Lottery Lawsuits, For Small Harm Law

Twenty-five years ago I posted a short essay, on which I commented ten years later. Let me now elaborate on an improved variation of that same idea.

Imagine you came out from the grocery store to find a scratch on the side of your car door, a scratch that matches the position of the door on the car next to yours. You estimate they’ve done you $100 of damage. But in our world today this is where the story ends, as it would usually be crazy to spend thousands on a lawyer to sue them for such a small amount. So law today does little to discourage such harms. People can sloppily scratch car doors without fearing that they will have to pay damages.

Now imagine a better world. You take a few pictures of the two cars, including their license plate, and then use a phone app to upload all this and officially declare that they owe you $100 in damages. Using the license plate photo, the car owner is identified and notified, and is issued a “ticket” in that amount, like tickets are now issued for parking violations. If they accept your claim and pay that amount, then it goes to you, and the issue is closed. (Same if they offer you a smaller amount to settle, which you accept.) Unpaid tickets accumulate in the usual way, and the local government uses its usual methods to try to get people to pay them.

The ticket is also settled, and no longer counted as unpaid, if they refuse to accept your claims, but still deposit at least $100. And if they do this, then you must also deposit at least $100. (You each might want to deposit more than this $100 min to help with trial legal fees.)

Both of you also submit a chance, like one in a thousand, and then both of your deposits are converted into lottery claims at the smaller of the two chances. Claims which are then soon (i.e., in a few days) resolved (perhaps via collecting many similar legal cases.) So if the smallest submitted chance was one in a thousand, then 999 times out of a thousand, both of your deposits disappear, and you are both notified that the issue is now settled.

However, one time out of a thousand, you both win the lottery, and then each of your accounts now holds 1000 times what you deposited there. At which point you could also settle the suit.

But if you don’t settle, then your lawsuit goes to trial, and if the court rules that their car door scratch hurt you by $100, then they now owe you $100K, to be paid out of their account. However if the court rules against you, and also affirms their automatic countersuit, that your suit was frivolous, then you now owe them $100K, to be paid out of your account. Once each of you has paid what you owe, any remaining funds in your accounts are returned to you each in cash, tax-free.

In this better world, if they scratch your car, then they expect to pay $100 on average, and you expect to get that on average. But if you just frivolously sue someone for $100, without a plausible prospect of winning, then you expect to pay $100 on average, and they expect to gain that amount. And thus in this world the prospect of such lawsuits changes behavior, toward more optimal care, just as it usually does for large harms today. Law now works to discourage small as well as large harms.

Note that we might want to set some lower limit on allowed lottery chances, such as via a max limit on how much can appear in your account after winning. It also seems fine to let people sell their claims, and also to insure against these lottery risks, perhaps even by depositing money in other accounts to be won exactly when the main lottery is lost. And once notified, defendants should be required to save relevant info on a case until its lottery is resolved.

The key idea here is this: If I’m willing to suffer a lottery risk to sue you, you must also suffer the same lottery risk to defend yourself.

That is, if I claim that you hurt me and am willing to deposit an amount to cover your counter-claim that I’ve sued you frivolously, then I can force you to make (at least) the same size deposit, after which both of our deposits, and also our legal claims against each other, are converted into lottery claims. If we win this lottery, we do a trial the usual way, except now with larger stakes.