Exploring economic and democratic theories of civil litigation: differences between individual and organizational litigants in the disposition of federal civil cases.

• Author: Hadfield, Gillian K.
• Position: The Civil Trial: Adaptation and Alternatives

INTRODUCTION I. THE DATA: TERMINATED FEDERAL CIVIL CASES II. 1970 TO 2000: THE CHANGING COMPOSITION OF FEDERAL CIVIL CASES A. 1970 to 2000: Three Decades of Change B. The Changing Distribution of "Nature of Suit" III. CODING LITIGANT TYPE--AUDITS, COMPARING 1970 AND 2000 A. Background: The Theoretical Significance of Litigant Type and Existing Empirical Tests B. Audits of Case Type IV. AUDITS OF DISPOSITION CODING V. DISPOSITION RATES BY LITIGANT TYPE A. Do Differences in Disposition Matter? B. Disposition Rates by Case Type: Three definitions of "Rate" CONCLUSION APPENDIX A. Coding Conventions for Nature of Suit Categories (Figure 1) B. Coding Conventions Used in Audits C. Sample Sizes in Audits INTRODUCTION

The legal system in modern market democracies performs multiple functions. It secures public order and protects against violence. It provides a mechanism for the peaceful resolution of disputes among family members, neighbors, and communities. It structures democratic political institutions and protects the civil rights of citizens. It provides a means for monitoring and controlling the exercise of public power. It promotes the achievement of collective moral goals, be they protection of the environment or the right to marry. It structures and regulates the operation of markets and commercial enterprises. It protects the autonomy, and promotes the responsibilities, of private individuals. And it coordinates and administers the collection of tax revenues and their expenditure on public goods and benefits.

As a democratic market society, our objectives for the operation of the legal system in these various functions are also different. When the legal system is securing public order, our goal is the reduction of violence and harm without compromising democratic constraints on state power. When the legal system is responding to disputes among family members, neighbors, and fellow citizens, our goal is peaceful resolution and the creation of incentives for appropriate levels of care and respect in our dealings with one another. When the legal system is securing civil rights or controlling the exercise of state power, our objective is to achieve democratically chosen ends of equality, dignity, autonomy, and fundamental fairness. When the legal system is securing the contractual commitments and property rights that undergird market exchange, our objective is largely to achieve efficiency and prosperity. And when the legal system is administering our welfare system, our objective is efficacy and fidelity to the goals of the system as established through democratic means.

But despite the substantial differentiation in the functions of our legal system, as a profession and as scholars we have largely approached the increasingly urgent questions of how the legal system is changing, how it needs to change, and how private alternatives to public judicial process can and should be promoted as if law were an undifferentiated whole. We approach the issue as if what is happening and what is appropriate in one sphere of the system is the same as what is happening and what is appropriate in every other sphere. We differentiate civil from criminal justice, but not much more.

On the descriptive side, for example, recent efforts to assess whether or not the trial is "vanishing" from the civil justice system (1) have thus far generally not drawn distinctions between cases in which commercial enterprises are contesting contract terms and cases in which individuals are seeking to protect their civil rights. We assume that what is happening on average is happening in the same way for all types of cases. As Marc Galanter famously posited thirty years ago in his seminal work on why the "haves" come out ahead, however, we should expect that there are significant differences in how corporations, organizations, governments, and private individuals fare in our legal system: these different entities bring different resources to bear, and they face different "repeat" versus "one-shot" incentives. (2) As I have explored elsewhere, the legal services retained by organizations differ fundamentally from those retained by individuals, as we would predict from the economics of the market for lawyers (3) and as has been documented by empirical studies of the legal profession. (4) If the number of trials is diminishing due to increased incentives to settle to avoid litigation costs or increased capacity among defendants to marshal effective arguments to support summary judgment, we should expect these incentives to differ across different types of litigants and types of cases, and hence for trial rates to be adjusting differently. Indeed, if our hypotheses are correct about the causes of diminished trial rates, we should be able to explain differences across different litigant types. The existing empirical literature on the legal system--thin as it is--nevertheless devotes next to no attention to distinctions between litigant types. (5)

On the normative side, we also fail to differentiate among the functions of the legal system in our assessments of the changing disposition of civil cases and the rapid developments in alternative dispute resolution (ADR). Concerns that crowded dockets and heightened standards for surviving summary judgment are "eroding our day in court and jury trial commitments," (6) for example, do not distinguish between commercial cases, in which parties may not seek jury trials, and tort or civil rights cases in which individuals seek their day in court to challenge corporate or official misconduct--cases in which parties often do seek juries. (7) Criticisms of federal judicial policy favoring settlement and the increased use of private ADR (8) emphasize the loss of public adjudication of "rights" and the expression of public "values" as if these rights and values have the same salience in these two types of cases. But do they have the same salience when we are talking about a corporation's right to cancel a contract as when we are talking about a person's right to collect disability benefits or to vote? Concerns about the use of judicial case management to restrict rights focus, indeed, on cases in which individual rights vis-a-vis the state are at stake. (9) Economic analyses of suit, settlement, and trial, on the other hand, assume that the only values at stake in the choice of a dispute resolution mechanism are the private costs of litigation compared to settlement. (10) This assumption may be tenable in the context of commercial disputes, but it is not so in the context of disputes that invoke public commitments to democratic values.

Even in our developing statutory and common law of ADR, there is relatively little attention paid to differences among the various types of cases in which ADR might be pursued. Interpretive canons that favor the finding of an agreement to arbitrate a matter are applied equally to sophisticated, heavily negotiated, commercial contracts and to adhesive, standard-form, consumer contracts. (11) Under U.S. Supreme Court cases interpreting the Federal Arbitration Act (FAA), (12) commercial entities will be compelled to arbitrate statutory claims under the antitrust laws against their competitors for the same reasons and in the same way as employees are compelled to arbitrate statutory claims under the civil rights laws against employers. Moreover, the FAA is read to preempt state efforts to regulate categories of contracts, such as particular consumer contracts, via federal policy clearly enacted in order to support the efforts of large commercial trade associations to obtain enforcement of their private dispute resolution systems. (13) Evidentiary rules and privileges protecting the confidentiality of mediation are applied across the board, whether to the resolution of disputes between divorcing spouses or to disputes between citizens and the state. (14) The parties' legal capacity to keep settlement agreements secret is largely the same whether the agreement pertains to a unique commercial dispute or a mass tort. (15) Whether seeking to promote alternatives to litigation to resolve a family dispute over custody (16) or to resolve a dispute arising under a commercial construction, contract courts speak the same language, emphasizing overburdened dockets and the merits of private problem-solving.

The issues at stake in our understanding of what is happening to civil cases and the efforts to craft alternatives to traditional civil litigation, however, absolutely require that we differentiate between litigants, between legal functions, and between the different goals of our legal system. It may be that the disappearance of public civil trials to resolve commercial contract disputes is of no consequence; indeed, it may be an efficient response to the increasing cost of the public system. The same cannot be said of the disappearance--if it is a real phenomenon--of public adjudication of civil rights or the claims of individuals about the misconduct of public or corporate actors. Private dispute resolution may be perfectly appropriate and something to be promoted in the resolution of family disputes. But it may be inappropriate in the resolution of patent disputes in which two corporations may bargain over the division of monopoly rents, or in the resolution of disputes between the state and citizens about how electoral districts' boundaries are determined. If judicial resources are strained by caseloads, which litigants are flooding in--corporate or individual? And if rationing and an attempt to reduce the number of cases to which judges and courts devote their efforts are required, which cases should be diverted into private dispute resolution and which should be retained for public adjudication?

In this Article I present preliminary data on the differences between individual and organizational litigants in the disposition of federal civil cases. This Article follows on an earlier...