With Second-Best Justice, J. Mark Ramseyer offers a more compelling, better-grounded explanation: the low rate of lawsuits in Japan results not from distrust of a dysfunctional system but from trust in a system that works—that sorts and resolves disputes in such an overwhelmingly predictable pattern that opposing parties rarely find it worthwhile to push their dispute to trial. Using evidence from tort claims across many domains, Ramseyer reveals a court system designed not to find perfect justice, but to “make do”—to adopt strategies that are mostly right and that thereby resolve disputes quickly and economically.
An eye-opening study of comparative law, Second-Best Justice will force a wholesale rethinking of the differences among alternative legal systems and their broader consequences for social welfare.
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About the Author
J. Mark Ramseyer is the Mitsubishi Professor of Japanese Legal Studies at Harvard University Law School.
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The Virtues of Japanese Private Law
By J. Mark Ramseyer
The University of Chicago PressCopyright © 2015 The University of Chicago
All rights reserved.
Doing Well by Making Do
I meet a lot of lawyers in this business.
And for the most part, Japanese lawyers talk about the same things American lawyers do. Like American lawyers, they talk about their families. They talk about their colleagues' families. They add details about their colleagues' extramarital affairs. They complain about the compensation that their rival partners negotiate.
They talk about the law too. They talk about new statutes. They talk about politically charged cases. They talk about opinions they think are wrong. They gossip about corrupt politicians.
But some topics over which American lawyers obsess, Japanese lawyers never touch. They never wonder whether they can successfully game a state judge in a dubious product liability claim. They never try to convince juries to award damages their clients did not suffer. They never wonder whether to contribute to a judge's reelection campaign.
On many dimensions, the Japanese courts work far better than the courts in the United States, and the topics Japanese lawyers never touch over late-night drinks reflect some of the reasons why. At root, the Japanese courts do well because they try merely to "make do." They do not aspire to perfection. They aspire only to "good enough." And that is the subject of this book.
* * *
Japanese file many fewer lawsuits than do Americans, and they file fewer suits for the same reasons no one would have this conversation in Japan. Those reasons lie at the heart of this book on "tort" disputes.
I take as my implicit focus the contrast in litigation between the United States and Japan, and I take as my explicit focus the Japanese half of that contrast. On litigation in the United States, readers can turn to an enormous English-language library. I offer here a book on Japanese litigation. Implicitly, I write it to explore the US-Japan difference. Explicitly, I concentrate on Japan — and describe the way Japanese parties, lawyers, and judges handle some of the disputes that otherwise plague wealthy modern capitalist societies.
People have long speculated about why Japanese file so few suits, but the content of their speculation has shifted over the years. In the 1960s and 1970s, they argued that Japanese filed fewer suits because they lived in a culture that discouraged them from asserting their claims — because it simply was not something good Japanese did. The argument has largely disappeared. In part, it disappeared because Japanese do indeed assert their claims; they just do not assert them in court. And in part it disappeared because the argument usually gave circularity a bad name: explaining how people behave by citing their culture, while defining their culture by how they behave is not — as Talcott Parsons is said to have told class after class of sociology students — "terribly informative" (Geertz 1973).
Since the 1980s, scholars have tended (only "tended," the practice is not universal) to argue instead that Japanese file fewer suits because their legal system does not work. American scholars are not the only ones to make the claim. Japanese law professors make it routinely, too. Would-be plaintiffs in Japan face barriers across the board, they argue: the courts are too slow, crucial information is hard to obtain, and lawyers are expensive. They face other barriers specific to various legal fields: judges may impose too high a standard of proof or the statute may make impossible demands.
The finger pointing goes in the wrong direction. Japanese do not file fewer suits because their legal system does not work. It works just fine. Courts are not slower than those in the United States. Information is not harder to obtain. Lawyers are not more expensive. Instead, we Americans file more suits because our system works so badly. Indeed, it works so badly that attorneys can make a living — a good living, at that — filing claims against firms with little evidence of wrongful conduct at all. File suit, and hire an expert to discover a wrong. Were the suit to go to trial, the plaintiffs would probably lose. But one cannot be sure, and the road to trial is long and paved with one toll charge after another. All too many firms find it cheaper just to pay the lawyers to go away.
Pay them they do, and the attorneys live to file again another day.
* * *
Maybe we try too hard. Maybe if we tried to do a bit less, we could accomplish a bit more.
Maybe our problems result from trying too hard to offer a perfect legal system. Japanese do not expect as much of their courts. They do not aspire to run a perfect system or to offer perfect justice. To be sure, interview a law professor, a judge, or a TV talk-show host and he will likely talk long and maybe even eloquently about his passionate commitment to truth and equity. But the government does not run a system that embodies any attempt to offer the best judicial system possible. It runs a system designed merely to make do.
Economists call it the "theory of the second best" (Lipsey and Lancaster 1956). If something (the cost of the courts, e.g., or the inability of real-world judges to reconstruct the past) prevents us from obtaining exactly what we want on one dimension, sometimes we do better not to try to come as close as we can to that ideal. Sometimes we do better to scale back our hopes on other dimensions, too.
Richard Epstein and Douglas Baird (Baird 2009, 13; Epstein 1995) recount a more intuitive version of the principle and attribute it to their late University of Chicago colleague Walter Blum. "Blum's law," they call it: "In law, 95 percent is perfection." Sometimes, getting a problem "mostly right" gives better results than trying to get it "exactly right." The difference between mostly and exactly right is not only the institutional cost — though those costs can be huge — but also the risk that the extra ambition will produce a result that is flatly worse.
Our American legal system illustrates the phenomenon in spades in litigation over those private wrongs that I take as the focus of this book, wrongs we call "torts" — think barroom brawls, for instance, or traffic accidents, the exploding television set (a genre we call "products liability"), and the operation on the wrong knee (medical malpractice). In manyways, in American courtrooms we adopt rules and procedures that imply we aspire toward 99 percent — and reap disasters. Had we made do with Blum's 95, we might have earned better results all around.
This contrast between "mostly right" and "exactly right" explains much of the contrast between US and Japanese litigation. To be sure, it does not explain all the contrast. It explains much, but in the chapters to follow I also detail other reasons for the contrast. Products liability litigation in the United States, for example, is also shaped by the fact that some state judges are elected, encouraging extortionate litigation with the ballot box in mind. Medical malpractice litigation in Japan is shaped by the way the Japanese national health insurance reduces the number of sophisticated state-of-the-art procedures that generate malpractice claims.
Perhaps an example of the difference between "mostly right" and "exactly right" would help. With even routine disputes like fatal traffic accidents, we in the United States run trials in ways that make it hard for the people involved to predict what will happen. Fact finding, for instance, we assign to juries. Rather than to a professional who has seen it all before and whose past behavior lawyers can investigate, we assign the job to novices — and let them decide (almost) whatever they will.
We adopt this largely unsupervised approach ("cull six people from DMV rolls, and take whatever you can convince them to give you" — my own words) in the name of individualized justice. Give all claimants the opportunity to tell their peers about the indignities they suffered and the injuries they sustained. Instead of assigning the job to a tired and cynical bureaucrat (called a "judge"), assign it to men and women without a professional bias (our "jury of our peers"). Rather than use evidence of what usually happens in similar situations, ask these ordinary men and women to consider each conflict afresh.
This devotion to individualized justice brings at least three pernicious effects. First, it makes it hard for a quarreling pair to stay out of court. Trials are expensive. All else equal, people would prefer to avoid them if they could. If they can agree about what a judge would do, they can indeed avoid them. Rather than litigate their fight, they can settle by reference to what a judge would say if they asked him.
Unfortunately, the use of juries and the focus on the particularity of each dispute make outcomes less predictable — and when outcomes are unpredictable, people find it harder to settle. To cut a mutually acceptable deal, they need to agree about what would likely happen if they litigated. Plaintiffs will settle if a defendant will pay at least as much as they would obtain (net of what they expect to pay their lawyer) in court. Defendants will pay if a plaintiff will take no more than what they would owe (including what they would pay their lawyer) in court. If the two parties hold similar estimates of the litigated outcome, they can settle and pocket the amount they would otherwise pay their attorneys. If they agree about what a judge would likely say if they asked him, they need not bother to ask at all.
When outcomes are unpredictable, the odds increase that the two parties will hold (incompatibly) optimistic views of the litigated outcome. If that happens, the plaintiff will demand more than the defendant would ever pay. The defendant will refuse to pay even the least the plaintiff would ever accept. Lacking a "window for settlement," the parties will have no choice but to litigate.
Second, in some cases the American system introduces a distinct local bias. Juries in some counties famously favor local plaintiffs over out-of-state defendants. In turn, lawyers fund a massive industry locating these counties. Because our procedural rules mostly let plaintiffs sue large corporations anywhere they like, lawyers file suit in the most biased county they can find.
Although most defendants in traffic accidents are local, the defendants in products liability claims are often out-of-state firms. In effect, if an enterprising lawyer can find a plausible local victim in a plaintiff-friendly county, he can sue the out-of-state defendant and reap a windfall. If he can aggregate multiple claims through procedural devices like the class action (yet another example of the American insistence on getting matters "exactly right" and insuring everyone "a day in court"), he can reap still more. Since the aggregated claims expose even big firms to the risk of bankruptcy, the firm may pay even attorneys with the weakest claims to desist.
Third, in some classes of cases the cost of trying to get it "exactly right" can be particularly pernicious. Take medical malpractice. Although juries are clueless about medicine, we ask them to decide whether a doctor acted with appropriate care in arcane, high-tech procedures. Because we want to offer everyone a full recovery, we let plaintiffs prove a victim's "pain and suffering." And because we want to give everyone a chance to prove his case, we let plaintiffs hire physician "experts" to invent stories about why they should recover amounts larger still. The collateral consequences can be huge.
Those consequences go beyond the recovery in the individual case. When we let plaintiffs extort massive sums from manufacturers, sometimes the firms take the products off the market. When we let them extract unwarranted amounts from physicians, sometimes the doctors leave the state.
* * *
Japanese courts do well by making do. They adopt little of this American individualized approach. Instead, they follow rules and procedures that suggest someone took seriously Blum's rule and decided to accomplish more by attempting less.
Japanese judges do not pretend to offer the level of particularized inquiry that we expect in American courts. In traffic accidents, they apply simple and public formulae to calculate a victim's damages. They publish charts that explain the relative fault of the two parties in standard accidents. We do not live in Lake Woebegone. Most real-world victims are about average, so judges mostly award the damages and apply the rules that would be appropriate to the average case. Compensation is not perfect, and neither are the resulting incentives. But rather than get the numbers exactly right, they adopt strategies that are mostly right — and stop the inquiry.
Because so much of what a Japanese judge will do is clear at the outset, the fraction of cases where the two parties are both optimistic about their chances falls. With less mutual optimism, the parties more often agree to an out-of-court settlement. In the process, they save the amount they would otherwise pay their lawyers.
I illustrate these principles with tort disputes — the focus of this book. Traffic victims file many fewer suits than they do in the United States, but they do not "eat their losses" (chap. 2). Instead, they file demands against the wrongful driver. Those drivers then pay the victims out of court. They pay amounts that track the judgments the courts would impose if they refused to settle. They settle, in short, in the "shadow" of the litigated outcome.
Japanese courts take the same concern for uniformity and predictability to products liability and medical malpractice disputes. They apply no aggregation rules (class actions) for small claims. This obviously reduces the ability of a minor claimant to recover, but it also limits the ability of unprincipled lawyers to use fraudulent claims to extort settlements from risk-averse manufacturers.
Japanese litigate fewer products liability claims than do Americans (chap. 3) — and the standardized tables from the traffic accident jurisprudence explain much of that story. Yet, although they also file fewer product liability claims out of court, they do not live with uncompensated wrongs. They file few claims because modern products are safe and defective products cause few injuries. Americans file more claims because American courts sometimes reward plaintiffs who file fraudulent claims and rarely punish their lawyers for facilitating the fraud.
Japanese also file fewer medical malpractice claims (chaps. 4 and 5) — and again the standardized tables play a part. But Japanese also — again — file fewer claims out of court. They file fewer malpractice claims because they suffer fewer injuries caused by malpractice. They do not suffer less malpractice because they enjoy better medical care. They suffer less malpractice because they have worse medical care. The reason for the contrasting litigation patterns in medical malpractice, in other words, lies entirely outside the law of malpractice — and instead in the health insurance system.
Japan maintains a national health insurance that dramatically reduces the level of care Japanese receive. To keep costs low, it reimburses complicated and sophisticated modern procedures at relatively low levels. Japanese doctors respond by focusing their practice on the simple routine procedures reimbursed at the relatively higher levels.
Whether here or in Japan, malpractice claims stem from the most complicated, sophisticated, high-risk procedures. Patients do not file claims unless there is an adverse event, and (by definition) adverse outcomes result more frequently from high-risk procedures than low. What is more, ordinary human failings (e.g., a wandering mind) will more likely constitute "negligence" when the doctor is performing heart surgery than when he is prescribing a drug for asthma. The national insurance cuts the number of sophisticated, complex procedures — and, in the process, cuts the number of malpractice claims patients file.
Excerpted from Second-Best Justice by J. Mark Ramseyer. Copyright © 2015 The University of Chicago. Excerpted by permission of The University of Chicago Press.
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Table of ContentsAcknowledgments
Chapter 1. Doing Well by Making Do
Chapter 2. A Tort System That Works: Traffic Accidents
Chapter 3. A System with Few Claims: Products Liability
Chapter 4. Few Claims, but for a Different Reason: Medical Malpractice (I)
Chapter 5. Medical Malpractice (II)
Chapter 6. Wrong but Predictably Wrong: Labor, Landlord-Tenant, and Consumer Finance
Chapter 7. A Second-Best Court
Chapter 8. Conclusion