Of Two Wrongs that Make a Right: Two Paradoxes of the Evidence Law and Their Combined Economic Justification

This essay offers a new rationale to the standard of proof requirements in civil trials. The civil proof doctrine, as traditionally understood, presents two economic paradoxes (or anomalies). First, it focuses on accuracy ex post by requiring judges to reconstruct the relevant events, as they unfolded in reality, including the actual damage to the plaintiff, based on the information available at the trial. This retroactive (ex post) accuracy is both expensive and may undermine deterrence along with other economic objectives of the law. For deterrence purposes, only information that had been available to the defendant prior to taking the litigated action (ex ante information) matters. Moreover, accuracy ex post is an investment-dependent opportunity rather than static good. As such, it fosters a secondary market for competitive adversarial investments in information, which might adversely affect the primary market, that is, the market for goods, services, risks and precautions. Thus, when prospective litigants are rationally unwilling to commit themselves to the required investments in information, inefficiencies are bound to occur. In such cases, each party will account for the event that he will be wrongfully defeated in the future trial because his opponent's investment in information outscored his. This prospect will foil transactions that are otherwise efficient and chill many other socially beneficial activities. Second, if the doctrine is nonetheless committed to accuracy ex post, then it should require judges to determine the ultimate probability of the plaintiff's case by multiplying the probabilities of the relevant entitlement, breach and damage. Yet, the doctrine refuses to apply the multiplication principle and thus reduces the total number of correct verdicts, instead of maximizing it. On these grounds, the controlling civil proof doctrine was criticized as economically unsound.Under the new rationale offered by this essay, the two alleged wrongs make a right since in combination they generate a synergetic mechanism that aligns, to the extent feasible, the ex ante and the ex post probabilities of transgression. This alignment is attained by the combined, but not conjunctive, functioning of the two probabilities: the probability of the litigated entitlement and the ex post probability of the entitlement's breach. The entitlement's probability dominates the defendant's ex ante information, thus adjusting the ex ante probability of breach. This adjustment is achieved due to the visibility element, uniformly featured by legal entitlements: under the definition of virtually any entitlement, the entitlement must both exist and be reasonably ascertainable ex ante, that is, at the time and in the circumstances of its breach. The ex post probability of breach has a different function, namely, to substantiate the allegation that the defendant has actually violated the entitlement. This combined framework secures the appropriate alignment between the ex post and the ex ante probabilities of breach. The plaintiff will prevail at trial only when each probability is preponderant, that is, greater than 0.5, so prospective defendants can safely rely on the probabilities of breach that exist ex ante. Indeed, because the entitlement's probability functions as a misalignment-corrector for the ex post probability of breach, and not as its conjunctive companion, the two probabilities must not be multiplied in determining the ultimate probability of the plaintiff's case. This doctrinal mechanism also saves litigation expenses. The plaintiffs' litigation effort is substantially alleviated by the doctrinal refusal to apply the multiplication principle. This entails greater hardship for defendants, but they receive offsetting benefits: the doctrine allows potential transgressors - before they become defendants - to rely on their ex ante information. The doctrine thus encourages potential transgressors not to go into uneconomic expenses by acquiring further information that might become available at their subsequent trials.This essay also supports the existing award system, under which, as a matter of general rule, the winner takes all. Due to the existing constraints in law-enforcement, the essay prefers this system over that of probabilistic awards. Under the existing law-enforcement constraints, trial awards function as incentives for reducing the number of both underusers and overusers of the adjudication facility. This rationale turns trial awards into a discrete component of civil litigation. The doctrinal mechanism exposed in this essay consequently separates between the breach-related and the damage-related proof requirements. Probability of the litigated damage must therefore also be removed from the multiplication formula, so the conjunction paradox disappears altogether. As demonstrated by the essay, this rationale also necessitates an adjustment in punitive damages. The essay therefore offers the required adjustment.The essay establishes the above arguments by using the following methodology: it constructs a simple Bayesian model of civil litigation, from which it derives the ideal proof requirement (the "first-best"); subsequently, the essay compares that requirement with the positive law in a way that accounts for the existing constraints in law-enforcement (the "second-best"). The essay demonstrates that the ideal proof requirement is economically unfeasible under these constraints, which forces the legal system to develop an adequate surrogate. This surrogate is identified by the essay as embedded in positive law.