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The Lawsuit Market: A Thought Experiment to Reduce Framing Effects

By Barry Goldman

As all dispute resolution practitioners know, a great deal depends on whose ox is gored. Parties to a dispute have little inclination or ability to "look at the case from the other person's point of view" or to "look at the case objectively". The other side, after all, is Evil Itself and looking at the matter from their point of view would be wrong. And besides, as we all know, my point of view is objective. I was there.

So I want to offer another approach. This one doesn't require asking parties to step into anyone else's shoes. They get to stay in their own shoes. They just have to imagine the existence of a lawsuit market.

To a plaintiff, a lawsuit is the right, under certain conditions, to take money from a defendant. To a defendant, a lawsuit is the obligation, under certain conditions, to pay money to a plaintiff. The conditions can get quite complicated. They involve whose witnesses are believed and which jurisdiction's law applies and what the judge had for breakfast and so on. And each has a range and a probability distribution which may also be quite complicated. But if we strip all that away and look just at basic economic structure, a lawsuit involves an obligation to pay and a right to be paid.

Once we realize that, it is only a short step to imagine that there could be a market for lawsuits in which the right to sue and the obligation to be sued could be bought and sold. The reframing I propose comes about when we ask the parties to a dispute to think of themselves as investors in this market. We say to the Plaintiff:

Suppose you didn't have this lawsuit, how much would you be willing to pay to get it?

In other words, we ask the plaintiff to put a value on the economic opportunity represented by his right to sue. But instead of thinking of it as a gain, we ask him to think of it as a loss - a cost.

And we say to the defendant:

Suppose you weren't involved in this lawsuit, how much would someone have to pay you to endure it?

We ask the defendant to put a value on the economic cost represented by his obligation to be sued. But instead of thinking of it as a loss, we ask him to reframe it as a gain.

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March 2005