Document Type
Article
Publication Date
2016
Publication Information
35 Civ. Just. Q. 219 (2016)
Abstract
The costs-budget system implemented in the Jackson reforms promises to keep litigation costs within socially appropriate bounds. To realise this promise fully however; the goal of this reform must be reoriented. Using real-options analysis, this article demonstrates that costs budgeting in its present form often fails to achieve a reduction of litigation costs to the socially appropriate level–defined to be the point at which the social benefits of litigation exceeds its costs–because parties may have a private incentive to invest socially excessive amounts on litigation. This result is true under both the English ("loser pays") and the American ("bear your own costs") rules. Under a loser-pays system, however, the ability of the parties to consent to each others budgets can create particular incentives for parties to spend more–sometimes much more–on civil litigation than is socially desirable. The article suggests that, if litigation costs are to be kept to a socially appropriate level, the present costs-budget system must be reoriented into a "litigation-budget" system in which judges limit budgets to socially justifiable levels. This solution raises both theoretical and practical problems to which the article responds. It describes how a judge can practically make the calculation of social benefits and costs and keep parties from overspending their budgets to obtain private advantage. It also suggests that the use of DBAs is inconsistent with this solution, and that judges must calculate contingency fees more along the model of CFAs in order for litigation budgeting to succeed.
Recommended Citation
Jay Tidmarsh,
Realising the Promise of Costs Budgets: An Economic Analysis,
35 Civ. Just. Q. 219 (2016).
Available at:
https://scholarship.law.nd.edu/law_faculty_scholarship/1315