Of Equal Wrongs and Half Rights

Abstract:     
With a tiny handful of exceptions, common law jurisprudence is predicated on a "winner-take-all" principle: the plaintiff either gets the entire entitlement at issue or collects nothing at all. Cases that split an entitlement between the two parties are exceedingly rare. While there may be sound reasons for this all-or-nothing rule, we argue in this Article that the law should prefer equal division of an entitlement in a limited but important set of property, tort and contracts cases. The common element in such cases is a windfall, a gain or loss that occurs despite the fact that no ex ante effort to promote, prevent, or allocate it would be cost-justified or reasonable. We show that an equal division of disputed windfalls in these cases promotes both efficiency and fairness, and also has the virtue of clarifying some tortured legal doctrines.

We also address and reject the standard objections to split-the-difference remedies. We demonstrate that using such remedies is unlikely to distort judicial incentives, and that it is likely to improve the integrity of the judicial system. Counterintuitively, we show that giving judges the option to order a compromise remedy in windfall disputes is likely to reduce judicial error, rather than to increase it, and that the valuation problems that attend the introduction of a split-the-difference rule are insignificant.

Number of Pages in PDF File: 52

Keywords: Property, Torts, Contracts, Jurisprudence, Common Law, Winner-Take-All, Split Entitlement, Windfall, Efficiency, Fairness, Judicial Incentives, Judicial Error, Valuation

JEL Classification: K11, K12, K13, K40

working papers series