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Avraham D. Tabbach - One of the best experts on this subject based on the ideXlab platform.
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Deterrence and tax treatment of monetary sanctions and Litigation Costs
International Review of Law and Economics, 2009Co-Authors: Jacob Nussim, Avraham D. TabbachAbstract:The tax treatment of monetary sanctions and Litigation expenditures varies across legal jurisdictions and time. The effects of these different tax regimes - particularly, on crime deterrence - have not been fully explored. Instead, legal intuitions in court decisions and legislative reforms are found. This paper explores the effects of these tax regimes. It shows that our common intuitions are sometimes misguided, since we tend to ignore cross-effects between crime and Litigation. For example, contrary to commonly held views, it is shown that non-deductibility of monetary sanctions may increase the level of crime, if Litigation expenses are deductible. In addition, if deductibility of legal expenses depends only on a successful trial outcome, this may also increase amounts spent on Litigation and time allocated to crime. As this paper shows, however, a complete deductibility regime, under which both monetary sanctions and Litigation expenditures are deductible, maintains the pre-tax levels of crime and Litigation expenditures for risk-neutral offenders. The paper further explores the effects of different tax reforms.
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Deterrence and Tax Treatment of Monetary Sanctions and Litigation Costs
2004Co-Authors: Jacob Nussim, Avraham D. TabbachAbstract:This paper explores the effects of alternative tax rules regarding monetary sanctions and Litigation Costs on the levels of criminal activity and Litigation expenditure. The key insight is that taxation may affect crime not only by changing the relative expected returns from legal and criminal activity but also through its effect on Litigation. The cross-effects of crime and Litigation expenditures, that is, the fact that criminal activity and Litigation expenditure may be complements, yield interesting, counter-intuitive results. For example, contrary to commonly held view, non-deductibility of monetary sanctions may increase the level of crime, if Litigation expenses are deductible. In addition, if deductibility of legal expenses depends on a successful trial outcome, this may also increase amounts spent on Litigation and time allocated to crime. As this paper shows, however, pure income tax, that is, income tax allowing deductions for monetary sanctions and Litigation Costs, maintains the pre-tax levels of crime and Litigation expenditures for risk-neutral offenders. The paper further explores related policy implications.
Jacob Nussim - One of the best experts on this subject based on the ideXlab platform.
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Deterrence and tax treatment of monetary sanctions and Litigation Costs
International Review of Law and Economics, 2009Co-Authors: Jacob Nussim, Avraham D. TabbachAbstract:The tax treatment of monetary sanctions and Litigation expenditures varies across legal jurisdictions and time. The effects of these different tax regimes - particularly, on crime deterrence - have not been fully explored. Instead, legal intuitions in court decisions and legislative reforms are found. This paper explores the effects of these tax regimes. It shows that our common intuitions are sometimes misguided, since we tend to ignore cross-effects between crime and Litigation. For example, contrary to commonly held views, it is shown that non-deductibility of monetary sanctions may increase the level of crime, if Litigation expenses are deductible. In addition, if deductibility of legal expenses depends only on a successful trial outcome, this may also increase amounts spent on Litigation and time allocated to crime. As this paper shows, however, a complete deductibility regime, under which both monetary sanctions and Litigation expenditures are deductible, maintains the pre-tax levels of crime and Litigation expenditures for risk-neutral offenders. The paper further explores the effects of different tax reforms.
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Deterrence and Tax Treatment of Monetary Sanctions and Litigation Costs
2004Co-Authors: Jacob Nussim, Avraham D. TabbachAbstract:This paper explores the effects of alternative tax rules regarding monetary sanctions and Litigation Costs on the levels of criminal activity and Litigation expenditure. The key insight is that taxation may affect crime not only by changing the relative expected returns from legal and criminal activity but also through its effect on Litigation. The cross-effects of crime and Litigation expenditures, that is, the fact that criminal activity and Litigation expenditure may be complements, yield interesting, counter-intuitive results. For example, contrary to commonly held view, non-deductibility of monetary sanctions may increase the level of crime, if Litigation expenses are deductible. In addition, if deductibility of legal expenses depends on a successful trial outcome, this may also increase amounts spent on Litigation and time allocated to crime. As this paper shows, however, pure income tax, that is, income tax allowing deductions for monetary sanctions and Litigation Costs, maintains the pre-tax levels of crime and Litigation expenditures for risk-neutral offenders. The paper further explores related policy implications.
Lucian Arye Bebchuk - One of the best experts on this subject based on the ideXlab platform.
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The Effect of Offer-of-Settlement Rules on the Terms of Settlement
National Bureau of Economic Research, 2000Co-Authors: Lucian Arye Bebchuk, Howard F. ChangAbstract:Under an offer of settlement' rule, a party to a lawsuit may make a special offer to settle with the other party, such that if the other party rejects this offer, then this offer (unlike an ordinary offer) becomes part of the record in the case and may affect the allocation of Litigation Costs. Specifically, if the parties litigate to judgment, then the allocation of Litigation Costs may depend on how the judgment compares with the special offer. This paper develops a model of bargaining under offer-of-settlement rules that can be used to analyze the effect that such rules have on the terms of settlement. The analysis first sets forth a general principle that identifies the settlement amount under any such rule. We then apply this principle to derive the settlement terms under the most important of these rules, and we identify a large set of seemingly different rules that produce identical settlements. Our results have both positive and normative implications.
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The Effect of offer-of-Settlement Rules on the Terms of Settlement
SSRN Electronic Journal, 1998Co-Authors: Lucian Arye Bebchuk, Howard F. ChangAbstract:Under an "offer-of-settlement" rule, if a party to a lawsuit makes a formal offer to settle which the other party rejects, the offer nonetheless becomes part of the record, and thus may affect the allocation of Litigation Costs. If the parties litigate to judgement, the allocation of Litigation Costs may depend on how the judgement compares with the formal offer. This paper examines the effect that such rules have on the terms of settlement. The analysis first sets forth a general principle that identifies the settlement amount under any such rule. We then apply this principle to derive the settlement terms under the most important of these rules, and we identify a large set of seemingly different rules that produce identical settlements. The analysis has substantial policy implications; in particular, it shows how offer-of-settlement rules can be designed, when deemed desirable, to ensure that settlement terms not deviate from but rather mimic the expected judgement.
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On Divisibility and Credibility: The Effects of the Distribution of Litigation Costs Over Time on the Credibility of Threats to Sue
1996Co-Authors: Lucian Arye BebchukAbstract:When the Litigation Costs of a potential plaintiff exceed the expected judgment in the case, the plaintiff's threat to sue can nevertheless succeed in extracting a settlement offer if that threat is credible. This paper analyzes how the credibility of such threats is shaped by the way in which the parties' Litigation Costs are expected to be distributed over time. The analysis starts by demonstrating that greater divisibility of Litigation Costs may help -- and can never hurt -- the plaintiff's strategic position. The analysis then identifies the strategic implications of the order in which the parties must incur the bulk of their Litigation Costs; it is shown that, contrary to what might be initially thought, the plaintiff will be better off if the defendant's Costs must largely be incurred after the plaintiff's cost. Finally, for the various possible distributions of parties' Costs over time, the analysis identifies necessary and sufficient conditions for the plaintiff's threat to be credible (and, therefore, to succeed in extracting a settlement).
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A New Theory Concerning the Credibility and Success of Threats to Sue
The Journal of Legal Studies, 1996Co-Authors: Lucian Arye BebchukAbstract:Negative-expected-value (NEV) suits are ones in which the expected Litigation Costs exceed the expected judgment. This article offers a new theory for the credibility and success of plaintiffs with NEV suits. The theory is based on recognizing that Litigation Costs are generally not incurred all at once but rather over time; this divisibility of the Litigation process is shown to play a crucial strategic role. The analysis identifies the conditions under which a plaintiff with an NEV suit will have a credible threat and succeed in extracting a settlement. It is demonstrated that plaintiffs have credible threats in a much wider set of cases--including in numerous small-stakes cases--than has been suggested by prior economic analysis of the subject. Copyright 1996 by the University of Chicago.
Thomas J. Miceli - One of the best experts on this subject based on the ideXlab platform.
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The optimal adjustment to liability when Litigation is costly: A note
International Review of Law and Economics, 2019Co-Authors: Jef De Mot, Thomas J. MiceliAbstract:Abstract We show that the optimal liability award with variable Litigation Costs may be either larger or smaller than the sum of the victim's harm and Litigation Costs. The reason is that there are two countervailing effects at play. On the one hand, larger damage awards lead to increased Litigation expenditures, which have a dampening effect on optimal damages. On the other hand, variable Litigation Costs only make sense if the parties anticipate a gain from expending Litigation effort, which necessarily translates into a probability of plaintiff victory that is less than one. Consequently, the deterrence function of the trial is mitigated, justifying an upward adjustment in the optimal damage award. The optimal adjustment balances these two effects.
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“Piggyback” lawsuits and deterrence: Can frivolous Litigation improve welfare?
International Review of Law and Economics, 2014Co-Authors: Thomas J. Miceli, Michael P. StoneAbstract:Previous literature on frivolous lawsuits has focused on Litigation Costs and the optimal settlement-trial decision of defendants, but has not examined how they affect deterrence. This paper considers whether there are circumstances under which frivolous suits might actually increase deterrence, and thereby possibly improve welfare. The reason this is possible is that in a costly legal system, injurers will generally be underdeterred because they will ignore the Litigation Costs of plaintiffs. The fact that some uninjured plaintiffs will succeed in obtaining settlements may therefore affect the care and activity choices of injurers in a socially valuable way.
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Optimal attorney advertising
International Review of Law and Economics, 2012Co-Authors: Michael P. Stone, Thomas J. MiceliAbstract:Attorney advertising routinely targets tort victims. This paper reviews legal services advertising restrictions in the United States and abroad. A theoretical model is developed which incorporates advertising intensity, Litigation Costs, and an endogenous number of lawsuits. Since advertising induces victims to bring suit, it increases the level of injurer care. However, Litigation Costs are also incurred. At the optimum, the marginal benefit of deterrence equals the sum of marginal Litigation and advertising Costs. Extensions of the model are considered, including the possibility that advertising stirs up frivolous lawsuits and that firms use advertising to rent seek. Fee shifting and alternative fee structures are also discussed. Although blanket prohibitions on attorney advertising are likely suboptimal, some regulations may be justified.
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Deterrence, Litigation Costs, and the statute of limitations for tort suits
International Review of Law and Economics, 2000Co-Authors: Thomas J. MiceliAbstract:The conventional justification for statutes of limitations is that evidence deteriorates over time, thereby increasing the likelihood of legal error. The optimal statute length balances this cost of a longer statute length against the dilution in deterrence that results from a shorter length. This paper develops a model to show that a finite statute length is optimal even in a world without legal error. The trade-off involves only Litigation Costs and deterrence: a shorter statute reduces deterrence but also saves on Litigation Costs by limiting the number of suits. The paper examines this trade-off under both strict liability and negligence and shows that the optimal statute is (probably) shorter under strict liability. Intuitively, the marginal benefit of lengthening the statute is higher under a negligence rule because, by increasing the length of time over which victims can sue, deterrence is enhanced, which reduces the likelihood that a given injurer will be found negligent. As a result, the plaintiff's chances of winning are reduced, thereby resulting in fewer suits being filed. The paper concludes by presenting evidence for the theory in the form of statutes of repose for products liability suits, the discovery rule under negligence law, and the difference in the statutes of limitation for trespass versus nuisance.
Jiang Zuoli - One of the best experts on this subject based on the ideXlab platform.
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an analysis on the causes and countermeasures of the excessive pre Litigation Costs of wto Litigations by developing countries from the perspective of encouraging developing countries participation
World Trade Organization Focus, 2012Co-Authors: Jiang ZuoliAbstract:The legalization, obscure rules and complex procedures of the west jurisprudence, ambiguous regulations of the different and preferential treatment and the lack of lawsuit experiences are the main causes of the high Costs of the pre-Litigation, and thus restrict developing countries’ participation for the protection of their interests. Developed countries have accumulated rich experiences in their long-time judicial practices, and developing countries should learn from them by establishing necessary legal mechanisms, building their ability to make full use of all resources, and reducing their pre-Litigation Costs practically.