Law's Information Revolution as Procedural Reform: Predictive Search as a Solution to the 'In Terrorem' Effect of Externalized Discovery Costs
Bruce H. Kobayashi
George Mason University - School of Law
October 9, 2013
George Mason Law & Economics Research Paper No. 13-56
By allowing parties to proceed on an informed basis, liberal discovery under the Federal Rules of Civil Procedure was intended to support the Rule 1’s idealized goal of securing the "just, speedy, and inexpensive" resolution of civil cases. The large costs of conducting discovery may instead produce the opposite result. The creation of cross-party agency costs and the litigants’ ability to externalize much of the effort and costs of discovery to their adversary can generate litigation that is expensive, slow, and unjust. The problem may be particularly acute in cases involving vast amounts of electronically stored information, where the amount of data and potential for externalized costs of discovery can rise exponentially. This paper examines how the expanded use of technology can serve as de facto procedural reform. Use of advanced technological tools such as predictive search allow the tasks and costs to be allocated in a way that simultaneously yields better incentives, mitigates asymmetric cost and information problems, and reduces cross‐party agency costs. This in turn mitigates both the problems of overdiscovery and the in terrorem effect of discovery costs on pre‐discovery settlements. The result is more information and lower costs, allowing the system of legal discovery to move toward fulfilling the idealized goals of Rule 1.
Number of Pages in PDF File: 45
Keywords: asymmetric information, cost allocation, discovery, economic analysis, ESI, Federal Rules of Civil Procedure, FRCP, innovation, keyword search, legal services, manual search, predictive search, Rule 1, settlements, technology
JEL Classification: D61, D62, D63, D82, K10, K41
Date posted: October 14, 2013
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