present a two stage real option model of the litigation process that involves sequential information revelation and bargaining over the surplus generated by early settlement. Litigants are risk neutral and have no private information. The model generates results that, we believe, have analytic and normative significance for the economic analysis of litigation. From an analytic perspective, we demonstrate that negative expected value (NEV) lawsuits are analogous to out of the money call options held by plaintiffs and that every NEV lawsuit is credible if the variance of the information revealed during the course of the litigation is sufficiently large. This finding helps explain the prevalence of a class of lawsuits that has proved puzzling to traditional, expected value-based modes of litigation analysis. The model also suggests that risk neutral defendants can act as though they are risk averse and that risk neutral plaintiffs can act as though they are risk seeking because increases in variance can increase a lawsuit's settlement option value just as it increases a call option's value without regard to the holder's degree of risk aversion. Models that presume defendants' relative risk aversion may therefore rely on an unnecessary assumption. Our model also suggests that a lawsuit's option settlement value is not a monotonically increasing function of the variance of the information revealed during the litigation. In particular, at low levels of variance a lawsuit's option settlement value may equal its traditional expected value, but as variance increases its option settlement value can display a discontinuity after which its option settlement value becomes a monotonically increasing function of variance. NEV lawsuits can also display dead zones - regions of variance over which the claim is not credible even though it is credible over higher or lower levels of variance. Comparative statics analysis also quantifies the extent to which a lawsuit's settlement value increases as plaintiff's litigation expenses occur later in the litigation process, as the ratio of defendant to plaintiff litigation expense increases, and as plaintiff bargaining power increases. From a normative perspective, we offer an impossibility conjecture suggesting that the mere presence of an irreducible degree of uncertainty endemic to the litigation process can be sufficient to prevent private litigation incentives from equating to socially optimal incentives, even if one adopts all other assumptions necessary to equate private and social incentives. It follows that it may be impossible to articulate normative principles of law through substantive standards that ignore the uncertainty inherent in the litigation process and the procedural environment in which the litigation occurs.

Corporate Governance, Executive Compensation and Securities Litigation

It is generally accepted that good corporate governance, executive compensation and the threat of litigation are all important mechanisms for incentivizing managers of public corporations. While there are significant and robust literatures analyzing each of these policy instruments in isolation, their mutual relationship and interaction has received somewhat less attention. Such neglect is mildly surprising in light of a strong intuition that the three devices are structurally related to one another (either as complements or substitutes). In this paper, we construct an agency cost model of the firm in which corporate governance protections, executive compensation levels, and litigation incentives are all endogenously determined. We then test the predictions of the model using a firm-level data set including governance, executive compensation, and securities litigation variables. Consistent with our predictions, we find governance and compensation to be structural substitutes with one another, so that more protective governance structures tend to coincide with lower-powered incentives in executive contracts. Also consistent with our predictions, we find executive compensation and shareholder litigation appear to be structural complements to one another, so that higher powered incentives tend to catalyze more frequent litigation. In fact, we estimate that each 1% increase in the incentive component of a CEO's contract predicts 0.3% increase in the likelihood of a securities class action and a $3.4 million dollar increase in expected settlement costs. In addition, the complementarity of executive compensation and litigation allows us to formulate new ways to test for the effects of legal reform, such as the Private Securities Litigation Reform Act of 1995. The results of our preliminary tests appear inconsistent with the claims of the statute's proponents that the PSLRA systematically discouraged non-meritorious litigation without burdening meritorious claims, particularly for firms with relatively low volatility.

Why Shareholders Sue: The Evidence from Japan

This article explores the dynamics of shareholder litigation in a heretofore overlooked context: Japan. Following a 1993 reduction of filing fees, the number of shareholder derivative suits filed in Japan has increased dramatically, creating a database from which to study litigation incentives. This article shows that most plaintiffs in Japan lose, few suits settle, settlement amounts are low, and shareholders do not receive direct stock price benefits from suits. Most derivative suits in Japan, as in the United States, can be explained not by direct benefits to plaintiffs but by attorney incentives. Still, derivative litigation has more than one cause. The residuum of suits not wholly explained by attorney incentives is best explained by a combination of (1) nonmonetary factors, (2) corporate troublemakers, (3) insurance, and (4) “piggyback” enforcement. These findings suggest that the difficult and messy issues of derivative suits are not unique to the United States.

Why Shareholders Sue: The Evidence from Japan

This Article explores the dynamics of and motivations behind shareholder litigation in a heretofore overlooked context: Japan. Following a 1993 reduction of filing fees, the number of shareholder derivative suits filed in Japan has increased dramatically, creating a database from which to study litigation incentives. This Article shows that most plaintiffs in Japan lose, few suits settle, settlement amounts are low, and, as in the United States, shareholders do not receive direct stock price benefits from suits. Most derivative suits in Japan, as in the United States, can be explained not by direct benefits to plaintiffs, but by attorney incentives. But derivative suits, like most things in life, have more than one source of causation. The residuum of suits not explained by attorney incentives is best explained by a combination of (a) non-monetary factors such as altruism, spite, and social concerns, (b) corporate troublemakers (sokaiya), (c) insurance, and (d) close corporation fights. I also find that many derivative actions piggyback on government enforcement actions in Japan, which, especially given the lack of information available to shareholders and low white-collar crime enforcement rates, raises interesting questions regarding the relationship of public and private enforcement. These findings suggest that the difficult and messy issues of derivative suits are not unique to the relatively litigious or attorney-centered United States, and instead simply are endemic to the derivative suit mechanism.

Litigation and Settlement in the Federal Appellate Courts: Impact of Panel Selection Procedures on Ideologically Divided Courts

This article compares the D.C. Circuit practice of announcing the composition of its panels before the parties have prepared their briefs with that of the remaining federal circuit courts, which announce their panels only after the filing of the briefs. The D.C. Circuit appears to have believed that its practice would reduce the court's adjudicatory burden as a result of the perception by litigants that D.C. Circuit judges vote in an ideological manner. This article shows that the D.C. Circuit practice gives rise to certain litigation‐reducing and settlement‐inducing incentives, but that it gives rise to countervailing incentives as well. The practice also has the effect of understating the court's ideological divisions. The analysis helps explain the incentives for litigation and settlement generated in other situations in which the identity of the adjudicator is thought to have an effect on the outcome of the case. It also provides an explanation unrelated to the existence of asymmetric information for settlements that are entered into after litigation has commenced.

Class-action privileges and contingent legal fees: Investor and lawyer incentives to litigate and the effect on audit quality

The Cohen Commission recognized the importance of litigation incentives and recommended that research based upon an economic approach be conducted into the effects that litigation incentives can have on the auditing profession. By extending Simon (1981), an economic analysis of an auditing environment is presented wherein audit firms issue reports, representative investors make decisions based upon audit reports, and lawyers (as well as representative investors) play an active role in determining whether or not to initiate litigation against audit firms. The influence that alternative litigation privileges (i.e., class-action privileges with contingent legal fees and no class-action privileges with fixed legal fees) have on representative investor and lawyer incentives to litigate and on the equilibrium characteristics of this audit market are analyzed.