A new options theory for risk multipliers of attorney's fees in federal civil rights litigation

Given the importance of private enforcement of federal civil rights laws, C ongress and the courts have attempted to encourage plaintiffs' attorneys to accept meritorious civil rights cases through fee shifting and risk multip liers. Recently, however, the Supreme Court has essentially prohibited the use of risk multipliers, thus undercompensating attorneys for the risk of l osing civil rights actions and discouraging the filing of such cases. In th is Article, Professor Huang develops a new options-based theory of calculat ing attorney's fees. Professor Huang argues that a lawsuit consists of a se quence of options to continue with the case rather than a once-and-for-all irreversible commitment, thus allowing an attorney to assess the plaintiffs probability of prevailing at trial at different stages in a lawsuit His pr oposal is for courts to recognize this option feature of lawsuits and adjus t the risk multiplier accordingly. Consequently, the size of the risk multi plier would more accurately reflect the risk of losing, thus providing atto rneys with better incentives to bring meritorious civil rights actions. In developing his theory, Professor Huang surveys the history and caselaw on r isk multipliers, applies a simple options approach to lawsuits, and discuss es the effect of an options-based approach on attorneys' incentives to brin g and settle civil rights actions. A mathematical Appendix formally models Professor Huang's options-based approach.