All-or-Nothing, or Something – Proportional Liability in Private Law

Abstract

Judges and juries often make factual decisions even if the facts are disputed and there is no clear-cut evidence available. Despite this common state of uncertainty, verdicts are thought of as having clear winners and losers––either the plaintiff wins and receives a full remedy, or the defendant wins and the plaintiff gets nothing. In private disputes, factfinders base their binary factual determinations on the preponderance of the evidence. There are, however, several doctrines that allow for partial remedy, discounted by the probability that the facts support the plaintiff’s case, given the available evidence (proportional liability). This Article offers a general theory for proportional liability in private law. It identifies three types of factual uncertainty—mutual uncertainty, unilateral uncertainty, and institutional uncertainty—and shows that legal economists should support proportional liability when the state of uncertainty is shared by the parties and the court (mutual uncertainty), and they should adopt an all-or-nothing rule whenever the information is observable but unverifiable (institutional uncertainty). In cases where one party holds private information (unilateral uncertainty), proportional liability is sometimes, but not always, superior to an all-or-nothing rule.