Delegation in a Multi-Tier Court System: Are Remands in the U.S. Federal Courts Driven by Moral Hazard?

54 Pages Posted: 4 Jan 2018 Last revised: 23 Apr 2020

See all articles by Roee Sarel

Roee Sarel

Institute of Law and Economics, University of Hamburg

Melanie Demirtas

Georgetown University McDonough School of Business

Date Written: April 22, 2020

Abstract

We analyze the countervailing incentives that mid-level appellate judges face when deciding whether to remand a case back to the lower court. Although appellate courts' ability to remand cases can mitigate moral hazard problems, by restraining trial court judges, it may sometimes instead exacerbate such problems by enabling the mid-level appellate judges to circumvent the top-level court's preferences through delegation. Our empirical assessment reveals a `Subsequent Remand Effect': cases that are remanded by the Supreme Court to the appellate court are far more likely to be subsequently remanded again to the district court compared to other cases. We investigate whether this effect originates from legitimate case-relevant reasons or from moral hazard by exploiting variations in ideological distances between court levels. A supplementary text analysis is also implemented for robustness. We find that the size of the effect varies with the composition of ideologies, which seems consistent with moral hazard.

Keywords: appeals, remands, delegation, federal courts, judicial ideology, ideological distances, strategic delegation

JEL Classification: K41, D02, P48

Suggested Citation

Sarel, Roee and Demirtas, Melanie, Delegation in a Multi-Tier Court System: Are Remands in the U.S. Federal Courts Driven by Moral Hazard? (April 22, 2020). Available at SSRN: https://ssrn.com/abstract=3094634 or http://dx.doi.org/10.2139/ssrn.3094634

Roee Sarel (Contact Author)

Institute of Law and Economics, University of Hamburg ( email )

Johnsallee 35
Hamburg, 20148
Germany

Melanie Demirtas

Georgetown University McDonough School of Business ( email )

37th and O Streets, N.W.
Washington, DC DC 20057
United States

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