Post by Sapphire Capital on Aug 20, 2008 8:18:25 GMT 4
Towards Procedural Optionality: Private Ordering of Public Adjudication
Robert J. Rhee
University of Maryland - School of Law
U of Maryland Legal Studies Research Paper No. 2008-28
Abstract:
Private ordering and public adjudication of legal disputes stand as discrete, antipodal processes. In private resolution, the parties are not bound by the law, and they can rearrange the disputed right as they wish. In public adjudication, courts administer the substantive and procedural laws. Uniform application satisfies the concern of fairness and predictability. But these come at a cost. For instance, the standard of proof allocates the risk of error as between the parties, and rules of attorney fees allocate transaction cost. Together, these laws have substantial influence on the value and risk profile of a case, and the parties' strategy; yet the parties have no say in the choice of rules. By fixing the standard of proof and attorney fees, the law limits the ability of the parties to rearrange value and risk per their views of the facts and substantive laws. This can result in undesirable outcomes, such as positive settlement value in frivolous cases, unprosecuted meritorious cases, greater costs, and delays in settlement. This Article proposes a theory of procedural optionality, the idea that certain procedural laws should be subject to private ordering. Specifically, it shows that the election of the standard of proof coupled with fee shifting would allow parties to better value and assess the legal dispute. Procedural optionality minimizes strategic behavior and allows the parties to bond their good faith belief in the merits of a case. The result is more efficient disputes resolution, measured by increased enforcement of and compliance with the substantive laws at lower cost. The policy implications touch a wide range of substantive laws, including torts, contracts, securities, and corporations.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1217722_code829721.pdf?abstractid=1206082&mirid=1
Robert J. Rhee
University of Maryland - School of Law
U of Maryland Legal Studies Research Paper No. 2008-28
Abstract:
Private ordering and public adjudication of legal disputes stand as discrete, antipodal processes. In private resolution, the parties are not bound by the law, and they can rearrange the disputed right as they wish. In public adjudication, courts administer the substantive and procedural laws. Uniform application satisfies the concern of fairness and predictability. But these come at a cost. For instance, the standard of proof allocates the risk of error as between the parties, and rules of attorney fees allocate transaction cost. Together, these laws have substantial influence on the value and risk profile of a case, and the parties' strategy; yet the parties have no say in the choice of rules. By fixing the standard of proof and attorney fees, the law limits the ability of the parties to rearrange value and risk per their views of the facts and substantive laws. This can result in undesirable outcomes, such as positive settlement value in frivolous cases, unprosecuted meritorious cases, greater costs, and delays in settlement. This Article proposes a theory of procedural optionality, the idea that certain procedural laws should be subject to private ordering. Specifically, it shows that the election of the standard of proof coupled with fee shifting would allow parties to better value and assess the legal dispute. Procedural optionality minimizes strategic behavior and allows the parties to bond their good faith belief in the merits of a case. The result is more efficient disputes resolution, measured by increased enforcement of and compliance with the substantive laws at lower cost. The policy implications touch a wide range of substantive laws, including torts, contracts, securities, and corporations.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1217722_code829721.pdf?abstractid=1206082&mirid=1