Litigation Discovery Cannot Be Optimal but Could Be Better: The Economics of Improving Discovery Timing in a Digital Age
Scott A. Moss
University of Colorado Law School
April 15, 2008
Duke Law Journal, Forthcoming
U of Colorado Law Legal Studies Research Paper No. 08-13
Cases are won and lost in discovery, yet discovery draws too little academic attention. Most scholarship focuses on how much discovery to allow, not how courts decide discovery disputes - which, unlike trials, occur in most cases. The growth of e-discovery - imprudent emails or lingering deleted files - makes cost issues increasingly salient, but the e-discovery rules just reiterate existing cost/benefit proportionality limits. Proportionality limits are topic of broad consensus among civil procedure scholars and economists, but this Article deems them impossible to apply effectively. Proportionality limits fail to curb discovery excess while also disallowing discovery meritorious cases need, resulting in bad cases dominating good ones. This Article acknowledges proportionality's flaws but rejects the consensus blaming bad rulemaking or judging. Rather, proportionality requires impossible comparisons: how can courts compare discovery value and cost before parties gather the evidence? Like other arguments that procedural rulings are never truly separate from case merits, this Article notes how discovery has more probative value in the closest cases - yet case merits remain uncertain in discovery, when courts cannot yet examine all the evidence. In game theory terms, parties with discovery disputes cannot convey case merit credibly; courts have too little information, so low-merit parties can claim high merit, and courts act as if all cases warrant similar discovery. In this pooling equilibrium, ruling the same on all cases in the pool, regardless of merit, is courts' best strategy but a sub-optimal one, yielding too much discovery in low-merit cases, too little in higher-merit ones. Thus, the quest for better discovery has disappointed not because of bad rules or decisions, but because courts and parties are stuck in a pooling equilibrium with information-timing circularity: optimal evidence-gathering requires merits analysis, which requires evidence-gathering.
One answer is to defer close decisions on possibly useful but costly evidence until meritorious cases separate from the pool, turning pooling equilibria into separating equilibria. Summary judgment can be this separation: cases going to trial, post-summary judgment, likely have 50/50 odds - better than most. Costly evidence has more value in 50/50 cases, where juries struggle to reach verdicts, than in weaker or stronger cases. No one yet has proposed post-summary judgment discovery to redress the costly discovery dilemma (summary judgment typically follows discovery), but high-cost evidence can be an exception: cases surviving summary judgment are close calls warranting more fact-gathering, so some costly discovery regularly denied now should be allowed after summary judgment. Thus, the existing debate is too focused on discovery quantity; it should focus more on discovery timing. Existing rules give courts discretion to use this proposal, but a new rule could minimize the risk of misusing the proposal to deny more discovery. This Article concludes by briefly noting how economic analyses must consider the details and information timing of the litigation process.
Number of Pages in PDF File: 55
Keywords: Civil procedure, discovery, litigation, economic analysis, pooling equilibrium, separating equilibrium, game theory, information economics
JEL Classification: K00, K4, K40, K41
Date posted: April 17, 2008