Legal compliance and litigation spending under the English and American rule: Experimental evidence

Baptiste Massenot (), Maria Maraki and Christian Thoeni
Authors registered in the RePEc Author Service: Christian Thöni

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: We investigate fee-shifting rules in litigation with regard to their impact on legal compliance, settlement, and litigation spending. We develop a model to compare the English rule, according to which the winning party is compensated by the losing party, to the American rule, according to which parties pay their own expenses independent of the outcome of the trial. We conduct an experiment to put the predictions to an empirical test. In accordance with the model, we find that litigants spend substantially more under the English rule than under the American rule. Defendants are significantly more compliant under the English rule when out-of-court settlement is not possible, but not when settlement is possible. Settlement rates do not significantly differ between the two rules, nor do they differ within the subsets of strong or weak cases.

Keywords: litigation; experiment; American rule; English rule; fee-shifting; loser-pays; legal compliance; settlement; litigation spending (search for similar items in EconPapers)
JEL-codes: C72 C91 D44 K13 K41 (search for similar items in EconPapers)
Pages: 34 pp.
Date: 2016-10
New Economics Papers: this item is included in nep-exp and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:16.19

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