26 February 2016

The Weak Spot In Civil Litigation

Above the Law has a nice post on what the American civil litigation system handles poorly, which is middle sized disputes, although in Colorado, the real bottom end is more like $15,000 (the jurisdictional limit of county court civil cases), rather than $50,000:
Our system handles both very small and very high value disputes fairly well. However, it does an atrocious job of handling disputes in the middle. . . .
If the dry cleaner messes up your clothes (and you can’t otherwise work it out), if FedEx screws up the package (and you can’t otherwise work it out), or if your ex-roommate won’t return the $400 security deposit you gave him (and you can’t otherwise work it out), small-claims court provides fast and low cost justice.

You can get real justice or something close to it at the other end of the money value spectrum. At our firm we handle many multi-jurisdictional, complex commercial matters where the result in the case can make a difference in the millions, or tens of millions, or even more, or where the result determines whether or how someone does business. For such matters, it makes perfect sense to spend a great deal of money on lawyers . . . since the legal fees likely will pale in comparison to the value of the dispute or the result you hope to obtain (or avoid).

If your damages are too high to be in small claims court, but not over a million and “only” $50,000 or $300,000 or “only” about your lower-paying job, then litigation likely doesn’t make sense. That’s because it is very tough to find a good lawyer for a price where the legal fees and other expenses do not in the end swamp the possible recovery. . . . As much as you may hate to say it (and as much it may be against your business interests), sometimes you have to tell a plaintiff who has been screwed to just walk away; fighting isn’t worth it. Sometimes you have to tell a defendant wrongly sued just to pay something; fighting isn’t worth it.
The author doesn't address solutions in his short post, and I won't either in this one, but a lot of the more commonly proposed solutions sound nice but in my opinion also won't solve the problem.

Exceptions To The "Unsweet Spot" 

I'd also add that there are some kinds of cases in the middle range that are more tractable than others within the court system.  And, these kinds of tractable claims make up a pretty decent share of the total docket in general jurisdiction trial courts.

For example, simple automobile accident suits against careless or reckless drivers who cause damages in this range (or a few other simple negligence tort scenarios like slip and fall cases) can often be litigated cost effectively by mass production Plaintiff's trial lawyers working on contingency on one side and insurance defense lawyers on the other.

Similarly, simple collection lawsuits with one Plaintiff, one or two defendants, and a single simple cause of action, for example, to enforce promissory notes or credit card bills or taxes in arrears, or foreclose on a mortgage or repossesses mortgaged tangible personal property in this dollar range can also often be litigated cost effectively (and often give rise to default judgments).

But, anything that causes a case to transform a completely transparent plain vanilla case into a more complex one (such as construction defect cases, employment discrimination lawsuits, disputes related to ownership of real property, business to business contract disputes, breach of fiduciary duty claims, contested guardianship, conservatorship and probate cases, etc.) swiftly becomes excessively expensive to litigate in this dollar range.

It is almost impossible to litigate a middle range case that is not completely simple and plain vanilla, for less than $35,000-$50,000 of attorneys' fees and litigation costs, and it isn't hard at all for that figure to soar to several hundred thousand dollars if any minor or major complication comes up.  This is very manageable in a $500,000 or $1,000,000+ dispute, but is a real burden in medium sized civil litigation (which makes up a lot of the practice of the kind of law firms where I have worked all of my life).

A Breakdown Of "Unsweet Spot" Cases By Type

There are about 20,000 non-domestic relations cases a year in Colorado (which had a population of about 5,050,000 in 2010 when the caseload data was collected) that fall into that "unsweet spot" of complex cases involving medium amounts in controversy (excluding contested domestic relations cases which are another "unsweet spot").  Of course, that doesn't consider thousands of other cases in that dollar range where no suit was filed out of concerns for litigation costs.

This breaks down into about 3,000 complex tort cases, about 3,500 cases seeking to quiet title or seek possession of property, about 13,000 cases involving contract or real property disputes, about 1,000 cases involving appeals or administrative or municipal law, and about 3,000 complex cases within probate court jurisdiction (mostly, but not entirely, contested mental health, conservatorship and guardianship cases). But, some judicial mortgage foreclosures, personal property possession cases, contract disputes that amount to collection cases, and only minimally disputed probate cases within this total are probably actually fairly simple and perhaps 5%-10% are for very large amounts, so the actual estimate of truly problematic cases may be a bit less than 20,000.

There are also about 20,000 domestic relations cases a year (including both initial divorces or child custody and support orders, and subsequent motions to modify parenting time, child support or alimony), of which perhaps half (i.e. 10,000) are meaningfully contested by parties who don't have the resources to make this really cost effective.  So roughly a third of cases in the "unsweet spot" are contested domestic relations actions.

By comparison, there were about 150,000 collection cases and 43,000 eviction cases and about 13,000 restraining order cases tried in county court (which has jurisdiction limited to $15,000), and about 85,000 pro forma foreclosure and tax collection cases, and about 3,000 simple negligence tort cases in district court (which has general jurisdiction), about 8,000 pro forma uncontested probate cases, and about 10,000 uncontested domestic relations actions.

A Final Note On Solutions

The "unsweet spot" in civil litigation is a problem that calls for foxes and not hedgehogs.  Divide and conquer is the order of the day, and the best approach probably involves multiple independent tweaks, rather than just a single overarching solution to an overarching problem.  One of the reasons that these cases have to be resolved under very general and often inefficient rules is that they are diverse and each one presents different issues.

The answer also lie only partially in the rules of civil procedure themselves; another big issue is the business models that can be adopted to provide legal services and dispute resolution to these cases in a just, inexpensive and speedy manner.

But, I am confident that it is possible to come up with good solutions to be more cost effective in handling a large share of the "unsweet spot" docket, and I am confident that once one state comes up with these solutions that they can be widely replicated because pretty much every state in the United States has the same problem with this class of cases.  I will, however, defer specific ideas for solutions to a later post.

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