Negative-Expected-Value Suits

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Negative-Expected-Value Suits

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Title: Negative-Expected-Value Suits
Author: Bebchuk, Lucian Arye; Klement, Alon

Note: Order does not necessarily reflect citation order of authors.

Citation: Lucian Bebchuk and Alon Klement, Negative Expected-Value Suits (Harvard John M. Olin Discussion Paper Series, No. 656, Dec. 2009).
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Abstract: We review the literature on negative-expected-value suits (NEV suits) – suits in which the plaintiff would obtain a negative expected return from pursuing the suit all the way to judgment. We discuss alternative theories as to why, and when, plaintiffs with NEV suits can extract a positive settlement amount. In particular, we explain how such a plaintiff can extract a positive settlement due (i) asymmetry of information between the parties, (ii) divisibility of the plaintiff's litigation costs, (iii) upfront costs that the defendant must incur before the plaintiff incurs any costs; (iv) expectation that the arrival of information during the course of the litigation may turn the suit into a positive-expected-value one, (5) reputation that enables the plaintiff to bind itself to going to trial if the defendant refuses to settle; or (6) the plaintiff’s having a contingency fee or retainer arrangement with its lawyer.
Published Version: http://www.law.harvard.edu/programs/olin_center/papers/pdf/Bebchuk_656.pdf
Other Sources: http://ssrn.com/abstract=1534703
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:30064399
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