A few good questions

February 4, 2011Duke Law News


Duke Law scholars are using empirical research tools to illuminate the inner workings of the law — and propose ways of doing things better.



Are juries prone to make excessive awards of punitive damages?


Neil VidmarNeil Vidmar’s latest study addresses a concern raised by the Supreme Court in its 2008 ruling in Exxon Shipping Co. v. Baker: that juries are unpredictably prone to make outlandish awards of punitive dam­ages that exceed the Court’s guideline of a single-digit ratio to compensa­tory damages.

Vidmar, Duke’s Russell M. Robinson II Professor of Law and a professor of psychology, and Mirya Holman, an assistant professor of political sci­ence at Florida Atlantic University, say the Court’s concern is misguided. Their audit of punitive damages awarded by juries in 2005 appears in the Suffolk University Law Review.

As their primary data set, Vidmar and Holman used the U.S. Bureau of Justice Statistics (BJS) 2005 Civil Justice Survey of State Courts, which provided information on all completed civil jury cases from the 46 largest county courts in the country. The BJS data recorded 6,427 civil jury trials, in which punitive damages were requested in pleadings 567 times, or in 8.8 percent of the cases. Punitive damages were awarded in 131 of the trials — 2 percent of all trials and 23 percent of cases where punitive damages were requested in the pleadings. Only 14 punitive award verdicts exceeded a single-digit ratio guideline. Strikingly, although the controversy about punitive damages frequently involves claims about such awards in product liability cases, except for a single asbestos case there were no other punitive awards for product liability, they note. The representative general patterns revealed by the BJS data were consistent with other quantitative surveys on jury awards of punitive damages conducted by Vidmar and others.

Noting that the Supreme Court has ruled that the appropriateness of awards is a qualitative, or subjective, judgment, Vidmar and Holman, who served for two years as the Goodson Law Library’s inaugural empirical research associate, supplemented the BJS data with a qualitative analysis of punitive damage awards from nine states. This additional database provided details about the disputes and procedural matters associated with the trials and offered insights into the litigation outcomes.

In fact, in the 11 cases identified with large punitive to compensatory ratios, they found what they called “arguably clear evidence” pointing to the reprehensibility of actions by the defendant — the very circumstances where the Supreme Court has allowed them.

See: The Frequency, Predictability, and Proportionality of Jury Awards of Punitive Damages in State Courts in 2005: A New Audit, 43 Suffolk University Law Review 855–885 (2010)

How do securities class action settlements affect targeted firms?


James CoxJames Cox’s recent project focuses on the institutional cost of securities class action lawsuits — the impact of suits and settle­ments on defendant firms’ financial vitality. The study, co-authored with Lynn Bai of the University of Cincinnati College of Law, is the latest in an ongoing, multi-year collaboration between Cox, Duke’s Brainerd Currie Professor of Law, and Randall S. Thomas, the John Beasley Professor of Law and Business at Vanderbilt University.

Cox and his colleagues analyzed the impact of securities class actions on the financial health and stock market performance of 480 companies that were defendants in settled lawsuits whose class period commenced after 1996, one year after Congress passed the Private Securities Litigation Reform Act of 1995. After establishing the firms’ financial performance at set intervals using a range of metrics, including stock returns, they made comparisons with the performance of similar companies.

Settlements did not significantly affect defendants’ sales opportunities, the investigators found, but the companies operated at reduced efficiency while the lawsuits were pending. Most significantly, the defendant firms were found to experience liquidity problems after settlement, and a worsening overall level of financial distress. In fact, 43 of the companies in the sample filed for bankruptcy protection during the study time period.

The clear correlation between settle­ments and financial distress strongly supports the view that suits are better directed towards the individual executives, officers, and advisers who were responsible for the fraudulent representations that spawned the lawsuits, argue Cox and his colleagues.

“Suits so directed do not pose the same burdens on the subject corpora­tion as do suits whose prosecution and ultimate settlement are focused on the corporation itself,” they write, noting that lucrative executive-compensation packages “yield a financial target worthy of even the most avaricious class of plaintiffs and their attorneys.” But given recent Supreme Court jurisprudence narrow­ing the scope of liability in securities fraud litigation, they acknowledge that entity liability is likely to continue, “and just deserts are likely to remain an unfulfilled public policy objective founded on data such as what we have presented here.”

See: Lying and Getting Caught: An Empirical Study of the Effect of Securities Class Action Settlements on Targeted Firms, 158 University of Pennsylvania Law Review 1877–1914 (2010)

How do state lobbyists affect policy?


John de FigueiredoHow lobbying works has proven to be a fertile avenue of scholarly inquiry for John de Figueiredo, one that already has resulted in seven published articles and a massive, growing database.

Among the findings yielded by a data set that currently contains more than 50,000 observations: Lobbying during budgetary sessions is much more effective than lobbying close to election time and, contrary to popular belief, the mere act of lobbying alone does not result in earmarks, or legislative provisions directing funds to specific projects.

“In fact, lobbying for earmarks is only effective when it is coupled with a representative of your district who is also a powerful legislator,” explains de Figueiredo, a leading scholar in the areas of political and legal strategy, innovation management, law and economics, and competitive strategy who joined the Duke Law faculty last July. “Powerful legislators will sometimes craft earmarks with virtually no lobbying. Representation by powerful legislators plus lobbying results in lots of earmarks [for a legislative district].”

De Figueiredo engages in math­ematical and statistical modeling of complex problems to spot, analyze, and interpret patterns of behavior that affect business and law in myriad ways; he has compiled databases that illuminate the workings of courts, business strategy, the management of technology and innovation, competitive strategy, and administrative law, to name just a few.

To build his own data set on lobbying expenditures, de Figueiredo inter­viewed lobbyists, discovering that many had never examined exactly why the most effective strategies worked. Choosing to focus at the state level, he gathered aggregate data from all 38 states that monitor lobbying, and then began collecting data on individual lobbyists.

“That way I could see how much AT&T lobbied in Massachusetts in 1991 versus 1992, and compare that with Oregon in the same years,” he says. De Figueiredo anticipates eventually collecting hundreds of thousands of observations based on the activities of thousands of firms. Why?

“There’s very little written on how firms and lawyers actually lobby. There are a lot of case studies and much anecdotal evidence, but very little examination of large data sets to find patterns in lobbying,” he notes. “When you want to actually change pol­icy, how do you do it? This data set will allow us to answer this and other ques­tions in a systematic manner.”

See: Academic Earmarks and the Returns to Lobbying, Working papers 4245-02, Massachusetts Institute of Technology (MIT), Sloan School of Management (2002)

Why Is There So Little Money in U.S. Politics? Journal of Economic Perspectives 17, 1 (Winter 2003)

Do sexual harassment laws decrease gender inequality in the workplace?


Daniel ChenSexual harassment laws reflect one attempt by legislators to make the workplace friendlier to women; sexual harassment is widely thought to be a major impediment to women’s participation in the labor force in both developed and developing countries, says Professor Daniel Chen.

“But we don’t know if this has been good or bad for women. Some say that forbidding harassment will make women happier at work, they will be more likely to come to work, and along a number of different dimensions gender inequality would decrease,” he says.

“There are scholars who say, ‘If you forbid sexual harassment, these women become potential litigants. Firms might not hire as many women, or they might sweep things under the rug or otherwise try to avoid imple­menting programs or procedures to reduce sexual harassment.’”

Chen’s recent study examines the effects of sexual harassment deci­sions to see if they had the labor market consequences theorists hoped for. Along with co-author Jasmin Sethi, an associate at Mayer Brown in Washington, D.C., he amassed a database of legal decisions in sexual harassment cases and information related to the effects of sexual harass­ment laws, such as the number of women in the workplace, numbers of women in management positions, wage equality statistics, and implemen­tation of human resources policies regarding sexual harassment.

Sexual harassment laws do decrease gender inequality — to a degree, the investigators report in a forthcoming paper.

“We found that these laws actually do increase gender equality in a number of areas,” Chen explains. “But we find that this effect is reduced for small firms, probably because they don’t have the resources to develop the kinds of programs intended for curbing the problem.”

In all of his wide-ranging and highly sophisticated empirical research, Chen examines how laws and legal theories translate into actual human behavior.

“Too frequently, there has been very little empiri­cal scrutiny of claims made by legal scholars and judges about the effect of laws and regulations. When others make contradictory counter­claims, we don’t really know what is true,” says Chen. “I develop tools to verify or disprove these claims.”

See: Insiders and Outsiders: Does Forbidding Sexual Harassment Exacerbate Gender Inequality?

Does variation in process between federal appellate courts affect equity and outcome?


Marin LevyThe Federal Rules of Appellate Procedure establish a set of rules to govern how appeals are handled but leave room for enormous variation when it comes to the processes by which cases are to be shepherded through the courts. Whether or not procedural disparities and differences are fair is the question at the root of Lecturing Fellow Marin Levy’s current empirical study.

Over the past year, Levy has been travelling to federal appellate courts, interviewing judges and clerks of court in order to document exactly how they handle cases after they are filed.
“How many people are reviewing each case?” asks Levy, who clerked for Judge José A. Cabranes on the United States Court of Appeals for the Second Circuit prior to joining the Duke Law faculty in 2009. “Do staff attorneys, rather than judges, look at the cases and do much of the work? Will there be oral argument, or will a case be treated in some other way?” The answers to those questions get to the heart of her inquiry, she says.

“Is it a problem that you could have a litigant in one circuit who is get­ting oral argument, who is getting a lot of judicial time and investment in the case, whereas a similarly situated litigant, just by virtue of being in a different circuit, could get none of those things?”

To date, Levy has conducted interviews about process in the D.C., First, Second, Third, and Fourth Circuits.

“What I’ve discovered is that there are two things that really shape the practices of any given circuit,” she says. “One is the docket. For example, the Second Circuit had a huge influx of immigration cases, and as a result created a non-argument calendar — a track for handling immigration cases without oral argument.

“Additionally, what drives these practices are the values of the circuit. Some of those are dictated by the current chief judge, but you also find that different circuits have different traditions dating back decades, and that affects how they choose to allo­cate judicial resources.”

Do insurance expansions hurt those they are designed to help?


Barak RichmanMost of American health policy is premised on expanding health insurance to the currently unin­sured. But research by Professor Barak Richman suggests that this strategy might be ineffective at best and perhaps even harmful to intended beneficiaries.

In a widely cited 2007 Health Affairs article, “Insurance Expansions: Do They Hurt Those They Are Designed to Help?,” Richman studied a socioeco­nomically and racially diverse population that enjoyed comparable health insurance benefits. He found that whites and people with higher incomes used their insurance to help pay for certain outpatient health services significantly more than did their African American, Asian, and low-income counterparts. For pharmaceutical and mental health insurance, for exam­ple, whites were shown to receive “nearly four times the annual insurance dollars that African Americans expected to receive and more than three times the dol­lars that Asians expected to receive,” Richman writes.

“This means that whites and high-income individuals are getting more insurance dollars than their non-white and lower-income co-workers,” says Richman. “At the very least, it suggests that efforts to expand insurance coverage are more likely to benefit the affluent, or those who are not the targets of the policy.”

Given the general consensus among health econo­mists that employees themselves are the ones who ultimately bear the cost of health insurance premiums in the form of lower wages, these findings suggest that forcing low-income and minority employees to pay insurance premiums for more affluent whites amounts to a regressive redistribution of wealth. The findings, he notes, “raise serious questions about the efficacy and fairness of mandating mental health and pharma­ceutical benefits.”

In follow-up research on mental health insurance, Richman examined differences in how individuals sought mental health care and measured whether the additional consumption of mental health services by higher-income and white insureds led to better health. He found little evidence that the specialized outpatient care consumed by white and high-income employees achieved results substantially different from that achieved by those who instead sought care from their primary care physicians.

“[T]here is no statistically significant evidence that receiving outpatient care from a mental health care provider reduces the likelihood of adverse mental health,” Richman writes in a work­ing paper. “[Yet] white and affluent workers take greater advantage of the mental health insurance benefit than their nonwhite and lower-income co-workers, [who instead] are significantly more likely to seek care from general practitioners than from mental health care providers. ... [T]hese results suggest that expanding mental health benefits increases regres­sive and undesired wealth transfers [and] raise serious questions about the provision of mental health insurance.”

Richman acknowledges that his empirical find­ings “raise as many questions as they answer” and might come at a particularly critical time. “President Obama’s Affordable Care Act means that many more Americans will have health insur­ance in the years to come,” he says. “That is an extremely positive development, but it brings unusual urgency to understanding what insurance should cover and how we can make it more affordable.”

See: Insurance Expansions: Do They Hurt Those They Are Designed to Help?, 26 Health Affairs 1345–1357 (Sept./Oct. 2007)

Who is more precautionary, the United States or Europe?


Jonathan WienerWhether Europe or the United States adopts a more precautionary stance regarding risk regulation has been a matter of intense debate for decades. With risk now a global concern and demands on policymakers to take protective action on such risks as chemicals, climate change, food, finance, and terrorism, the inquiry has implications for future regulatory research and policy and could illuminate appropri­ate areas for international dialogue.

Jonathan Wiener, Duke’s Perkins Professor of Law, professor of public policy, and professor of environmental policy, undertook a thorough, multi-year examina­tion of the question, along with a team of transatlantic legal scholars, scientists, and experts in specific areas of risk and regulation. He is the co-editor of a new book about the project, titled The Reality of Precaution: Comparing Risk Regulation in the United States and Europe (RFF Press/Earthscan, 2010, with Michael. D. Rogers, James K. Hammitt, and Peter H. Sand, eds.)

The project included what may be the most comprehensive and methodologically rigorous comparative study of relative precaution in risk regulation conducted to date. In addition to offering a dozen in-depth case studies on salient risks, Wiener and his colleagues developed a matrix of almost 3,000 risks identified in the scholarly literature over the last three decades and categorized them by type of source (such as alcohol and tobacco, terrorism and war, consumer products, and pollution) or by cause and end point — ecological, health, or safety. They randomly selected 100 for thorough analysis.

For each of the 100 sampled risks, they scored the relative stringency of regulation in Europe and the United States from 1970 to 2004; their analysis of the distribu­tion and trends in these scores can be found in the chapter titled “A Quantitative Comparison of Relative Precaution in the United States and Europe, 1970–2004.”

“The polity that regulates a risk earlier and more stringently than the other was considered more precautionary,” they write.

Overall, they find the United States and Europe to exhibit rough parity in relative precaution over the last four decades, with occasional divergence on particular risks. “The most common pattern, exhibited by 33 risks, is that Europe and the United States are equally precautionary over the entire period,” they write. While Europe has been more precautionary on risks such as genetically modified foods, toxic chemicals, and climate change, they find that the United States has been more precautionary about risks such as mad cow disease, air pollution, and terrorism.

“What we found is that the reality of precaution is very selective on both sides of the Atlantic, with frequent borrowing of ideas,” says Wiener.

See: A Quantitative Comparison of Relative Precaution in the United States and Europe, 1970–2004, in The Reality of Precaution: Comparing Risk Regulation in the United States and Europe (2010)

How has the Supreme Court’s ruling in United States v. Leon affected search warrant practices in federal district courts?


Dean David F. Levi,Jack Knight, Mitu GulatiIn its 1984 ruling in United States v. Leon, the Supreme Court stated that a warrant obtained in good faith from a neutral magistrate cannot later be attacked for lack of probable cause; the onus is on the defendant seeking to undermine the warrant to prove that police (or pros­ecutors) actively misled the magistrate or that no reasonable magistrate would have issued it.

Dean David F. Levi and Professors Jack Knight and Mitu Gulati  are investigating how Leon’s “good faith” exception to the probable cause rule may have changed the prac­tices of police, prosecutors, and magistrate judges seeking, processing, and issuing warrants and, more broadly, the impact of a Supreme Court opinion over time.

The three are examining all warrants issued in the U.S. District Court for the Eastern District of North Carolina during specific intervals before and after Leon until the present. They also are checking returns on the warrants and conducting supplementary interviews with judges and mag­istrate judges about their practices.
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