The Problem of Biased Precedents

Abstract

This Article addresses the problem of biased precedents, wherein sophisticated repeat players, often corporate and state entities armed with superior resources and a vested interest in shaping the law, manipulate legal proceedings to systematically establish self-advantageous precedents. Specifically, by strategically choosing to litigate cases they anticipate will lead to favorable precedents, and settling those expected to produce unfavorable outcomes, these players systematically bias the law over time to their advantage, at the expense of one-shot parties and society at large. The problem of biased precedents challenges the commonly held view about the efficiency and fairness of the legal system and raises questions about the social benefits of settlements. The Article introduces two innovative, implementable, market-based solutions, which are inspired by the realm of insurance: Judgment Insurance (JI) and Settlement Insurance (SI). Judgment Insurance involves a third-party "insurer," which could be an NGO, an interest group, or a state entity, that cares about the precedential value of a certain case and is willing to pay for it, who provides the plaintiff, a premium-free coverage for the expected judgment that the plaintiff is likely to receive. SI operates similarly to JI, but insures an existing or a future settlement offer rather than an expected court judgment. Both mechanisms aim to incentivize one-shot litigators to refrain from settling their cases and instead pursue them to a conclusion with a precedential court decision. They help level the legal playing field between powerful corporate entities and weaker individuals, ensuring that precedents are established in an impartial manner. After introducing JI and SI and demonstrating their superiority over existing legal mechanisms that could, in theory, tackle the problem of biased precedents, the Article explores potential obstacles and strategic challenges associated with JI and SI. It shows that both are doctrinally feasible and have the potential to restore justice to the legal system.