The relational contingency of rights

Virginia Law Review

Volumn 98, Issue 6, 2012, Pages 1313-1372

  Parchomovsky, Gideon ^a,b   Stein, Alex ^c  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

^b BAR ILAN UNIVERSITY   (Israel)

^c YESHIVA UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 84871866861     PISSN: 00426601     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (176)

1. See 17 U. S. C. § 504 (c) (2006) (providing that a successful plaintiff in a copyright suit can elect to recover an award in any amount between $750 and $150, 000 per infringed work in a case where the copyright owner sustains the burden of proof and the court finds willful infringement).
2. For definition of negative-value suits, see, e.g., Samuel Issacharoff, Preclusion, Due Process, and the Right To Opt Out of Class Actions, 77 Notre Dame L. Rev. 1057, 1059-60 (2002) (defining a negative-value suit as a "claim⋯ too small to justify the cost of prosecution. ").
3. This observation holds true in most cases, but there are exceptions. See Lucian Arye Bebchuk, A New Theory Concerning the Credibility and Success of Threats to Sue, 25 J. Legal Stud. 1, 5-9 (1996) (demonstrating that multistage litigation with divisible costs often allows a plaintiff with a negative-value suit to extract settlement from a defendant by expending-and thereby sinking-some of her costs and credibly threatening to go to trial that promises her a positive net return from the remaining expenditure); (Pubitemid 126406443)
4. Lucian A. Bebchuk & Alon Klement, Negative-Expected-Value Suits, in 8 Encyclopedia of Law and Economics: Procedural Law and Economics 341, 341-44 (Chris William Sanchirico ed., 2d ed. 2012) (specifying circumstances in which divisibility of costs and informational advantage allow a plaintiff with a negative-value suit to extract settlement from defendant, and surveying relevant literature);
5. Lucian Arye Bebchuk, Suing Solely To Extract a Settlement Offer, 17 J. Legal Stud. 437, 448 (1988) (showing that a plaintiff with a negative-value suit can sometimes exploit asymmetrical information to extract settlement from the less informed defendant);
6. Joseph A. Grundfest & Peter H. Huang, The Unexpected Value of Litigation: A Real Options Perspective, 58 Stan. L. Rev. 1267, 1299-1315 (2006) (using option theory to demonstrate that negative-value suits can be viable in a regime that allows parties to make piecemeal investments in the litigation, gradually reveal information to each other, and negotiate a settlement at any given point in time).
7. See Wesley Newcomb Hohfeld, Some Fundamental Legal Conceptions as Applied in Judicial Reasoning, 23 Yale L. J. 16, 19 (1913).
8. See Wesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L. J. 710, 718-20 (1917).
9. See Marc Galanter, Why the "Haves" Come Out Ahead: Speculations on the Limits of Legal Change, 9 Law & Soc'y Rev. 95 (1974).
10. See Ronald Dworkin, Rights as Trumps, in Theories of Rights, supra note 11, at 153, 153;
11. see also Joseph Raz, Rights and Individual Well-Being, in Ethics in the Public Domain: Essays in the Morality of Law and Politics 29, 30 (1994) (arguing that rights afford individuals' interests special protection that is more stringent than a requirement that state officials account for those interests in making decisions).
12. For one exception, see Stephen Holmes & Cass R. Sunstein, The Cost of Rights: Why Liberty Depends on Taxes (1999) (factoring costs of enforcing rights into philosophy of entitlements).
13. See also Patricia Munch, An Economic Analysis of Eminent Domain, 84 J. Pol. Econ. 473, 495 (1976) (demonstrating that owners of high-valued properties, who spend more on eminent domain proceedings, receive compensation that exceeds their properties' market value, while owners of low-valued properties are undercompensated).
14. See Robert Nozick, Anarchy, State, and Utopia, at ix-xi, 28-30 (1974) (favoring a strong deontological format of rights as unbending endowments).
15. See Richard A. Posner, Economic Analysis of Law 40 (8th ed. 2011) ("The proper incentives are created by parceling out mutually exclusive rights to the use of particular resources among the members of society. If every piece of land is owned by someone-if there is always someone who can exclude all others from access to any given area-then individuals will endeavor by cultivation or other improvements to maximize the value of land. Land is just an example. The principle applies to all valuable resources.");
16. see also Joe Mintoff, Can Utilitarianism Justify Legal Rights with Moral Force?, 151 U. Pa. L. Rev. 887, 901, 905-09 (2003) (justifying a utilitarian theory under which individuals are given rights in order to maximize human welfare);
17. cf. David Lyons, Utility and Rights, in Theories of Rights, supra note 11, at 110, 111, 113-20 (arguing that utilitarian justifications of rights have no moral force).
18. See generally Matthew D. Adler & Eric A. Posner, New Foundations of Cost-Benefit Analysis (2006).
19. This feature looms large in Kaplow and Shavell's seminal juxtaposition of fairness against social welfare. See Louis Kaplow & Steven Shavell, Fairness Versus Welfare 11-12 (2002) (attesting that for purposes of economic theory, individuals' "taste for fairness is no different⋯ from a taste for a tangible good or for anything else").
20. Another purpose of entitlements' clear demarcation is strengthening of ownership that incentivizes owners of valuable assets to put those assets to their best use. See generally Henry E. Smith, Exclusion Versus Governance: Two Strategies for Delineating Property Rights, 31 J. Legal Stud. S453 (2002).
21. See R. H. Coase, The Problem of Social Cost, 3 J. L. & Econ. 1 (1960) (famously demonstrating that law can unlock movement of assets and entitlements to their most efficient users by reducing transaction costs that impede voluntary exchange).
22. For an insightful analysis of the theorem, see Robert Cooter, The Cost of Coase, 11 J. Legal Stud. 1 (1982).
23. For a both critical and comprehensive review of existing efficient-breach theories, see Daniel Markovits & Alan Schwartz, The Myth of Efficient Breach: New Defenses of the Expectation Interest, 97 Va. L. Rev. 1939, 1977-2005 (2011).
24. See Daniel Friedmann, The Efficient Breach Fallacy, 18 J. Legal Stud. 1, 4 (1989).
25. Theft, of course, is never efficient. See Richard L. Hasen & Richard H. McAdams, The Surprisingly Complex Case Against Theft, 17 Int'l Rev. L. & Econ. 367, 370-74 (1997) (explaining that society's unnecessary costs from theft include owners' defensive measures and thieves' operational investments that include expenditures on transactions with stolen goods);
26. Gil Lahav, A Principle of Justified Promise-Breaking and Its Application to Contract Law, 57 N. Y. U. Ann. Surv. Am. L. 163, 184-85 (2000) ("[T]heft undermines the tremendous utility of certain intangible benefits associated with a theft-free society, such as: the ability to rely on the future presence of one's possessions; the ability to trust strangers not to steal one's personal property; and the ability to enjoy the privacy of a domicile that will not be invaded by thieves.").
27. See Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L. Rev. 497, 548-50 (1991) (attesting that plaintiffs in securities class actions extort favorable settlements from defendants because defendants' costs are much higher than theirs);
28. Lucian Arye Bebchuk & Howard F. Chang, The Effect of Offer-of-Settlement Rules on the Terms of Settlement, 28 J. Legal Stud. 489, 510-12 (1999) (noting that settlement terms as compared with expected judgment tend to favor the party with lower litigation costs and explaining how feeshifting rules can ameliorate this problem);
29. John C. Coffee, Jr., New Myths and Old Realities: The American Law Institute Faces the Derivative Action, 48 Bus. Law. 1407, 1415 n. 39 (1993) ("[T]he existence of asymmetric litigation costs could allow some plaintiffs to exploit this cost differential to obtain a settlement unrelated to the merits.");
30. James D. Hurwitz, Abuse of Governmental Processes, the First Amendment, and the Boundaries of Noerr, 74 Geo. L. J. 65, 71 (1985) (noting that predatory litigation can be successful when it imposes disproportionate legal costs on a rival);
31. D. Rosenberg & S. Shavell, A Model in Which Suits Are Brought for Their Nuisance Value, 5 Int'l Rev. L. & Econ. 3, 3 (1985) (demonstrating that strike suits with negative-expected value are possible when plaintiff can exploit asymmetric litigation costs to extort settlement);
32. see also William H. Wagener, Note, Modeling the Effect of One-Way Fee Shifting on Discovery Abuse in Private Antitrust Litigation, 78 N. Y. U. L. Rev. 1887, 1902-04 (2003) (summarizing literature that analyzes the effects of litigation cost asymmetries).
33. Consider again the conflict between Brutus Inc. and Anne, but assume this time that Anne has found an incredibly inexpensive and capable attorney who can vindicate her entitlement to quiet enjoyment for a $1000 fee. Aware of this circumstance, Brutus makes a proposal to recognize the entitlement if Anne pays it $1000 in return. The parties' conflict, of course, would be best resolved if Brutus were to recognize Anne's entitlement for free. The company's extortion of that payment, however, still leads to the economically second-best state of affairs, vastly superior to the otherwise probable scenario in which the parties go to court to litigate quiet enjoyment. Under that scenario, Anne's entitlement will be redeemed at a much steeper price. Brutus' extortion of $1000 consequently can be viewed as an efficient transaction that saves the parties and society at large the expense of the trial and opens up the possibility for Anne's attorney to apply his talent elsewhere. As the famous adage goes, "A bad settlement is better than a good trial." See, e.g., Strong v. Bell South Telecomm., Inc., 173 F. R. D. 167, 172 (W. D. La. 1997) ("In this case, I could hold my nose and accept the [suspicious class-action] settlement, after all, it is said that a bad settlement is better than a good trial.").
34. This declination separates mainstream economists from rights deontologists. See Ronald Dworkin, Taking Rights Seriously 92-97, 200 (1978) (asserting and justifying rights' immunity from utilitarian trade-offs).
35. See Jack N. Rakove & Elizabeth Beaumont, Rights Talk in the Past Tense, 52 Stan. L. Rev. 1865, 1865 (2000)
36. (reviewing Richard A. Primus, The American Language of Rights (1999)) ("Rights have been a staple of Anglo-American law and politics since at least the seventeenth century.");
37. see also J. Harvie Wilkinson III, The Dual Lives of Rights: The Rhetoric and Practice of Rights in America, 98 Calif. L. Rev. 277, 281 (2010) (observing that rights "help[] to shape our most important legal institutions", while arguing that rights are absolute only in speech, but defeasible in practice when special circumstances call for their removal, and describing this duality as an example of "our nation's most admirable qualities").
38. See James Griffin, On Human Rights (2008) (unfolding a comprehensive personhood-based account of human rights);
39. Margaret Jane Radin, Property and Personhood, 34 Stan L. Rev. 957, 957 (1982) (developing a personhood account of entitlements that includes protection of property rights upon recognition that a person cannot properly develop herself without having some control over resources in the external environment).
40. See Gerald Dworkin, The Theory and Practice of Autonomy (1988) (laying out autonomy theory);
41. H. L. A. Hart, Legal Rights, in Essays on Bentham: Studies in Jurisprudence and Political Theory 162, 183-84 (1982) (advancing an autonomy-based account of rights);
42. see also Charles Fried, Modern Liberty and the Limits of Government (2007) (offering an account of rights that underscores the primacy of individuals' autonomy over the government's vision of the good);
43. Matthew D. Adler, Rights Against Rules: The Moral Structure of American Constitutional Law, 97 Mich. L. Rev. 1, 2-3 (1998) (recommending "moral reading" of the Constitution that perceives rights as limitations on the government's power to set up rules regulating individuals' conduct).
44. See, e.g., Neil MacCormick, Legal Right and Social Democracy: Essays in Legal and Political Philosophy 143 (1982) ("[R]ights always and necessarily concern human goods, that is, concern what it is, at least in normal circumstances, good for a person to have.").
45. See, e.g., John H. Garvey, What Are Freedoms For? (1996) (offering an account of freedoms consisting of rights that serve societal good).
46. For a superb exposition of existing theories of rights, see Alon Harel, Theories of Rights, in The Blackwell Guide to the Philosophy of Law and Legal Theory (Martin P. Golding & William A. Edmundson eds., 2005).
47. For an early statement of this idea, see 2 John Stuart Mill, Principles of Political Economy with Some of Their Applications to Social Philosophy 560 (D. Appleton & Co. 1909) (1848) ("Whatever theory we adopt respecting the foundation of the social union, and under whatever political institutions we live, there is a circle around every individual human being, which no government, be it that of one, of a few, or of the many, ought to be permitted to overstep⋯. [T]here is, or ought to be, some space in human existence thus entrenched around, and sacred from authoritative intrusion⋯.").
48. See, e.g., Matthew H. Kramer, Rights Without Trimmings, in A Debate Over Rights: Philosophical Enquiries 7, 75 (Matthew H. Kramer et al. eds., 1998).
49. See Gary S. Becker & George J. Stigler, Law Enforcement, Malfeasance, and Compensation of Enforcers, 3 J. Legal Stud. 1, 13-16 (1974) (identifying conditions under which private enforcement of the law economically dominates public enforcement).
50. See William M. Landes & Richard A. Posner, The Private Enforcement of Law, 4 J. Legal Stud. 1, 14-15 (1975) (arguing that private enforcement is economically suboptimal when government can intensify deterrence by increasing penalties without making expensive enforcement efforts, while self-interested private enforcers will make efforts to realize their entitlements).
51. See, e.g., Jonathan R. Hay et al., Privatization in Transition Economies: Toward a Theory of Legal Reform, 40 Eur. Econ. Rev. 559, 562-64 (1996) (demonstrating that efficient enforcement of entitlements crowds out enforcement by mafia and vice versa).
52. See, e.g., Richard A. Posner, Overcoming Law 387-405 (1995). These differences do not affect our discussion of entitlements' unrealizability.
53. For an important critique of rights idealism in constitutional law, see Daryl J. Levinson, Rights Essentialism and Remedial Equilibration, 99 Colum. L. Rev. 857 (1999).
54. Guido Calabresi and A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972).
55. See Carol M. Rose, The Shadow of the Cathedral, 106 Yale L. J. 2175, 2177-82 (1997).
56. See Abraham Bell & Gideon Parchomovsky, Property Lost in Translation (May 8, 2012) (unpublished manuscript, on file with the Virginia Law Review Association).
57. See Robert H. Mnookin & Lewis Kornhauser, Bargaining in the Shadow of the Law: The Case of Divorce, 88 Yale L. J. 950, 997 (1979).
58. Cf. Daron Acemoglu, Reward Structures and the Allocation of Talent, 39 Eur. Econ. Rev. 17, 18, 20, 27, 32 (1995) (identifying similar dynamics in societies that tolerate corruption).
59. Pub. L. No. 104-67, 109 Stat. 737
60. (codified as amended in scattered sections of 15 U. S. C.).
61. For discussion of this rule and the relevant case law and literature, see Richard A. Bierschbach & Alex Stein, Overenforcement, 93 Geo. L. J. 1743, 1762-65 (2005).
62. See Stephen J. Choi, Do the Merits Matter Less After the Private Securities Litigation Reform Act?, 23 J. L. Econ. & Org. 598, 622-23 (2007) (demonstrating empirically that alongside their discouragement of frivolous suits, the PSLRA's heightened pleading and proof requirements have discouraged many meritorious suits by making them unprofitable).
63. See 15 U. S. C. § 78r (2006) (codified version).
64. Pub. L. No. 73-22, ch. 38, 48 Stat. 74, 83 (1933)
65. (codified as amended at 15 U. S. C. § 77k (e) (2006)).
66. Akerman v. Oryx Commc'ns, 810 F.2d 336, 341 (2d. Cir. 1987).
67. Alaska Elec. Pension Fund v. Flowserve Corp., 572 F.3d 221, 234 (5th Cir. 2009)
68. (citing and quoting Akerman, 810 F.2d at 341).
69. Akerman v. Oryx Commc'ns, 609 F. Supp. 363, 371 (S. D. N. Y. 1984)
70. (quoting Collins v. Signetics Corp., 605 F.2d 110, 115-16 (3d Cir. 1979) (emphasis added)). The Akerman trial court further observed that "[t]he influence of general market factors⋯ entitles defendants only to an appropriate reduction of damages" and that "[t]he legislative choice to impose the burden of proof on defendants under section 11 (e) represents a judgment that the risk of any uncertainty as to causality must fall upon defendants in order to insure the full disclosure that is the primary goal of the Act."
71. (quoting Herman & MacLean v. Huddleston, 459 U. S. 375, 389 (1983)).
72. For similar interpretations of Section 11 (e) of the Securities Act, see In re Adams Golf, Inc., Sec. Litig., 618 F. Supp. 2d 343, 347 (D. Del. 2009) (requiring defendant asserting Section 11 (e) defense to prove "negative causation"
73. (citing Akerman, 810 F.2d at 340
74. and Collins, 605 F.2d at 114));
75. *14 (C. D. Cal. July 21, 2005) (attesting that defendant's proof burden under Section 11 (e) is "heavy"
76. (citing In re Dynegy, Inc. Sec. Litig., 339 F. Supp. 2d 804, 867-68 (S. D. Tex. 2004))).
77. See In re Enron Corp. Sec. Derivative & "ERISA" Litig., 529 F. Supp. 2d 644, 720 (S. D. Tex. 2006) (noting that "[o]ne method increasingly recognized by courts and mandated by some of them is an event study, a statistical method of measuring the effect of a particular event such as a press release⋯ or a prospectus, on the price of a company's stock" and citing court decisions (footnote omitted));
78. In re N. Telecom Ltd. Sec. Litig., 116 F. Supp. 2d 446, 460, 468 (S. D. N. Y. 2000) (granting summary judgment for defendants where their expert's event study, uncontroverted by the plaintiffs, showed that none of the challenged statements caused increases in the stock price);
79. see also Michael J. Kaufman & John M. Wunderlich, Regressing: The Troubling Dispositive Role of Event Studies in Securities Fraud Litigation, 15 Stan. J. L. Bus. & Fin. 183, 187-88, 260 (2009) (documenting and criticizing the prevalence of event studies in securities fraud litigation);
80. Marc I. Steinberg & Brent A. Kirby, The Assault on Section 11 of the Securities Act: A Study in Judicial Activism, 63 Rutgers L. Rev. 1, 36-37 (2010) (documenting defendants' frequent resort to event studies in establishing "negative causation" under Section 11 (e) of the Securities Act).
81. See, e.g., New Eng. Health Care Emp. Pension Fund v. Fruit of the Loom, 234 F. R. D. 627, 634-35 (W. D. Ky. 2006) (finding that a "significant component" in plaintiffs' reimbursable expenses of more than two million dollars (not including attorneys' fees) "was the cost of experts and consultants");
82. Merritt B. Fox, Why Civil Liability for Disclosure Violations When Issuers Do Not Trade?, 2009 Wis. L. Rev. 297, 306-07 (including the high cost of experts among the factors that raise the social cost of securities fraud litigation).
83. See generally Gideon Parchomovsky & Alex Stein, The Distortionary Effect of Evidence on Primary Behavior, 124 Harv. L. Rev. 518 (2010) (describing how the quest for favorable evidence affects-and oftentimes distorts-a party's primary behavior);
84. see also Chris William Sanchirico, A Primary-Activity Approach to Proof Burdens, 37 J. Legal Stud. 273, 276-80 (2008) (showing how allocation of proof burdens can affect the cost and direction of underlying primary activity);
85. Robert E. Scott & George G. Triantis, Anticipating Litigation in Contract Design, 115 Yale L. J. 814, 858-70 (2006) (showing how default and contractual allocations-of-proof burdens can improve performance of contractual obligations).
86. Recently, a private company made itself an assignee of multiple copyrights solely for the purpose of filing suits against alleged infringers and profiting from those suits by utilizing economies of scale. The company had no standing to file those suits, as only the legal or beneficial copyright owner can sue for infringement. See 17 U. S. C. §§ 106, 501 (b) (2006);
87. Silvers v. Sony Pictures Entm't, 402 F.3d 881, 884 (9th Cir. 2005) (en banc).
88. For that reason, presumably, the company did not disclose its assignee status and the copyright owner's identity in two hundred actions for copyright infringement. The court dismissed the company from the case and ordered it to show cause why it should not be sanctioned for egregious litigation behavior. Righthaven LLC v. Democratic Underground, LLC, 791 F. Supp. 2d 968, 978-79 (D. Nev. 2011).
89. See Gideon Parchomovsky & Alex Stein, Originality, 95 Va. L. Rev. 1505, 1509-16 (2009) and sources cited therein.
90. See, e.g., Neil Weinstock Netanel, Copyright's Paradox 54-80 (2008) (criticizing "copyright's ungainly expansion");
91. Yochai Benkler, Free as the Air to Common Use: First Amendment Constraints on Enclosure of the Public Domain, 74 N. Y. U. L. Rev. 354, 354-60 (1999) (criticizing the "enclosure movement" in copyright law: the current tendency to outlaw uses of expressive works that were previously considered legitimate);
92. Jessica Litman, Billowing White Goo, 31 Colum. J. L. & Arts 587, 587 (2008) (attesting that rights granted by copyright law underwent extraordinary expansion over the past fifty years);
93. John Tehranian, Infringement Nation: Copyright Reform and the Law/Norm Gap, 3 Utah L. Rev. 537, 543-48 (2007) (observing that copyright protection and liability for copyright infringement are excessive);
94. Pamela Samuelson, The Copyright Grab, Wired, Jan. 1996, at 134, 134 (describing the enclosure dynamic as "the copyright grab").
95. See generally Siva Vaidhyanathan, Copyrights and Copywrongs: The Rise of Intellectual Property and How It Threatens Creativity (2001).
96. Dellar v. Samuel Goldwyn, Inc., 104 F.2d 661, 662 (2d Cir. 1939).
97. Gideon Parchomovsky & Philip J. Weiser, Beyond Fair Use, 96 Cornell L. Rev. 91, 100 (2010) ("The standard's vagueness prevents actors from discerning the optimal behavior that the law requires of them.").
98. See James Gibson, Risk Aversion and Rights Accretion in Intellectual Property Law, 116 Yale L. J. 882, 884 (2007).
99. But see Steven J. Horowitz, Copyright's Asymmetric Uncertainty, 79 U. Chi. L. Rev. 333, 360-61 (2012) (arguing based on the prospect theory that uncertainty of users' liability stimulates use of copyrighted works as people generally prefer uncertain losses over certain ones).
100. See Stanley M. Besen, Sheila N. Kirby & Steven C. Salop, An Economic Analysis of Copyright Collectives, 78 Va. L. Rev. 383, 390 (1992) (explaining how copyright collectives economize on monitoring and collection costs).
101. See Wendy M. Grossman, Is a Picture Really Worth £1, 000?, The Guardian, Nov. 27, 2008, at 1, available at http://www.guardian. co.uk/technology/2008/nov/27/internetphotography (same strategy used by a large picture company).
102. See, e.g., Michelle Castillo, Law Firm Finds Success Targeting Those Who Post Copyrighted Images, Time Techland, Feb. 9, 2011, http://techland.time.com/ 2011/02/09/law-firm-finds-success-targeting-those-who-post-copyrighted-images/ (describing a law firm whose strategy is to "[b]uy out the copyrights for viral content and then sue bloggers and other people who violate copyright by reposting those images" and reporting that the firm's annual profits from these suits exceed $300, 000);
103. Alison Frankel, Porn Copyright Troll Targets Strike Back in New Class Action, Reuters, July 6, 2012, http://blogs.reuters.com/alison-frankel/2012/07/ 06/porn-copyright-troll-targetsstrike-back-in-new-class-action/ (reporting that a company pressured thousands of users of the Internet into settlement payments after accusing them of unpermitted downloading of its copyrighted porn materials and that a class action was filed to fend off this practice and reimburse victims).
104. Indeed, as Professor Jason Mazzone recently demonstrated, copyright owners oftentimes exploit their strategic advantage by filing suits for remedies they do not lawfully deserve. See Jason Mazzone, Copyfraud and Other Abuses of Intellectual Property Law (2011).
105. Gideon Parchomovsky & R. Polk Wagner, Patent Portfolios, 154 U. Pa. L. Rev. 1, 36 (2005).
106. See Daniel L. Rubinfeld and Robert Maness, The Strategic Use of Patents: Implications for Antitrust, in Antitrust, Patents and Copyright: EU and US Perspectives 85, 90 (François Lévêque & Howard Shelanski eds., 2005) (observing that large patent holders pay reduced legal fees, which allows them to use litigation warfare to their advantage).
107. See Adam Goldman, Some Claim Inventor Lemelson a Fraud, USA Today, Aug. 21, 2005, available at http://www.usatoday.com/tech/science/discoveries/2005-08- 21-lemelson-fraud-x.htm.
108. see also Ashby Jones, Patent 'Troll' Tactics Spread, Wall St. J., July 8, 2012, http://online.wsj.com/article/ SB10001424052702303292204577514782932390996.html (reporting proliferation of a business model that involves large corporations acquiring hefty patent portfolios and aggressively suing ostensible infringers in order to extort licensing fees).
109. Professor Kevin Greene was the first to note this problem in the context of the entertainment industry. K. J. Greene, Abusive Trademark Litigation and the Incredible Shrinking Confusion Doctrine-Trademark Abuse in the Context of Entertainment Media and Cyberspace, 27 Harv. J. L. & Pub. Pol'y 609 (2004). He expressed concern about corporations' abusive litigation strategies, while underscoring that the "effectiveness of lawsuits to silence corporate critics derives in part from the disparity of resources between the plaintiff corporation and the defendant parody artist."
110. (quoting Sarah Mayhew Schlosser, Note, The High Price of (Criticizing) Coffee: The Chilling Effect of the Federal Trademark Dilution Act on Corporate Parody, 43 Ariz. L. Rev. 931, 948 (2001)).
111. Leah Chan Grinvald, Shaming Trademark Bullies, 2011 Wis. L. Rev. 625, 625-26.
112. See Emmett J. Vaughan & Therese Vaughan, Fundamentals of Risk and Insurance 35-40, 87-90, 130-38 (10th ed. 2008) (explaining how insurance companies gather, pool, and evaluate information pertaining to risks they insure against).
113. See, e.g., Stephen J. Choi, Motions for Lead Plaintiff in Securities Class Actions, 40 J. Legal Stud. 205, 221 (2011) (noting that "the very largest attorney firms⋯ enjoy the greatest expertise and economies of scale in bringing a securities class action");
114. Steven L. Schwarcz, Explaining the Value of Transactional Lawyering, 12 Stan. J. L. Bus. & Fin. 486, 494 (2007) (specifying economies of scale and scope of transactional lawyers).
115. See Keith J. Crocker & Sharon Tennyson, Insurance Fraud and Optimal Claims Settlement Strategies, 45 J. L. & Econ. 469, 469 (2002) (identifying optimality conditions for insurers' underpayments and furnishing empirical proof of systematic underpayments of injury claims arising from car accidents).
116. See Tom Baker, Constructing the Insurance Relationship: Sales Stories, Claims Stories, and Insurance Contract Damages, 72 Tex. L. Rev. 1395, 1430-31 (1994) (arguing on empirical grounds that "insurance companies⋯ engage in strategic behavior with claimants" and systematically underpay claims);
117. Leon E. Trakman, David Meets Goliath: Consumers Unite Against Big Business, 25 Seton Hall L. Rev. 617, 623 (1994) ("Insurance companies consistently underpay valid insurance claims to horde the difference between the amount due to each insured and the amount actually paid.").
118. 227 P.3d 73 (N. M. 2010).
119. For additional examples, see, e.g., Kelsey D. Dulin, Comment, The Disaster After the Disaster: Insurance Companies' Post-Catastrophe Claims Handling Practices, 61 Okla. L. Rev. 189, 191-92, 196-206 (2008) (explaining and illustrating how insurance companies take advantage of catastrophe victims and underpay claims);
120. see also Bradshaw v. State Farm Mut. Auto. Ins. Co., 758 P.2d 1313, 1322-23 (Ariz. 1988) (admitting into evidence an insurer's statements in settlement negotiations to show that it attempted to strong-arm the policyholder into a cheap settlement).
121. See N. M. Stat. Ann. § 57-12-3 to-10 (2011) (prohibiting and making actionable "[u]nfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce").
122. Truong, 227 P.3d at 84-89.
123. Louisiana ex rel. Caldwell v. Allstate Ins. Co., 536 F.3d 418, 421-22 (5th Cir. 2008).
124. Pub. L. No. 109-2, 119 Stat. 4
125. (codified at 28 U. S. C. § 1332 (d) (2006)).
126. Caldwell, 536 F.3d at 430.
127. See, e.g., Dwight R. Carswell, Comment, CAFA and Parens Patriae Actions, 78 U. Chi. L. Rev. 345, 353-57 (2011) (discussing the Caldwell decision).
128. See, e.g., David Dietz & Darrell Preston, Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits, Bloomberg, Aug. 3, 2007, http://www.bloomberg.com/apps/news?pid=21070001&sid=aIOpZROwhvNI (observing that insurance companies systematically underpay claims and providing examples).
129. See, e.g., Cal. Bus. & Prof. Code § 7028 (a), (b) (West 2012) (providing that unlicensed work as a contractor is a misdemeanor punishable upon first conviction "by a fine not exceeding five thousand dollars ($5, 000) or by imprisonment in a county jail not exceeding six months, or by both that fine and imprisonment").
130. See, e.g., Brandon L. Garrett, Aggregation in Criminal Law, 95 Calif. L. Rev. 383, 393 (2007) (noting that prosecutors, as repeat players, "can achieve economies of scale⋯ by coordinating, channeling and settling cases⋯ in the shadow of strict sentencing rules that routinize outcomes").
131. Cf. Gabriel J. Chin & Richard W. Holmes, Jr., Effective Assistance of Counsel and the Consequences of Guilty Pleas, 87 Cornell L. Rev. 697, 703 (2002) ("[I]n some cases defendants who might be acquitted after trial plead guilty to relatively minor offenses because the cost of defense exceeds seemingly minimal penalties and consequences.").
132. Importantly, the defendant in our example cannot obtain legal representation at the state's expense. Because he is not poor, he is not entitled to a state-funded attorney under Gideon v. Wainwright, 372 U. S. 335 (1963). More crucially, Gideon entitles an indigent defendant to be represented by counsel at the government's expense only when he stands to receive prison sentence upon conviction. Hence, even if our defendant were poor, he would still be ineligible for Gideon's protection as in the event of conviction he will only be fined rather than go to jail.
133. See Scott v. Illinois, 440 U. S. 367, 373-74 (1979) (holding that only actual imprisonment prospect makes an indigent defendant eligible for Gideon protection). Note that a defendant's eligibility for a state-funded counsel under Gideon does not level the playfield. Criminal defense requires expert assistance and testimony in a variety of areas ranging from DNA and forensics to corporate accounting.
134. See Paul C. Giannelli, Ake v. Oklahoma: The Right to Expert Assistance in a Post-Daubert, Post-DNA World, 89 Cornell L. Rev. 1305, 1307-10 (2004).
135. Under extant doctrine, an indigent defendant can receive expert assistance at the government's expense only upon showing of necessity. See Criminal Justice Act of 1964, 18 U. S. C. § 3006A (e) (1) (2006) (entitling an indigent defendant to government-funded expert assistance when "necessary for adequate representation");
136. Medina v. California, 505 U. S. 437, 444-45 (1992) (interpreting Ake v. Oklahoma as "an expansion of earlier due process cases holding that an indigent criminal defendant is entitled to the minimum assistance necessary to assure him 'a fair opportunity to present his defense' and 'to participate meaningfully in [the] judicial proceeding.'"
137. (quoting Ake v. Oklahoma, 470 U. S. 68, 76 (1985));
138. Ake, 470 U. S. at 76, 79-85;
139. David Alan Sklansky, Hearsay's Last Hurrah, 2009 Sup. Ct. Rev. 1, 7, 75-77 (proposing to expand the Sixth Amendment confrontation right to enable defendants to challenge prosecution's forensic evidence with the help of court-appointed experts);
140. cf. Commonwealth v. Serge, 896 A.2d 1170, 1185 (Pa. 2006) (noting, in relation to expensive computer-generated animation that prosecution adduced as evidence of guilt, that defendant's financial inability to acquire computer-generated animation for exculpatory purposes weighs against admissibility).
141. See Russell D. Covey, Fixed Justice: Reforming Plea Bargaining with Plea-Based Ceilings, 82 Tul. L. Rev. 1237, 1254 (2008) (discussing strategic "horizontal overcharging", the widespread prosecutorial practice of charging defendants with multiple counts of the same or similar offense (s) when a criminal can be properly penalized by a single count);
142. see also Frank O. Bowman, III, Debacle: How the Supreme Court Has Mangled American Sentencing Law and How It Might Yet Be Mended, 77 U. Chi. L. Rev. 367, 464 (2010) (attesting that prosecutors file multiple-count charges to achieve higher sentences).
143. See generally Uzi Segal & Alex Stein, Ambiguity Aversion and the Criminal Process, 81 Notre Dame L. Rev. 1495 (2006) (explaining and illustrating criminal defendants' aversion toward risk and ambiguity).
144. See Stephanos Bibas, Plea Bargaining Outside the Shadow of Trial, 117 Harv. L. Rev. 2464, 2496-527 (2004).
145. Cf. Alan Wertheimer, The Equalization of Legal Resources, 17 Phil. & Pub. Aff. 303, 306-07 (1988) (advocating imposition of limits on parties' ability to litigate as a means for achieving equal distribution of legal resources).
146. Cf. Margaret H. Lemos, Special Incentives to Sue, 95 Minn. L. Rev. 782, 782-83 (2011) (analyzing one-way attorneys' fee shifts and damage multipliers that function as special incentives to file suits in federal courts and expressing doubts about their efficacy on the ground as judges react negatively to increased caseload).
147. In appropriate cases, pooling rightsholders into a class action will allow them to realize their entitlements. This pooling, however, is only possible when the rightsholders' suits exhibit commonality. Fed. R. Civ. P. 23 (a) (2). Even then, the class attorney's self-seeking conduct (e.g., a collusive settlement with the defendant) might lead to the entitlements' erosion.
148. See generally John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 Colum. L. Rev. 370 (2000) (analyzing agency costs in class actions and ways to reduce those costs). Under certain conditions, state attorneys general and federal regulatory agencies may decide to seek legal redress for aggrieved citizens. These conditions typically include commonality of suits and presence of a strong public interest in prosecuting those suits.
149. See Myriam Gilles & Gary Friedman, After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion, 79 U. Chi. L. Rev. 623 (2012);
150. Adam S. Zimmerman, Distributing Justice, 86 N. Y. U. L. Rev. 500, 518-39 (2011).
151. Even then, there will be no alignment between the agencies' and the attorneys' general goals and the interests of the citizens they represent. For a superb analysis of this misalignment and its policy implications, see Margaret H. Lemos, Aggregate Litigation Goes Public: Representative Suits by State Attorneys General, 126 Harv. L. Rev. (forthcoming 2012) (unpublished manuscript, on file with the Virginia Law Review Association);
152. See David Rosenberg & Kathryn E. Spier, On Structural Bias in the Litigation of Common Question Claims (June 20, 2012) (unpublished manuscript, available at http://ssrn. com/abstract=1950196) (identifying a structural bias in non-unified common question litigation: while each plaintiff invests in the litigation to promote his own case, the defendant spends to defeat all plaintiffs);
153. see also David Rosenberg, Mandatory-Litigation Class Action: The Only Option for Mass Tort Cases, 115 Harv. L. Rev. 831, 831-33 (2002) (arguing that mandatory class action enhances social welfare).
154. Bradley L. Smith, Note, Three Attorney Fee-Shifting Rules and Contingency Fees: Their Impact on Settlement Incentives, 90 Mich. L. Rev. 2154, 2154 (1992).
155. See Richard A. Posner, Comment on Donohue, 22 Law & Soc'y Rev. 927, 928 (1988) (claiming that "making the losing party pay the winning party's attorney's fees would reduce, not increase, the settlement rate");
156. Steven Shavell, Suit, Settlement, and Trial: A Theoretical Analysis Under Alternative Methods for the Allocation of Legal Costs, 11 J. Legal Stud. 55, 65-66 (1982) (arguing that there will be fewer settlements under a fee-shifting regime when parties' expected judgments are the same).
157. But see John J. Donohue III, Opting for the British Rule, or If Posner and Shavell Can't Remember the Coase Theorem, Who Will?, 104 Harv. L. Rev. 1093 (1991). Full discussion of the "English Rule or American Rule?" debate is beyond the ken of this Article.
158. See, e.g., Jules Coleman & Charles Silver, Justice in Settlements, 4 Soc. Phil. & Pol'y 102, 114-19 (1986) (arguing that the private and often secret character of settlements deprives society of the valuable information and public goods generated by adjudication);
159. Ben Depoorter, Law in the Shadow of Bargaining: The Feedback Effect of Civil Settlements, 95 Cornell L. Rev. 957, 960 (2010) (demonstrating that some settlements create socially undesirable benchmarks for primary behavior);
160. Owen M. Fiss, Against Settlement, 93 Yale L. J. 1073, 1075-76 (1984) (underscoring distortionary effects of settlements and describing settlement as a "capitulation to the conditions of mass society [that] should be neither encouraged nor praised").
161. See Jeremy Bentham, Scotch Reform; Considered, with Reference to the Plan, Proposed in the Late Parliament, for the Regulation of the Courts, and the Administration of Justice, in Scotland 75-76 (London, R. Taylor & Co. 1808) (describing settlements as "repugnant to" and a "denial of" justice);
162. see also Amalia D. Kessler, Deciding Against Conciliation: The Nineteenth-Century Rejection of a European Transplant and the Rise of a Distinctively American Ideal of Adversarial Adjudication, 10 Theoretical Inquiries L. 423, 438-41 (2009) (laying out an insightful historical account of Bentham's opposition to settlements).
163. Allowing defendants to file early motions to dismiss the suit and requiring courts to decide those motions promptly may provide a partial solution to this problem. This approach is followed by the Anti-SLAPP (Strategic Lawsuit Against Public Participation) statutes, enacted by numerous states to protect citizens who petition the government against suits aiming to suppress their petitioning activities. Anti-SLAPP statutes allow aggrieved citizens to file an early motion to dismiss the suit. This motion will be granted and the plaintiff will be obligated to pay the citizen's legal fees if the court finds that the plaintiff sued the citizen because of her potentially meritorious petition to the government. See Paul D. Wilson & Noah C. Shaw, Robber Barons, Back-Stabbers and Extortionists: How Far Does Anti-SLAPP Protection Go?, 43 Urb. Law. 745, 745 (2011). Notably, courts recognize the cost advantage of SLAPP plaintiffs as one of the main reasons for granting early dismissal and cost-shifting remedies.
164. See, e.g., United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 970-71 (9th Cir. 1999) ("The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party's case will be weakened or abandoned, and of deterring future litigation. "
165. (citing Wilcox v. Superior Court, 33 Cal. Rptr. 2d 446, 450 (Ct. App. 1994)));
166. *10 (E. D. N. Y. Oct. 26, 2011) (acknowledging that "California has an interest in protecting its citizens from malicious [SLAPP], even when the only damage they suffer is the costs of litigating the underlying lawsuit").
167. See generally Steven Shavell, The Fundamental Divergence Between the Private and the Social Motive to Use the Legal System, 26 J. Legal Stud. 575 (1997) (discussing misalignments between private and social incentives in litigation).
168. See generally Barbara Allen Babcock, Inventing the Public Defender, 43 Am. Crim. L. Rev. 1267 (2006) (describing the history and the role of public defenders' offices across the United States).
169. Henry E. Smith, An Economic Analysis of Law Versus Equity 17 (Oct. 22, 2010) (unpublished manuscript, available at http://www.law.yale.edu/documents/ pdf/LEO/HSmith-LawVersusEquity7.pdf);
170. see also Mark P. Gergen, John M. Golden & Henry E. Smith, The Supreme Court's Accidental Revolution? The Test for Permanent Injunctions, 112 Colum. L. Rev. 203, 242-49 (2012) (stating and illustrating equity's rule in counteracting opportunistic behavior).
171. For the goals and mechanics of punitive damages, see Dan Markel, How Should Punitive Damages Work?, 157 U. Pa. L. Rev. 1383 (2009).
172. See A. Mitchell Polinsky & Steven Shavell, Costly Litigation and Optimal Damages (Jan. 24, 2012) (unpublished manuscript, available at http://ssrn. com/abstract=1990786).
173. A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 Harv. L. Rev. 869, 896-97 (1998) (arguing that courts should take defendants' probability of escaping liability into account when calculating punitive damages).
174. Cf. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U. S. 408, 416-18, 425 (2003) (voiding on due process grounds award of $145 million in punitive damages as an addition to $1 million in compensatory damages against an insurance company that used strategic litigation to put unfair pressure on the insured, while indicating that a singledigit ratio between punitive and compensatory damages will pass constitutional muster).
175. The Supreme Court has imposed constitutional limitations on state courts' power to award punitive damages. See BMW of N. Am., Inc. v. Gore, 517 U. S. 559 (1996). Specifically, the Court ruled that the Due Process Clause of the Fourteenth Amendment prohibits the imposition of punitive damages that are grossly excessive or arbitrary.
176. Theodore Roosevelt, President's Message at the Opening of the Second Session of the Fifty-Eight [sic] Congress, Dec. 7, 1903, in 1 The Roosevelt Policy: Speeches, Letters and State Papers, Relating to Corporate Wealth and Closely Allied Topics 191, 196 (William Griffith ed., 1919).