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Article Excerpt
INTRODUCTION
Political scientists studying the judiciary have long been interested in what, if any, impact judicial decisions have on their intended audiences, particularly the lower courts that must comply with them. Compliance in this sense has been defined as the lower court's proper application of standards the superior court has enunciated in deciding all cases raising similar or related questions. (1) Most studies find widespread compliance in lower courts, (2) with only rare instances of overt defiance. (3)
This Article attempts to address three questions in the extant judicial impact literature. First, the existing studies use rather insensitive measures of compliance and thus may fail to identify instances of subtle resistance to higher court rulings. Justice O'Connor once noted that judges "know how to mouth the correct legal rules with ironic solemnity while avoiding those rules' logical consequences." (4) In many, if not most cases, lower court judges that do not like a controlling precedent have a number of strategic options open to them to avoid applying that precedent, including interpreting the precedent narrowly, distinguishing it factually, or disposing of the case on procedural grounds. (5)
Equally problematic for the study of judicial compliance is the malleability of stare decisis. Under a strict view of precedent, lower courts are bound to follow the legal principles articulated by courts superior to them in the judicial hierarchy. (6) But this doctrine can bend in practical application. Courts may exercise discretion in determining whether to adhere to stare decisis and may consider, among other things, social or economic changes that render a precedent no longer applicable. (7) This raises an issue of classification: which decisions not to apply precedent constitute the appropriate exercise of judicial discretion and which are simply noncompliant?
The ability of lower court judges to avoid precedents they do not like and the flexibility of stare decisis confound judicial impact studies, particularly because the variables used are often only weak proxies for compliance--for example, the proportion of liberal or conservative decisions following a liberal or conservative Supreme Court decision. (8) With these kinds of dependent variables, judicial politics scholars recognize that researchers may often be unable to identify instances of noncompliance. (9)
A second limitation in the judicial impact literature lies in its restrained focus. Judicial politics in general and the judicial impact literature in particular tend to have a "high court" bias. Scholars typically devote most of their attention to whether the United States courts of appeals or state supreme courts comply with the decisions of the United States Supreme Court. (10) Comparatively few studies (11) examine whether United States district courts comply with the precedents of their circuits, even though most judicial activity occurs at the trial court level. Over the last two years, there was an average of nearly 326,000 civil and criminal cases commenced annually in the United States district courts, compared to about 63,000 appeals commenced--about 19% of the district total. (12) During the same time period, the Supreme Court on average granted review in less than one hundred cases. (13) A focus on high court precedents misses most instances where a court must decide whether or not to comply with controlling precedent.
In addition to devoting most of their attention to the tip of the judicial iceberg, scholars studying judicial politics less frequently examine the ultimate consumers of judicial policies--the members of society who are subject to the rule the court has announced. (14) This limitation in the literature is understandable; consumer behavior is typically much less visible than the behavior of the implementing courts and therefore much more difficult to study. (15) Yet judicial decisions are only words on paper; the real significance of those decisions can be measured only by examining how they affect litigants and other impacted parties.
The data on comparative caseloads at the various levels of the judicial hierarchy raise a third question. If large scale compliance exists, what mechanisms drive it? It has become common to view the judicial hierarchy as a principal-agent system. (16) Lower court agents subject to light monitoring have the ability to shirk, which in the case of judging may involve the district court advancing its own policies rather than those the appellate court prefers. The caseload data suggest a relatively small likelihood that any individual decision will be heard on appeal (much less reversed), a situation which might create prime conditions for non-compliance. (17) Nonetheless, many scholars assume that, even when the likelihood of reversal is remote, fear of reversal plays an important role in keeping lower courts in line. (18) All else being equal, a judge who is reversed more often may suffer a loss of reputational capital or reduced prospects for promotion. If these incentives exist, then one would expect that where the probability of reversal is higher, compliance will be higher as well. Yet some recent evidence raises questions about this argument, finding that there is actually little correlation between the likelihood of Supreme Court review and compliance. (19)
The data analyzed in this Article allow us to address each of these questions (the appropriate measure of compliance, the impact of stare decisis at the trial court level and in the consumer population, and the mechanisms driving lower courts to comply with or resist controlling precedent). Specifically, we examine how the district courts in the Second Circuit responded to the decision of the Court of Appeals in Goldberger v. Integrated Resources, Inc., (20) a 2000 case that mandated strict scrutiny by trial court judges of attorneys' fee applications in class actions and admonished trial courts to seek "moderation" in awarding fees. Goldberger strongly suggested that excessively high fee awards had a much greater chance of reversal than excessively low ones. If federal district courts complied with Goldberger, we would expect to see lower fee awards and greater scrutiny of fee requests. We would also expect that plaintiffs' attorneys would moderate their fee requests.
How much can this analysis tell us about district court compliance generally? After all, fee setting in securities class actions is just one narrow legal issue arising in a specific litigation context. Nonetheless, studying this setting also has several advantages. First, the variables relevant to fee requests and awards have been thoroughly studied and thus we know a great deal about how they are determined. (21) When combined with a large database of fee awards (approximately seven hundred), we have the potential for a much more precise instrument for studying compliance than past studies have been able to exploit, and therefore we have a much better chance to identify more subtle forms of noncompliance.
Second, we have information about the ultimate consumer population--the plaintiffs' attorneys in securities class actions. Civil procedure rules require those attorneys to publish a notice of any settlement and to specify the fee request they intend to make to the court. The availability of this information allows us to examine whether Goldberger affected their behavior as well.
Third, the dynamics of this particular setting shed new light on the hypothesis that judges comply with precedent in order to avoid the chance of reversal on appeal. The Goldberger court suggested that reversal on appeal will be more common when a judge awards high fees than when the judge awards low fees. But, as is explained in more detail below, (22) in the average securities case, it is the plaintiffs' attorneys, not the members of the class, who are the most likely to appeal a fee award. Since they are only likely to do so if the court awards a low fee, district judges looking to avoid appeals and the potential for reversal have an incentive to give the attorneys precisely what they asked for--the exact opposite of what the Goldberger court wanted. It is only where settlements are very large that it may be worthwhile for a class member to undertake the costs and burdens of appeal. These dynamic processes yield a testable hypothesis: if compliance is tied to fear of reversal, we may observe greater compliance as settlement size increases. If on the other hand we observe compliance remaining constant or decreasing with settlement size, we might doubt that district court behavior in fee-setting is driven principally by reversal concerns.
Our empirical analysis yields three primary results. First, contrary to what might be expected, Goldberger is not correlated with a general decline either in fee awards or in fee requests. On average, fees demanded and fees received by attorneys in the Second Circuit post-Goldberger are no lower than the fees they demanded and received earlier, or the fees in other circuits.
Second, we fend that, although Goldberger did not result in a wholesale lowering of fees, it did have an impact on fee-setting practices. Specifically, there appears to be an interaction between Goldberger and settlement size. As settlement size increases, both fee requests and fee awards rise at a slower rate in the Goldberger cases (later cases in the Second Circuit) than in the non-Goldberger cases (cases in other circuits and pre-Goldberger cases in the Second Circuit). The moderating effect of...
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