Lottery system Flexible damage multiplier Adversely affects the - - PowerPoint PPT Presentation

INCREASING ACCESS TO JUSTICE: A PROPOSAL

Jef De Mot & Ben Depoorter

• Lottery system
• Flexible damage multiplier
• Adversely affects the probability of

adjudication

• 1. Example
• Risk neutral and fixed costs
• Three types of plaintiffs: A, B and C
• All three have 70 % chance of winning
• Amount at stake = 1.000
• Trial costs: A = 500, B = 1.000, C = 2.000

A: 0.7 x 1.000 – 500 = 200 > 0 B: 0.7 x 1.000 – 1.000 = - 300 < 0 C: 0.7 x 1.000 – 2.000 = - 1.300 < 0

• 1. Example

1. Let plaintiff choose multiplier. Damages are multiplied with that multiplier in case plaintiff wins. For example: plaintiff chooses multiplier of 2  receives 2.000 instead of 1.000 if he wins 2. Courts select randomly with probability inverse to multiplier. If plaintiff chooses 2  50 %, if he chooses 3  33.33 %

• 1. Example
• B now has a credible threat:

Suppose he selects a multiplier of 2: ½ x (0.7 x 2.000 – 1.000) + ½ x 0 = 0.7 x 1.000 – 1.000/2 = 200 > 0

• If C chooses a multiplier of 2, his suit still is NEV:

½ x (0.7 x 2.000 – 2.000) + ½ x 0 = 0.7 x 1.000 – 2.000/2 = - 300 > 0

• But if C chooses a multiplier of 3, his suit has PEV:

1/3 x (0.7 x 3.000 – 2.000) + 2/3 x 0 = 0.7 x 1.000 – 2.000/3 = 33 > 0

• 2. General

Without: Pp x J – Cp With: Pp x J – Cp/M 1/M x (Pp x M x J – Cp) + (1 – 1/M) x 0

equal decrease

• 2. General

Defendant: EL = 1/M x (Pd x J x M + Cd) = Pd x J + Cd/M Settlement before multiplier has been chosen: between Pp x J – Cp/M and Pd x J + Cd/M.

• 3. Disadvantages of the proposal
• 1. Risk costs
• Plaintiff: not being selected
• Defendant: may have to pay a multiple of the harm he

caused

• Settlement before plaintiff has choses M
• Maximum multiplier
• Up to certain value
• Linking maximum multiplier to amount at stake

• 3. Disadvantages of the proposal
• 2. Increased trial expenditures
• Higher amount at stake  increased exp.
• Risk aversion  low multipliers
• High multiplier  high probability of

elimination

• Increased trial expenditures  increase

settlement frequency

• Trial expenditures do not increase

proportionally

• 3. Disadvantages of the proposal
• 3. Frivolous suits
• Ask for high multiplier in the hope that

case will be randomly selected  risk averse defendants may settle

• Punishment of frivolous suits
• Maximum multiplier/ other measures

• 3. Disadvantages of the proposal
• 4. Weak cases
• Reduces costs of litigation relative to the

gains

• Maximum multiplier.
• Tying multiplier to the merits of the

case

Conclusion

• May promote valuable suits
• Disadvantages/ eliminated