Daniel M. Klerman

Jurisdictional Competition and the Evolution of the Common Law

This paper explores the role jurisdictional competition played in the development of the common law. For most of English legal history, there were several courts with overlapping jurisdiction. In addition, judges received fees on a per case basis. As a result, judges had an incentive to hear more cases. The central argument of this article is that, since plaintiffs chose the forum, judges and their courts competed by making the law more favorable to plaintiffs. Courts expanded their jurisdictions to give plaintiffs more choices, made their procedures cheaper, swifter and more effective, and developed legal doctrines which made it difficult for defendants to prevail. Of course, jurisdictional competition was not without constraints, most importantly Parliament and Chancery. This paper tries to show how important features of the common law, including the structure of contract law, can be explained as the result of competition among courts and the constraints on that competition. Starting in 1799, statutes took fees away from the judges. The hypothesis that competition induced a pro-plaintiff bias is tested by quantitative analysis of judicial decisionmaking before and after those statutes.

Settlement and the Decline of Private Prosecution in Thirteenth-Century England

Although modern societies generally entrust enforcement of the criminal law to public prosecutors, most crimes in pre-modern societies were prosecuted privately by the victim or a relative. This article is the first rigorously quantitative analysis of private prosecution. It focuses on thirteenth-century England and uses statistical techniques, such as regression analysis, to chart and explain the changing rate of private prosecution. The rate of private prosecution fell by fifty percent between 1200 and the 1220s, climbed back to turn-of-the-century levels by the 1240s, and then swiftly dropped by two-thirds and remained at a low level through the end of the century. The most plausible explanation for the wide fluctuations is the changing judicial treatment of private settlements. One of the victims motives for bringing a private prosecution was the utility of suit in facilitating monetary settlement. Settlement was attractive to the accused, however, only if it protected him from further prosecution. In the late twelfth and early thirteenth centuries, settlement almost always protected the defendant. At various times during the thirteenth century, however, judges sent defendants to trial even though the prosecutor was no longer interested in the case. The implementation and relaxation of this anti-settlement policy can account for most of the changing frequency with which private prosecutions were brought.

Inferences from Litigated Cases

Priest and Klein argued in 1984 that, because of selection effects, the percentage of litigated cases won by plaintiffs will not vary with the legal standard. Many researchers thereafter concluded that one could not make valid inferences about the character of the law from the percentage of cases plaintiffs won, nor could one measure legal change by observing changes in that percentage. This article argues that, even taking selection effects into account, one may be able to make valid inferences from the percentage of plaintiff trial victories, because selection effects are partial. Therefore, although selection mutes changes in the plaintiff trial win rate, it does not make the win rate completely invariant to legal change. This article shows that inferences from litigated cases may be possible under the standard screening and signaling models of settlement, as well as under Priest and Klein’s original divergent-expectations model.

Settling Multidefendant Lawsuits: The Advantage of Conditional Setoff Rules

In cases involving multiple defendants, each defendants incentive to settle is influenced by the setoff rule enforced in the relevant jurisdiction. This article suggests that the effect of a setoff rule depends on whether the setoff is conditional on a finding that the settling defendant or defendants were legally liable. Previous research, which assumed that the setoff was unconditional, found that the two principal rules applied by modern courts--the pro tanto and proportionate share rules--often discourage settlement when the plaintiffs probabilities of prevailing against each defendant are not perfectly correlated. This article shows that the disincentive to settlement can be reduced or eliminated by making the setoff conditional on the liability of the settling defendant or defendants. The conditional setoff rules are of practical as well as theoretical interest because several states currently apply them.

The Value of Judicial Independence: Evidence from 18th Century England

This paper assesses the impact of changes in judicial independence on equity markets. North and Weingast (1989) argue that judicial independence and other institutional changes inaugurated by the Glorious Revolution of 1688-89 improved public and private finance in England by putting restraints on the government. We calculate abnormal equity returns at critical points in the passage of statutes giving judges greater security of tenure and higher salaries. Early eighteenth-century legislation granting tenure during good behavior is associated with large and statistically significant positive abnormal returns. Other statutes had positive but generally insignificant effects.

Corruption and Private Law Enforcement: Theory and History

This article analyzes private law enforcement in an environment with corruption. The effect of corruption is studied both under the assumption of monopolistic enforcement by a single private enforcement agency and under the assumption of competitive enforcement by many private enforcers. In addition, the model takes into account the different objectives of a benevolent, social-welfare-maximizing group and a self-interested, rent-seeking group, as well as the possibility of a government divided between welfare-maximizing and rent-seeking groups. Among the central results of the paper are (1) corruption is especially problematic under monopolistic enforcement, (2) when governmental decision making is divided, a rent-seeking group which is unable to control the level of fines and rewards usually prefers monopolistic to competitive enforcement. The article demonstrates the plausibility and relevance of the model by examining corruption and private law enforcement in pre-modern England.

The Selection of 13th‐Century Disputes for Litigation

Priest and Kleins seminal 1984 article argued that litigated cases differ systematically and predictably from settled cases. This article tests the Priest‐Klein selection model using a data set of 13th‐century English cases. These cases are especially informative because juries rendered verdicts even in settled cases, so one can directly compare verdicts in settled and litigated cases. The results are consistent with the predictions of the Priest‐Klein article, as well as with the asymmetric‐information selection models developed by Hylton and Shavell.

Legal Infrastructure, Judicial Independence, and Economic Development

Economic theory generally supports the idea that judicial independence, and, more generally, high quality courts, facilitate economic growth. Good, independent courts enforce contracts and protect property, and by doing so encourage the investment which is crucial for economic development. Nevertheless, judicial independence and good courts are not necessary to investment, because there are other mechanisms which can enforce contracts and protect property, albeit perhaps not as well as courts. Contracts can be enforced by reputation, without recourse to the courts. Similarly, the government can protect property through executive restraint and policing, even if constitutional protections are weak and private litigation is ineffective. Thus, economic growth often starts without strong courts, and efforts to improve the quality of the judiciary are often the consequence, not the cause, of economic development.The empirical literature, to the extent that it has investigated the relationship between courts and economic growth, has focused on judicial independence. Judicial independence is, of course, only one aspect of quality courts. Nevertheless, it is relatively easy to measure and probably correlated with other indices of court quality. It thus serves as a rough proxy for the quality of legal infrastructure. There is some evidence that judicial independence is associated with economic growth, but the evidence is mixed and causation is unclear.

Personal Jurisdiction and Product Liability

This article is the first sustained economic analysis of personal jurisdiction. It argues that plaintiffs should be able to sue where they purchased a product which caused injury. Such a rule allows manufacturers to set prices which take into account the quality of the forum state’s courts. If the courts are biased against out-of-state corporations, have overly generous judges or juries, or apply substantive law which is excessively pro-consumer, manufacturers can, through contracts with distributors and retailers, charge a higher price to consumers in that state. This prevents judges and juries from engaging in inter-state redistribution and gives states an incentive to provide efficient substantive rules and adjudicative institutions. In contrast, a rule which required suit in a place more fully under the control of the defendant – such as the place of manufacture or the location of the distributor – would encourage manufacturers to select inefficiently pro-defendant jurisdictions for their activities. Because consumers are unlikely to know where products are manufactured or distributed and are unlikely to be able to evaluate the quality of the law in those states, it is implausible to think that the market will give manufacturers incentives to locate their jurisdiction-triggering activities in states with efficient laws and institutions. This analysis is particularly important, because the Supreme Court has recently deadlocked on personal jurisdiction in product liability cases.

The emergence of English commercial law: Analysis inspired by the Ottoman experience

Thirteenth-century England was a commercial backwater whose trade was dominated by foreigners. To accommodate and encourage foreign merchants, England modified its legal system by creating legal institutions that were available to both domestic and foreign traders. Among the most important of these institutions were streamlined debt collection procedures and mixed juries composed of both Englishmen and foreigners. By introducing institutions that treated locals and foreigners equally, England created a level playing field that enabled English merchants to become increasingly prominent in the later Middle Ages. Englands ability to modernize its law was facilitated by the secular nature of English law, the representation of merchants in Parliament, and legal pluralism. Medieval England contrasts sharply with the early modern Ottoman Empire. The latter created special institutions for foreign merchants, which eventually put Ottoman Muslims at a competitive disadvantage.