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Litigation Cost Strategies from Economics

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Legal Strategies

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Abstract

Starting with a simple economic model of the value of civil litigation from each side’s perspective, this paper analyses a wide range of potential litigation cost strategies, settlement offers and negotiations, together with relevant applications and insights from game theory. Specific issues examined include: optimal settlement agreements, optimal settlement timing, optimal choice of lawyers; principal–agent problems aligning lawyer cost incentives; optimal client–lawyer contracts; “Conditional Fee Agreements” (CFAs); success rules and size of success premia; the exploitation and mitigation of liquidity and bankruptcy constraints; impact of collateral, “Security for Costs” and “Freezing Orders”; optimal “Part 36 Offers”; public and “without prejudice” offers; fixed rate and state-contingent offers; the role of mediation and alternative dispute resolution (ADR); the effect of litigant group size, co-ordination and class actions; rationale for confidential no-liability settlement agreements; effects of legal aid; time-value to trial and “optionality” of news; the impact of the “Law of Costs”; optimal trial cost applications and requests for “leave to appeal”. Both familiar and paradoxical new results are confirmed by the analysis.

This article relates in part to the Law of England and Wales as of June 2007. Copyright reserved Rupert Macey-Dare.

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Authors and Affiliations

  1. St. Cross College, Oxford, UK

    Rupert Macey-Dare

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  1. Rupert Macey-Dare
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  1. de l¿Union Européenne, Tribunal de la Fonction Publique, Luxembourg, 2925, Luxembourg

    Antoine Masson

  2. Faculty of Law, University of Manitoba, Winnipeg, R3T 2N2, Canada

    Mary J. Shariff

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Macey-Dare, R. (2009). Litigation Cost Strategies from Economics. In: Masson, A., Shariff, M. (eds) Legal Strategies. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-02135-0_7

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