Lawsuit Outcomes Research Articles

Law, politics, and trade credit in China

This paper explores the interplay between politics and law enforcement in China and its effects on firm financing decisions. By examining a sample of corporate lawsuits involving listed firms in China, we find that politically connected firms are less likely to be defendants, have higher win rates, and experience shorter litigation durations than non-connected firms. Additionally, we observe that firms with higher legal risk extend more accounts receivable and receive less accounts payable, but this relationship holds only for non-connected firms. Our findings support the financing advantage theory for politically connected firms and the legal risk compensation view for non-connected firms. Moreover, reforms in China's judicial system do not appear to mitigate the disadvantages faced by non-connected firms in terms of lawsuit outcomes and trade credit provision. Our findings suggest that well-functioned judicial independence might be still lacking in China, and that political connections continue to negatively impact law enforcement and corporate policies.

Evolution of Jurisdiction in Medical Malpractice Cases in Hungary

In Hungary, in the period before the political transition, in 1989 and in the first years afterwards, a relatively small number of medical compensation lawsuits were initiated. However, the enactment of the Health Act in 1997 has gradually changed this and made the patient from the previous vulnerable position to an equal partner with the healers. As a consequence, we can observe the conscious consumer behaviour of citizens in relation to healthcare services, so recently the quality of health services is more often being questioned.In the previous judicial practice, the rate of patients winning lawsuits was completely different compared to the current situation, the majority of cases ended with the dismissal of their claims. The reason for this lies in the vulnerable position of the patient which already exists during healthcare and lawsuits as well. Neither the judicial practice nor the legal environment attempted to counterbalance this vulnerability at that time.However, this has gradually changed, and nowadays we can witness a particularly strict judicial practice, the establishment of liability for damages of healthcare institutions is frequent.The purpose of the article is to demonstrate how the judicial practice of the medical compensation cases has evolved over the past 15-20 years in Hungary, and as a result, what currently observable trends have emerged. To achieve this, it is essential to examine extensively two preconditions of civil law liability for damages, namely causation and fault, as jurisdiction has changed the most in this aspect. Many factors of uncertainty arise in connection with healthcare services due to the uniqueness of the human body. The outcome of lawsuits is significantly influenced by how the court assesses uncertainty factors and which party bears the burden of uncertainty.

Partners with Benefits: When Multinational Corporations Succeed in Authoritarian Courts

AbstractScholars often assume that courts in authoritarian regimes cannot credibly protect foreign investors’ interests because these institutions lack judicial independence. In this article, we construct a novel data set on multinational corporations’ litigation activities in Chinese courts from 2002 to 2017. This supports the first systematic case-level analysis of foreign firms’ lawsuit outcomes in an authoritarian judiciary. We find that foreign companies frequently engage in litigation in authoritarian courts. Moreover, we theoretically and empirically distinguish between two types of government–business ties in terms of their effectiveness in incentivizing the host state to protect foreign investors’ interests. We argue that ad hoc, personal political connections deliver only trivial lawsuit success for multinational enterprises, while formal corporate partnerships with regime insiders can lead the state to structurally internalize foreign investors’ interests. In particular, we demonstrate that joint venture partnerships with state-owned enterprises help foreign firms obtain more substantial monetary compensation than other types of multinational enterprises. By contrast, the personal political connections of foreign firms’ board members do not foster meaningful judicial favoritism. These findings are robust to tests of alternative implications, matching procedures, and subsample robustness checks. This article advances our understanding of multinational corporations’ political risk in host countries, government–business relations, and authoritarian judicial institutions.

When Are Audit Firms Sued for Financial Reporting Failures and What Are the Lawsuit Outcomes?

ABSTRACTWe examine how often audit firms are sued in a large sample of accounting lawsuits that allege financial reporting failures. We find an insignificant relation between the likelihood of auditor litigation and restatements, but the likelihood of auditor litigation is strongly related to the types of alleged accounting deficiencies. We also find that the auditor's type influences the probability of the auditor being sued and the size of the payouts from auditor and nonauditor defendants. In particular, the Big N firms are approximately 7 percent less likely than non–Big N firms to be named as co‐defendants, and the auditor's contribution to the plaintiff's payout is significantly larger when a Big N firm is sued. Overall, our findings suggest that auditors are rarely blamed when there are allegations of financial reporting failures, but the types of accounting deficiencies and the auditor's type significantly influence the probability of the audit firm being sued and the outcomes of the lawsuits.

Judge political affiliation and impacts of corporate environmental litigation

This study examines the role of judges' political affiliation in determining the outcomes of environmental lawsuits filed against public corporations and their economic impacts on the defendant firms. Drawing on legal theories of judicial decision making, individual judges are expected to play an important role in influencing lawsuit outcomes and consequently the sued firms' shareholder wealth. This study employs a hand-collected sample of environmental lawsuits filed in the U.S. Federal District Courts against public firms during 2000–2015, utilizing the random assignment of judges to lawsuits to combat endogeneity concerns. The empirical evidence shows that lawsuits with Republican-appointed judges are approximately 12% less likely to succeed in reaching a settlement compared with those adjudicated by Democratic-appointed judges, holding constant other lawsuit-, judge-, and firm-specific factors. Further, investors of defendant firms react more favorably to the outcome of a lawsuit adjudicated by a Republican-appointed judge compared with a Democratic appointee: the difference of 0.6% of market value during the three-day period surrounding the lawsuit conclusion represents a substantial saving of shareholder wealth. These significant differences are not attributable to alternative explanations, such as other judge idiosyncrasies or firm characteristics, and remain robust to a series of additional analyses. These empirical findings offer new insights into the significant impacts of judge political affiliation on corporate environmental litigation and provide novel evidence on the magnitude of their economic consequences.

Colorectal Cancer Litigation: 1988-2018.

The purpose of this study was to examine colorectal cancer (CRC) malpractice suits over the past 20 years in the United States and evaluate the most common allegations, lawsuit outcomes, indemnity payment amounts, patient outcomes, and physician characteristics. The malpractice section of VerdictSearch, a legal database, was queried for cases in which CRC was a principle component of the lawsuit. Legal notes were used to characterize plaintiff allegations, verdict, financial compensation, and case year. Clinical history for each case were analyzed for patient demographics, medical outcomes, and physician characteristics. A total of 240 CRC-related malpractice cases (1988-2018) were collected, resulting in defense (n = 101, 42.1%), plaintiff (n = 37, 15.4%), or settlement (n = 96, 40%) verdict. The primary defendants were often primary care physicians (n = 61, 25.4%) and gastroenterologists (n = 55, 22.9%). Most common plaintiff allegations are failure to perform diagnostic colonoscopy for patients with symptoms (n = 67, 27.9%), failure to perform screening colonoscopy according to screening guidelines (n = 46, 19.2%), or failure to detect CRC with colonoscopy (n = 45, 18.7%). A common alleged error in diagnosis before the median year of 2005 was failure to detect CRC by the noncolonoscopic methods (<2005: n = 22, 24.2%; >2005: n = 3, 3.09%). Plaintiff-alleged errors in diagnosis are consistently the most common reason for CRC malpractice litigation in the past 20 years, whereas specific diagnostic allegations (i.e., failure to screen vs failure to detect) and methods used for surveillance may vary over time. It is important to identify such pitfalls in CRC screening and explore areas for improvement to maximize patient care and satisfaction and reduce physician malpractice litigations.

The Role of Corporate Political Connections in Commercial Lawsuits: Evidence From Chinese Courts

Like courts in democratic regimes, courts under authoritarianism play an important role in the regulation of complex economies. In particular, scholars suggest that authoritarian judiciaries are commonly encouraged to provide independent adjudication in the context of economic disputes between firms. Yet because regime insiders are often connected to firms, judges have strong incentives to consider the political implications of their decisions even in areas of the law where they are allegedly more independent. In this article, I propose a new theory about the role of corporations’ political background in commercial lawsuits. Using a data set on the litigation outcomes of firms in China, I find that the composition of a firm’s board membership is a significant predictor of its lawsuit outcomes. A higher percentage of corporate board members with political connections leads to a higher probability of lawsuit success. The results point to the limitations of the selective judicial independence theory.

Trends in Pediatric Malpractice Claims 1987-2015: Results From the Periodic Survey of Fellows.

Pediatricians are less frequently sued than other physicians. When suits are successful, however, the average payout is higher. Little is known about changes in the risk of litigation over time. We sought to characterize malpractice lawsuit trends for pediatricians over time. The Periodic Survey is a national random sample survey of American Academy of Pediatrics members. Seven surveys between 1987 and 2015 asked questions regarding malpractice (n = 5731). Bivariate and multivariable analyses examined trends and factors associated with risk and outcome of malpractice claims and lawsuits. Descriptive analyses examined potential change in indemnity amount over time. In 2015, 21% of pediatricians reported ever having been the subject of any claim or lawsuit, down from a peak of 33% in 1990. Report of successful outcomes in the most-recent suit trended upward between 1987 and 2015, greatest in 2015 at 58%. Median indemnity was unchanged, averaging $128 000 in 2018 dollars. In multivariate analysis, male sex, hospital-based subspecialty (neonatology, pediatric critical care, pediatric emergency medicine, and hospital medicine), longer career, and more work hours were associated with a greater risk of malpractice claim. From 1987 to 2015, the proportion of pediatricians sued has decreased and median indemnity has remained unchanged. Male pediatricians and hospital-based subspecialists were more likely to have been sued. Greater knowledge of the epidemiology of malpractice claims against pediatricians is valuable because it can impact practice arrangements, advise risk-management decisions, influence quality and safety projects, and provide data to guide advocacy for appropriate tort reform and future research.

Naturally Occurring Asbestos: A Global Health Concern? State of the Art and Open Issues

ABSTRACT Naturally occurring asbestos (NOA) is a global public health issue because minerals that may be classified as asbestos are a common constituent of certain types of rock and soil, found in many regions on every continent. Disturbance of these rocks and soils, especially through construction activities, can result in airborne particles, leading to inhalation and risk of disease from these known human carcinogens. The presence of NOA in the environment affects all the human activities aimed at its modification, and all engineering/geological actions in the natural environment should take it into account. In the presence of NOA, specific procedures for sampling, evaluation of environmental risk, and monitoring should be applied to minimize the risk of exposure for the workers and the general public. Unfortunately, detailed procedures have been lacking to date, and consensus is difficult to achieve because basic issues, such as the definition of asbestos itself, are still open and being debated by scientists and regulators. While the term “asbestos” has been used in older geological publications, it is not currently defined by geologists. For the past century, “asbestos” was a commercial term used to describe minerals mined for specific purposes, and the term then entered the legal lexicon for purposes of control and compensation. All these basic matters are critically illustrated in the article. Finding clear and universally accepted definitions is mandatory; otherwise, there will continue to be controversial positions that can cause regulatory and legal issues and the outcome of lawsuits to be very subjective.

Does content of informed consent forms make surgeons vulnerable to lawsuits?

Written informed consent forms (ICFs) are important for ensuring that physicians disclose core information to patients to help them autonomously decide about treatment and for providing substantial evidence for the surgeon in case of a legal dispute. This paper aims to assess the legal and ethical appropriateness and sufficiency of the contents of ICFs designed for several elective surgical procedures currently in use in Turkish hospitals. One hundred and twenty-six forms were randomly selected and were analyzed for 22 criteria. The results were compared using the Fisher' exact test, and 95% confidence intervals were calculated. More than 80% of ICFs contained information about the risks of the proposed treatment, the diagnosis of the patient, and the patient's voluntariness/willingness, as well as a designated space for the signatures of the patient and the physician and a description of the proposed treatment. Some ICFs were designed for obtaining blanket consent for using patients' specimens. The ICFs for general elective surgery contain many deficiencies regarding disclosure of information, and there is significant variation among primary healthcare providers. Unrealistic expectations regarding the surgery or the post-operative recovery period due to insufficient information disclosure may lead patients, who experience post-surgical inconveniences, to file lawsuits against their surgeons. Although all ICFs, regardless of their institution, are generally insufficient for defending hospital administrations or surgeons during a lawsuit, ICFs of private hospitals might be considered better equipped for the situation than those of state or university hospitals. However, further research is needed to show if private hospitals have lower lawsuit rates or better lawsuit outcomes than state or university hospitals in Turkey.

Compensation clawback policies and corporate lawsuits

PurposeThe purpose of this paper is to study the relation between compensation clawbacks and lawsuits and analyze how these two corporate disciplinary forces interact. This paper hypothesizes that by allowing firms to recoup compensation from managers who breach their fiduciary duty, clawbacks provide a form of discipline that potentially reduces the likelihood of managerial wrongdoing, which, in turn, lowers the risk of corporate lawsuits.Design/methodology/approachThis paper identifies whether or not a company in the S&P 1500 had a clawback policy between 2007 and 2014 by searching the company filings and press releases. The authors also construct different proxies for litigation risk and lawsuit outcomes using the Audit Analytics Database. They then perform a variety of empirical tests to examine the association between clawbacks and litigation risk and the association between clawbacks and litigation outcomes.FindingsThis paper finds that firms with higher litigation risk are more likely to adopt a clawback policy. In addition, after the adoption of clawback provisions, litigation risk significantly declines, suggesting that clawback policies are effective in reducing the likelihood of corporate lawsuits. Furthermore, firms with clawback policies are approximately 50 per cent more likely to have lawsuits against them dismissed or settled for lower amounts (approximately 12 per cent lower).Practical implicationsThe findings of this paper provide insights to the efficacy of a current change in compensation regulation, the mandatory clawback adoption requirement by the Dodd–Frank Act of 2010.Originality/valueThis paper contributes to the literature on both clawbacks and litigation, as it is the first to analyze the relation between the two.

A global analysis of corporate litigation risk and costs

We analyze a unique hand-collected international sample of 475corporate lawsuits involving 361 publicly-traded defendant firms headquartered in 16 developed countries to explore how country factors influence litigation risk, equity market value, lawsuit outcomes, and settlement costs. Unlike U.S.-focused studies, we do not find a significant relation between stock turnover, equity performance, and the probability of litigation. Defendant firms headquartered in civil law countries or countries with less efficient judiciary systems face lower litigation risk and costs as well as less share price decline at filing. Countries whose courts are less independent demonstrate a significant bias against foreign defendant firms.

A comparison of malpractice lawsuits mediated and judged in court in China

ObjectiveAn analysis of malpractice lawsuits judged in court compared with those mediated in court may help explain perceptions of malpractice risk. MethodsWe conducted a retrospective study of malpractice lawsuits mediated and judged in court using data from district courts in Beijing from 2010 through 2014. We evaluated the number of cases, the payment amount, and the time to resolution, by resolution type. Patient age, sex, the severity of injury, and adverse event type were measured. Subsequently, a binary logistic regression identified factors associated with patients' pursuit of judgment. ResultsBetween 2010 and 2014, there were 1226 lawsuits (49.9%) mediated in court and 1259 (50.1%) judged in court. The proportion of the judged lawsuits varied significantly across the study period (p < 0.001). The mean payment amount and the time to resolution were significantly higher in judgment lawsuits (p < 0.001). The younger the patients, the greater the possibility of being judged in court (odds ratio [OR] = 0.831, p < 0.0001). Lawsuits where the adverse event type was treatment, obstetrics, or diagnostics were more likely to be judged than those where the adverse event type was surgical (OR = 2.311, p < 0.0001; OR = 2.311, p < 0.0001; OR = 3.302, p < 0.0001, respectively). When lawsuits were for a temporary injury, they were more likely to be judged in court than those for a permanent injury (OR = 0.723, p = 0.0139).results ConclusionsThe patient-physician relationship may in fact not be particularly close in our country. Lawsuits with certain characteristics tend to be judged in court. Understanding these characteristics may be useful for predicting the outcome of lawsuits against physicians.conclusions

Federal Judge Ideology and the Going Concern Reporting Incentives of Big 4 and Non-Big 4 Auditors

We analyze how variation in federal level legal liability associated with judge ideology is associated with the likelihood of firms receiving going-concern modified audit opinions, separately for Big Four and non-Big Four clients. With auditors trading off between Type I and Type II reporting errors, the threshold value (of client bankruptcy probability) above which auditors issue going-concern reports is decreasing and convex in the level of federal litigation risk. Building on literature showing that federal judge ideology affects the likelihood and outcome of lawsuits, we find that Big Four and non-Big Four auditors converge in their going-concern reporting decisions as federal litigation risk increases and that this convergence is caused by the greater effect of judge ideology on non-Big Four than on Big Four auditors. The key results remain with firm-fixed effects and are not driven by the effects of judge ideology on auditor choice or bankruptcy probability.

Consumer Litigation Funding and Medical Malpractice Litigation: Examining the Effect of Rancman v. Interim Settlement Funding Corporation

Consumer litigation funding, a growing industry in the United States, is an alternative credit source for cash‐strapped tort plaintiffs. Financiers give plaintiffs nonrecourse loans that are premised on lawsuit outcomes. This article is the first to empirically examine the effect of consumer litigation funding. Specifically, I explore the impact of nonrecourse loans on medical malpractice litigation outcomes by exploiting the variation in timing and geography from two Ohio policy changes: the Ohio Supreme Court's 2003 ban of funding in Rancman v. Interim Settlement Funding Corporation and the state's subsequent legislative legalization of funding in 2008. Using closed‐claim data from the National Practitioner Data Bank, I find evidence that the availability of funding increases claim payment and claim duration.

Law Firm Expertise and Agency Problem in Securities Class Action Lawsuits

Using securities class action lawsuits from 1996 to 2013, we document a measure of law firm expertise that predicts the outcome of future lawsuits conducted by law firms. We use prior Dismissed Ratio as law firm expertise. We find that law firms with a lower prior Dismissed Ratio are more likely to be skilled law firms with less agency problem. Cases conducted by skilled law firms with less agency problem are more likely to be settled, have more negative cumulative abnormal return during the filing date, win larger settlement amounts, result in a larger probability of CEO turnover and are associated with larger short interest one week prior to the filing event. Skilled law firms contribute to better outcomes by exerting more effort in the litigation process, as evident by the longer Case Length from filing date to status date. In addition, the market share of law firms increase after performing as skilled law firms and skilled law firms are less likely to disappear from the market. Overall, predictive power and persistence of law firm expertise suggest law firm fixed effect in securities class action lawsuits. Robustness tests suggest existence of law firm expertise beyond case selection.

Securities fraud and corporate board turnover: New evidence from lawsuit outcomes

We examine the relationship between outcomes of securities fraud class action lawsuits (SFCAs) and corporate board turnover rates. Our results indicate that turnover rates for board members are higher when a firm settles a lawsuit than when a suit is dismissed. Outside director turnover is most sensitive to SFCA outcomes, perhaps reflecting reputational effects. Results demonstrate that involvement in securities fraud is costly for corporate board members.

Does Losing a Patent Lawsuit Cause M&amp;A? An Experiment Using Uncertain Lawsuits

I investigate how a change in patent rights affects industry structure and R&D incentives. For this purpose, I hand-collect all patent lawsuits in the Court of Appeals for the Federal Circuit (CAFC). Using the historical decisions of randomly assigned judges as an instrument for lawsuit outcomes, I find that infringers sharply increase M&A to acquire substitute patents. This points to an amplifying effect of patent rights on the M&A market. Next, using an unexpected Supreme Court decision that decreased the strength of patent rights, I find that diminished M&A activity is associated with a decrease in R&D for small firms.

Do Going Concern Audit Reports Protect Auditors from Litigation? A Simultaneous Equations Approach

ABSTRACT: Audit researchers have a long-standing interest in understanding whether issuing a going concern report to financially stressed clients protects auditors from litigation. An endogeneity issue arises, in that litigation risk affects the going concern decision and the going concern decision impacts auditor litigation risk. Using a simultaneous equations approach, we find a significant positive association between auditors' ex ante litigation risk and going concern reporting. By applying simultaneous equations, we also find a significant negative association between going concern reporting and auditor litigation, suggesting that auditors deter lawsuits by issuing going concern reports to their financially stressed clients. Our research further provides a more rigorous analysis of the relation between going concern reporting and lawsuit outcomes in the form of auditor litigation dismissals, small settlement amounts, and large settlement amounts. Our results indicate that when auditors are named in lawsuits, having issued a going concern report reduces the likelihood of large financial settlements. Data Availability: The data used in this study are publicly available through sources identified in the study.

Incompatible Contrasts? — Preventive Detention in Germany and the European Convention on Human Rights

AbstractThis article will give an overview of the idea and history of origins of preventive detention and the legal changes in the German Criminal Code that underlie the decision of the European Court of Human Rights (ECHR) (17 December 2009). It will attempt an outlook by considering the prospective outcome of future law suits against German legal statutes relating to preventive detention, and will also describe the present situation and current legal recommendations, including the much-discussed alternative of detention in psychiatric wards. The article will close with a brief comparative look at the related legal problems arising in countries with a criminal law which is based on the establishment of personal guilt of the offender while facing public pressure to detain persons for protective reasons.