A study by Amy Farmer, a University Professor in the economics department at the Sam M. Walton College of Business and holder of the Margaret Gerig & R.S. Martin, Jr. Chair in Business, has been accepted for publication by International Review of Law and Economics.
The study is entitled “Litigation with Judgment Proof Defendants.” The research focuses how the decision to settle or to go to trial in legal cases may be influenced by whether or not a defendant’s assets are known or can be discovered by the plaintiff.
“When a defendant’s level of assets cannot be viewed by a plaintiff, this informational asymmetry can be the source of settlement failure,” Farmer said. “As such, we would expect greater incidence of trials and inefficient court expenditures. Since asset level are not generally subject to pre-trial discovery laws, this type of informational asymmetry is likely to be important as a practical matter. In addition, the English Rule (in which the losing party pays the legal fees of the winner) will likely increase trials in this situation (and this is counter to what the English Rule is intended to accomplish).”
Farmer is publishing the study along with co-author Paul Pecorino of the economics, finance and legal studies department at the University of Alabama.