In praise of irrational plaintiffs

Classical economic analysis suggests that parties in a lawsuit decide wheth er to settle or litigate an action based solely upon calculations of costs and potential recovery in the pending action. This analysis suggests that t he current policy of encouraging settlement is beneficial. Using statistica l analysis and behavioral economics, Professor Cross argues that, in fact, many litigants do not engage in rational decision making and that policies should encourage the "irrational plaintiff." The classical economic analysi s neglects the negative effect of repeat player litigants upon precedent. T his Article notes that repeat player litigants, particularly tort and Produ ct liability defendants,, have a strong economic interest to engage in stra tegic precedent setting and reduce their potential liability in future case s. These repeat player litigants manipulate precedent by pursuing settlemen t in cases with unfriendly facts, while tenaciously litigating cases with f avorable facts. In contrast, behavioral economic analysis suggests that man y plaintiffs have noneconomic motivations to litigate rather than settle, i ncluding vengeance, fairness, or vindication. Professor Cross suggests that the irrational plaintiff may counteract the negative effects of strategic settlement by pursuing litigation in spite of large settlement offers. Prof esser Cross concludes, through an understanding of behavioral economics and classical economic analysis, that settlement can result in significant ine fficiencies, and that the irrational plaintiff holds the greatest correctiv e potential.