17 Pages Posted: 6 Jan 2016 Last revised: 22 Apr 2016
Date Written: January 1, 2016
In recent years, federal courts have heard, without clear subject matter jurisdiction, contract disputes involving billions of dollars worth of securitized financial instruments (SFIs). These SFI disputes are litigated in federal court under the federal interpleader statute, which specifies that a federal court has subject matter jurisdiction over these cases only when parties deposit the disputed amount with the court. SFI litigants have ignored this requirement, so courts have, at best, uncertain jurisdiction over these cases. Why have no parties raised the jurisdictional defect, even though some would stand to gain from raising it? This Essay advances game theoretical explanations for litigants’ puzzling silence in these major post-financial crisis cases, and argues that parties may strategically value litigating in federal court under jurisdictional uncertainty over other alternatives.
Keywords: securitized financial instruments (SFI), SFI disputes, post financial crisis cases
JEL Classification: K00, K22
Suggested Citation: Suggested Citation
Hwang, Cathy and Edwards, Benjamin P., The Value of Uncertainty (January 1, 2016). Northwestern University Law Review Online, Vol. 110, p. 19, 2015 (reprinted in Northwestern University Law Review, Vol. 1, No. 1, p. 283, 2015); Rock Center for Corporate Governance at Stanford University Working Paper No. 215. Available at SSRN: https://ssrn.com/abstract=2711781
By Adam Levitin