Litigation with Inalienable Judgments

Journal of Legal Studies, vol. 52(1), pp. 1-50 (2023)

50 Pages Posted: 6 Apr 2022 Last revised: 2 Jun 2023

See all articles by Erik Hovenkamp

Erik Hovenkamp

Cornell University - Law School

Steven C. Salop

Georgetown University Law Center

Date Written: April 1, 2022

Abstract

We study strategic behavior by private litigants when courts' judgments are "inalienable" in the sense that it is unlawful to contract around them ex post. Inalienable judgments arise in many contexts, including antitrust, labor law, intellectual property, unfair competition, and various types of public interest litigation. We show that inalienability systematically creates incentives for problematic rent-seeking behaviors: strategic investments intended to influence the outcome of litigation, and collusive ex ante settlements that enrich the parties at the public's expense. These problems arise because the parties generally have asymmetric stakes, and asymmetric stakes affect strategic behavior differently when judgments are inalienable. Our analysis offers new insights into the normative evaluation of private settlements, and establishes a underlying economic connection between problematic settlements spanning a wide range of legal contexts. It also sheds new light on the selection of disputes for litigation.

Keywords: litigation, settlement, inalienability, rent-seeking, collusion, law and economics, antitrust

JEL Classification: K00, K10, K20, K41, K42, D23, D63, D74, L40

Suggested Citation

Hovenkamp, Erik and Salop, Steven C., Litigation with Inalienable Judgments (April 1, 2022). Journal of Legal Studies, vol. 52(1), pp. 1-50 (2023), Available at SSRN: https://ssrn.com/abstract=4072927 or http://dx.doi.org/10.2139/ssrn.4072927

Erik Hovenkamp (Contact Author)

Cornell University - Law School ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Steven C. Salop

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9095 (Phone)
202-662-9497 (Fax)

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