The financial collapse of 2008 has had a lasting, disruptive effect on many aspects of the U.S. economy, including the civil justice system. A preliminary assessment of the impact of the financial crisis on various facets of the civil justice system identified a set of priority areas that warrant further empirical research and additional data collection.
An Early Assessment of the Civil Justice System After the Financial Crisis
Something Wicked This Way Comes?
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- In the aftermath of the financial collapse, which civil justice system effects warrant examination the most?
- What kinds of descriptive trends can be observed in recent years concerning state court system resourcing levels, the number of civil claims being filed in state and federal courts, and the number and nature of securities litigation claims?
- Are there pertinent conclusions to be drawn about the impact of the financial collapse on the people who work within the justice system, access to legal aid, or emerging trends in litigation financing or legal outsourcing?
- Where are there significant gaps in data that must be addressed before a comprehensive empirical investigation of the civil justice effects of the financial crisis can be undertaken?
The financial collapse of 2008 has had a lasting, disruptive effect on many aspects of the U.S. economy. Whenever unforeseen economic disruptions produce widespread losses, there will predictably be some civil justice system aftereffects as people seek compensation for those losses. A preliminary assessment of the impact of the financial crisis on various facets of the civil justice system identified five significantly affected areas that warrant further empirical research and additional data collection: (1) state judicial branch resourcing, (2) patterns of litigation, (3) securities litigation and enforcement, (4) trends in the legal services industry, and (5) legal aid and the provision of legal services. Specifically, state court systems have experienced increased stress and funding restrictions, though the complexities of state court funding mechanisms mean that it is necessary to rely on anecdotal evidence of gauge the true extent of these changes. In terms of litigation, the numbers of civil claims in state courts are on the rise, but it is difficult to pinpoint the precise effects of the crisis due to a lag in data reporting. Data on securities litigation suggest that the financial crisis has had a mixed impact on securities litigation activity, with some evidence suggesting a surge in litigation, although government enforcement activity remained flat. In the legal services industry, employment has fallen dramatically as firms face tightened budgets and explore alternative fee arrangements and new employment models. Finally, one of the more troubling findings that warrants further investigation concerns the effects on the provision of legal aid: An increased demand for such services and funding, coupled with a diminished supply, may reduce access to the justice system for the most vulnerable members of society.
Data Availability Is Variable for Different Aspects of Civil Justice System Performance and Policy
- Limited and low-quality data across many dimensions of civil justice system performance will hamper future empirical efforts to trace the lasting effects of the crisis and Great Recession.
- It is imperative that research efforts continue: Long-run strain in the operation of the civil justice system, or changes in its basic function and institutional characteristics, could have serious policy ramifications going forward.
Preliminary Data Suggest Some Observable Civil Justice Trends in the Immediate Wake of the Financial Collapse
- There are preliminary data to suggest that litigation demands on some parts of the civil justice system have increased, that funding for state courts may now be trending downward, and that there have been disruptions in the legal services economy, in the provision of legal aid, and in the operation and staffing of courts.
- It remains to be seen whether any of these effects can be attributed with precision to the financial collapse, or whether some of the effects reflect longer-run emerging trends, particularly as government institutions move into a mode of austerity and deficit reduction.
- There are several possibilities for major new data collection that warrant further investigation (e.g., regarding the effects of the 2008 financial crisis on court system budgets, securities litigation, legal outsourcing, and alternative fee arrangements).
- New research on the effects on the judiciary and the legal profession, as well as on outcomes and process measures pertaining to civil litigation itself, will be increasingly necessary in the future.
Table of Contents
State Court Funding
Patterns of Civil Litigation
Securities Litigation and Enforcement
Legal Services Industry
Provision of Legal Aid Services
The research described in this paper was conducted within the RAND Institute for Civil Justice, a research institute within RAND Law, Business, and Regulation (LBR). LBR is a research division of the RAND Corporation.
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