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Courts, practitioners, and scholars have recently expressed concern over the ex post costs of discovery in civil litigation. In this Article, we develop a game theoretic model of litigant behavior to study an overlooked phenomenon-the ex ante effects of discovery on a defendant's incentive to engage in unlawful conduct. We focus on motions to seal, which limit the disclosure of discovered information to the public, but permit disclosure to the court and parties. Specifically, we examine the effect different rules regarding such motions have in deterring defendants from engaging in unlawful behavior. We show that as a rule becomes more permissible in granting motions to seal, a potential defendant has greater incentive to engage in unlawful actions that would result in reputational loss. The welfare effect of this result, however, is ambiguous because protecting a defendant from such reputational losses may be welfare enhancing. After setting forth the model, we discuss extensions and provide some thoughts on further directions for research.
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Introduction
There has been a recent focus by federal courts, rulemakers, practitioners, and scholars on the costs of discovery.1 Discovery is a phase of litigation that allows the parties to compel the production of evidence from each other and third parties. Because, under the "American rule," the parties bear their own litigation costs,2 courts and scholars have focused on the strategic use of discovery to impose costs on opposing parties.3 The potential for such strategic behavior has inspired recent amendments to the Federal Rules of Civil Procedure, such as an amendment making clear to trial courts that they have the discretion to refuse to enforce discovery requests that they do not consider "proportional."4 Moreover, the Supreme Court has expressed concern in the context of pleading that "the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings."5
Although the ex post costs of discovery are a worthy area of study, in this Article we examine an often overlooked phenomenon- the effect of discovery on a party's ex ante behavior. Here we focus on the ability of the parties to control the disclosure of information. specifically, we focus on motions to seal, which allow a party to disclose information to the judge...