There is a belief out there that the American justice system is always in search of the truth. Certainly, that’s the belief we held before starting to interact with it more. We’ve updated our beliefs as follows: that the search for the truth is the overarching goal of the American justice system is far from the truth.
You may know by now that we love sports analogies. We believe finance has much to learn from the game of basketball. It turns out, the law can also learn from sports. So, let’s talk about football, shall we?
The Super Bowl between the Kansas City Chiefs and Philadelphia Eagles, worthy adversaries in many ways, recently ended (congrats to the Eagles, a well-deserved win). Of course they both want to win and in order to do that they have to be better than the other team.
What is the referee’s job? To call a fair game. To penalize teams if they play outside of the rules. If there is a call that needs to be made, make sure the call is the right one. They even have a back-up system in place for many calls that were made incorrectly, after all, they are just human.
That sounds like the adversarial system, which is one of the two common types of legal traditions that dominate the nature of investigation and adjudication around the world:
The adversarial system assumes that the best way to get to the truth of a matter is through a competitive process to determine the facts and application of the law accurately.
The other legal tradition that is used in some countries is called the inquisitorial system:
An inquisitorial system is a legal system in which the court, or a part of the court, is actively involved in investigating the facts of the case. This is distinct from an adversarial system, in which the role of the court is primarily that of an impartial referee between the prosecution and the defense.
Now there are certainly cases where an adversarial system makes sense. Assuming the evidence offered is truthful, an adversarial posture in criminal settings probably makes sense. Nobody really has more riding on the case than the accused criminal and the person or entity harmed. Similarly, it probably makes sense in a divorce case. Perhaps with the exception of the kids, the spouses are the ones that will feel the impact the most. As Lord Devlin observed:
It can also be argued that two prejudiced searchers starting from opposite ends of the field will between them be less likely to miss anything than the impartial searcher starting at the middle.
Basically, if the parties to the case also happen to be the biggest stakeholders, assuming they both have equal access to legal representation, the truth will likely come out. Why wouldn’t it? The parties that care the most about the truth are already at the table, and, through counsel, they will fight very hard to win.
Does the adversarial system serve us well? That article contains this quote from Lord Denning, who Margaret Thatcher described as “probably the greatest English judge of modern times.”
In the system of trial which we have evolved in this country, the judge sits to hear and determine the issues raised by the parties, not to conduct an investigation or examination on behalf of society at large, as happens, we believe, in some foreign countries. (emphasis added)
Right there, the words we emphasized hold the keys to our core message. Society at large prefers the criminal to be punished and the innocent to walk away free. The competitive adversarial process generally serves that goal well. Similarly, if a spouse wronged the other spouse, there should be consequences; after all, most of us will end up being a spouse one day. The interests of the society at large are aligned to one of the parties.
Not so in cases where the society at large happens to be the biggest stakeholder and has more riding on the outcome than either party.
The goal of a profit-maximizing business is, well, to maximize profits. It is absurd to expect that business to have society’s interests at heart. If the government is on the other side, technically the government could be a proxy for society at large, but as we explained in our last post, the government may not always be an effective advocate for the public, especially, at its core, when the case involves definitions, as was the case with Kalshi v. CFTC.
Thus, the buck must stop with the courts. A good judge should be inquisitive and open to the possibility that the truth may not be coming out through a competitive process that plays out inside the courtroom, especially when parties tussle over definitions like they did in Kalshi v. CFTC. Often, that’s as good a sign as any, that the truth may lie outside the four corners of the courtroom.
Yet, the courts also face significant headwinds.