I. Introduction

B. Review of microeconomic theory (cont'd.)

    Positive vs. Normative
    See handout

1. Maximizing behavior, efficiency and markets
    (3) Markets typically promote efficiency

    Demand reflects willingness-to-pay
(Alfred Marshall's measuring rod for efficiency)
    Weaknesses
    (1) accepts people's personal value judgments (consumer sovereignty)
    I may not always know what is in my interest--but I can be trusted to want what is in my interest more than other people can be trusted to want what is in my interest

    (2) uses dollars as common unit
    20: Claim: "One dollar is worth the same number of dollars to everyone"
    22: WTP "is the best criterion available," not a "perfect criterion"
    25: Friedman prefers WTP to the Pareto criterion

    Efficient legal rules when markets work well: private property plus freedom of exchange
    25: "Everything belongs to someone. Everyone is free to buy or sell on any terms mutually acceptable to buyer and seller."

2. Market failure
    free market outcome fails to achieve efficiency

    Corollary: What should we do about it?
    ? What can go wrong with markets?

    (1) Imperfect competition

    The market does not behave competitively.
    Sellers restrict output and charge a price above marginal cost (P > MC)

    Later in course, we will focus on one legal response to that problem: Antitrust law

    (2) Imperfect market signals

    Market prices do not send accurate signals about benefits and costs

    --Imperfect information (ex: drug interactions)
    --Externalities (ex: pollution)
    --Public goods (ex: intellectual property)

    These problems too have been around for a long time, and the courts have dealt with them.

    We will focus on one legal response to these problems too: Common law

    This is just a review of the basics--much econ to develop as we go: game theory; present value; risk and insurance. But we'll cover these when we need to use them

II. Law and economic analysis

A. Legal institutions and processes (see legal system handout--Q&A

a. The court system
    the judicial branch of government--established by Article III of the Constitution

    Key distinction: Federal versus State
    Class focus: US and California

    Q1. What are the three levels of courts called... 
a. In the federal court system? 
b. In the California state court system?

			Federal	State-California
	3.	Supreme courts	U.S. Supreme Court	California Supreme Court
	2.	Appellate courts	Court of Appeals for the _th Circuit (12 districts)	Court of Appeals for the _th Appellate District (6 districts)
	1.	Trial courts	Federal District Courts (94 districts)	County Superior Courts (400)

    Q2: What are three types of cases that get tried in the federal courts?

    Sources of federal cases
    (1) federal question jurisdiction (federal law, the Constitution, US a party, conflict between states or state/federal law)
    -- the type of case we most often read about in the paper
    (2) diversity jurisdiction (disputants are not from a single state)
    (3) bankruptcy

    1. Trial courts

    Courts of record where proceedings are written down.

    Federal:
    94 federal court districts--4 in CA
    1-3 judges per case
    Fed courts include bankruptcy courts, tax courts & federal administrative agences with administrative law judges.

    State:
    Trial courts usually organized by county

    2. Appellate courts

    Can appeal "as of right"--appellate courts cannot deny a request for appeal

    Federal:
    13 total; 11 numbered circuit courts + DC
    + US Court of Appeals for the Federal Circuit, since 1982, for IP cases

    Usually a 3-judge panel, up to all circuit judges in key cases ("in bank")

    3. Supreme Courts

    Have a discretionary right of appeal
    obligated to review death penalty in many states; true in CA

    U.S. Supreme Court:
    Appeals from State Supreme Courts are made directly to the U.S. Supreme Court
    Court calendar: 1st Monday of Oct to June.
    Hears < 10% of appealed cases; number peaked in 1980s

    104: Britain's high court consists of a committee of "law lords" appointed by the House of Lords to serve as judges for a particular case

b. The legal process

    Gets expensive--each side typically pays its own legal costs

    Q3: What are two types of law that take precedence over the common law?

    Order of precedence:
        Constitutional law
        Statutory law
        Common law -- judge-made law (through court cases)
    --by "interpreting legislation and constitutions, resolving ambiguities, filling in gaps."
    Courts of the English king were to "find" law as it existed within prevailing social norms--> common law

    In US, courts can use the Constitution to strike down laws.
    No constitutional review in England.

    Q5: What do each of the following phrases refer to: stare decisis, voir dire, writ of certiorari?

    104: stare decisis doctrine makes decisions precedents for other courts
    for common law, decisions in the UK can be cited in the US

    Ambiguity of "civil law" (C&U60)
    France: threw out common law with French Revolution, since judges and king were considered corrupt.
    Resulting alternative: Napoleanic Code, 1804
    Based on the "The Body of the Civil Law," 528-534, Roman Emperor Justinian.
    Civil law is more common than common law--in most of WEur, Wn Hemis; Asia, Puerto Rico. Common law in places colonized by Britain.
    Common law findings refer to precedent and social norms; civil law decisions are based on references to meaning of code.
    Examples of civil law in the US: Louisiana; Uniform Commercial Code

    Key distinction:
    Criminal law vs. Civil law = Public law vs. Private law
    infractions against the public at large vs. disagreements between private parties

b1 Civil law process

    Q4: What do each of the following mean in the context of a civil law case: cause of action, serve, answer, discovery, strike, brief?

    1. Incident--an injury

    2. Case filing

   Plaintiff needs a "cause of action"-- a recognized legal claim
        requires "standing" -- a direct stake in the action
    Complaint describes (1) the plaintiff's injury; (2) how the defendant caused it; (3) requested relief

    Relevant areas of law:
    108: "Property law deals with the ownership of things, especially but not exclusively land and buildings ("real property"). Included in the law of property is the law of intellectual property: patent, copyright, trademark, trade secret, and related areas."
    109: Contract law deals with "the legal rules that determine when a contract has been formed, what obligations it imposes on the parties, and what recourse one party has against another for violating the agreement."
    108: "Tort law deals with...wrongs, actions by one person that wrongfully injure another person or the person's property."
    Loosely, the civil counterpart to criminal law, but with compensation to "make whole" the injured party.

    Contract right applies only to the parties involved, property rights and torts apply to all without their consent
    Property law applies to rights associated with objects
    Tort law applies to rights associated with a person
    110: The 3 areas overlap (nuisance = tort+property; breach=contract+tort; lease=property+contract)
    110: other areas: antitrust law and regulatory law

    Plaintiff files a lawsuit with the court and "serves" (delivers) a copy to the defendant
    Defendant must "answer" (provide a point-by-point response to) the complaint
    Otherwise a "default judgment" is rendered in favor of the plaintiff

    Where to file?
    Who hears a case is complicated--makes up "Conflict of Laws" courses in law school

    Q6: A family from Pennsylvania (P) sues a driver from Delaware (D) who injured the family in an auto accident. 
    a. Under what condition must the case be tried in a Delaware state court? 
    b. Under what two conditions could the plaintiff sue in a federal court? 
    c. Under what three conditions could the case be tried in a Pennsylvania state court?

    Ex: Dispute with plaintiff and defendant from 2 different states
        Plaintiff (Pf) from Pennsylvania (P)
        Defendant (Df) from Delaware (D)

    3. Pre-trial discovery

    exchange of information / depositions (taken under oath and recorded in transcript)

    Complete records are kept
    "strike" that remark => Highlighting it in the record of a case as evidence that has been improperly offered and will not be relied upon. It does not disappear from the record

    4. Pre-trial conference

    Motions
    Negotiations: Courts encourage alternative dispute resolution (ADR)
    mediation, arbitration,...

    90-95% of lawsuits reach settlement

    5. Trial

    Usually begins with motion for dismissal or summary judgment for the defendant

    Adversarial process (common law tradition)
        judge is neutral and enforces procedure and evidence rules.
    Judge decides relevant law

    Q7: Who can request a jury in a civil trial?

    Either party can request a jury to decide the facts.
    Right to a jury trial is guaranteed by the Constitution: 7th Amendment for civil cases, 6th for criminal cases
        Civil case juries 6-12 jurors; parties may agree to a non-unanimous verdict

    voir dire--process in which judge and the attorneys then ask the potential jurors questions to determine their suitability to serve on the jury

        UK--juries abolished in nearly all civil cases since 1966; common in criminal cases.
        France--juries only for the most serious crimes.

        Civil law: inquisitorial process.

    Q8: Which side has the "last word" in arguing a civil case?

    Steps in a Trial:
    (1) Opening Statements: Plaintiff / Defense
    (2) Direct Examination by Plaintiff / Cross-Examination by Defense
    (3) Motion by defense to dismiss
    (4) Direct Examination by Defense / Cross-Examination by Plaintiff
    (5) Closing Statements: Plaintiff / Defense
    (6) Rebuttal Argument by Prosecutor
    (7) Jury Instruction as to the law that applies in the case
    (8) Jury deliberations
    (9) Verdict