Do Attorneys Do Their Clients Justice? An Empirical Study of Lawyers' Effects on Tax Court Litigation Outcomes

- Leandra Lederman Indiana University-Bloomington - Maurer School of Law & Warren B. Hrung Federal Reserve Bank of New York

Do Attorneys Do Their Clients Justice? An Empirical Study of Lawyers' Effects on Tax Court Litigation Outcomes Leandra Lederman Indiana University-Bloomington - Maurer School of Law Warren B. Hrung Federal Reserve Bank of New York Wake Forest Law Review, Vol. 41, p. 1235, 2006 Indiana Legal Studies Research Paper No. 49 Abstract: Do attorneys really add value or can unrepresented parties achieve equivalent results? This fundamental question ordinarily is difficult to answer empirically. An equally important question both for attorneys and the justice system is whether attorneys prolong disputes or instead facilitate expeditious resolution of cases.


Fortunately, there is a federal court that provides an excellent laboratory in which to test and answer these questions. In the United States Tax Court (Tax Court), where most federal tax cases are litigated, the government always is represented by Internal Revenue Service attorneys but a large portion of the taxpayer litigants proceed pro se. In addition, the Tax Court is exceptional in that it maintains files on cases that settle. Furthermore, Tax Court disputes involve money, so case outcomes can be readily compared. These institutional characteristics provide the rare opportunity to isolate the effects of lawyers on outcomes in both settled and tried cases.

In order to assess the predicted and actual impacts of attorneys on case outcomes, the article identifies five distinct ways in which attorneys typically differ from unrepresented parties and explores how each of those characteristics may affect case outcomes. The article then exploits the opportunity afforded by the institutional features of the Tax Court; using a unique database of randomly selected cases, the study tests the impact of attorneys on financial outcomes in both tried and settled cases. It also tests the effects of attorneys on time to settlement and time to trial.

Interestingly, the study found that the presence of an attorney for the taxpayer significantly improved the taxpayer's financial outcome in tried cases, an effect that increased with the experience of the attorney. No such effect existed in settled cases. Although the latter result initially is surprising, it highlights the paramount importance of procedural expertise in formal trial proceedings, as opposed to negotiations with the opposing party. The study also found that the presence of an attorney for the taxpayer did not affect time elapsed to trial or settlement. Thus, the study found that taxpayers' attorneys, who generally are paid by the hour, neither prolonged disputes nor expedited their resolution but did significantly improve the financial outcomes of the cases they tried.

Keywords: lawyers, lawsuits, settlement, litigation, justice system, dispute resolution, judges, taxation, Tax Court, empirical study