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Some Effects of Uncertainty on Compliance with Legal Standards
... 2 Judicial error may be due to inadequate education and training of judges, immorality and corruption among judges, or simply the lack of sufficient knowledge about substantive and procedural law. See Savchyn (2014) for further details. in appeals court due to evidentiary error at trial. 3 It is also well known theoretically that many important properties regarding the efficiency of legal rules no longer hold once uncertainty is introduced into an otherwise ideal world of perfect information (Haddock and Curran, 1985;Calfee and Craswell, 1984;Craswell and Calfee, 1986;Cooter and Ulen, 1986). Introducing the possibility of judicial error leads to a number of questions. ...
... This number should be interpreted as an underestimation of the frequency of judicial error, because some cases involving evidentiary error may not have been appealed.4 Calfee and Craswell (1984) suggested that, in order to correct any incentive for potential defendants to over-or under-comply with the standard of due care induced by uncertainty, courts should make corresponding adjustments in legal standards of damages awarded.Edlin (1994) also followed this line of analysis. ...
This paper considers the effect of whether burden of proof is assigned to plaintiffs or defendants in tort claims on the defendant's care-taking incentive under the possibility of judicial error. We argue that it is socially better to place burden of proof on the plaintiff if the proof costs of both parties are low and the evidence is very accurate, thus reducing the wasteful incentive for defendants to commit over-precaution. If the burden of proof is placed on the defendant, it exacerbates the defendant's over-precaution due to an accident-avoidance effect whereby the defendant is incentivized to take more care to avoid an accident, thereby saving evidence costs. We also discuss the sine qua non rule in the case of noisy evidence and reconfirm the accident-avoidance effect. This is compared to the result of Gómez (2002). JEL Classification: K13
... elevated as the standard method for managing the risks of negligent hiring. This outcome-where organizational practices diverge from and even exceed legal requirements -has been observed in other contexts by scholars of tort litigation, who point out that vague standards such as "reasonable care" can prompt organizations to pursue a strategy of "overcompliance" (Calfee and Craswell 1984;Chapman 1995;Gibson 2008). On the one hand, by not defining compliance practices in advance, standards such as reasonable care give "courts the flexibility they need to arrive at the correct judgment in factdependent contexts" (Gibson 2008(Gibson , 1649). ...
... Thus, uncertainty surrounding legal standards provides the initial condition for overcompliance. In this context, scholars argue that cost also emerges as a salient consideration affecting the likelihood of taking excessive precautions (Calfee and Craswell 1984;Chapman 1995;Gibson 2008). Thus, when faced with legal uncertainty, organizations will be more likely to over-comply if their internal costs for doing so are low. ...
The threat of negligent hiring lawsuits is thought to play an important role in the widespread use of criminal background checks among US employers. This article examines the construction of negligent hiring within the trade literature of the human resources (HR) field using a qualitative content analysis. While courts tend to view criminal record checks as unnecessary for occupations that do not carry foreseeable risks, the article finds that the HR field has broadly endorsed criminal record checks as the default practice for screening job candidates. The article argues that this divergence stems from the structured uncertainty of compliance under the common law tort of negligent hiring, which shapes organizational behavior in ways that defy the substantive clarity of relevant case law.
... I přesto tyto a na ně navazující studie (např. Calfee a Craswell, 1984, Damato, 1983nebo později Sutton a Dobbin, 1996 položili základy zkoumání vlivu právní nejistoty na chování ekonomických subjektů. ...
... Většina ostatních autorů se shoduje na obecně uznávaných závěrech autorů studií (viz Calfee a Craswell, 1984nebo Damato, 1983, kteří vysvětlují, jak právní nejistota způsobuje distorze v chování jednotlivých subjektů, přičemž se s časem zvětšuje. Tento postoj sdílejí také další autoři z různých oblastí práva, jako jsou Meyer (2016), Afanasyev (2016) nebo Guenther (2015). ...
This article builds on long-term research by authors in the field of tax burden and its impacts,incorporating a newly designed indicator of legal uncertainty in the tax area which is conceived onthe basis of a detailed description of the legislation. This indicator, together with other importantfactors, is incorporated into the tax system model and its links and influence on the behaviour ofeconomic actors are examined. The aim of the article is to evaluate the impact of legal uncertaintyin taxation on the labour supply in the Czech Republic. From a methodological point of view, DSGEmodelling and quarterly data for the period 2002–2016 are used. The main conclusion of the studyis the confirmation of the negative impact of uncertainty on all examined taxes. At the same time,in all the cases, a shift from the official to the shadow economy occurs.
... Si l'analyse économique s'intéresse à l'existence et la détermination du degré optimal de complexité du droit, des auteurs montrent que la complexité réglementaire traduit l'existence de rentes au bénéfice de certains acteurs juridiques (professionnels du droit) en leur garantissant un niveau d'activité du fait leur expertise (Ogus, 1999). En outre, produire des règles détaillées implique de supporter des coûts d'écriture élevés auxquels s'ajoutent des coûts informationnels pour les agents 219 (1974), Calfee et Craswell (1984 93 effets de concurrence entre les Etats. A travers ces espaces qui traduisent la différenciation des systèmes juridiques nationaux en termes de complexité des réglementations ou des législations, les agents économiques (consommateurs de droit) se déplacent et se déterminent selon leurs préférences en matière de coûts informationnels et de capacité du droit à répondre à leurs attentes. ...
... 223 Notons que Obidzinski précise que l'incertitude dans le droit n'est pas le seul fait du caractère incomplet des règles légales. Elle provient certes de l'ambiguïté du langage juridique, mais aussi des erreurs juridiques et de l'ensemble des facteurs qui peuvent affecter le résultat du procès (Calfee et Craswell, 1984DariMattiacci et Deffains, 2005). 224 Voir Landes et Posner (1976). ...
Dans un monde intégré où les systèmes juridiques européens se rapprochent presque inéluctablement, les juridictions développent des cadres attrayants en vue de capter les bases fiscales. Nous proposons de caractériser les processus d'intégration juridique à l'échelle européenne et de justifier la nature concurrentielle des comportements institutionnels qu'adoptent les Etats européens, en définissant notamment les ressorts du droit communautaire. Ces ressorts permettent par exemple d'identifier les différentes stratégies juridiques de rapprochement des cadres normatifs mises en oeuvre par les instances européennes. Ils laissent également entrevoir des marges de manoeuvre institutionnelles, lesquelles justifient et légitiment l'analyse de type concurrentiel des processus d'intégration juridique communautaire et rendent pertinente la définition d'un cadre d'analyse de l'attractivité des juridictions selon une approche de concurrence institutionnelle. Par ailleurs, la réflexion porte sur l'analyse de l'attractivité des pays, notamment du point de vue immatériel et qualitatif, justifiant davantage l?approche juridique de la concurrence entre Etats membres de l'Union. Deux types de modèles de concurrence spatiale sont proposés pour illustrer la compétition institutionnelle à l'oeuvre au sein de l'espace européen, à savoir une approche de « shopping » qui tienne compte d'aspects fiscaux et institutionnels de la concurrence entre Etats et une approche de concurrence institutionnelle à étapes multiples. Les deux analyses mettent en avant l'impact des caractéristiques intrinsèques locales (taille, efficacité publique institutionnelle) sur la nature de la concurrence entre pays européens.
... 3 This can address either contractual violations or non-violation nulli…cation and impairment of expected bene…ts. 4 A third avenue for sustaining the agreement is renegotiation. 5 This can be scheduled, such as the negotiated rounds of the General Agreement on Tari¤s and Trade (GATT) that transpired approximately every decade, or unplanned. ...
... The right of consultation under the Dispute Settlement Understanding (DSU) of the WTO permits some accommodation of obligations as a settlement. 4 Under the Marrakesh Agreement (MA) of the Uruguay Round (UR) establishing the WTO, there is a presumption of N&I when a violation is substantiated through the DSP. 5 As Koremenos (2005) discusses, SG are less ‡exible than renegotiation. There isn't a provision for more permanent adjustment in commitments in SG. 6 The WTO seems unable to continue with this tradition, as the Doha round was scheduled for completion a decade ago. ...
Self-enforcement in international agreements in the presence of uncertainty in the form of shocks and imperfect information regarding the extent of compliance by other members is enhanced by the use of standards in performance of commitments. Standards are less precise than rules. They must be sufficiently demanding that undercompliance is distinguishable from non-compliance. Discretion permits undercompliance as an alternative to renegotiation of commitments, safeguards and the filing of disputes. Undercompliance, particularly when restrained, is a lower cost and less confrontational resolution to addressing adverse shocks. Signatories are restrained in undercomplying so that the effects of their actions are imperfectly distinguishable from the effects of shocks. Compliance and evidentiary standards for formal disputes define the accomplishments of the agreement. Evidentiary standards serve as an important discipline to undercompliance even in the absence of formal disputes.
... For a long time, contemporaneous literature develops the theme of errors made by Court Craswell (1984) and(1986), Goetz (1984), Polinsky and Shavell (1989), Kahan (1989), etc). These errors stem from the Court's lack of information about the nature and the extent of losses induced by victims, information asymmetries about the nature of technologies, production and safety costs, etc. ...
... It also leads to inefficiency due to the unintended consequences of either over-or undercompliance with uncertain legal standards. 169 This is all the more so given consumers may be less inclined to bring a legal claim against a supplier for claims with lower monetary value. However, these lower value transactions make up the bulk of retail trade and household spending in Hong Kong's economy. ...
Hong Kong courts have read into its Unconscionable Contracts Ordinance the general doctrine of unconscionability requiring supplier’s identification and knowing exploitation of consumer weakness, making the Ordinance unsuitable for consumer protection. This has resulted in an approach straddling the unconscionability doctrine and the more intuitive ‘unfairness’-based concepts in unfair terms legislation. Through a comparative analysis of Hong Kong’s position with Australian developments in unconscionable conduct and unfair terms in the Australian Consumer Law, and unjust contracts in the Contracts Review Act 1980 (NSW), this article argues that new unfair terms legislation (rather than a re-interpretation of the Ordinance) is needed for Hong Kong. Applying contemporary understandings of consumer behaviour, it proposes a new ‘unfairness’ standard for the legislation to consider three factors: unfair tactics in procuring an agreement, erosion of consumer autonomy and choice, and whether the term is reasonably necessary to protect the legitimate business interests of the supplier.
... Raskolnikov, 2017). Legal uncertainty can lead to 'overcompliance', which can be seen as a barrier towards the adoption of PBT-techniques, or to 'undercompliance', which facilitates the adoption of PBT-techniques (Calfee & Craswell, 1984). For instance, Anstead (2017) notes how parties felt disadvantaged by targeting possibilities facilitated by the perceived undercompliance with UK campaign finance law during the 2015 general elections. ...
Political campaigns increasingly use data to (micro)target voters with tailored messages. In doing so, campaigns raise concerns about privacy and the quality of the public discourse. Extending existing research to a European context, we propose and test a model for understanding how different contextual factors hinder or facilitate data-driven capabilities of campaigns. We applied the model during the 2017 national election campaign in the Netherlands. The results show how data-driven targeting techniques are not only useful in a first-past-the-post system, but also in a proportional representation system, which at first sight seems to be less suitable for such techniques.
... Consequently, physicians do not know exactly how careful they have to be in order to escape liability. Calfee and Craswell (1984) have studied the consequences. If there is uncertainty about the due care norm and its application in court, there is a chance that a physician who has taken sufficient care may still be held liable for damages. ...
This article concerns the preventive effects of medical liability. On theoretical grounds it is argued that medical liability does not necessarily lead to a socially optimal level of precaution, because the incentives are distorted in various ways. Since the 1970s, US states have enacted a variety of reforms in their tort systems. This variation has provided highly useful data for empirical studies of medical liability issues. For one thing, it has become clear that only some 2 % of the patients with negligent injuries gets compensation. The empirical evidence nevertheless suggests that medical liability pressure does affect the behavior of healthcare providers to some degree. It has a negative effect on the supply of services, and it encourages the ordering of extra diagnostic tests. At the margin, medical liability law does seem to have some social benefits that offset reasonable estimates of overhead and defensive medicine costs.
Error in medicine is common and can lead to significant patient injury. Although successful systematic efforts to reduce human error have been applied in other complex systems, the field of medicine has just begun to make a broad-based effort in this regard. However, both research in and implementation of patient safety measures may not occur without considering important legal issues that may impede these health policy efforts. Tort and contract law may interact with the vagaries of managed care to limit participation in these error reduction efforts by health care providers as well as by managed care organizations. Thus, for patient safety research to be successful, all members of the health care enterprise must participate in a coordinated effort to identify and establish effective practices that may reduce human error in medicine. But beyond this understanding, it is imperative that legal impediments be recognized and addressed before the goal of a continuously improving, increasingly safe health care system can become a reality.
De acuerdo con una visión ampliamente aceptada, el derecho privado debe quedar al margen de la redistribución de recursos. Esta tarea debe dejarse al derecho tributario y al gasto público. En este artículo argumento que el derecho privado puede contribuir en esta tarea de modo significativo. Contra las objeciones usuales, intentaré mostrar que algunas de sus normas, en especial las relativas a la responsabilidad civil y los contratos, no son particularmente ineficaces o ineficientes en comparación con las alternativas propias del derecho público. Siendo esto así, el rechazo del derecho privado como un medio idóneo para la implementación de políticas redistributivas carece de fundamento.
Over the past several years, constitutional, supreme and human rights courts had to deal with the problem of adjudicative retroactivity in criminal law with ever-greater intensity. Following the case Contrada c. Italie, in which the European Court of Human Rights found a violation of the legality principle under Art. 7 due to an unforeseeable retrospective application of a judicially created criminal offence, the issue of citizens’ safeguard upon an overruling occurrence is even more in the foreground. What temporal effect is best given to an unfavorable overruling decision? Should its application be limited to acts and conduct occurring after it or should it operate retrospectively and subject to criminal responsibility those who, acting in reliance on an earlier decision, did only what courts declared to be lawful? A limited prohibition of adjudicative retroactivity in criminal law seems to help foster an up-to-date relationship between the individual and the state.
Courts generally insist that two criteria be met before imposing strict liability rather than basing liability on the negligence rule. The first—that the injurer’s activity must be dangerous—is sensible because strict liability possesses general advantages over the negligence rule in controlling risk. But the second—that the activity must be uncommon—is ill-advised because it exempts all common activities from strict liability no matter how dangerous they are. Thus, the harm generated by the large swath of common dangerous activities—from hunting, to construction, to the transmission of natural gas—is inadequately regulated by tort law. After developing this theme and criticizing ostensible justifications for the uncommon activity requirement, the article addresses the question of how it arose. The answer is that its legal pedigree is problematic: it appears to have been invented by the authors of the first Restatement of Torts. The conclusion is that the uncommon activity requirement for the imposition of strict liability should be eliminated.
Given their long tenure and broad powers, Supreme Court justices are among the most powerful actors in American politics. In this paper, we present a model of the nomination process that highlights the how uncertainty about a potential justice's preferences can lead a president to prefer a nominee with extreme preferences. In certain cases, Senators may also prefer extreme nominees, leading to the nomination and confirmation of justices whose preferences seem to diverge from those of elected officials. While our focus in this paper is on the Supreme Court, the analysis extends in many ways to other multimember appointed bodies as well. © The Author 2018. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved.
I develop a dynamic model of judge‐made law in which the ideal legal rule is unknown but can be learned. In contrast to existing articles, the flow of cases heard by the court is affected by the court's prior decisions. The model highlights the significance of this feedback in explaining when and why the court will write broader or narrower opinions, and the long‐run properties of common law. In equilibrium, the law settles endogenously, because the incentives to make legally controversial choices disappear as the law evolves. Settled law exhibits residual uncertainty and ambiguity, and potentially implements inefficient outcomes.
This article examines the impact of four types of law-related uncertainty on the utility of risk-neutral agents. We find that greater legal or factual uncertainty makes agents worse off if enforcement is targeted (which means that greater deviations from what the law demands lead to a greater probability of enforcement) or if sanctions are graduated (which means that greater deviations from what the law demands result in higher sanctions). In contrast, agents are indifferent to changes in uncertainty about detection induced by variation in enforcement resources or to changes in uncertainty about sanctions arising from legally irrelevant factors. Finally, risk-neutral agents benefit from greater legal uncertainty if they act only on preapproval by a cautious regulator. Our findings shed light on policy debates about the appropriate specificity of legal standards, the reform of corporate criminal liability, and the government’s reluctance to clarify the details of tax law and tax enforcement.
This paper considers victim heterogeneity in harm levels in a bilateral-care model, where harm is private information. In practice,resources are expended on the verification of damages suffered. We establish a suficient condition for the possibility to accurately deduce the harm level from the observable care choice without spending on verification. For cases in which this condition does not hold, this paper sets out a simple screening mechanism that induces victims to reveal their type truthfully and induces optimal care in equilibrium without verification costs.
Life is pervaded by risks of suffering harm to property or personal well-being. An obvious example in everyday life is commuting to work; be it by car, train, or bicycle. Often, discretion to reduce the probability of harm is outside the personal realm; instead it lies in the hands of others. For instance, the probability of suffering harm as a cyclist in an accident is very much affected by the way fellow citizens drive their cars. Tort law deals with situations such as this one. Specifically, it addresses relations between people that are not regulated by private agreement due to high transaction costs broadly conceived (Cooter and Ulen 2004:310).1 In contexts of high transaction costs, the allocation of legal entitlements is critical for eficiency (Coase 1960). However, whether tort law purports to aim at effciency is open to question.
This paper examines the incentive performance of liability and regulation when a potential injurer can take two types of preventative care, one of which is observed and one of which is not. The problem is studied in a general asymmetric information model, where settlement behavior is endogenous and which incorporates an uncertain legal standard. Contrary to existing literature, we find (1) a shift to a negligence rule may have a perverse effect on unobserved care; (2) uncertainty in legal standards may be socially beneficial as it provides a relatively good incentive for unobserved care; (3) a regulation may not be effective if preventative care efforts are substitutes but is effective if they are complements; (4) an increase in settlement rate may or may not increase the level of care, depending on the cause of the increase; (5) a “decoupling” arrangement with a feature that the defendant pays more than the plaintiff recovers, reduces legal costs and is therefore socially beneficial.
Consider legal uncertainty as uncertainty about the legality of a specific action. In particular, suppose that the threshold of legality is uncertain. I show that this legal uncertainty raises welfare. Legal uncertainty changes deterrence in opposite directions. The probability of conviction increases for firms below the threshold, while the probability of conviction decreases for firms above the threshold. Hence, legal uncertainty acts as a welfare enhancing screen and increases welfare. Legal uncertainty discourages some actions with low private benefits, while it encourages other actions with high private benefits.
This paper investigates the drivers of tax honesty of high-ranking politicians and bureaucrats in a developing country with a predatory tax system and an autocratic political regime. We argue that in this environment, high-ranking officials may report their income truthfully in order to send a credible signal of their strength to the political leadership, indicating that they are more costly to fire. This is because, in the setting that we study, tax honesty paradoxically increases the risks for taxpayers, making them more transparent and therefore vulnerable to the attacks of their opponents (especially in law enforcement agencies); only powerful officials can survive these attacks. We test our argument using a unique dataset of the tax returns filed by the Russian regional governors and members of their families for the year 2009.
Strict liability and negligence are the basic rules that courts apply to affirm tort liability and award damages. Law and Economics is concerned with the efficiency of the rules and therefore compares strict liability and negligence based on the incentives they provide accident parties to minimize total accident costs. To analyze the implications of the two liability rules for economic efficiency, a distinction is made between unilateral accidents, in which only the injurer can affect the probability of accident occurrence and the magnitude of the accident losses, and bilateral accidents, in which both accident parties can affect the probability of accident occurrence and the magnitude of the losses. Provided that damages are perfectly compensatory and that the due care level is set to be equal to the optimal level of care, both rules induce optimal precaution in unilateral accident settings; however, only the rule of strict liability induces the injurer to engage in the optimal activity level. In bilateral accident settings, all rules besides the rule of simple strict liability induce both accident parties to take optimal care; however, none of the rules can simultaneously create both accident parties incentives to engage in the optimal activity level. The litigation costs per trial are higher under a negligence rule and its variations because courts have to determine if the injurer and/or the victim complied with the set level of due care. In accident contexts where a preexisting market relationship exists between the injurer and the victim, such as in the case of a defective product, a critical factor is whether consumers (victims) are aware of the risk level of the product. If they are, all liability rules create the injurer optimal precaution incentives; if they are not, only the rule of strict liability with a defense of contributory negligence creates optimal care incentives. Today, the rule of negligence is the most commonly used rule of tort liability.
This article concerns the preventive effects of medical liability. On theoretical grounds it is argued that medical liability does not necessarily lead to a socially optimal level of precaution, because the incentives are distorted in various ways. Since the 1970’s US states have enacted a variety of reforms in their tort systems. This variation has provided highly useful data for empirical studies of medical liability issues. For one thing, it has become clear that only some 2% of the patients with negligent injuries gets compensation. The empirical evidence nevertheless suggests that medical liability pressure does affect the behavior of health care providers to some degree. It has a negative effect on the supply of services, and it encourages the ordering of extra diagnostic tests. At the margin, medical liability law does seem to have some social benefits that offset reasonable estimates of overhead and defensive medicine costs.
The demand for and supply of liability insurance arise from the legal liability of individuals and corporations for injuries caused to third parties. Tort liability rules and liability insurance markets have attracted substantial attention in recent years. This paper introduces the literature on the demand for and supply of liability insurance. The focus is on issues that distinguish liability from first party insurance. Particular emphasis is given to the relationships between liability law, liability insurance, and risk reduction.
Under the usual tort rules, damages for an accident equal the victim's loss (compensation). This paper departs from current law by proposing damages equal to the injurer's gain from untaken precaution divided by the probability of liability. Known as disgorgement damages for accidents (DDA), it is the minimum liability necessary to provide injurers with efficient incentives for care. We distinguish three forms of DDA with different information requirements and the same incentive effects. Because DDA is smaller than compensation, it typically induces more activity by injurers and less activity by victims. Calculating DDA generally requires different information than calculating compensation. Consequently, some imperfections in information cause courts to distort incentives for care under compensatory damages and not under DDA, while others have the opposite effect. Furthermore, the smaller disgorgement damages compared with compensation damages can shrink or magnify the distortion in incentives for care caused by courts' and injurers' errors.
Lo que años después se denominó el Sistema de Varsovia alcanzó un nivel considerable de insatisfacción entre académicos y aplicadores del Derecho, debido principalmente a la disparidad de textos legales y a la diversidad interpretativa. Tales falencias proporcionaron un escenario ideal para un litigio desafortunado, fenómeno descrito como forum shopping. La comunidad internacional se apresuró en la búsqueda de una solución, la cual parecía proveer un nuevo texto internacional. La respuesta vino con la Convención de Montreal de 1999. No obstante, discrepante conceptualización de rubros del daño entre los países de Derecho Civil Codificado y del Common Law, terminó por reintroducir un nuevo reto a la estandarización perseguida por la Convención. El análisis debe incluir los diversos modelos de responsabilidad previstos para los supuestos de muerte y lesión de pasajeros, por cuanto las soluciones difieren según el riesgo creado por el transportista aéreo internacional de pasajeros se base en culpa o en intención. Con el objetivo de evitar teorizaciones innecesarias, en consideración a que la Convención es norma en sentido material, cualquier estudio del ejercicio legal deberá basarse en su literalidad. A su vez, el análisis económico de la jurisprudencia invita a juristas a aceptar su validez en la corrección de los modelos legales, así como en la aprehensión de los principios y valores del Instrumento Internacional. El presente trabajo busca, en efecto, compatibilizar los métodos jurídico y económico desde una perspectiva comparativa; para determinar el futuro de la Convención, sus aciertos y fracasos.
The evolution of corporate criminal law is explained by the shifting risks of liability and loss between corporations and their agents in accommodating the illogic of vicarious liability. A vivid example of the effects of this risk shifting is seen with the recent emergence of the good citizen corporation movement. This movement encourages prosecutors with vast discretion to leverage indictments and convictions of subordinate agents, resort to civil and administrative actions against large and medium-sized corporations in place of criminal indictments, compromise agent indemnification, and enforce corporate self-regulation through elaborate plea agreements. Not surprisingly, organizations tend to conceive of corporate compliance, no less corporate ethics, as matters of risk management that serve an impor-tant insurance function. Corporations that purchase only the amount of compliance nec-essary to effectively shift liability away from the firm encourage moral hazards. After risks are transferred, the firm's incentive to maintain high levels of care decreases. Crimes once imputed to the firm remain with "wayward" agents. Given equivocal evidence of compliance effectiveness, the rise of the good corporate citizenship movement risks undermining the objectives and spirit of the corporate criminal law.
This Note provides a defense of the Supreme Court's decision in Credit Suisse Securities (USA) LLC v. Billing, in which the Court reaffirmed a broad standard for determining when securities market activities are impliedly immune from antitrust liability. It argues that, contrary to criticisms leveled by several commentators, Billing's implied immunity analysis is consistent with precedent and, moreover, that a broad grant of immunity is normatively desirable. Antitrust courts are likely to prohibit too much conduct in the securities area and to impose excessive liability even as to activities that merit prohibition. As a result, the concern with a narrow implied immunity doctrine is not just that it might produce overdeterrence ex post but that ex ante it might induce the SEC to forgo an optimal, nuanced regulatory approach in favor of completely authorizing a particular practice in order to preempt antitrust litigation.
Should a doctor be held liable under negligence law for harmful treatment she administered to a patient, if the treatment should have been considered negligent at the time it was administered but is now considered reasonable at the time of trial? Should a manufacturer be held liable for harm caused to a consumer from a product that is considered reasonable, and therefore non- defective, at the time of trial, but that should have been considered unreasonable, and therefore defective, at the time of its distribution More generally put: Should the law impose liability for ex-post right but ex-ante wrong behaviors? The answer offered by this Article is yes, on both efficiency and corrective justice grounds. The Article also proposes the adoption, in certain cases, of an alternative liability rule, " wherefry an injurer bears liability f his behavior is either ex-post or ex-ante wrong. Thus far, there are no reported cases where a plainliff brought suit for ex-post reasonable but ex-ante unreasonable behavior or products. This is puzzling; especially given the abundance of reverse cases before the courts, where the defendant's behavior or product is found to be ex-post unreasonable but ex-ante reasonable, and liability is not imposed. The Article's explanation for the lack of suits for ex-post right but ex-ante wrong behavior is plaintiffs' and their attorneys' strong belief that when a behavior, or a product, is considered reasonable at the time of trial, it is considered reasonable by the law. The claim made in the Article is that this belief is unfounded and a plaint if who proves ex-ante negligence should succeed at trial regardless of whether the defendant's behavior is considered reasonable at that time.
It is a virtual axiom in the world of law that legal norms come in two prototypes: rules and standards. The accepted lore suggests that rules should be formulated to regulate recurrent and frequent behaviors, whose contours can be defined with sufficient precision. Standards, by contrast, should be employed to address complex, variegated behaviors that require the weighing of multiple variables. Rules rely on an ex ante perspective and are therefore considered the domain of the legislature; standards embody a preference for ex post, ad hoc analysis and are therefore considered the domain of courts. The rules/standards dichotomy has become a staple in economic analysis of the law, as well as in legal theory in general. This Essay seeks to contribute to the jurisprudential literature by unveiling a new form of legal command: the catalog. A catalog, as we define it, is a legal command comprising a specific enumeration of behaviors, prohibitions, or items that share a salient common denominator and a residual category often denoted by the words "and the like" or "such as" that empowers courts to add other unenumerated instances. This Essay demonstrates that the catalog formation is often socially preferable to both rules and standards and can better enhance the foundational values of the legal system. In particular, catalogs are capable of providing certainty to actors at a lower cost than rules, while avoiding the costs of inconsistency and unbridled discretion inimical to standards. Moreover, the use of catalogs leads to a better institutional balance of powers between the legislature and the courts by preserving the integrity and autonomy of both institutions. This Essay shows that these results hold in a variety of legal contexts, including bankruptcy, intellectual property, criminal law, torts, constitutional law, and tax law.
Trade secret law arose to help companies protect confidential information (e.g., the Coca-Cola formula) from competitors seeking to copy their innovative efforts. But companies increasingly use trade secret law to block a wide swath of information from the scrutinizing eyes of consumers, public watchdog groups, and potential improvers. Companies can do this, in part, because trade secret law lacks clear limiting doctrines that consider the social benefits of unauthorized use. For example, trade secret law makes no allowance for the departing employee that uses proprietary information to create a substantially improved product or disclose public health risks. This Article argues that trade secret law's indifference to the social benefits of unauthorized use stands in contrast to other intellectual property doctrines, like patent and copyright. Copyright law incorporates the affirmative defense of "fair use," which aims to protect a variety of unauthorized but socially beneficial uses of another's copyrighted work (e.g., educational uses). To a lesser extent, patent law's reverse doctrine of equivalents and remedies analysis direct courts to consider the social benefits of a defendant's technological improvement. Such limiting doctrines act as safety valves to reconcile intellectual property rights with competing cumulative innovation and First Amendment interests. This Article demonstrates the merits of a similar safety valve in trade secret law and argues that courts should adopt a multi-factor "trade secret fair use" analysis to better address these competing concerns.
Legal and economic scholarship generally assumes that people weigh costs and benefits in responding to legal rules. This same scholarship often assumes, however, that trial judges applying the law do not compare the costs and benefits of their own effort when implementing legal rules. Consideration of trial court effort results in the so-called enforcer's dilemma, a similar problem that infects the decision of plaintiffs to bring suit. Suppose the trial court devotes lots of its own effort in every case fully to minimize errors; it never triages the cases, dismissing on the pleadings or on summary judgment. Knowing, for example, that negligence is apt to result in liability, relatively few will violate the legal rule if they could avoid doing so at a reasonable cost. The pool of defendants causing accidents will then consist mainly of those who were nonnegligent. Understanding as much, the trial court should not waste its own effort or judicial time confirming what it knows to be true. Instead, the trial court has an incentive to deviate, to dismiss the cases after a cursory investigation, contradicting our initial assumption about the trial court's behavior. Given this profitable deviation, game theorists say that looking closely at every case that comes in the courthouse door cannot be an equilibrium. Instead, with trial courts operating under budget constraints we demonstrate that the only equilibrium involves treating like cases differently. Given the same facts, sometimes the court looks closely at the merits, meaning they let the case proceed beyond dismissal or summary judgment. Other times they do not. Yet this trial court strategy is inconsistent with the rule of law. After pointing out this persuasive feature of ex post adjudication, the conclusion turns to appellate review as a possible fix. It turns out that this "fix" suffers the same problem.
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