Consistent with the first half of the fourfold pattern of risk attitudes, scholars have amassed a body of empirical data showing that Framing Theory holds in experimental settings where plaintiffs and defendants face moderate to high probability gains and losses.7 In other words, the Framing Theory explains behavior in what we might call 'ordinary legal cases'. Building on the core principles of the economic model of lawsuits and settlements, lawyers and economic scientists have developed two types of frivolous litigation models: asymmetric cost models and asymmetric information models.3. negotiations.").
Asymmetric Cost Models
Lucian Bebchuk proposed a more nuanced asymmetric cost model.38 According to Bebchuk's model, frivolous lawsuits persist because a plaintiff can credibly threaten to sue due to having to incur legal costs in stages.39 Once the plaintiff is' sunk' If he has insufficient legal costs at a certain stage of the proceedings, he can maintain a credible threat to continue litigating 'on the basis of the small part of the legal costs that remain to be incurred.' Because the plaintiff and the defendant early recognize that this phenomenon will continue to occur. If the threats occur later in the trial, the plaintiff's threats are credible throughout the trial and the defendant has an incentive to take those threats more seriously than she otherwise would. The asymmetric cost models – such as the Rosenberg-Shavell and Bebchuk models – have their flaws, but provide important insight into frivolous lawsuits.
Asymmetric Information Models
In Katz's version of an informed plaintiff model, for example, a rational plaintiff with a frivolous claim sues because she knows that the defendant does not know whether her claim is frivolous or genuine.4 The rational defendant is uncertain about the merits of the plaintiff's case, decides whether to settle or defend based "on his estimate of the likelihood that the claim is genuine, as updated by any inferences he may draw from the plaintiff's decision to sue." Limits of the rational actor models of frivolous litigation The existing models - which claim that costs and information.
Limits'of the Rational Actor Models of Frivolous Litigation The existing models-which contend that cost and information
Like the asymmetric cost models, the asymmetric information models present a compelling account of frivolous litigation. According to these models, frivolous litigation persists because rational plaintiffs and rational defendants make decisions about whether to file, settle, and try frivolous lawsuits under conditions of uncertainty created by information asymmetries.
Prospect Theory's "Fourfold Pattern of Risk Attitudes"
First, when faced with a framework of moderate-to-high-probability gains, decision makers prefer the risk-averse option.6' In their. Second, when faced with a moderate-to-high probability loss frame, decision makers tend to prefer the risk-seeking option. Y Also in their latest work on this topic, Tversky and Kahneman found that when they asked individuals to choose between a loss with a 50% or greater chance of occurring—eg. 50% chance a.
PROSPECT THEORY'S FOURFOLD PATTERN
The First Half of the Fourfold Pattern and Ordinary Litigation Legal scholars have used the first half of prospect theory's four-
According to the first half of the fourfold pattern, decision makers faced with moderate to high probability gains tend to make risk-averse choices, while decision makers faced with moderate to high probability losses tend to make risk-seeking choices. Plaintiffs in regular lawsuits can choose between a certain settlement offer and a moderate to high chance of recovering more at trial, while defendants must choose to pay a certain settlement amount or face a moderate to high chance of a settlement. more losses at trial.81 In other words, for plaintiffs in ordinary lawsuits, litigation appears to represent a framework of moderate to high probability gains, such that they are likely to exhibit risk aversion. In contrast, defendants in ordinary lawsuits are likely to view lawsuits as a framework for medium- to high-probability losses, and thus are likely to exhibit risk-seeking preferences.
Framing theory therefore assumes that in normal court proceedings, where plaintiffs and defendants face at least a moderate probability of winning or losing at trial, plaintiffs are likely to prefer settlement, while defendants are likely to prefer trial.* Table 2 presents plaintiffs' predicted risk. positions in ordinary legal proceedings. Experts have found considerable evidence in experimental settings to demonstrate that plaintiffs facing a moderate to high probability of gains and defendants facing a moderate to high probability of losses exhibit risk aversion or desire for risk, respectively. In all these problems, the plaintiff-subjects explicitly or implicitly faced a 30-80% chance of winning at trial, and the defendants explicitly or implicitly faced a 30-80% chance of losing at trial. In other words, existing work on Framing . The theory explains how litigants are likely to behave in a normal court proceeding—that is, where they face a moderate to high probability of winning or losing at trial—but it does not explain how litigants are likely to behave frivolously or lowly. -probability of legal proceedings.
The Second Half of the Fourfold Pattern and Frivolous Litigation For all the attention they have paid to the first half of prospect
The Second Half of the Quadruple Pattern and Frivolous Litigation For all the attention paid to the first half of the prospects. In a decision problem with the highest payoff ($1,500) and the lowest probability (5 percent), students on average chose the 5 percent chance at $1,500 ($75 expected value) over some cash payments up to three times the expected value of the gamble ($225 ). Based on this insight, in the next part of the article I develop a positive theory of frivolous litigation.
A PSYCHOLOGICAL ACCOUNT OF THE LAW OF KOSOVO Frame Theory, which is based on the first half of the four-pronged model of perspective theory of risk attitudes, describes how litigants are likely to behave in ordinary litigation. " The article draws on the second half of the four-pronged perspective theory model of risk attitudes to describe how litigants are likely to behave in frivolous litigation.9 First, the theory posits that plaintiffs in a lawsuit frivolous are likely to prefer trial—the risk-seeking option—while defendants are likely to prefer settlement—the risk-averse option.Second, given these psychological tendencies, the theory posits that plaintiffs and defendants in a lawsuit frivolous litigation is likely to either settle cases on terms favorable to the plaintiff or reach a deadlock in negotiations.
Operationalizing Frivolous Litigation
After all, plaintiffs must make ex ante rather than ex post decisions about the likely merits of the plaintiff's case.0' Before and. Although the law requires her to evaluate the case at the time it was originally filed, the judge actually knows a lot more than the attorney did at the time. The Frivolous Framing Theory posits that plaintiffs in frivolous or low-probability lawsuits, unlike plaintiffs in ordinary lawsuits, are likely to be risk-seeking, while defendants in frivolous lawsuits, unlike defendants in ordinary lawsuits, are likely to be risk-averse.
In other words, plaintiffs in frivolous lawsuits are likely to view trial options as low-probability gains, and thus they tend to prefer trial over an actuarially fair settlement, while defendants in frivolous lawsuits are likely to view trial options as low-probability. probability losses, so they tend to prefer an actuarially fair settlement to a lawsuit.'O Ta-. 34; “Low-probability litigation” is clearly an overly inclusive definition, as it would include civil rights test cases, a category of cases that I would not label as “frivolous” in common parlance. This article focuses on low-probability cases where monetary damages are at the heart of the dispute, and excludes those cases where the parties seek to defend important principles or change current law.
- Proposition #2: Advantage Plaintiff
- Plaintiff-friendly settlements
- Bargaining breakdown
- EXPLORING WHY PLAINTIFFS SEEK RISK IN FRIVOLOUS LITIGATION
- Explanation #1: Psychophysical
- Explanation #2: Motivational
- Hope > Fear
- Elation > Disappointment
- Rejoicing > Regret
- Explanation #3: Cognitive
- Conclusion
- Targeting Plaintiff Risk Seeking
- Undermining overweighting
- Changing plaintiffs' decision frame
- Cautions
Absent a taste for risk (which can be satisfied easily and at less cost by taking a trip to Las Vegas), risk-seeking choices make no sense."); McCaffery, 1994 Wis L Rev at 73 (cited in note 63) (noting that risk-seeking behavior is "an inherently unstable state that we would not desire to thrive"). See also Gonzalez and Wu, 38 Cognitive Psych at 136 (cited in note 67) ("Under the principle of diminishing sensitivity, increments near the ends of the probability scale are greater than increments near the middle of the scale."). Although the concept can explain the curvature of the weighting function, it cannot account for the level of absolute weights." Gonzalez and Wu, 38 Cognitive Psych at 138 (cited in note 67).
In short, because the prospect of disappointment is highest (and the prospect of disappointment lowest) when the plaintiff's probability of prevailing at trial is lowest, plaintiffs in a frivolous lawsuit are more likely than plaintiffs in a ordinary litigation to choose trial as a way to maximize happiness." Thus, overweighing the plaintiff's low-probability chance of prevailing at trial may simply constitute rational, or even opportunistic, risk-taking behavior (at least (in high-risk cases, where the plaintiff has a chance to gain substantial wealth through a judgment that she could not obtain through settlement) . . . when a risk becomes very apparent or visible to people."); The combined effect of selective reporting and selective recall leads to misperceptions of the likelihood of major verdicts, particularly in tort contexts.").
34. Portfolio Managers.'a Like investors who want to maximize their investment returns through diversification, N plaintiffs' attorneys with busy schedules are likely to diversify their client portfolios by taking some off. Model Rules of Professional Conduct Rule 1.8(e) ("A A lawyer shall not provide financial assistance to a client in connection with pending or proposed litigation, except that: (1) a lawyer may advance legal costs and costs of proceedings, the reimbursement of which may be subject to of the outcome of the case."). See also Kritzer, 47, DePaul L Rev, 270 (cited in note While in many states clients are liable for costs regardless of the outcome of a case, the reality is that attorneys who unsuccessfully prosecute a case based on contingency rarely collect reimbursement for those expenses (or even attempt to collect them).").
In short, requiring plaintiffs to pay court costs is likely to change the plaintiffs' frame for submitting judgments by subjecting plaintiffs to the threat of a small economic loss that will loom large psychologically.''
