A New Options Theory for Risk Multipliers of Attorney's Fees in Federal Civil Rights Litigation

Abstract:     
This Article provides five distinct contributions to the literature about federal civil rights litigation. First, the Article applies a new and very general technique of real options analysis to federal civil rights litigation. A real options approach to litigation recognizes that litigation contains a series of continuation options. Second, the Article demonstrates that a real options theory of federal civil rights litigation provides insights different from traditional views on the incentives of plaintiffs' attorneys to accept cases. Third, the Article derives an options-based risk multiplier that lies in between the current Supreme Court position of no risk multiplier and the traditional risk multiplier equal to the reciprocal of the initial probability of the plaintiff winning at trial. Fourth, the Article makes use of a real options perspective to investigate plaintiffs' attorneys incentives to settle lawsuits. Finally, the paper utilizes a real options theory of federal civil rights litigation to suggest reforming the statutory law or judicial doctrine of risk multipliers to compensate plaintiffs' attorneys for the risk of not getting paid if they lose.

Note: This is a description of the paper and is not the actual abstract.

JEL Classification: G13, D81, K3, K4

Accepted Paper Series