Difference between revisions of "Litigation Finance"
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==Professors' Impracticality== | ==Professors' Impracticality== | ||
| + | Professors are not practical people. That is why they become professors. They are mild-mannered, timid even, and lack practical business skills. As a result, the university can expect them to settle for too little. Suppose a professor earns $80,000/year plus $20,000 in fringe benefits (health insurance, pension, etc.) and is 50 years old. If the university fires him, and as a result of the firing he will not be able to get a comparable job, he has lost about $2 million. Let us suppose, too, that he has an 80% chance of winning in court. The value of his claim is .8*2 million = $1.6 million (ignoring time discounting). He will have to pay 1/3 to his lawyers, about $500,000, but the university will have to pay about the same to its lawyers, another $500,000. If professor and university are equally good at bargaining, we'd expect the university to pay the professor $1.6 million to settle the case. In reality, though, the university will offer the professor $300,000 and the typical professor will accept it. The sum of $300,000 looks really big to him, and he doesn't realize how badly the university wants to settle. Also, he is highly averse to risk, and incapable of living quietly and calmly the four years the lawsuit will take. | ||
==The conflict of interest of the professor's lawyers== | ==The conflict of interest of the professor's lawyers== | ||
Revision as of 09:15, 23 September 2021
A common tactic of university administrations is to unlawfully fire a tenured professor, knowing that he would win if he sued them in court for breach of contract, but then to settle out of court by paying him a lump sum of money. Looking at it this way, a lot of apparently senseless university behavior makes sense. Why do they fire the professor when they know they'd lose in court? ---because they've done the calculation, and they've decided it's worth paying $100,000 to get rid of him.
The question for a university president is thus how much firing the professor will cost, not whether it is legal or not. A big part of how much it costs is the university's use of three sub-tactics: 1. Professors' impracticality, 2. The conflict of interest of the professor's lawyers, and 3. Starving him out.
Contents
Professors' Impracticality
Professors are not practical people. That is why they become professors. They are mild-mannered, timid even, and lack practical business skills. As a result, the university can expect them to settle for too little. Suppose a professor earns $80,000/year plus $20,000 in fringe benefits (health insurance, pension, etc.) and is 50 years old. If the university fires him, and as a result of the firing he will not be able to get a comparable job, he has lost about $2 million. Let us suppose, too, that he has an 80% chance of winning in court. The value of his claim is .8*2 million = $1.6 million (ignoring time discounting). He will have to pay 1/3 to his lawyers, about $500,000, but the university will have to pay about the same to its lawyers, another $500,000. If professor and university are equally good at bargaining, we'd expect the university to pay the professor $1.6 million to settle the case. In reality, though, the university will offer the professor $300,000 and the typical professor will accept it. The sum of $300,000 looks really big to him, and he doesn't realize how badly the university wants to settle. Also, he is highly averse to risk, and incapable of living quietly and calmly the four years the lawsuit will take.
