FORIS contracts: Litigation Cost Shifting and Contingent Fees in Germany

Arbeitspapier

This paper analyzes the impact of FORIS contracts on litigation and settlement decisions using a simple divergent-expectations model. A FORIS contract introduces contingent fee arrangements under the British legal cost allocation rule: the plaintiff pays a percentage of his settlement or trial returns to FORIS and obtains coverage for trial costs in case he loses in court; the plaintiff?s attorney receives the standard fee. We take into account the sequential nature of the settlement and trial decisions. Without FORIS contracts, only cases with positive expected value provide credible threats for the plaintiff and thereby motivate the defendant to agree to a settlement. A FORIS contract has two important effects: cases with negative expected value are turned into credible threats, hence a settlement is triggered. Even in positive expected value cases, the settlement result for the plaintiff is increased. According to our results, FORIS should prohibit settlement negotiations before a contract with the plaintiff has been made. The paper argues that FORIS should abolish the non-disclosure clause which prohibits the plaintiff to reveal the existence of the FORIS contract to a third party.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CSLE Discussion Paper ; No. 2001-04

Classification and Topics

• Classification: Wirtschaft ; Litigation Process ; Insurance; Insurance Companies; Actuarial Studies
• Subject: Contingent fees ; British cost allocation rule ; Legal Cost Insurance ; strategic moves ; Gerichtliche Prozesskosten ; Rechtsschutzversicherung ; Erfolgsbeteiligung ; Vertragstheorie ; Verhandlungstheorie ; Theorie ; Deutschland ; FORIS AG

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kirstein, Roland ; Rickman, Neil
• Event: Veröffentlichung
• (who): Universität des Saarlandes, Center for the Study of Law and Economics (CSLE)
• (where): Saarbrücken
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/23113
• Last update: 10.03.2025, 11:43 AM CET