Judicial Ability and Securities Class Actions

We exploit a new data set of judicial rulings on motions in order to investigate the relationship between judicial ability and judicial outcomes. The data set consists of federal district judges’ rulings on motions to dismiss, to approve the lead plaintiff, and to approve attorneys’ fees in securities class actions cases, and also judges’ decisions to remove themselves from cases. We predict that higher-quality judges, as measured by citations, affirmance rates, and similar criteria, are more likely to dismiss cases, reject lead plaintiffs, reject attorneys’ fees, and retain cases rather than hand them over to other judges. Our results are mixed, providing some but limited evidence for the hypotheses

Application of the statistical theory of extreme values to spacecraft receivers

Statistical theory of extreme values application to spacecraft communication receiver

The Dynamics of Contract Evolution

Contract scholarship has given little attention to the production process for contracts. The usual assumption is that the parties will construct the contract ex nihilo, choosing all the terms so that they will maximize the surplus from the contract. In fact, parties draft most contracts by slightly modifying the terms of contracts that they have used in the past, or that other parties have used in related transactions. A small literature on boilerplate recognizes this phenomenon, but little empirical work examines the process. This Article provides an empirical analysis by drawing on a data set of sovereign bonds. The authors show that exogenous factors are key determinants in the evolution of these contracts. We find an evolutionary pattern that roughly separates into three stages. Stage one where a particular standard form dominates; stage two where there are external shocks and marginal players experiment with deviations from the standard form; and stage three where a new standard emerges. The pattern confirms roughly to the S curve commonly described in the product innovation literature. The authors also find that more marginal law firms are likely to be leaders in innovation at early stages of the innovation cycle but that dominant law firms are the leaders at later stages

Pricing Terms in Sovereign Debt Contracts: A Greek Case Study With Implications for the European Crisis Resolution Mechanism

Conventional wisdom holds that boilerplate contract terms are ignored by parties, and thus are not priced into contracts. We test this view by comparing Greek sovereign bonds that have Greek choice-of-law terms and Greek sovereign bonds that have English choice-of-law terms. Because Greece can change the terms of Greek-law bonds unilaterally by changing Greek Law, and cannot change the terms of English-law bonds, Greek-law bonds should be riskier, with higher yields and lower prices. The spread between the two types of bonds should increase when the probability of Greek default increases. Recent events allow us to test this hypothesis, and the data are consistent with it. We suggest that sovereigns, like private entities, minimize their cost of credit by offering investors with different risk preferences bonds with different levels of risk, which is reflected in their terms, including choice-of-law clauses. The market understands this practice. This finding has implications for the design of the European Crisis Resolution Mechanism (ECRM), which is currently being debated. To the extent the goal of the new restructuring mechanism is to force private investors to take better precautions, ex ante, the restructuring authorities would be well advised to abandon the past practice of largely ignoring variations in the boilerplate of sovereign debt contracts and giving equal treatment to different types of debt

A Winner’s Curse?: Promotions from the Lower Federal Courts

The standard model of judicial behavior suggests that judges primarily care about deciding cases in ways that further their political ideologies. But judicial behavior seems much more complex. Politicians who nominate people for judgeships do not typically tout their ideology (except sometimes using vague code words), but they always claim that the nominees will be competent judges. Moreover, it stands to reason that voters would support politicians who appoint competent as well as ideologically compatible judges. We test this hypothesis using a dataset consisting of promotions to the federal circuit courts. We find, using a set of objective measures of judicial performance, that competence seems to matter in promotions in that the least competent judges do not get elevated. But the judges who score the highest on our competence measures also do not get elevated. So, while there is no loser’s reward, there may be something of a winner’s curse, where those with the highest levels of competence hurt their chances of elevation

Political Risk and Sovereign Debt Contracts

Default on sovereign debt is a form of political risk. Issuers and creditors have responded to this risk both by strengthening the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and by creating terms that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce their debt burden; and debtors and creditors may attempt to externalize costs on the taxpayers of other countries. We support this argument with an empirical overview of the development of sovereign bond terms from 1960 to the present

The Law and Policy of Judicial Retirement

Lifetime tenure maximizes judicial independence by shielding judges from political pressures, but it creates problems of its own. As is widely known, judges with judicial independence may implement their political preferences or shirk in other ways. Less attention has been given to another problem: that judges will remain in office after their abilities degrade as a result of old age. The U.S. federal system addresses these problems in an indirect way. When judges’ pensions vest, they receive a full salary regardless of whether they work or not; thus, the effective compensation for judicial work falls to zero. Judges can retire, receive their pension, and obtain paying work elsewhere. This approach limits some of the harmful effects of judicial independence by encouraging judges to vacate their offices when they reach a certain age, and by causing judges who lack talent, and therefore find their work burdensome, to self-select themselves out of office. But this solution is hardly perfect. Wealthier judges will be insulated from the financial incentives, and judges with strong partisan preferences can time their retirement for political purposes. We test the potential benefits and costs of this system using a database of federal district judges

How Well Do Measures of Judicial Ability Translate Into Performance?

Diverse measures are used as proxies for judicial ability, ranging from the college and law school a judge attended to the rate at which her decisions are cited by other judges. Yet there has been little serious examination of which of these ability measures is better or worse at predicting the quality of judicial performance—including the management and disposition of cases. In this article, we attempt to evaluate these measures of ability by examining a rich group of performance indicators. Our innovation is to derive performance measures from judicial decisions other than case outcomes (which are inherently difficult to evaluate): the decisions to preside over a securities class action, to reject a motion for lead plaintiff, to dismiss the complaint with prejudice, and to reject a request for fees. In each case, an affirmative decision requires more work from the judge, and thus may be an indicator that the judge works hard and, all else equal, performs well. Using a database of securities class action cases, we find that judges who publish frequently and are highly cited are more likely to dismiss with prejudice but no more likely to make the hard choice in the other cases. Other proxies for judicial ability (attended top law school, judicial experience, earlier position as judge, prior private practice, heavy business caseload, and senior status) are more mixed

Antitrust in the Not-For-Profit Sector

Despite the conceptual differences between for-profit and non-profit firms stressed in conventional economic analyses of the non-profit sector, U.S. antitrust law generally does not distinguish between these two organizational forms. This paper argues that the same incentives to restrain trade exist in the non-profit sector as in the for-profit sector. Altruistic firms benefit from exploiting market power, just as non-altruistic ones do, even when they would price below cost without regard to competition. Therefore, promoting competition is socially valuable regardless of the particular objectives of producers, and the fact that antitrust law does not distinguish between the two sectors is efficient.