Legal Compliance and Litigation Spending Under the English and American Rule: Theory and Experimental Evidence

29 Pages Posted: 17 Feb 2016

See all articles by Baptiste Massenot

Baptiste Massenot

University of Toulouse - Toulouse Business School

Maria Maraki

University of Lausanne

Christian Thöni

University of Lausanne

Date Written: November 30, 2015

Abstract

We investigate fee-shifting rules in litigation with regard to their impact on legal compliance, settlement, and litigation spending. We develop a model to compare the English rule, in which the winning party is compensated by the losing party, to the American rule, in which parties pay their own expenses independent of the outcome of the trial. We conduct an experiment to put the predictions to an empirical test. In accordance with the model, we find that litigants spend substantially more under the English rule than under the American rule. Defendants are significantly more compliant under the English rule when out-of-court settlement is not possible, but not when settlement is possible. Settlement rates do not significantly differ between the two rules, nor do they differ within the subsets of strong or weak cases.

Keywords: litigation, experiment, American rule, English rule, fee-shifting, loserpays, legal compliance, settlement, litigation spending

JEL Classification: K13, K41, C91, C72, D44

Suggested Citation

Massenot, Baptiste and Maraki, Maria and Thöni, Christian, Legal Compliance and Litigation Spending Under the English and American Rule: Theory and Experimental Evidence (November 30, 2015). Available at SSRN: https://ssrn.com/abstract=2732759

Baptiste Massenot

University of Toulouse - Toulouse Business School ( email )

20, bd Lascrosses
BP 7010
Toulouse, 31068
France

Maria Maraki

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Christian Thöni (Contact Author)

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

HOME PAGE: http://https://sites.google.com/site/christianthoeni/

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