Tortfest
This Article argues that mass torts involving multiple tortfeasors can be welfare enhancing. It begins by investigating the role of “dilution of liability”—a phenomenon that has been condemned for its role in facilitating accidents. According to the literature, in alternative care situations where the damage to the victim is constant, dilution of liability leads to inefficient precaution levels and consequently to more (bad) accidents. The Article deviates from this literature and shows that dilution of liability can be welfare enhancing. This is so even in the quintessential case where dilution of liability has been denounced. The Article further shows that an activity that is socially undesirable and should give rise to liability can become desirable as the number of tortfeasors increases. Put differently, it shows that in some situations an activity that would and should be condemned if conducted by one tortfeasor may become socially desirable if done by many. The Article analyzes the conditions under which such desirable “tortfests” occur, and it has important implications to the salience literature. After investigating the impact of tortfests on actors’ precaution and activity levels, the Article examines mechanisms that would incentivize actors, in certain situations, to join a group wrongdoing or combine with others to initiate one. The result, it is argued, could increase societal welfare.
I would like to thank Professor Anup Malani, Professor Jared Mayer, and the editors and staff of the University of Chicago Law Review for their thoughtful input and careful review.
The latest development in class action litigation is the “future stakes settlement.” Under this novel mechanism, unveiled in the settlement proposal to end a privacy law class action lawsuit against the startup Clearview AI, a defendant grants a privately traded equity stake to the class in exchange for a release of all claims.
Future stakes settlements, though similar to existing mechanisms in class action and bankruptcy law, offer distinct benefits and costs. Through a future stakes settlement, the class may recover against a cashless defendant and receive a larger payout than would be possible through a traditional cash damages fund. But this recovery is uncertain, as the value of a future stake can fluctuate. Furthermore, by transforming injured parties into shareholders, future stakes settlements pose serious moral quandaries.
Existing guidance for settlement agreements under Federal Rule of Civil Procedure 23(e) is insufficient to handle the high degree of risk associated with future stakes settlements. This Comment recommends additional standards that courts should apply when evaluating these settlements. Through these additions, courts can prevent defendant gamesmanship, ensure future stakes settlements are fair to the class, and fulfill the dual purposes of compensation and regulation in class actions.
We thank Bruce Ackerman, Lucian Bebchuk, Robert Ellickson, Daniel Epps, Edward Fox, Jens Frankenreiter, Clayton Gillette, Brian Highsmith, Noah Kazis, Reinier Kraakman, Zachary Liscow, Jon Michaels, Mariana Pargendler, and David Schleicher, as well as those who provided feedback from presentations at Yale Law School and the annual meeting of the American Law and Economics Association. We also thank Josh Kaufman, Daniella Apodaca, Jonah Klausner, and the other editors of the University of Chicago Law Review for their excellent feedback on both substance and style.
We thank Bruce Ackerman, Lucian Bebchuk, Robert Ellickson, Daniel Epps, Edward Fox, Jens Frankenreiter, Clayton Gillette, Brian Highsmith, Noah Kazis, Reinier Kraakman, Zachary Liscow, Jon Michaels, Mariana Pargendler, and David Schleicher, as well as those who provided feedback from presentations at Yale Law School and the annual meeting of the American Law and Economics Association. We also thank Josh Kaufman, Daniella Apodaca, Jonah Klausner, and the other editors of the University of Chicago Law Review for their excellent feedback on both substance and style.
When one thinks of government, what comes to mind are familiar general-purpose entities like states, counties, cities, and townships. But more than half of the 90,000 governments in the United States are strikingly different: They are “special-purpose” governments that do one thing, such as supply water, fight fire, or pick up the trash. These entities remain understudied, and they present at least two puzzles. First, special-purpose governments are difficult to distinguish from entities that are typically regarded as business organizations—such as consumer cooperatives—and thus underscore the nebulous border between “public” and “private” enterprise. Where does that border lie? Second, special-purpose governments typically provide only one service, in sharp contrast to general-purpose governments. There is little in between the two poles—such as two-, three-, or four-purpose governments. Why? This Article answers those questions—and, in so doing, offers a new framework for thinking about special-purpose government.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
We thank Lucian Bebchuk, Alon Brav, Ryan Bubb, Ed Cheng, Quinn Curtis, Elisabeth de Fontenay, Jared Ellias, Jill Fisch, Joe Grundfest, Cam Harvey, Scott Hirst, Colleen Honigsberg, Marcel Kahan, Louis Kaplow, Jonathan Klick, Brian Leiter, Saul Levmore, Dorothy Lund, John Morley, Mariana Pargendler, Elizabeth Pollman, Roberta Romano, Paolo Saguato, Holger Spamann, George Vojta, and Michael Weber for valuable suggestions and discussions. This Article has benefited from comments by workshop participants at Columbia Law School, George Mason University Antonin Scalia Law School, Georgetown University Law Center, Harvard Law School, Stanford Law School, UC Berkeley School of Law, the University of Chicago Law School, the University of Oxford Faculty of Law, the University of Pennsylvania Carey Law School, the University of Toronto Faculty of Law, the University of Virginia School of Law, and the Washington University School of Law, as well as at the American Law and Economics Association Annual Meeting, the Corporate & Securities Litigation Workshop, the Labex ReFi-NYU-SAFE/LawFin Law & Banking/Finance Conference, and the Utah Winter Deals Conference. Robertson gratefully acknowledges the support of the Douglas Clark and Ruth Ann McNeese Faculty Research Fund. Katy Beeson and Levi Haas provided exceptional research assistance. All errors are our own.
For years, academic experts have championed the widespread adoption of the “Fama-French” factors in legal settings. Factor models are commonly used to perform valuations, performance evaluation and event studies across a wide variety of contexts, many of which rely on data provided by Professor Kenneth French. Yet these data are beset by a problem that the experts themselves did not understand: In a companion article, we document widespread retroactive changes to French’s factor data. These changes are the result of discretionary changes to the construction of the factors and materially affect a broad range of estimates. In this Article, we show how these retroactive changes can have enormous impacts in precisely the settings in which experts have pressed for their use. We provide examples of valuations, performance analysis, and event studies in which the retroactive changes have a large—and even dispositive—effect on an expert’s conclusions.