The Yale Law Journal

January 2005

On the Alienability of Legal Claims

Michael Abramowicz
114 Yale L.J. 697 (2005)

Courts have become increasingly skeptical of rules restricting plaintiffs' ability to sell legal claims, while legal commentators have argued that markets for claims would be economically beneficial, moving claims to those who can prosecute them most efficiently. Claim sales intuitively might appear to present a clash of economic and philosophical arguments, with perceived efficiency benefits coming at the expense of societal commitments to values other than efficiency. In this Article, Professor Abramowicz argues that economic and philosophical arguments do point in opposite directions, but not as one might expect. A range of philosophical and other noneconomic considerations, such as concerns about commodification, corrective justice, legal ethics, and procedural justice, pose no significant problems for claim sales. There is, however, a significant economic problem. Markets for legal claims face a particularly strong adverse selection effect, because a prospective purchaser must consider not only why the plaintiff wishes to dispose of the claim, but also why the plaintiff cannot obtain a better deal from the defendant. Thus, even a regime permitting alienation might result in very few claim sales, and many of those might be motivated by prospective inefficiencies, such as attempts to manipulate the path of legal doctrine. Using a hypothetical mandatory-alienation regime as a heuristic device, this Article shows that if claim sales became the norm, these economic concerns would be largely eliminated. Philosophical concerns, though, might reemerge.