September 25, 2012 10:44 Age: 2 yrs

The Economics of Civil Procedure

Jonathan Nash

Professor of Law

(read the Insights article)

BA, Columbia College, 1988
JD, New York University Law School, 1992
LLM, Harvard Law School, 1999

Scholarly interests: federal courts, civil procedure, judges and judging, property law, and environmental law

In his scholarly pursuits, Jonathan Nash goes behind the scenes, to explore questions essential to the effective and efficient operation of the judicial system. In particular, his scholarship considers what a law and economics approach can offer to the design of procedural devices and judicial systems — two areas where that approach has not commonly been applied.

Nash’s research focuses on trans-jurisdictional devices and on the proper role of standing doctrine. Trans-jurisdictional devices enable legal questions that arise within the judicial system of one sovereign to be resolved, at least in part, by the courts of a different sovereign. The mechanism of certification, for example, empowers federal courts — and even administrative agencies — to certify questions of state law that arise in federal litigation to a relevant state high court, for definitive resolution. Analogously, abstention doctrines allow federal courts, in select circumstances, to abstain from proceeding further with a federal case in order to allow state courts to hear litigation raising relevant state law issues. The Supreme Court reviews issues of federal law arising in state courts, under its certiorari review authority. For the most part, legal commentators — among them his colleagues Robert Ahdieh, William Buzbee, and Robert Schapiro — have expressed enthusiasm about trans-jurisdictional procedural devices; they endorse their increased use and expansion of their scope. 

 In recent articles in the Vanderbilt Law Review and Virginia Law Review, as well as earlier work, Nash takes a different tack. He critically examines the value of trans-jurisdictional procedural devices, elucidating their costs and benefits from an economic vantage. Nash argues that courts and commentators tend to overstate the benefits of trans-jurisdictional procedural devices and, even more commonly, to understate their costs. The smooth application of trans-jurisdictional procedural devices in most cases, for example, requires that the relevant federal and state law issues can easily be disentangled. In reality, however, this disaggregation is fraught with difficulty — and often controversial. This need not require throwing the baby out with the bathwater. Some trans-jurisdictional procedural devices may be useful , but Nash cautions us to take pause in our head-long rush to apply them.

Nash’s research has likewise brought a law and economics approach to bear on standing, a gatekeeping tool that permits only certain cases to reach the federal courts. In “Standing and the Precautionary Principle,” published in the Columbia Law Review, he explains how standing doctrine fails to integrate modern economic understandings of events whose occurrence is less than certain. Existing doctrine is hesitant to allow federal courts to hear cases based on injuries that may never occur. Nash, by contrast, argues for standing, based on the principle of precaution. Developed in the context of environmental law — and especially international environmental regulation — the precautionary principle calls for precaution in the face of uncertainty. A framework of precaution-based standing would thus allow cases into federal court where the injury is uncertain, so long as the injury, were it to occur, would be catastrophic. The expected value of such an injury, Nash argues, should be sufficient to meet the requirements for standing. He emphasizes that such an acknowledgement of standing does not necessitate the grant of relief. It simply allows the case through the courthouse doors. Finally, he offers a creative justification for such precaution-based standing: By comparison with the courts, the political branches of government are perhaps especially unlikely to take up the possibility of relief for high-cost, low-probability harms. 

In a forthcoming piece in the Michigan Law Review, Nash continues to explore standing doctrine’s failure to integrate economic understandings of expected value. While courts are quite willing to find standing where an injury is certain to occur, but of very low value, they are reluctant to find standing where the injury is not certain to occur but of large value — even where the expected value of the latter injury is the same as, or even greater than, the low-value certain injury. This seems paradoxical, however, given that standing doctrine already embraces, if only implicitly, expected value-based standing in certain instances. Especially given the latter, Nash argues, cases involving injuries with identical expected values should be treated consistently.

Nash’s future work on procedural design will continue to focus on standing, exploring whether existing standing doctrine is in fact well-suited to contribute to the sharpness of our adversarial litigation system, as is commonly claimed by both judges and academic commentators alike. 

Nash’s study of courts and procedure thus adds not only to the analysis of academics in law, economics, and political science, but also to the policies and decisions of legislators and judges who design procedural devices and judicial systems.

Excerpt: “Standing’s Expected Value”

Suppose that Jones has an investment. It is worth $10. Suppose that the government takes action that renders the investment worthless. Has Jones suffered an “injury in fact”? The answer is clear. Jones has lost an asset, and if the government takes that asset, it has injured Jones.

Now suppose that Jones has another investment. It is far more likely than not that the investment will turn out to be worthless. But there is a small chance—1 in 10,000—that the investment will be worth $1 million. Suppose that the government takes action that renders the investment certainly worthless. Has Jones suffered an “injury in fact”? Under existing doctrine, the answer is fairly clear.  Jones has lost an asset, the expected value of which is $100, and if the government takes that investment, it has injured Jones.

Now suppose that Smith faces a mortality risk of 1 in 100,000. Smith wants the Environmental Protection Agency to eliminate that risk, as he believes that it is legally required to do so. The EPA refuses to act. Has Smith suffered an “injury in fact”?  Under existing doctrine, the answer is not entirely clear; confusion over whether the injury should be seen as procedural or substantive muddles the issue.  But under figures the government itself has used, the expected value of the mortality risk of 1 in 100,000 is $60.

Whether a plaintiff can establish that he or she has suffered an injury in fact is critical to whether the plaintiff can pursue his or her legal action in federal court. Traditional understanding has it that Article III requires that, in order for there to be standing, a plaintiff must demonstrate (i) “injury in fact”, (ii) a causal link between that injury and the conduct complained of, and (iii) redressability. It is apparent that “injury in fact” is a necessary antecedent to standing analysis; without injury, there is nothing with which a causal link can connect and there is nothing to redress. 

My principal claim is simple: Standing doctrine has been constructed in a way that is oblivious to the simple idea of expected value. If people have suffered a loss with a positive expected value, they have suffered an “injury in fact.” It is unhelpful to say, as courts often have done, that an injury is “speculative” or “conjectural” when it has a positive expected value.  A 1 in 10,000 chance of losing $100,000 is the equivalent of a $10 loss (assuming risk neutrality), and a $10 loss is an injury. A small risk of death is an injury in the sense that rational people would pay to eliminate it. Indeed, the federal government’s own practice treats small risks of deaths as injuries calling for a regulatory response.

These points cast grave doubt on many of the Court’s decisions in which it has denied standing on the ground that the relevant injury is too “speculative” or has not been shown to be “likely” to be redressed by a decree in the plaintiff’s favor. Speculative risks have a positive value; to suffer them is to suffer an injury in fact. If a victory by the plaintiff would give the plaintiff an asset with a positive expected value, then the plaintiff’s injury would be redressed by a decree in his favor.

Indeed, notwithstanding the Court’s ambivalence towards it, the notion of expected value-based standing is consistent with the essence of existing standing doctrine: Extant doctrine implicitly embraces expected value by allowing standing in settings where the harm is far from certain, and indeed merely probabilistic. For example, standing in declaratory judgment actions necessarily assumes that the subject of the declaration sought will probably come to pass. And standing in cases raising overbreadth challenges—in which a speaker challenges a government speech restriction on the basis that it might chill the protected speech of parties not before the court—presumes both that the government likely would prosecute the actions by others that come near the margin of a statute, and that others would as a result likely would not engage in such actions in the first place.

What, then, might explain the pattern in the rest of existing standing law, which has had such difficult in understanding a simple point about expected value? I suggest four possibilities. The first possibility is that courts are simply confused. They have not understood that a small risk of a significant harm is equivalent in value to a certain loss of a harm of a specified magnitude. The second possibility is that in refusing to hear cases in which plaintiffs complain about a loss of positive expected value, courts are relying on common law conceptions of injury—conceptions that poorly fit modern regulatory law. The third possibility, related to the second, is that some of the key cases are not about injury in fact at all. They are grounded instead in the (unarticulated) judgment that no relevant source of law should be taken to grant the plaintiff a cause of action. The fourth possibility is that some of the relevant decisions are based on judicial concerns over the generalized nature of the harm.  In some cases, millions of people face a loss with a positive expected value. In such cases, there should be no problem with injury in fact; millions of people have been injured (in fact). If a problem exists, it is that widely generalized harms should not be judicially cognizable, at least when Congress has not explicitly said that they should be—not that Article III bars suits where the occurrence of injury is less than certain.

In my view, there is no reason to say that Congress lacks the power to channel into federal court cases in which harm in the future is probabilistic. Nor does the injury-in-fact test bar courts from hearing such cases. If the plaintiff has lost a small chance to gain a large amount, the loss is equal to an amount that would unquestionably be a basis for standing. To be sure, the prudential barrier on generalized harms might apply in some such cases. But there is no reason to hold, as some courts have, that Article III poses an obstacle to standing for probabilistic harms, so long as the expected value test is met.

--from Standing’s Expected Value, Michigan Law Review (forthcoming 2013)

Selected Publications

Book Chapters

Legal Defeasibility in Context and the Emergence of Substantial Indefeasibility, Essays on Legal Defeasibility (forthcoming Oxford University Press 2013) (Jordi Ferrer & Giovanni B. Ratti eds.)

Articles

"Standing’s Expected Value," Michigan Law Review (forthcoming 2013)

"On the Efficient Deployment of Rules and Standards to Define Federal Jurisdiction," 65 Vanderbilt Law Review 509 (2012)      

"Prosecuting Federal Crimes in State Courts," 97 Virginia Law Review 243 (2011) (with Michael G. Collins)

"The Majority That Wasn’t: Stare Decisis, Majority Rule, and the Mischief of Quorum Requirements," 58 Emory Law Journal 831 (2009)

"Identitarian Anxieties and the Nature of Inter-Tribunal Deliberations," 9 Chicago Journal of International Law 613 (2009) (with Adeno Addis) (symposium contribution)

 

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