Efficiency of 'Simple' Liability Rules When Courts Make Erroneous Estimation of the Damage

The literature on liability rules shows that the damage awards under a liability rule affect the efficiency of the rule. One crucial factor that could affect the damage awards and therefore the efficiency characteristics of liability rules is the error made by a court while estimating the harm suffered by the victims. In this paper efficiency property of what we label as 'simple' liability rules when courts make errors in estimation of the damage is studied in a unified framework. The paper provides a characterization of efficient simple liability rules and shows that the biased court errors act to change the efficiency characterization of simple liability rules. A necessary and sufficient condition for a simple liability rule to be efficient in the presence of upper-biased court errors is provided. The analysis is carried out in a quite general framework.     

Employment preservation vs. creditors’ repayment under bankruptcy law: The French dilemma?

The paper investigates the French dilemma associated with court administered resolution of corporate financial distress. In such a legal system, the courts seek a double objective: maintaining job positions through continuation, and determining the best outcome for the claimants. We discuss this dilemma empirically, using a unique sample of bankruptcy files on French SMEs. We address successively three critical questions. First, we highlight the determinants of the final bankruptcy outcome (continuation through reorganization or sale, or piecemeal liquidation): does continuation (the most employment-friendly outcome) depend on the firm's characteristics, and/or on the way the procedure is managed? Second, we study the determinants of the creditors’ recovery rates: do the courts play an active role in increasing recoveries? Third, we address the dilemma directly by focusing on sales as a going concern. We model the court administered selection process between rival buyout offers: do the courts balance the social content against the financial content of each offer? Is there an explicit arbitrage between employment preservation and creditor recoveries? Our main results are: (1) the French courts actively work to facilitate continuation against liquidation, and thus play a role in employment preservation. Besides, we find continuation is more likely to prevail when default is an outcome of specific difficulties (outlets, finance, and production). (2) We confirm the Radulovic (2008) findings: the global recovery rate mainly depends on the firm's ex ante characteristics at the time of triggering, while the way the procedure is managed by the court has little impact. Similarly to LoPucki and Doherty (2007), continuation via reorganization does not generate lower recovery rates on average than the other outcomes. (3) Last, the courts’ choice between rival buyout offers confirms that social considerations prevail in the arbitration. Yet, the courts still consider financial issues as well (a higher sale price increases the chances that an offer is selected), but without clear connection with the amount of due claims (one direct consequence is a moderate recovery rate on sales).     

Cost-effectiveness analysis in the courts: recent trends and future prospects

This article provides an initial look at how managed care organizations (MCOs) might incorporate cost-effectiveness analysis (CEA) into their decision-making process and how the courts might respond. Because so few medical liability cases directly involve CEA, we must look at other areas of the law to assess potential MCO liability for applying CEA. In general negligence cases, courts rely on a risk-benefit test to determine customary practice. Likewise, in product liability cases, courts use a risk-utility calculus to determine liability for product design defects. And in challenges to government regulation, courts examine how agencies use CEA to set regulatory policy. The results have been mixed. In product liability cases, CEA has led to some punitive damage awards against automobile manufacturers. But courts have integrated it in negligence cases without generating juror antipathy, and generally defer to agency expertise in how to incorporate CEA. The article discusses the implications of these cases for MCO use of CEA and outlines various options for setting the standard of care in the managed care era.     

Modelling appellate courts’ responses in motor injury disputes

Motor third-liability insurance is compulsory in the European Union. We examine the behaviour of Spanish appellate courts in the context of motor liability insurance and pay particular attention to four characterising features. Specifically, we investigate (1) how the appellate court interprets the rules for updating the financial compensation when the courts’ ruling is made in a different year to that in which the motor accident occurred; (2) the response of the appellate court when its legal medical evaluation differs from the court’s decision; (3) whether the appellate court modifies the criteria when the insurance company was not charged with interest for delaying payment in the first instance; (4) whether the fault allocated by trial courts is revised by the appellate court. We apply a multi-categorical selection mechanism to deal with samples that are potentially non-random. This allows us to separately consider the characteristics of victim’s and the insurer’s decisions to appeal. The results indicate that disputing agents have significantly different appeal functions, where insurers show a more effective and consistent behaviour than victims.     

MEASURING PROGRESS IN IMPROVING COURT PROCESSING OF CHILD ABUSE AND NEGLECT CASES

With all of the changes in federal law relating to child maltreatment, foster care, and adoption, courts have become active partners with child welfare agencies in assuring safety and permanency for children. Outcome measures are needed to track achievement of the distinct goals of courts and those goals they share with child welfare agencies. This article presents a set of measures that focuses on the court contribution to desirable outcomes for children and families. These measures have undergone extensive development, review, and field testing by representatives from several national organizations interested in court reform and child welfare, but they still require more discussion and refinement. Indeed, outcome measures are an essential component of a process of continuing improvement, which means they need to be reviewed periodically to ensure they are valid, reliable, and not redundant.     

Using Outcome Measurement to Promote Continuous Quality Improvement for Children in Foster Care

Continuous Quality Improvement is the term used to measure progress toward achieving safety, permanency, and well‐being for children in foster care. This report highlights the results of a 2014 survey conducted by the National Resource Center on Legal and Judicial Issues asking states to identify how they are using performance measures to improve the lives of children in care, which measures are being used, whether the newly‐created well‐being measures are being integrated into the original set of court performance measures, and how performance measures are being used to support Continuous Quality Improvement. Although there is much more to do, the number of performance measures being used, the number of states sharing data between courts and child welfare agencies, and the number of documented examples of improvement in lives of abuse and neglected children are all encouraging signs.     

A note on the optimality of (even more) incomplete strict liability

This paper starts from the premise that liability is incomplete and establishes that firms may nevertheless invest excessively in care. This may justify a (further) reduction in the level of liability from a social standpoint, thereby arguing against seeking to approach full compensation as close as possible. In our framework, firms are liable under product liability, but also invest in care to prevent consumers’ switching to competitors. Affecting the partition of consumers by means of care-taking is not desirable from a social standpoint. Consequently, it may be optimal to reduce liability below a given level of incomplete compensation in order to adjust firms’ care incentives.     

No Judge,No Job! Court errors and the contingent labor contract

Judges are prone to error and misapprehension when they are verifying the facts of a legal case. We analyze the significance and scope of accurate court decisions and judicial error for labor contracting and identify the implications of these concepts on behavioral incentives and market outcomes. We find that imperfect judicial state verification and the diverging beliefs on a court ruling reduce the efficiency of contingent labor contracts and make them less effective in stipulating sufficient incentives for compliance. If increasing court accuracy in general is not feasible, the courts (and the legislator) should primarily mitigate type I errors. The common reversal of the burden of proof to the employer in labor laws reflects these insights. The model also indicates that the ability of judges to verify facts is a prerequisite for efficient law-making and contributes significantly to the economic role of courts.     

‘Working’ the international child protection case: a snapshot of local authorities’ experiences within an evolving legal context

Child protection proceedings often concern children with international connections. In recent years, the courts of England and Wales have handed down a number of significant judgments examining the application of international legal instruments (in particular Brussels IIa) to care proceedings. This article considers the impact of court judgments on the practical ‘working’ by Local Authorities of international child protection cases. A case study was conducted, oriented by socio-legal theory, consisting of a small number of qualitative interviews with Local Authority lawyers and social workers. The article concludes that some judgments have acted as a catalyst to change working practices for Local Authorities. However, international child protection cases present a variety of challenges for Local Authorities, and judgments provide an imperfect site for the provision of procedural and substantive guidance in this complex area. Further, there was often a tension between the need to conscientiously adhere to such guidance, and the welfare needs of the children with whom the Local Authority was concerned.     

Does it pay to pollute? Shareholder wealth consequences of corporate environmental lawsuits

In this paper, we employ the event study methodology to examine shareholder wealth consequences of corporate environmental lawsuits filed in the US Circuit Courts from 1980 to 2001. We find that stocks of defendant firms experience significant negative abnormal returns around the lawsuit filing dates. When the plaintiffs are government entities, the abnormal returns of the defendant stocks are significantly negative. On the other hand, when the plaintiffs are individuals or nonpublic business entities, the abnormal returns are statistically insignificant. When lawsuits are filed under EPA's superfund statute, defendant firms experience significant loss in equity value. For shareholders of the average firm in our sample, the empirical evidence suggests that it does not pay to pollute if the firm is sued.     

Suicide and Psychiatrist's Liability in Italian Law Cases

The aim of the study is to analyze the factors that are most frequently associated with a verdict of guilty delivered to the psychiatrist in cases of a patient's suicide in Italian law. Twenty‐six sentences (1975–2009) were analyzed according to the claim of malpractice, patient characteristics, circumstances of the suicide, and reasons for the court's judgment. The court held the psychiatrist guilty in 12 cases, considering that the act of suicide was predictable and could have been avoided. Predictability was mainly related to errors in surveillance (7 cases), therapy (1 case), or both (2 cases). An error in diagnosis was considered to be related to the patient's death in two cases. Analysis of medical behavior considered to be erroneous and associated with a verdict of guilty provides an opportunity to discuss the topics relevant not only to practicing psychiatrists but also to experts assessing medical liability in cases of patient suicide.     

Business Litigation in the Transition: A Portrait of Debt Collection in Russia

Russian firms are drowning in debt. Managers are increasingly turning to the courts for help. Drawing on a database of 100 non-payments cases decided by three courts in 2000, the article explores the parameters of this litigation and the motivations for filing lawsuits. The analysis shows that the docket is dominated by small-scale disputes between trading partners with short shared histories, suggesting that those who have long-term, trust-based relationships avoid the courts. Along with fear of disrupting ongoing relationships, the disinclination to use the courts is also motivated by a reluctance to open up transactions to state scrutiny. By contrast, the petty disputes that are brought to court tend to be simple and, therefore, managers are willing to risk exposure to the state. Indeed, in a world in which firms manipulate their financial records to create the impression of no income in order to avoid taxes (often putting bogus debts on the books), some of these managers bring cases even when there is little chance of recovering the debt because the decision provides convincing evidence to the tax authorities that the debt is bona fide.     

An aggregate-level examination of the caseload pressure hypothesis

The idea that guilty pleas may be encouraged by time-conscious attorneys to process court caseloads expediently implies that some defendants may be influenced to forego their constitutional right to trial. If true, these defendants may be denied an adequate determination of legal guilt. Building on previous research, this paper presents a more thorough aggregate level test of the caseload pressure hypothesis than has previously been offered. Controlling for variation in structural and procedural characteristics across 101 Illinois circuit courts, this study supports the idea that felony caseload pressures significantly covary with felony guilty plea rates. Also, this relationship was stable between 1973 and 1984.     

Transferring custody from birth parents to foster parents – an ambiguous matter

In this study, we analyse 32 district court decisions regarding custody transfers from the birth parents to the foster parents in Sweden. When a child has been in foster care for three years, in order to enhance stability for child, the local social welfare committee considers a transferral of custody to the foster parents following an application to the district court. Although all but one of the decisions in our study favoured a custody transfer, the courts acknowledge different reasons for this. Specifically, there is vagueness about whether or not functioning contact between the child and birth parents is a hindrance in custody transfer. Our findings stress the need for clarification in the law regarding the criteria for custody transfer in order to reach a more unified judgment. Furthermore, the district courts do not sufficiently acknowledge children’s views, and we suggest that children and young people should be made more visible in the decision-making process.     

Plea bargaining: An organizational perspective

A microlevel analysis of factors affecting the decision to plead guilty in felony trial courts in Chicago in 1972 and 1973 is presented. The court system is viewed from an organizational perspective, and guilty pleas are analyzed in light of the court's overall design for disposing of its workload. Operational definitions of the concepts introduced are presented, and multiple regression is used to analyze some of the hypothesized relationships. The implications of the findings, from an organizational perspective and for some of the issues of plea bargaining, are discussed.     

论赔礼道歉民事责任方式的适用

赔礼道歉源于道德责任,是集话语性、强制性、人身性、惩罚性于一体的责任方式。其实质是行为人认识到自己行为的错误而产生的内疚感,是"自向性行为",法院的强制性适用不能达到赔礼道歉的目的。赔礼道歉的内容应当作出明确解释。在现行法律规定下,法院在判决中应当谨慎适用,更不可超出法律规定之外适用赔礼道歉。     

R&D subsidy games: a cost sharing approach vs. reward for performance

This paper investigates government subsidy games for private sector research and development (R&D) in a two-country two-firm intra-industry trade model. Two funding structures are compared: ??cost sharing?? vs. ??reward for performance.?? Both the theoretical evidence and the results of a Monte Carlo simulation suggest that cost sharing is associated with higher social surplus and quality improvement because it prompts the firm to do more R&D. In a cost sharing program government and firm R&D are always complements. In the reward for performance program government and firm R&D may be complements, but are usually substitutes. In the Monte Carlo results the average firm contribution to R&D expenditure is actually negative with a reward for performance funding structure??raising the question of whether it might be construed as corporate welfare. Finally, the paper characterizes funding priorities for both structures in the case when subsidy dollars are scarce and when they are not.     

Reflections on <Emphasis Type="Italic">Prince</Emphasis>, Public Welfare Offenses, <Emphasis Type="Italic">American Cyanamid</Emphasis>, and the Wisdom of the Common Law

The fundamental requirement of Anglo-American criminal law is that crime must consist of the concurrence of a guilty mind—a mens rea—with a guilty act—an actus reus. And yet, the criminal law is shot through with discordant lumps of strict liability—crimes for which no mens rea is required. Ignoring the conventional normative objections to this aberration, I distinguish two different types of strict criminal liability: the type that arose at common law and the type associated with the public welfare offenses that are the product of twentieth and twenty-first century legislation. Using famous cases as exemplars, I analyze the two types of strict liability, and then examine the purposes served and incentives created by subjecting individuals to strict liability. I conclude that common law strict liability is rational in that it advances the purposes of the criminal law, while the public welfare offenses are at best pointless and at worst counterproductive. I suggest that in this respect the common law contains more wisdom than the results of the legislative process.     

Corporate criminal liability and optimal firm behavior: internal monitoring versus managerial incentives

Legislation addressing corporate criminal liability has been the subject of worldwide debate ever since the financial scandals of the early 2000s. Under current regimes, firms must observe such compliance requirements as internal monitoring mechanisms, the purpose of which is inducing firms to detect the wrongful conduct of their agents. We develop an analytical framework for identifying when, and to what extent, firms may find it beneficial to adopt these regulatory devices. We conclude that more productive firms, those operating in sectors with more market power, and firms whose managers have more opportunities for criminal activity are more likely to prevent wrongful conduct—either through monitoring or the payment of efficiency wages. When the potential returns to illegal activities are high or the firm is large, internal monitoring is probably the optimal strategy of crime prevention; in contrast, smaller firms typically proceed by paying efficiency wages (or ignoring crime). This paper also analyzes the role of the State’s legal capacity as well as the effects of interactions between the structure of reputational losses and the firm’s market power.     

FAMILY GROUP CONFERENCES

Family group conferencing has emerged as a child welfare system–transforming practice that fosters new collaborations between families, child welfare practitioners, and the courts. The key components of the model are explained. This article highlights the strengths and challenges associated with incorporating family group conferencing into traditional child welfare agency and court practice. It suggests future practice considerations and outcome-based study that are necessary to strengthen and sustain family group conferencing as a prevention/intervention strategy.