Informational Externalities and Settlements in Mass Tort Litigations

Deffains, Bruno and Langlais, Eric (2010): Informational Externalities and Settlements in Mass Tort Litigations. Forthcoming in: European Journal of Law and Economics , Vol. 30, No. 2&3 (October 2010)

Abstract

This paper elaborates on a basic model of mass tort litigation, highlighting the existence of positive informational externalities afforded by the discovery process (as a general technology of production of evidences) in order to study when a class action is formed, or when a sequence of individual trials is more likely. We illustrate the argument that when several plaintiffs file individually a lawsuit against the same tortfeasor, the resolution of the various cases through repeated trials produces positive informational externalities. When class actions are forbidden, these externalities only benefit to the later plaintiffs (through precedents, jurisprudence...). When they are allowed, the first filers may have an incentive to initiate a class action as far as it enables him to benefit from these externalities, through the sharing of information with later filers. We provide sufficient conditions under which a class action is formed, assuming a perfect discovery process. We also show that when contingent fees are used to reward attorneys' services, plaintiffs become neutral to the arrival of new information on their case.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mass Tort Class Action, information sharing, repeated litigation, contingent fees.
• Subjects: K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law; K - Law and Economics > K2 - Regulation and Business Law > K20 - General; K - Law and Economics > K1 - Basic Areas of Law > K13 - Tort Law and Product Liability ; Forensic Economics; K - Law and Economics > K2 - Regulation and Business Law > K22 - Business and Securities Law; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; K - Law and Economics > K2 - Regulation and Business Law > K21 - Antitrust Law; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K41 - Litigation Process

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