Managerial Judges: An Economic Analysis of the Judicial Management of Legal Discovery

We characterize how the process of publicly-gathering information via discovery affects strategic interactions between litigants. It allows privately-informed defendants to signal through the timing of settlement offers, with weaker ones attempting to settle pre-discovery. Discovery reduces the probability of trial. Properly designed limited discovery reduces expected litigation costs. Stronger defendants gain more (lose less) from a given amount of discovery. We find that the court should grant more discovery when defendants are believed to be stronger and should grant discovery on more efficient sources of information, leaving less efficient ones to trial.

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“…Schrag (1999) lets each litigant choose their discovery effort, where the return from discovery effort is higher when an opponent is weaker.…”

Section: Introductionmentioning

confidence: 99%

The optimal extent of discovery

Lee

Bernhardt

2016

The RAND J of Economics

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“…Schrag (1999) observes that the "proponents of managerial judging identify abuse of the pretrial discovery privilege as a main cause of both high litigation costs and the slow resolution of disputes. Judges can improve outcomes by intervening in the earliest stages of legal disputes."…”

Section: Introductionmentioning

confidence: 99%

Litigation and settlement under judicial agency

Koçkesen

Usman

2012

International Review of Law and Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe model the settlement of a legal dispute when the trial outcome depends on the behavior of a strategically motivated judge. A defendant, who is uninformed about the level of harm that he has caused, makes a take-it-or-leave-it offer to an informed plaintiff. If the parties cannot agree on a settlement and the case goes to trial, the judge decides how much effort to exert in discovering the actual damages. We show that under very general assumptions this model exhibits multiple equilibria. In some equilibria, the judge exerts less effort and more cases settle out of court, whereas in others the opposite occurs. We also show that the judge prefers the low effort equilibria with high settlement rate and argue that a "managerial judge" could easily steer the parties towards low effort equilibria. This may be deemed undesirable since in low-effort equilibria, the terms of the settlement heavily favor the informed plaintiff, and this in turn induces over-investment in ex ante preventive care by the defendant.JEL Classification: K00, K41, D82, C78.

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“…Our framework, however, accommodates the presence of a discovery phase, provided that expected payoffs depend on pre-existing heterogeneity and case preparation efforts only. Sobel (1989), Cooter and Rubinfeld (1994), Hay (1995), Schrag (1999), and Schwartz and Wickelgren (2009) have investigated settlement prior to discovery. Some of these papers consider litigation efforts, thereby endogenizing case strength.…”

Section: Introductionmentioning

confidence: 99%

“…In contrast to Hay's framework, investment occurs in the present paper prior to discovery, and is observed by the defendant. Schrag (1999) investigates the effects of regulating discovery efforts in a model with two types. If they fail to settle early, the litigants engage in simultaneous discovery efforts, the payoffs of which are modeled through reduced-form profit functions.…”

Section: Introductionmentioning

confidence: 99%

“…The settlement decisions alter the beliefs of the uninformed party and, in turn, her discovery efforts, which is anticipated at the time of the settlement bargaining. Schrag (1999) finds that the prospect of future discovery can undermine the incentives to settle early. Schwartz and Wickelgren (2009) study the incentives of plaintiffs with negative expected value cases to file a suit.…”

Section: Introductionmentioning

confidence: 99%

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