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Courts and Capitalism

Market-Based Law Development

PUBLISHED

Kathryn Sabbeth (@KathrynSabbeth) is Professor of Law at Rutgers Law School.

Critical scholars have highlighted the role of law in subordination and argued for redirection of energy away from courts, but they have devoted less attention to a more basic problem: The civil justice system supports and depends on market-based development of law. This can be seen in the wide divergence in social investments in the fora that adjudicate the problems of the poor and those reserved for the courts that entertain the concerns of the rich. It is also evident in an array of regulations that determine the distribution of lawyers so that their time and talents are allotted to developing the law in rough proportion to the economic power of interested parties. Lawyers and court personnel are devoted disproportionately to identifying, articulating, analyzing, defining, understanding, and sometimes expanding the law serving those with economic power. Those without such power are systemically excluded from this law-making process, resulting in doctrinal voids. Moreover, in a common law system that relies on precedent, and in an adversary system that relies on parties rather than judicial officers to initiate the development of law, our investment in courts and lawyers according to parties’ economic power results in the distorted development of law that increasingly serves the interests of the powerful. Not by coincidence, this system shortchanges the interests of people of color.

Stratified Investment in the Development of Common Law: Hierarchies of Courts

The courts are stratified, and this stratification shapes the development of law. Elite courts enjoy more resources. They produce more, or arguably better, legal precedent. And their dockets are reserved disproportionately for refining the law in areas that serve the interests of parties with economic power. Although the issues addressed by lower status courts are vitally important to the individuals who appear before them (e.g., defendants facing eviction or debt collection), these matters are given relatively short shrift in the civil justice system. Development of law in these areas stagnates.

Division between trial and appellate courts, however well-founded as a method of organizing adjudication, contributes to the refinement of law on behalf of those who can afford it. The vast majority of individuals in the civil courts are unrepresented by counsel, without which appellate litigation is nearly impossible. Those litigants with the capital to pursue appeals enjoy access to a forum where they and their claims will receive more time and attention than those down below.

Another source of stratification in the civil justice system is the amount in controversy requirement. Amount in controversy rules influence case distribution both between federal and state courts and between different divisions within state courts. Diversity jurisdiction in federal courts requires a minimum of $75,000 at stake. This means that, in the absence of a federal question, only those whose concerns are recognized by the law as worth $75,000 or more may use the forum. States also use a multi-layered stratification arrangement, whereby original jurisdiction at a particular level of state court depends on the claims’ monetary value. People (and, more often, corporations) with greater economic power are more likely to possess claims that translate into higher monetary awards. This means they can gain entry to more elite fora.

Courts at the top of the hierarchy have long been reserved for those with economic power—such as through the amount in controversy requirement for federal courts’ diversity jurisdiction—but the current environment makes contrasts between fora appear increasingly stark. Civil procedure scholars have documented that massive numbers of individuals who would otherwise qualify for court access based on federal question jurisdiction have been shut out by heightened pleading standards, mandatory arbitration, and rejection of workers’ and consumers’ class actions. These procedural obstacles have made it more difficult for poor and middle-class people to use the federal courts to address their concerns. Meanwhile, the state courts handling eviction, debt collection, and other matters of particular importance to poor people have swelled dramatically. State court administrators have described the growth in case numbers as creating a pro se crisis. That was before the pandemic and its economic fallout made things worse. Further compounding the disparities, within state courts, elite fora are also growing more elite. The amount in controversy levels are going up, demanding higher ticket prices for entry to the top and creating even larger dockets for the judges at the bottom.

The dockets and the budgets reveal dramatically different investments in the different courts. Federal courts arguably lack resources they need, but they are far better off than state and local institutions. As an illustration, in one year, the number of civil cases in Housing Court in New York City was higher than in all federal district courts combined, nationwide, and yet the Housing Court budget was less than one percent of the federal courts’. These differences influence the quantity (and arguably quality) of personnel—including judges, judicial law clerks, clerks’ offices’ staff, other employees—and the time and attention such personnel expend on each case. While federal judges rely on high-achieving law graduates to support the research and writing of their opinions, many of the judges in our lowest courts not only lack that support but themselves never attended law school. Ordinary investments in the work of the courts, such as technology, courtrooms, meeting spaces, and other equipment, also differ widely by court status. All of these differences in forum investments shape the handling of each individual litigant’s case.

The investments can be measured by dollars or case dockets, but the differences in court culture can also be observed by the untrained eye. At the bottom of the civil justice system, courts are teeming with unrepresented individuals, who go where they are directed, anxiously seeking to understand the process and identify opportunities to articulate their concerns. They get barked at by judges and administrators. Their entire cases—from first appearance to judgment—may last approximately two minutes. Most have no lawyer to advise them, let alone to raise arguments. When arguments are raised (and certainly when they are not), judges routinely disregard the plain letter of the law. Judges do not genuinely engage in the process of interpreting, let alone developing, legal doctrine.

Meanwhile, on a higher floor—and in state court it often literally is a higher floor of the same building—are the more sparsely populated, refined environs where (mostly white) lawyers for (mostly white) wealthier parties do their business. These matters proceed in an orderly fashion, with real motions hearings and trials governed by rules of evidence and procedure. Judges may devote months to researching and parsing the substance of claims and defenses, ultimately issuing full opinions providing reasons for decisions, with references to legal sources. While not every case results in a published opinion, all involve interpretation of legal principles and at least the possibility of participating in the production of law.

The differences between fora shape the development of the common law the courts produce. Those with economic power have access to courts that consider and address their interests as legal questions. At the top of the hierarchy, courts work through the concerns of the parties as they impose the rule of law and engage with it. Those at the bottom receive far less attention. These differences in treatment raise troubling questions not only for individual rights but also for broader democratic values.

The parties who appear in the courts starved of resources are disproportionately poor women of color. This is not an accident, nor a sign of malfunction. Rather, it is the reality of a court system designed by and for racial capitalism.

Allocation of Legal Services Based on Market Principles

Although this symposium is focused primarily on courts and capitalism, because of the significant role of lawyers in the U.S. court system, I want to devote some space to highlighting the role of lawyers and, specifically, how the distribution of lawyers contributes to the phenomenon I am describing. In brief, lawyers assist in the development of law in favor of those who can hire them. In other words, lawyers are a resource available primarily to those with capital, according to the degree of capital possessed, and they thereby further the market-based development of law.

An intersecting web of regulation governs the market that distributes legal services. Law developed by courts and legislatures structures the market so that the more capital a party has, the more service the party can use, while the majority of people have none. First, the U.S. Supreme Court has authorized a civil justice system in which people unable to pay market rates for legal services need not be provided services by the state, nor through other nonmarket means. Second, doctrines of torts, contracts, and damages shape the market so that some people cannot access services while, at the same time, other parties may use as much of this resource as they choose to purchase. Finally, the Model Rules of Professional Conduct, as adopted by the states, define the priorities of legal professionals based largely on clients’ ability to pay. Together, these doctrines ensure a particular, market-based distribution of legal services.

State

The default rule established by the Supreme Court is that the state is not responsible for providing civil legal services to individuals. The Court has rarely considered the possibility of a federal constitutional right to appointed counsel in such cases (I put to the side quasi-criminal cases involving prisoners’ rights or juvenile rights). In Lassiter v. Department of Social Services, the Court held that termination of parental rights did not justify appointing counsel at government expense for a defendant unable to purchase representation in the market. The Court then extended this in Turner v. Rogers, concluding that a man held in contempt and sent to jail for failure to pay child support was not necessarily entitled to government-provided counsel, if “alternative procedures” could sufficiently protect his interests. As a direct result of this jurisprudence, defendants appear in court without lawyers on a regular basis, while millions more struggle with legal claims that never reach a forum. Some of the gaps in federal constitutional rights have been filled by states and localities, but most of these initiatives are based on a model whereby future representation will depend on local politics, because the programs’ creation documents state expressly that they have created no enforceable rights. (Even where counsel is provided, it is for defendants only. As I discussed in Housing Defense as the New Gideon, litigating from a defensive position brings inherent structural disadvantages.)

Private Market

U.S. tradition requires parties to cover the costs of their participation in the legal system. To obtain representation by counsel, parties pay hourly fees or set sums with their own financial resources, or they rely on charity. Despite the important work of non-profits and contributions of volunteers, parties without financial assets often appear in court unrepresented, if they appear at all. Meanwhile, parties with resources enjoy the freedom to purchase as much lawyer time and skill as they choose.

Two funding models stand out as private, market-based means to provide lawyers for parties without the ability to pay upfront: contingency fees and fee-shifting statutes. Both contingency fee agreements and fee-shifiting statutes have improved access to lawyers for potential plaintiffs in this position. They do not, however, provide lawyers for defendants. Moreover, doctrines governing the market have limited the utility of these tools.

In the most common form of contingency fee agreements, lawyers agree to provide representation in exchange for receiving as compensation a percentage of clients’ ultimate winnings. Although the American Bar Association has loosened its opposition to such arrangements, government actors have created new challenges, with states capping tort awards and judges ruling that large awards violate the due process rights of corporations. More basic problems also hamper the ability of contingency fees to function as a means of acccess to legal services: Contingency fees depend on the economic value of the plaintiff’s claims, which, in turn, reflects the plaintiff’s social position. As an example, compensation for missed work is based on income, a market-based measurement that incorporates racist and sexist judgments of worth, as well as the human capital the individual brought to the position. Similarly, estimates of lost future work opportunities are constructed based on the plaintiff’s work history and the life circumstances expected of people in the plaintiff’s social group. The figures turn on factors connected with intergenerational wealth, educational attainment, and individual and family histories of exclusion or inclusion. These market-based calculations depend on values assigned by dominant society, depress awards for those of lower social status, and ultimately decrease the likelihood that a plaintiff of limited capital will obtain legal representation.

Fee-shifting statutes operate independently from the size of monetary awards and therefore could offer more promise. The statutes require defendants in certain public interest litigation to compensate the attorneys representing the prevailing plaintiffs, with the fee awards based on assessments of a reasonable fee for the work performed. In a series of decisions, however, the Supreme Court has restricted the size and likelihood of such compensation. These limits have undercut the strength of the fee-shifting statute as a market-based mechanism for providing counsel to parties unable to fund it independently.

Contingency fee agreements and fee-shifting statutes are not currently designed to support the development of law. Both of these mechanisms are designed to reimburse the lawyer of the party that wins. Yet, if a party is not likely to win, taking that party’s case will be a risky investment for a private lawyer. And law development through litigation is often a risky proposition. Law development by definition means there is some change; a case moves a needle, alters a status quo. Market-based models of legal access create incentives for lawyers to accept the cases that they are likely to win, but because litigation that develops law on behalf of those with minimal capital can involve betting against the odds (without any financial reward), these funding models do not adequately support this work.

While people with limited financial capital struggle to find any representation, those with excess capital are permitted to purchase as much representation as they desire. This means that in any given case, wealthy individuals, and more often corporations, will be represented by not one but many lawyers. They will enjoy the support of teams of well-trained researchers and advocates. It is common knowledge that wealthy criminal defendants enjoy strong defense teams, but those teams pale in comparison to the staffing in civil defense. Clients that purchase services from any of the top civil defense firms can expect the assistance of more lawyers than they will ever meet. These lawyers turn over every proverbial stone in their research and make aggressive arguments whenever it might serve the clients’ interests. And of course the majority of services purchased by powerful parties are not even used in litigation. Instead, powerful parties pay their lawyers to press for legislative and regulatory changes, or to advise them on daily business decisions that will increase their advantages in structuring social relations, so they can ultimately resolve matters in their favor, whether in or out of court.

Legal Profession

Special laws of the legal profession also influence the distribution of lawyers. Through the ABA Model Rules for Professional Conduct, as adopted by the states, the leaders of the profession have designed a set of rules that inform how lawyers’ time and attention is to be allocated. The rules indicate how lawyers are to choose which clients to represent, when to accept court appointments, and when to decline representation. They also govern how lawyers prioritize among conflicting interests. This body of rules reflects and shapes legal and economic structures that distribute lawyers based on the market.

Together, the rules emphasize a particular conception of neutral partisanship that is based on white, propertied interests (my students and I have taken a deep dive into them in Legal Ethics in Social Justice, a course whose syllabus I recently added to the LPE online collection). They prevent lawyers from reaching out to offer services to clients outside lawyers’ social circles. They include a client’s failure to pay as one of the few sins that can cause a client to lose a right to continued representation.

While outwardly encouraging an apolitical approach to representation choices and obligations, the professional rules indicate that ability to pay—a distinctly political question—will be the assumed common denominator of the activities expected of legal professionals. Few exceptions are even recognized, and where recognition exists, the rules emphasize that such exceptions are optional. One single rule suggests an obligation of service at below-market rates, but it then explicitly disavows its own message; the comments accompanying the rule state explicitly that the rule is “not intended to be enforced.”

Underdevelopment of Law for Poor People

Investment in courts and lawyers in rough proportion to economic power results in the self-perpetuating underdevelopment of law for poor people. This is partly because of our common law system and partly because attitudes about poor people’s interests—constructed as simple and non-legal—suggest poor people’s cases can be addressed without the careful attention reserved for serious legal matters. In Turner v. Rogers, the Supreme Court ruled that a man going to jail for failure to pay child support was not guaranteed a right to appointed counsel, and the first among three deciding factors was the presumed simplicity of his case. In Lindsey v. Normet, the Court ruled that eviction courts need not permit tenants to raise defenses based on the landlord’s breach of its duties, nor allow more than six days to prepare for trial, as the potential claims are too simple to be due more. In these examples and others, the distribution of lawyers and court resources are denied to poor people on the basis that their claims are too simple to justify them, and these denials then perpetuate the simplification of doctrine. Without lawyers to support them, time to prepare, or the opportunity to participate in defining the scope of issues before the court, these litigants are excluded from the benefits of law development.

Assumptions about whose cases are worthy of attention legitimize the simplification of entire bodies of law and de-legalization of lower status courts. These assumptions support the underdevelopment of poor people’s law—i.e. the law that serves poor people’s interests or would serve them if not actively underdeveloped. Indeed, the U.S. legal system actively underdevelops poor people’s law, and underdevelopment is always a political choice. Underdevelopment is a political choice that determines the allocation of resources. While powerful parties enjoy the benefits of the market-based legal system, the litigants who lose out are disproportionately women of color, a group long excluded from the benefits of “development.” Assessments of the social value of claims are used to justify these resource allocation decisions, but these judgments are not neutral; rather, they reflect the interests of those in power.

Perhaps those who have given up on courts are right. The underlying problems of social inequality shape the courts, and the courts entrench and further exacerbate these social dynamics. My hope is that conversations like those prompted by this symposium give us the space to examine and name the mechanics of the courts, and through such critique we may catch a glimpse of how courts could be reimagined.