northwestern law searle center on law, regulation, and economic growth

October 30, 2009

PointofLaw.com highlights the papers we are showcasing on the topic of Third Party Finance of Litigation:

Northwestern's Searle Center is showcasing two excellent papers by Stephen Presser (Northwestern) and Paul Rubin (Emory) from a public policy roundtable on the topic held at Northwestern. From Prof. Presser's draft, which is entitled A Tale of Two Models: Third Party Litigation in Historical and Ideological Perspective: 

In this modest paper I argue that we have two different models of litigation in this country. One is a traditional model, best exemplified by Sir William Blackstone and Abraham Lincoln, that litigation is something pernicious that ought to be discouraged. A second model, one that has recently captured the popular imagination (or at least the imagination of our policy makers and elite lawyers), is that litigation is a noble tool that can lead to transformative social change, just as it did, for example, in the struggle for civil and educational rights in the fifties and sixties. What one thinks about third-party financing of litigation may turn simply on the choice of which model or ideology seems more appealing, and what is now happening in the American states is confusion over which of these models ought to predominate. In addition to much interesting detail on the subject of societal views of litigation, Presser goes on to discuss key recent decisions on litigation finance from Texas and Ohio, and the general relaxation of restaints against champerty and maintenance. 

From Prof. Rubin's paper, On the Efficiency of Increasing Litigation, the abstract:

The common law has long forbidden third party investment in lawsuits based on "champerty" and related doctrines. More recently, these restrictions have been relaxed, although they may not have been entirely eliminated in the U.S. While it might appear efficient to allow such investment, in fact it is not. The effect of relaxing restrictions will be to increase litigation. When there are benefits of litigation these are deterrence of harmful activities. However, the U.S. already goes much farther than any other country in allowing class actions and other group based litigation, and so any benefits of increased litigation are likely to be small or nonexistent. There are two external costs from increasing litigation. First, the plaintiff must pay his own fees, but also imposes costs - sometimes quite significant costs - on defendants when a lawsuit is filed. In many cases, the costs imposed on defendants are greater than costs borne by plaintiffs, especially when plaintiffs are individuals or class members and defendants are business firms. Second, the type of lawsuits that would likely result from increased third party investment would probably move the legal system away from efficiency. Overall increasing third party financing of litigation is likely to be harmful.

This coverage is yet another example of the Searle Center helping to frame the debate on a timely issue with high-quality, thoughtful academic work product.