The Law and Economics of Jurisdiction

Abstract:     
Few legal rules are more absolute than the nullity of any and all acts by a federal court lacking jurisdiction. Although it serves important structural policies (separation of powers; federalism), voiding federal court judgments for lack of jurisdiction imposes countervailing costs: incentives to behave strategically in order to garner two chances to try the same case ('two bites at the apple'), and the waste of all the federal court’s factual and legal findings. Four cases decided during the Supreme Court’s Fall 2005 Term highlighted the complexity of, and the existence of critical private (asymmetric) information about, federal jurisdiction. Interaction between complexity and private information make strategic manipulation of jurisdiction both feasible and difficult to distinguish from innocent mistakes. A number of lower court opinions suggest that strategic abuse of federal court jurisdiction occurs with some frequency. Formal models of parties’ incentives to seek 'two bites at the apple' highlight the importance of asymmetric information for such strategic behavior. Perhaps more surprisingly, parties may litigate in federal court despite mutual knowledge of a fatal jurisdictional defect.

Working Paper Series