Litigation as Feud
Orlando Residence v. G.P Co., LLC is an exceptionally complex dispute, ongoing in various forms since the 1980s, which I’ve been fortunate enough to get to recode for my veil piercing project. This January, the case came up on appeal, again, before the Seventh Circuit. In an exceptionally clear opinion, Judge Posner took the parties to task and directed the trial court to move them toward some kind of peace. Too bad he had to lead off with this bit of rational actor claptrap:
“For 22 years these parties and their predecessors have been litigating, in numerous lawsuits in different courts, a dispute over a piece of property in Nashville. We were told at argument without contradiction that the parties have expended $3 million in legal fees, a figure that exceeds any reasonable estimate of the amount in controversy. Yet such behavior need not be irrational or a product of spite or even of bad legal advice. A rational litigant, having expended $X in unsuccessful efforts to prevail, yet having additional litigation options that he can pursue, will compare the cost of those options to the expected benefit, disregarding the $X he has spent already. That is a sunk cost–a cost he cannot recover by anything he does and therefore a cost that will not influence his behavior (if he is rational). Still, from an overall social standpoint, the money spent on this litigation–which we cannot quite end today, much as we would like to–is excessive. But our decision will bring the end within sight.”
Er, yes. It could be that the parties are thinking about litigation as a series of real options. But if Posner had read the underlying dockets, I think he’d come to a different conclusion. I’d say something more like a mix of legal agency costs and unadulterated hatred. The point is generalizable. Vexatious commercial litigation is exceedingly rare – I’ve found in previous work that less than 1% of cases have more than 150 docket entries. And it strikes me (anecdotally) that the amount at stake is at best a noisy predictor of such messy fights.