A Map Through the Punitive Damages Forest

Yehuda Adar, Touring the Punitive Damages Forest: A Proposed Roadmap, 1 Osservatorio Del Diritto Civile E Commerciale [The Civ. & Com. L. Observer] 275 (2012), available at SSRN.

The questions raised by punitive damages are numerous and varied: Should punishment be a part of the civil system? Are punitive damages awards “out of control”? Should a punitive damages award be split between the State and the individual plaintiff? Should caps be placed on punitive damages? Indeed, the topic of punitive damages has been examined from competing empirical perspectives, from a comparative law analysis, from a historical angle, and the list goes on and on and on.

Enter a new article by Yehuda Adar. In this thought-provoking piece, Adar offers a framework for organizing these various debates about punitive damages. In so doing, Adar provides a convenient and helpful synthesis of both the current objections to punitive damages, and the counter-arguments in support of punitive damages’ place in the civil liability system.

Adar contends that three central issues frame the debate regarding punitive damages: (1) Are punitive damages ever appropriate, and if so, for what conduct?; (2) Why are punitive damages part of the civil-private law system, rather than the public law system (either criminal law or administrative law)?; and (3) Why should punitive damages be awarded to the individual plaintiff? Adar initially disclaims that he will advance a specific position on these questions and asserts that his intent is to simply outline the issues. (P. 302.) Nevertheless, Adar ultimately does endorse the role of punitive damages within the civil law system, although he equivocates somewhat on the final question suggesting that “at least a substantial part” of a punitive damages award should be awarded to the individual plaintiff. (P. 347.)

Before exploring the three-part framework, however, Adar begins with a central question: Are punitive damages a form of punishment or are punitive damages merely extra-compensatory? In this part, Adar dives into the compensatory theory debate among punitive damages scholars. Compensation theories of punitive damages assert that punitive damages reflect payment for losses generally suffered by society, or alternatively, payment for harms suffered by others who did not choose to sue. Adar rejects these theories, and instead takes the position that punitive damages are punishment from a practical, descriptive perspective. Adar concedes that compensatory theories of punitive damages may be “normatively attractive” (P. 310), but concludes that the actual practice of awarding punitive damages reflects a judgment about the blameworthiness of the defendant’s conduct.

In the rest of the paper, Adar develops his tripartite taxonomy. In doing so, Adar identifies relationships between the many troublesome aspects of punitive damages and a number of secondary, related questions that he fits within the three-part framework.

First, Adar identifies the type of conduct that warrants punitive damages. In language familiar to any first-year law student, he runs through the litany of words used to describe this conduct such as “outrageous,” “reprehensible,” “malicious,” “willful,” and “reckless,” among others. Adar identifies a two-part test within this vague vocabulary. In Adar’s view, punitive damages require a threshold of a “very bad act” and a “very bad mind” together with an overall evaluation that the defendant’s conduct was an extreme departure from reasonable standards. (P. 314.) Given this traditional description of the defendant’s conduct, Adar turns to whether the imposition of punitive damages can be justified. Adar examines retribution and deterrence as rationales for awarding punitive damages. Adar posits—and ultimately rejects—the notion that punitive damages violate fairness principles, either by punishing defendants who are not truly blameworthy, by imposing punishment that does not “fit the crime,” by punishing the defendant multiple times for the same conduct, or by failing to give the defendant adequate notice of the potential punishment. Adar argues that punitive damages succeed under a deterrence rationale and that any potential over-deterrence is outweighed by the societal good of preventing reprehensible conduct. By deterrence, Adar means whether punitive damages achieve a moral deterrent effect of discouraging the defendant’s behavior by imposing a sufficiently high monetary penalty on the conduct. Notably, Adar does not consider the law and economics optimal deterrence rationale of cost-internalization because it does not reflect “real life cases.” (P. 323.)

Adar then considers whether punitive damages belong within the civil/private law system. Adar clearly synthesizes the objections to allowing punishment within the private law/civil liability framework. He spends the most time on whether imposing punitive damages without the procedural protections of the criminal/public law system undermines the moral legitimacy of punitive damages’ existence within the civil framework. Specifically, Adar notes the possibility of multiple punishment for the same conduct and the use of a preponderance of the evidence standard, not a reasonable doubt standard. Relying on two “important distinctions” between criminal and civil punishment, Adar ultimately rejects the underlying premise that punitive damages are sufficiently similar to criminal punishment to warrant these additional protections. First, Adar points out that the civil system does not risk a defendant’s liberty interests, nor entail long-lasting restrictions on the defendant’s civil rights. Second, Adar notes that punitive damages do not involve any imbalance between the prosecutorial forces of the State against the individual. Moreover, Adar identifies three advantages to civil punishment: (1) it supplements the efforts of the State, which are subject to budget limits, (2) punitive damages reach anti-social conduct that does not rise to the level of criminal conduct, and (3) punitive damages may be a preferable method of punishment precisely because they are less stigmatizing than incarceration or even a criminal charge.

Finally, Adar addresses the “windfall problem,” namely enriching the individual plaintiff with an extra-compensatory award at the expense of the defendant or society. Adar again canvasses the counter-arguments—the plaintiff provided a public service by bringing the lawsuit, the private award is justified under a private retribution theory, and practically, punitive damages provide an incentive to sue where the costs of litigation are high. Adar believes that the “accumulative weight” of these arguments supports awarding “at least a substantial part” of a punitive damages award to the individual plaintiff. (P. 347.) The natural segue at this point would be to examine the issue of splitting the punitive damages award with the State. Although Adar does not explore this area, he does note the topic of split-recovery statutes for the reader.

Adar’s framework provides a useful primer on punitive damages, and a good synthesis of the current contentious debates raging in this controversial area. I recommend it as a great introduction to the topic to those new to the field, and a useful synthesis to those scholars well-versed in punitive damages scholarship.

 
 

In Defense

James Goudkamp, Tort Law Defences (2013).

Who cares about tort defenses, or as Australian turned Englishman James Goudkamp spells it, “defences”? The decline in the potency of tort defenses over the last century, their only occasional use in actual litigation, their atrophy in contrast to the robust elements of negligence law, their lack of specificity to tort, their definition as second-tier questions, and their frequent specification by statute rather than common law—all have resulted in a fairly undersized group of interested scholars, according to Goudkamp.1 But for those of us who, nevertheless, maintain an interest in the topic, Goudkamp’s book is a must read.

At the start, after considering rival definitions, Goudkamp defines a tort defense as a device which “relieves the defendant of liability even though all the elements of the tort in which the claimant sues are present.”2 Then, through a vivid series of case examples, Goudkamp differentiates defenses from denials of an element of plaintiff’s prima facie case. Once separated, Goudkamp divides defenses into two mutually-exclusive sets: justification defenses and public policy defenses. In the first group “the defendant acted reasonably in committing a wrong.”3 Included within this group are defenses such as self-defense, consent, and public necessity. In the second, the defendant “makes no claim whatsoever about the justifiability of his acts,” but should not face liability anyhow.4 To this category, Goudkamp assigns defenses such as absolute privilege, various immunities and limitation bars. In addition to this dual taxonomy, Goudkamp ultimately argues for a third category which he terms “denials of responsibility,” and distinguishes them from excuses, for infancy and insanity.5

In support of this taxonomy, Goudkamp cites cases and arguments from a wide variety of common law courts and scholars. Indeed, the book asserts that its analysis is “not specific to any jurisdiction,” and is instead “intended to be relevant to all legal systems that are based on the common law.”6 It’s an audacious claim, particularly in light of the statutory and common law fragmentation of traditional defenses that Goudkamp himself later notes.7 Nevertheless, the book delivers on this promise of relevance across borders, at least from an American point of view.

One illustration that comes immediately to mind concerns the current Restatement. Reporters for the Restatement Third: Intentional Torts are just now deciding whether the concept of apparent consent constitutes an element of the battery cause of action, or rather a defense to it. The Restatement Second took the latter view. It subjected an actor to liability for battery if “he acts intending to cause a harmful or offensive contact,” and a harmful contact “directly or indirectly results.”8 The Restatement Second then addressed consent within its division on defenses, under the chapter on “justification and excuse.” By contrast, the current draft of the Restatement Third treats the absence of consent as an element of battery. Section 101 of the draft Restatement Third requires that “the actor intends to cause a contact with the person of the other,” “causes such a contact,” the contact “(i) is offensive or (ii) causes bodily harm to the other,” and “the other does not actually consent to the contact.” Absence of consent is a constitutive element of the plaintiff’s prima facie case.

Should consent be an element or defense? Goudkamp’s work, though ultimately directed at the somewhat different question of how to classify defenses once defined, provides valuable insights. First, Goudkamp discusses the transposable nature of tort law elements and defenses.9 Issues can be placed in either category. However, “torts generally specify acts that one has prima facie reasons not to commit.”10 Once the Restatement takes a broad view of the intent required to commit battery—an intent to contact—adding to the elements the absence of real or socially implied consent seems consistent with an admonition to draw elements in a way that proscribed conduct be wrongful. However, another route to bar only socially-undesirable contact would be to define the intent requirement more narrowly. If battery law proscribes harmful or offensive contact that is intended to be so, consent could be assigned to the defense side of the ledger.

With two viable definitions of the battery elements, Goudkamp’s thoughtful discussion of rationales for not locating all issues into the elements category is of real use. For example, it would be inefficient to require a plaintiff to anticipate and disprove, at the outset of a case, multiple defenses that might never be pleaded. In addition, the placement of an issue as a tort element or defense is “one way in which the law gives expression to the relative strength of the parties’ interests. By assigning an issue to the ‘tort’ element category, the law gives greater weight to the defendant’s interests…”11 In the case of the Restatement, a shift of the consent issue to the plaintiff’s prima facie case is likely to place a greater burden on plaintiffs with respect to the matter. Moreover, as Goudkamp counsels, the choice of placement has moral significance.12 It affects the substantive entitlement. If plaintiffs have to prove lack of consent in sexual battery cases, consent is being presumed implicitly. In addition, the litigation pressures on victims from shifting focus away from defendants’ intent toward plaintiffs’ consent, have been criticized in criminal law battery litigation.

But Goudkamp does not take a direct position on the most useful way to treat consent—as an element or a defense. Indeed, he discusses significant doctrinal ambiguity on the issue in the common law world.13 Still, his thoughtful discussion of the various doctrines in common law jurisdictions, and his outline of rationales for classifying issues as defenses rather than elements, provides important insight for the conversation. Even if the audience for Goudkamp’s weighty analysis is small, one can only hope that his work begins a larger discussion of defenses based on justification and public policy throughout the common law world.



  1. PP. 8-9. []
  2. P. 7. []
  3. P. 27. []
  4. P. 104. []
  5. PP. 164-92. []
  6. P. 6. []
  7. PP. 191-98. []
  8. Restatement of the Law (Second): Torts § 13. []
  9. P. 34. []
  10. P. 44. []
  11. P. 38. []
  12. P. 42. []
  13. P. 65. []
 
 

A Doctrine in Distress

Aaron D. Twerski & James A. Henderson, Fixing Failure to Warn, 90 Ind. L.J. (forthcoming, 2014), available at SSRN.

A major accomplishment of the American Law Institute’s 1998 Restatement Third of Torts: Products Liability project is its disaggregation of product defects into categories warranting distinct legal treatment: manufacturing (or construction) defects, design defects, and failure to warn. Indeed, this tripartite approach is at the core of the Restatement Third project, which was touted as “an almost total overhaul of Restatement Second as it concerns the liability of commercial sellers of products.”

It may then seem surprising that James Henderson and Aaron Twerski—joint reporters for the Restatement Third project—have second thoughts about the categories they so adeptly forged.

In “Fixing Failure to Warn,” Henderson and Twerski “now believe that too much has been made of the difference [between design defect and failure to warn]” and propose a simple, albeit powerful fix for a “doctrine in distress.” Namely, the former reporters would import the “reasonable alternative design” requirement from the design defect test into the realm of failure to warn, requiring plaintiff to propose a “reasonable alternative warning” in order to make out his prima facie case.

Henderson and Twerski’s proposed reform is best understood in the context of the “Tale of Two Restatements” in products liability law. Before the Third Restatement: Products Liability was adopted, the Second Restatement’s Section 402A (and extensive comments) was the basic text of modern products liability law. Issued in 1965, Section 402A adopted a broad strict liability rule for product defects, governed by the consumer expectations test. The issuance of this Restatement section coincided with an expansionary era in tort liability; an era marked by such developments as the rise of crashworthiness theories, the decline of the open and obvious defense, and expansive definitions of product defects. Tort litigation soared during this period, which lasted until the early 1980s.

In many ways, the Third Restatement reflects the transformation of products liability law after this period. And, in equally significant ways, it facilitated that transformation. By defining a distinct liability rule for each type of defect (manufacture, design and warning), it helped contract the heretofore expansive liability. It maintained the strict liability rule for manufacturing defects, but imposed a lower, “reasonably safe” standard in the realms of product designs and warnings. It also rejected the consumer expectations test, which it perceived as a vehicle for excessive liability, in favor of the negligence-inflected risk-utility test.

Henderson and Twerski do not revisit these standards; their revisions target how those standards are met.

The Third Restatement requires design defect plaintiffs to show that a “reasonable alternative design” exists that would have made the product at issue less dangerous. This requirement is embedded in the very definition of what a defective product is; namely, one where “the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller . . . and the omission of the alternative design renders the product not reasonably safe.”

Unfortunately, the definition of warnings defect is less clear. The Third Restatement defines such defects as “when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller . . . and the omission of the instructions or warnings renders the product not reasonably safe.”

This standard, which has bedeviled courts and commentators alike, is in the crosshairs of Henderson and Twerski’s revision campaign. They argue, persuasively, that the inclusion of a “reasonable alternative warning” requirement—akin to the successful “reasonable alternative design” requirement—is a move in the right direction.

The ultimate goal in products liability law—i.e., “optimal levels of safety”—is easy to state but far more difficult to map out. The Third Restatement aimed to give manufacturers the “incentives . . . to achieve optimal levels of safety in designing and marketing products,” but further recognized that “optimal” does not mean “as safe as theoretically possible.” Because of the costs associated with increasing product safety (costs that might include keeping a potentially salutary product off the market altogether), “[s]ociety does not benefit from products that are excessively safe . . . any more than it benefits from products that are too risky. Society benefits most when the right, or optimal, amount of product safety is achieved.”

In their article, Henderson and Twerski insightfully highlight an important similarity between design and warnings: both are “untaken precautions that would have increased the safety of the product use and consumption and reduced or prevented plaintiffs’ harm.”

The alternative design test is well suited to achieve optimal product-design safety, assuming courts can properly weigh the costs and benefits of the alternative proposed design. Redesign, though more costly than warning modifications, is more effective in achieving enhanced safety, as it relies entirely on a manufacturer that is, relative to end users, far better equipped to assess the risks of one design as compared to another.

Failure to warn cases are more complicated because the efficacy of warning labels depends entirely on an end user’s difficult-to-predict behavioral response to the instructions or warnings provided. Judges and academics often incorrectly assume that more information is always better, yet studies confirm the existence of “information overload” and “warnings dilution” where consumers make poorer choices as the amount of information increases.

Henderson and Twerski’s “fix” would focus attention on the notion of an “optimal” amount of information. They argue persuasively that “requiring the plaintiff to identify specifically what, how, and to whom the defendant distributor should have communicated additional risk information would contribute significantly to achieving a sensible, realistic assessment of the costs and benefits associated with providing allegedly better warnings.”

The authors believe their proposed revision will not only clarify the definition of defect but will also “add significantly to the clarity of the analysis necessary to determine but-for specific causation.” At the same time, Henderson and Twerski are realistic about their proposed revision’s ability to overcome the crucial “heeding presumption”—the presumption that had there been a sufficient warning, the plaintiff would have heeded the warning and avoided the harm. This presumption, which allows a plaintiff to get to the jury on a warnings case once a warning defect is established, essentially shifts the burden of proof to the defendant to rebut the presumption of causation. The heeding presumption has been overcome with such evidence as “the user was blind, illiterate, intoxicated at the time of use, irresponsible or lax in judgment,” but is typically extremely difficult for the defendant to rebut.

Henderson and Twerski make a persuasive case that “the heeding presumption cannot operate fairly unless plaintiff provides a [reasonable alternative warning] since defendant cannot rebut the presumption without knowing the content of the warning.” Their fix would presumably arm defendants with (slightly) better odds at rebutting the heeding presumption.

Henderson and Twerski “hope that this essay serves as the beginning of a dialogue on this issue.” I am persuaded that this provocative article will achieve that goal.

 
 

Do No Harm: Misdiagnosing Informed Consent

Erin L. Sheley, Rethinking Injury: The Case of Informed Consent, BYU L. Rev (forthcoming), available at SSRN.

For quite some time, the large majority of informed consent cases have been handled under a negligence rubric, the central issue being whether the physician’s disclosure of risks to the patient was reasonable, as measured either by the reasonable patient standard, or in some jurisdictions, the standard of the profession. The battery cause of action has now been relegated to a minor role. It only surfaces in cases in which the physician does not simply fail to give adequate information about the costs and benefits of an agreed-upon procedure, but has completely failed to secure the patient’s consent, for example, by operating on another body part or performing a tubal ligation following a C-section. The battery claim is so marginalized that the A.L.I., in the Restatement (Third) of Intentional Torts to Persons, is currently debating whether to limit the scope of battery/informed consent claims even further, perhaps requiring the patient to prove that her doctor knowingly exceeded her consent before allowing recovery for battery.

Going against the grain, Erin Sheley’s new article argues that the negligence framing of informed consent claims loses sight of the dignitary aspects of the claim that the battery cause of action captured so well. This overreliance on the negligence framing of consent claims creates “a class of factually injured patients who have no remedy under current law.” Sheley starts with an example of a breast cancer patient who was under the impression that she was to receive a biopsy on a lump in her breast. However, when the physician determined that her tumor was malignant, he decided to go ahead and perform a mastectomy in an effort to stop the cancer from spreading. Putting aside whether such a patient might possibly recover for battery under the current restrictions, Sheley argues that the patient in such a case has suffered a real injury, even if it turns out the physician made the right call from a medical point of view. The problem with proceeding under the negligence theory is that the plaintiff’s claim will likely fail because she cannot prove that she suffered a physical injury, a necessary element of a negligence claim predicated on lack of informed consent.

I expected Sheley either to argue in favor of shoring up the battery cause of action or to make the case for allowing negligence claims for pure emotional distress in the informed consent context. Instead, she makes a novel argument that draws upon the newly developing field of narrative medicine. Her claim is that the loss of control many patients experience when they have not been fully advised of the risks of surgery can itself lead to physical harm. In this interesting twist on the mind/body connection, the loss of control and autonomy generated by a lack of crucial information from one’s doctor, Sheley tells us, interrupts the patient’s individual “narrative” about his own illness. In this account of the healing process, it is not only the physician’s knowledge and skill that determines the success of a medical intervention but also the degree to which the patient is able to repair the damage the illness caused to his sense of self and “to find a way to integrate his potentially diminished bodily state into a new subjective identity moving forward.” There is evidence that patients improve their chances, for example, if they can adapt to the crisis of control by maintaining a “fighting spirit” ( “I can beat this disease”) or by meeting the suffering head on, and using it to create a new chapter in their life (“my illness is a journey that has become a quest”). Sheley maintains that when a physician “coopts a patient’s subjective knowledge about and control over his body,” it generates feelings of helplessness, powerlessness, and a sense of chaos that heightens the risk of physical injury.

In Sheley’s reconceptualization of the informed consent tort, the harm suffered by the patient is a special kind of a dignitary harm that resides in the physician/patient relationship: the physician’s failure to inform impedes the patient’s autonomy and free choice but also affects the quality of care that the physician provides to the patient. Although she never uses the “f” word, Sheley draws upon feminist philosopher Jennifer Nedelsky’s concept of “relational autonomy” that regards an individual’s exercise of autonomy as socially embedded in a web of human relationships, relationships that are necessary to support autonomous decision-making. Sheley points out that the famous maxim in the Hippocratic tradition of medicine should be more precisely formulated: “help, or at least do no harm,” rather than the familiar, “above all, do no harm.” This slight but significant re-phrasing supports Sheley’s view that physicians should strive affirmatively to help their patients, to the point of recognizing the importance of the patients’ subjective reactions as integral to the healing process.

However, it is not easy to translate this nuanced relational view of autonomy into elements of a tort cause of action. Sheley admits that there is no way to tell in an individual case whether a patient’s lack of control over his illness narrative caused any negative physiological symptoms that the patient might experience. At best, one can only say that patients’ lack of control in general can lead to enhanced physical injury. Analogizing to loss-of-chance cases, Sheley proposes that we dispense with the physical harm requirement in informed consent cases, provided that the patient can prove that she would in fact have foregone the particular treatment had she possessed all the relevant information. Unfortunately, Sheley does not further examine this knotty issue of causation that has also bedeviled courts in informed consent cases, namely, whether to apply a subjective or an objective standard of causation. Thus, getting rid of the physical injury requirement may simply put pressure on this other element of the informed consent claim that also implicates the balance between patient autonomy and physician duties. Finally, Sheley’s suggestion for measuring damages is quite unusual, even bizarre. She would allow the patient only to recover the “gain” the doctor derived from usurping the patient’s right to decide, presumably requiring the doctor to give up any fee or profit he derived from the unauthorized procedure. In my view, this measly recovery does not match up to the seriousness of the dignity harm Sheley so aptly describes and undercuts her central argument. If we want reform, we might be better off adopting the more conventional remedy of simply allowing informed consent plaintiffs to prove damages for their emotional harm, like other victims of negligent infliction of emotional distress.

 
 

Patching Things Up

Linda Radzik, Tort Processes and Relational Repair in Philosophical Foundations of the Law of Torts (John Oberdiek ed., 2014).

Imagine you are trying to write a mission statement for tort law. What aspiration would you put on paper? Tort theorists will find Linda Radzik’s answer at once familiar and foreign. In Tort Processes and Relational Repair, Radzik suggests that tort should pursue corrective justice. But she rejects the familiar Aristotelian conception of corrective justice, on which wrongdoing calls for compensation that offsets the harm caused. Instead, she suggests that corrective justice requires reconciliation. According to Radzik, tort should aim to repair the relationships ruptured by wrongdoing, rather than the harms that result from it.

The problem with the Aristotelian picture of corrective justice, Radzik says, is that it mistakes what’s wrong with wrongdoing. If you think that corrective justice consists in compensation for harm done, Radzik explains, then you are apt to think that what is wrong with wrongdoing is that it damages something that belongs to the victim, or deprives her of something she is entitled to have. But, as Radzik points out, there are wrongs that do not result in harms, and harms that did not result from wrongs, so it hardly seems like harm could be the essence of wrongdoing.

What is really wrong with wrongdoing, Radzik says, is the damage it does to relationships. The primary relationship in play is the one between the victim and her wrongdoer. A victim of a wrong, Radzik observes, has reason to feel insulted and threatened, as well as reasons to doubt that she can have a relationship of respect with the wrongdoer. But there are other relationships that are damaged too. A victim may feel that her standing in the community has been lowered, that other people think that she is a proper object of the treatment she received. Worse yet, she may come to think that of herself.

In Radzik’s view, corrective justice demands that we repair the relationships that wrongdoing ruptures. Of course, repairing harm may help. After all, harm is a constant reminder of the wrong. But repairing harm is not the only, or perhaps even the primary way, of repairing relationships in the wake of wrongdoing. A sincere apology aids reconciliation, in part because it distances the wrongdoer from the threat posed by his actions. And community members can help repair their own relationship with the victim, by coming to her aid, or otherwise making clear that they do not regard her as a proper object of the treatment that she received.

Radzik’s reconciliation picture of corrective justice is attractive. But one might wonder what it has to do with tort. The parties to a tort suit are often strangers, with no antecedent relationship that might be ruptured by wrongdoing. And nearly no one who has been involved in litigation would think of it as a mode of reconciliation. If anything, a lawsuit is apt to exacerbate tensions between parties, rather than relieve them.

Radzik is not moved by the first worry, as she thinks that strangers actually have relationships that can be ruptured. We may not know the person in the car next to us, but we trust that driver to take care for our safety, and regard ourselves as reciprocally responsible for the same. That trust is liable to be ruptured. Can tort repair it? I am more skeptical than Radzik. It seems doubtful that tort could do much to help an injured driver regain trust in the driver who negligently injured her. But it might, I suppose, reaffirm her standing in her community, by clearly signaling that her well-being matters, such that others are required to take account of it. So tort, we might think, has a role to play preventing a rupture in the relationship between the victim and her community, which would come about if the community did nothing to respond to the fact that she’d been wronged.

And what of the second worry? Radzik knows that litigation poses an obstacle to the kind of reconciliation that she thinks represents the ideal for corrective justice. But she nevertheless thinks that litigation has a role to play when the ideal is not attainable. If a wrongdoer is not interested in reconciliation, then we still have reason to repair the victim’s relationship with her community, and to restore her sense of her own social standing. By calling the wrongdoer to account and by requiring him to repair the damage he has done, we reject any thought that the victim was a proper object of the treatment that she received.

I find that suggestion very congenial. I have long been a critic of the Aristotelian account of corrective justice, on the ground that we can almost never do what it demands—put a victim in the position she would have been absent the wrong. In an essay that appears in the same volume as Radzik’s, I argue that that corrective justice, properly done, corrects the threat that wrongdoing poses to the victim’s social standing, a view that shares much in common with Radzik’s. Perhaps the most important difference is that Radzik thinks that justice demands more; it demands reconciliation between the victim and her wrongdoer, if we can achieve it. I am not so sure. Indeed, I doubt that reconciliation is always a worthwhile goal. To my thinking, there are ways you might wrong me that warrant my cutting you off entirely. Sometimes, holding open the possibility that we might reconcile sends a mistaken message about the gravity of the wrong.

In the big picture, that may be a small difference. But it has consequences for the way we think of tort. I am fully on board with the idea that tort should aim to vindicate a victim’s social standing. But I doubt that tort can do much repair the relationships between victims and their wrongdoers. And I think it might be misguided to try. Still, I find the approach in Radzik’s essay refreshing. She invites us to take a step back from tort law, to think through the way that we ought to respond to wrongdoing, and then to ask what role tort can play in that process. Her answer is familiar: tort should patch things up, as best it can. But it is also provocative, since she argues that what needs patching up is relationships, not people or property.

 
 

“The Only Thing We Have To Fear Is Fear Itself”: How Physicians’ Exaggerated Conception Of Medical Malpractice Liability Has Become The Real Problem

Myungho Paik, Bernard Black, & David A. Hyman, The Receding Tide of Medical Malpractice Litigation:  Part 1—National Trends, 10 J. Emp. Legal Stud. 612 (2013) available at SSRN.

Physicians continue to talk about the “Medical Liability Crisis” and physician-funded advocacy groups continue to push for additional and further-reaching liability-limiting reforms.  Yet although the prize advocates seek (tort reform!) has remained the same for decades, the justification for why tort reform is needed has undergone a subtle metamorphosis.  For a while, reformers argued that liability limits were needed because the problem of medical injury was grossly exaggerated—medical injury was a problem mostly ginned up by plaintiffs.  But then, the Institute of Medicine’s (IOM’s) groundbreaking 1999 study, To Err is Human, came along.  Estimating that between 44,000 and 98,000 Americans die in hospitals each year as a result of preventable medical errors, the IOM’s study took the wind out of that argument’s sails.  Undaunted, reformers changed their tune.  Tort reform was needed, reformers insisted, because, even if medical injury is all too real, medical liability is random, as decisions are untethered to the underlying merits of claims.  In 2006, however, that argument encountered a major setback.  David Studdert and co-authors published a groundbreaking study of 1,452 medical malpractice claims which convincingly debunked the litigation lottery story.  Some claims that don’t involve errors are indeed filed, they found.  But such claims do not typically result in payment.  Undeterred, another reason to resist medical liability has taken center stage:  the problem of defensive medicine.

Defensive medicine refers to instances when physicians, concerned about liability, test or treat despite the lack of medical necessity, as well as times physicians decline to provide particular services or accept certain individuals as patients for fear of liability.  A prototypical example might be a doctor who orders a CT scan, not because he believes it’s medically warranted but because he believes it’s prudent in light of the liability risk.  This behavior, some now say, imposes medical liability’s biggest cost.  Though numbers are hard to pin down (as it’s hard to discern whether that CT scan was really ordered to protect the physician from liability, as opposed to helping the patient or, perhaps, even padding the physician’s paycheck), defensive medicine appears to be widespread.  One recent survey found that 93% of physicians in high-risk specialties reported providing care that they thought was unnecessary.  And, respected academics suggest its price tag is high—roughly $45.6 billion per year.  Pointing to these statistics, some reason:  (1) defensive medicine is a huge problem, and (2) in order to rein in defensive medicine, we need to dramatically reduce medical malpractice liability—or, perhaps, dismantle the present system of compensation for medical injury.  That argument, in fact, appears to be gaining ground.

What’s puzzling, though, is that defensive medicine is caused mostly by fear—by physician’s fear of medical liability.  And, there are at least two ways to respond to another person’s fear of something.  One approach is to remove the menacing thing.  Another is to convince the person their fear is unfounded.  So, for example, when my son was four, he was terrified of lightning.  Confronted with his terror, I could choose to remove the lightning (perhaps by relocating to a sunnier clime) or I could convince him that lightning, while not without some danger, isn’t actually so threatening; his fear was totally overblown.  Not keen to move, I adopted the latter approach.  So, too, with medical malpractice liability.  Confronted with physician’s fear of medical malpractice (which via defensive medicine is causing demonstrable harm), we can, as some suggest, dismantle the liability system.  Alternatively, we can empirically assess and then convey to physicians the legitimate liability risk.

Of course, the latter tack will only prove fruitful if doctors’ current estimate of the risk is (like my son’s view of lightning) grossly exaggerated.  Evidence suggests it is.  Doctors substantially overestimate their risk of being sued.  Various studies suggest that, of patients who are negligently harmed, a very small minority—on the order of 2% to 3%—ever attempt to claim compensation for their medical injuries.  Yet, in 1989, researchers surveyed 739 New York physicians who estimated that 60% of negligent injuries led to lawsuits, while 45% of all iatrogenic injuries led to lawsuits, regardless of whether or not the injury was negligently inflicted.  Doctors, in other words, estimated the threat of liability to be some 20 times what it actually is.  Doctors’ views concerning the system’s accuracy are similarly out of whack.  The Studdert study (and a number of other studies, too) show that the medical liability system does quite a good job of sorting between meritorious and non-meritorious claims, and that, when errors are made, they tend to be made in favor of physicians (i.e., payment of claims not involving errors occurs less frequently than the converse form of inaccuracy).  Yet, in a 2002 poll, a full 83% of surveyed physicians indicated that, if sued, the current system of justice could not be trusted to “achieve a reasonable result.”  Given physicians’ apparent sense that lawsuits lurk everywhere and their concomitant distrust of the system once sued, it’s no wonder defensive medicine has come to the fore.  Indeed, a recent study puts the pieces together, suggesting that physicians who are most worried about malpractice liability are precisely the ones most apt to engage in costly “defensive” practices.  The same study looked to physicians’ actual liability risk (as measured by objective, state-level determinants, such as claims costs and tort reforms) and found these indicators counted for little:  “[I]t is perceived rather than actual risk, the authors found, “that determines how physicians behave.”

This all suggests that, if we want to curtail defensive medicine, there’s much to be gained by targeting perceptions—by assessing and conveying to physicians their legitimate liability risk.  This insight brings us to Myungho Paik, Bernard Black, and David Hyman’s recent, and important, work.  Relying on data from the National Practitioner Data Bank (NPDB), Paik and co-authors provide the first academic assessment of national trends in medical malpractice liability.  They show that, despite persistent and often panicked claims that the medical malpractice system is in “crisis,” in actuality, paid claims per physician dropped by 57% nationally from 1992 through 2012, while lawsuit filings (whether or not paid) are also in sharp decline.  Using data from Florida, Illinois, and Texas, they consider, and mostly refute, the possibility that the observed decline is explained by hospitals stepping in to pay settlements in order to shield practitioners from having to report payments to the NPDB.  By breaking states down into whether they have noneconomic damage caps, they show that, though tort reform is surely part of the story, it’s not the whole story, as there’s been a decline in per-capita physician payments even in non-cap states.  Finally, they consider, and cast doubt on, the possibility that “improvements in health-care quality” explain the observed drop—though, of course, they can’t wholly dismiss that possibility.  Nor, for that matter, can they disprove that an uptick in defensive medicine itself helps to explain identified trends.

Still, while the reasons for the precipitous decline aren’t entirely clear, the decline’s very existence adds an important coda to the true medical malpractice liability story.  We now know that few negligently-injured patients seek compensation, and when patients do seek compensation, payments generally track the quality of care.  Now, thanks to Paik, Black, and Hyman, we also know that, rather than facing a litigation “explosion,” physicians’ liability risk has (for whatever reason) dropped considerably over the past two decades.  Some contend that defensive medicine is the number one cause of “unaffordable health care in America.”  Stoked by fear, defensive medicine might be curtailed, at least in part, by ensuring doctors have a greater understanding of the real—rather than the imagined or grossly exaggerated—tort liability system.  The important work of empirical legal scholars over the past two decades ought to be deployed toward that end.

 
 

Federal Preemption and Products Liability

Daniel J. Meltzer, Preemption and Textualism, 112 Mich. L. Rev. 1 (2013).

Professor Daniel Meltzer’s article on federal preemption and statutory interpretation is not exactly a torts article. But for those of us who believe that federal preemption in products liability is among a handful of the most pressing and controversial tort issues today, Preemption and Textualism, is an essential read. One of the nation’s most admired federal courts scholars, recently back from a stint in the Obama administration, Professor Meltzer is an ideal commentator on contemporary debates about the proper scope of federal preemption doctrine.

Meltzer’s target is the interpretive method of textualism. Textualism, he argues, is not up to the task of handling the important preemption issues before the Supreme Court. In particular, Meltzer demonstrates that, while Justice Thomas denounced “obstacle preemption” as inviting unconstrained judicial lawmaking, neither Thomas’s reliance on statutory text nor his putative rejection of obstacle preemption holds up to close analysis.1 In the end, Justice Thomas, like his conservative brethren, inevitably turns to purposive analysis.

Three features of Meltzer’s analysis struck me as especially interesting and valuable. First, he argues persuasively that issues regarding the harmonization of state and federal laws are typically outside of the awareness of members of Congress who draft or vote for statutory text, even assuming they were within anyone’s awareness when a statute was passed. Add to this legislative gridlock and the unlikelihood of amendment, and the assumption that text reflects legislative will evaporates into thin air. Second, many of the words and concepts that must be analyzed in a preemption case are notoriously supple. This includes, for Meltzer, the interpretation of the word “requirement” in preemption clauses, and the concept of “logical impossibility” that (supposedly) undergirds the only form of implied preemption (impossibility) that Justice Thomas will tolerate.

A third and especially valuable feature of Meltzer’s article relates to the presumption against preemption, which has recently come under attack from Justice Thomas, relying upon important research by Professor Caleb Nelson.2 Nelson has claimed that the text of the Supremacy Clause was modeled after non obstante clauses commonly utilized by late 18th Century American legal draftsman. During that era, Nelson argues, such provisions were actually intended to displace the normal presumption that courts should strain to render existing statutes operative and viable in the face of later legislation that appears to repeal them. On this view, the Supremacy Clause should actually be interpreted to signal a rejection of any presumption against preemption. Meltzer’s cleverest criticism of this argument is that it proves too much: it entails that the Supremacy Clause is inconsistent with the Thayerian principle that statutes should be interpreted as constitutionally permissible, where possible. Most relevantly to tort law, Meltzer observes that the non obstante argument, even if it were justified historically and textually, addresses only the relationship between federal statutes and prior state statutes; it has no obvious implications for preemption of common law doctrine. Meltzer’s article concludes with a nuanced but confident defense of the presumption against preemption.

While Meltzer’s article is careful and illuminating, it seems to have been written without the benefit of a big picture of what has happened in products liability preemption litigation over the past two decades or so. Neither the text nor the legislative history of the federal statutes governing drugs, medical devices, or automobiles displays even a hint that Congress aimed to curtail products liability litigation (which was private, common law, traditionally rooted in compensatory goals, and often understood to be strict liability). By the mid-1980s, product manufacturers (and others) had pulled together a powerful movement that saw the attraction of federal tort reform, and, largely failing to persuade Congress, turned to the Court as a vehicle for national law reform. Combining an expertly honed litigation strategy with the ascendant law-and-economics conception of tort law as regulatory (which had never been a significant part of how judges or legislators understood torts), the tort reform movement convinced the Court to use preemption doctrine as a tort reform tool. As torts professors, we can see Geier and its progeny as of a piece with Daubert and BMW v. Gore and their progeny. Just as the Federal Rules of Evidence provided the means through which the Court could address ‘junk science,’ and the Due Process Clause of the Constitution anchored the Court’s critique of punitive damages run ‘amok,’ the Supremacy Clause is now the hook for softening what the Justices perceive to be unduly plaintiff-friendly liability standards.

Meltzer certainly succeeds in using preemption doctrine to demonstrate the shortcomings of textualism in action, but purposivism in action contains its own perils too, and Meltzer – coming from outside of tort law – may not be as alert to these concerns as one might wish. To be sure, his defense of the presumption against preemption (as against Justice Thomas and Professor Nelson) does indeed display an appreciation for federalist concerns. However, when Metlzer writes that “the task of fashioning a workable legal system—one that integrates state and federal law— will necessarily require a significant decisional role for the courts” he seems to be inviting just the sort of intrusion that rightly concerns Justice Thomas.

The Supreme Court’s most recent pharmaceutical preemption decision — Mutual Pharmaceutical Co. v. Bartlett, 133 S. Ct. 2466 (2013) — illustrates a tension that may be intrinsic to the sort of purposive preemption analysis Meltzer favors. In a 5-4 opinion penned by Justice Alito (and joined by Justice Thomas), the Court determined that a New Hampshire design defect verdict against a drug manufacturer must be struck down under impossibility preemption doctrine. The plaintiff conceded – indeed argued – that there was no way to have marketed the drug that would have protected the defendant from the jury’s categorization of it as “unreasonably dangerous,” notwithstanding the FDA’s having approved it for sale. And yet the plaintiff asserted that New Hampshire had the prerogative to impose strict liability for injuries inflicted by unreasonably dangerous drugs regardless of whether those drugs are permissibly sold under state and federal law. Justice Alito reasoned that if a manufacturer’s only way to avoid liability was to withdraw the drug from the market, notwithstanding the federal government’s designation of it as safe enough to market, then impossibility preemption applied.

While Meltzer does offer a nice critique of “impossibility preemption” (as mentioned above), and therefore cannot be assumed to accept Justice Alito’s analysis, his approach is nonetheless unduly receptive to the defense-side argument. That is because, whether or not it is correct to regard Mutual’s predicament as one rising to the level of “impossibility” preemption, there is surely real substance in the drug company’s complaint that the federal and state law in this case are poorly integrated. More generally, drug manufacturers are at least somewhat justified in complaining that it is costly and confusing for them to adjust their products and practices to the products liability law of fifty different jurisdictions as well as the FDA and federal law more generally, and uniformity of drug safety was undoubtedly among the goals of Congress in enacting the drug-regulatory statutes it enacted. Meltzer’s obstacle preemption seems well situated to accommodate these arguments; indeed, obstacle preemption arguably would have provided a more comfortable foundation for Mutual’s argument.

And yet, the Court’s decision in Bartlett should, I believe, be regarded as unacceptable from a federalist point of view that takes the common law of torts seriously. An authentic form of preemption analysis in Bartlett would begin by recognizing that states have chosen very different points on the spectrum between negligence and strict liability for their design defect law, and that they have also differed greatly from one another on the question of whether to subject pharmaceutical companies to a more defendant-friendly regime than other manufacturers (as Justice Sotomayor noted, in her powerful dissent). It would then ask whether anything in text or history of the FDCA or the Hatch-Waxman Act manifests a purpose of eliminating or even constraining these state choices in products liability law. I have never seen any evidence of such a Congressional purpose. Under these circumstances, I believe, drug companies’ preemption arguments should fail.

Meltzer’s purposivism straddles these two approaches. By arguing that textualism is unacceptably and artificially narrow, he seems to open the way to what I have just depicted as a form of preemption analysis faithful to a federalist recognition of the states’ entitlement to design their own tort law. But Meltzer also welcomes a form of purposivism that invites the Justices to sympathize with defendants’ descriptions of the legal thicket that results from this system. When the Justices do so, they are understandably tempted to think it is their job to prune away the state law that renders the whole system so burdensome.

Perhaps we should not be surprised that purposivism, like textualism, can be used on either side in preemption analysis, and perhaps we should be pleased that it has a higher degree of transparency. For now, I think, we should recognize that the plasticity of purposivism is not an unmitigated good in preemption analysis; serious federalist commitments regarding the integrity of state tort law can disappear all too quickly through the methododological prism of either textualism or purposivism.



  1. See also Catherine M. Sharkey, Against Freewheeling Extratextual Obstacle Preemption: Is Justice Clarence Thomas the Lone Principled Federalist?, 5 N.Y.U. J.L. & Liberty 63, 68 (2010). []
  2. See Caleb Nelson, Preemption, 86 Va. L. Rev. 225 (2000). []
 
 

Third-Party Financing of Litigation: Good or Bad?

Duty in the Litigation Investment Agreement: The Choice Between Tort and Contract Norms When the Deal Breaks Down, by Anthony Sebok and W. Bradley Wendel, addresses a topic of growing importance: third-party funding of litigation. In a third-party funding contract, a firm finances a lawsuit, and receives in return some portion of the judgment. Several finance firms have appeared recently, with Juridica and Burford perhaps the best known, that specialize in investing in large-claim lawsuits.

Third-party litigation funding is also known as champerty, and has been prohibited for a long time under the common law. The common law prohibition has been relaxed in recent years in some states, making the legal status of third-party funding agreements unclear as a general matter. The litigation investment firms have a large stake in the law changing in their favor, or at least remaining unclear.

The ancient prohibition on champerty seems to have been based on a desire to minimize external influence on judges. In the late Middle Ages, a wealthy landowner who funded a legal claim might pressure the judge to decide the dispute in a way that favored his investment. Although judges are not afraid of wealthy landowners today, the champerty prohibition emerged in a time when judges were not infrequently threatened and bullied by the wealthy and powerful.

There are several desirable and undesirable consequences that might result from expanded third-party funding of litigation today. Sebok and Wendel examine some of the risks facing the contracting parties and look at ways in which the law can minimize them. They conclude that the risks should largely be left to the parties to manage in their contracts.

In general, the types of claims that can be financed are, to borrow language from Robert Cooter, “matured” and “unmatured.” A legal claim is matured if the victim has already suffered (or is suffering) the injury and can sue for damages or an injunction based on what has happened to him. A legal claim is unmatured if the victim has suffered no harm at all; the claim is simply the right to sue for some wrong that may occur in the future.

Sebok and Wendel discuss matured claims, as do most of the most analyses of third-party funding. This is entirely reasonable because these are the only types of claim that are currently the subject of third-party financing.

The question that follows from their paper is whether their conclusions might also be applicable to markets in unmatured claims, should they ever arise. In comparison to matured claims, the risks associated with unmatured claims are a bit more difficult for the parties to manage. The informational asymmetry problems are an order of magnitude greater for unmatured claims. Markets in unmatured claims are not observed for the most part, but there are examples of such transfers. Patent trolls, for example, essentially purchase unmatured infringement legal claims.

Since many controversial legal relationships are designed primarily to solve the litigation funding problem – from class actions to patent trolls – the proper legal framework for third-party litigation funding is a topic with implications for several areas of the law. Sebok and Wendel are to be congratulated for calling attention to the topic.

 
 

Why Answer?

Nils Jansen, The Idea of Legal Responsibility, O.J.L.S. (forthcoming, 2014) available at SSRN.

Prof. Nils Jansen’s new article, The Idea of Legal Responsibility, is an ambitious work of tort theory. Jansen engages some of the most basic questions of private law.  The article’s rewards are found on two levels.  First, the argument it propounds—that responsibility in tort can be usefully (if not exclusively) framed in terms of restitution– is intriguing and offers another take on corrective justice.  Second, the framework around which Jansen builds his argument – the evolution of the law of restitution in scholastic and early modern European private law– is one that may be unfamiliar to many common lawyers. Jansen’s article make a persuasive case that contained within this history are lessons that transcend the common and civilian divide.

Professor Jansen’s thesis is deceptively simple:  He argues that the best justification for tort liability in many modern legal systems on both sides of the Atlantic is a principle of “responsibility” that has its roots in the doctrine of unjust enrichment.  Early in the article Jansen asserts that the question that all tort theorists in both the common law and civilian legal cultures must answer is, “why be responsible for another’s loss” and that the answer to this question lies in the “moral principle against unjust enrichment” (P. 3).  Yet by the end of the article, Jansen restates his position so that it seems that unjust enrichment is useful today because it helps illustrate the “constitutionalisation” of tort law, a modern phenomenon where the priority of basic human rights determines the variety of tort doctrines that dominate today’s legal landscape.  This tension is interesting and worth considering.

Jansen is quite clear at the outset of the article about what a tort theory needs to do.  It must explain responsibility in tort for losses that do not arise from the defendant’s wrong-doing.  According to Jansen, the chief problem with almost all modern corrective justice theorists (Pufendorf, Grotius and Weinrib, for example) is that “they cannot account for the fact that corrective justice is not only concerned with the correction of the consequences of wrongful behavior (wrongs), but also—and often more importantly—with the correction of losses and gains resulting from actions that are legally permitted” (P. 14, emphasis added).

It is clear that that in this article Jansen deals only with a set of concerns within one side of the modern tort theory debate. Although he mentions some well-known law and economics theorists in footnotes, he frankly chooses not even to address the solutions they offer.  His target is broad, nonetheless:  as he sees it, tort theory in both the common law and civilian systems took a wrong turn when it (and tort doctrine) became single-mindedly fixed around fault and negligence, leaving trespass and strict liability as either anachronisms or riddles to be resolved through even more clever fault-based explanations.

So Jansen goes back to the beginning:  to the sixteenth century (and earlier).  In the Christian doctrine of penitence we can see the roots of the solution to our twenty-first century problem.  According to Jansen, the scholastic theory of restitution “formulated a comprehensive system of non-contractual obligations” (P. 5).  To be a good person meant acknowledging and paying penance for the wrongs one committed before God; including wrongs that harmed other people. The doctrine of restitutio developed by Aquinas from Aristotle gave structure to this theological impulse by identifying the form of secular property interests which, if trespassed upon, entailed an obligation of repair.

Jansen provides a fascinating account of how the early doctrine of restitutio, which, he persuasively argues, was not fault-based, was marginalized in favor of a system of responsibility conditioned on fault.  Rejecting a unified natural law architecture, Grotius divided wrongs into two groups—wrongful gains (unjust enrichment) and wrongful losses (torts) and insisted that responsibility for the latter could only be justified on the basis of faulty (wrongful) conduct.  Pufendorf added to this a political dimension; stripping away natural law, he justified responsibility for wrongful losses by reference to the state; a person is responsible for the losses caused to others when they unreasonably failed to conform to the non-criminal conduct-guiding rules of the state (P. 12).  Finally, modern corrective justice theorists like Weinrib took the final step and argued that fault-based corrective justice was required not by God, not by political theory, but by the very conception of tort law itself.

Jansen’s main rebuttal to the advocates of fault is that they excise so much of tort law (in both the common law and civilian systems) that their accounts fit neither the law nor our moral intuitions.  Jansen’s main exhibits in his case against “fault-oriented” corrective justice are cases of necessity, such as Vincent v. Lake Erie and strict liability for ultra-hazardous activities. In these cases, liability is imposed even though the defendants acted reasonably.  Therefore their liability cannot be based on wrongful conduct unless by “wrongful” all we mean is conditional fault (an act that is wrong only if there is no compensation after the doing), a definition of “wronging” or “wrongfulness” which Jansen rejects as empty (P. 17).

Surprisingly, at this moment in his argument, Jansen turns his back on unjust enrichment.  It would have been open to him to have argued that cases like Vincent are best explained as restitution, and he notes some well-known theorists who make that very claim..  But Jansen does not want to collapse tort law into unjust enrichment.  In fact he rejects their conflation, saying that “wrong categories make bad law” (P. 20) and that to slot Vincent into unjust enrichment is to make a category error.

Instead, Jansen argues that restitution illuminates the solution to certain problems in the law of necessity, such as why a defendant is liable in tort if she engages in a privileged invasion of property and gains nothing by it (e.g. a stranded hiker who attempts to enter a cabin in the woods but fails to do anything but break the windows).  Jansen argues that responsibility in such a case is not based on the literal gain by the defendant, but on her invasion of one of the plaintiff’s “basic” rights (P. 25). An invasion of a basic right that is reasonable and of no benefit to the doer creates an obligation to restore losses even though they are not wrongful losses.

In this short review I cannot deal in detail with the argument Jansen adopts to determine when invasions of rights that are not wrongful are nonetheless the responsibility of the defendant to repair.  (His argument depends heavily on George Fletcher’s distinction between reciprocal and non-reciprocal risk.)  What I want to note, however, is just how far Jansen’s theory strays from its original roots in the law of unjust enrichment.  The idea that there are a certain basic rights that tort rules protect in doctrinal forms that are contingent on various circumstances has recently been propounded by a number of liberal tort theorists such as Arthur Ripstein and Greg Keating (whom Jansen generously acknowledges).  What is unclear to me is what work the doctrine of unjust enrichment does once the primacy of rights to certain human goods is asserted.

There is a way in which Jansen’s argument makes a full circle.  He acknowledges that the scholastic theory of penitence was vulnerable to attack by modern secularizers like Grotius and Pufendorf because it asserted a menu of property rights (dominium) whose invasion was absolutely prohibited by reference to divine command.  Although the content may be very different, the “constitutionalist” approach to tort—that private law rules are fixed around the protection of basic rights—shares a similar structure with the scholastic approach.  If a defendant today impairs a basic right whose invasion is absolutely prohibited, her responsibility is to pay restitution for the invasion—regardless of whether she was at fault, or her invasion was otherwise not wrongful.  The great difference is that back in the sixteenth century the law could refer to divine command to identify those interests, whereas now judges have to refer to something far more nebulous.

 
 

Tort as Backstop to Regulation in the Face of Uncertainty

Thomas Merrill & David Schizer, The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination: A Regulatory Strategy, Columbia Law and Economics Working Paper No. 440 (2013).

Thomas Merril and David Schizer—a property law theorist and tax law expert— deliver an ostensibly new framework for analyzing tort liability-regulation tradeoffs, standing on the shoulders of the pioneer in this area in the 1980s, Steven Shavell.  In The Shale Oil and Gas Revolution, Hydraulic Fracturing, and Water Contamination: A Regulatory Strategy,  Merrill and Schizer offer a fairly modest strategy for regulating water contamination from hydraulic fracturing (also commonly known as “fracking”), a practice that is “transforming the energy landscape of the United States.”  But their proposals lay the groundwork for a more ambitious project: to reassess the balance between tort liability and regulation in areas that pose emerging, and incompletely understood, health and safety risks.  Fracking exemplifies the widespread trend of new, controversial practices with highly uncertain risks.  Tort law emerges as a backstop to best practices regulation: tort liability rules provide “a form of protection for those injured by technological innovations, while information gradually accumulates that may eventually lead to more protective ex ante regulation.”

Hydraulic fracturing is a controversial process whereby energy companies pump fluid into shale formations at high pressure to crack the rock and release the gas and oil trapped inside.  Merrill and Schizer are not shy about their overall support for the “fracturing boom,” which holds the potential to “increase the competiveness of the United States in the global economy, reduce our reliance on energy imports and enhance our energy security.”  At the same time, they acknowledge the potentially high price of fracking: increased air pollution, traffic and congestion (all risks associated with conventional oil and gas drilling) and, most significantly, potential contamination of groundwater (a unique risk associated with fracturing).

Shavell’s classic four-factor approach to choosing an optimal regulatory framework continues to dominate discussion of tort-regulation tradeoffs.  Differential knowledge, namely actors’ superior understanding of the costs and benefits inherent in their particular activities (or what Merrill and Schizer term the “heterogeneity of risk” factor), favors liability rules over regulation.  Administrative costs likewise advantage ex post tort liability, which is triggered only after an injury, over ex ante regulation, which imposes costs across the board to prevent injuries (not only in the rarer instances in which someone is harmed).  Merrill and Schizer add a dimension to administrative costs, which they term “the settlement costs of making ex post case-by-case determinations.”  Borrowing self-consciously from the takings literature (but also reminiscent of Neil Komesar’s, Imperfect Alternatives: Choosing Institutions in Law, Economics, and Public Policy), which examines the functioning of tort liability in different injury settings defined by differences in the distribution of the impacts or stakes of the injury and its prevention), Merrill and Schizer point out that “[i]f the sources of an external harm are diffuse, or victims are numerous, the costs of case-by-case adjudication may be prohibitive.”

As in Shavell’s framework, ability to pay and likelihood of escaping suit are factors that point in the opposite direction, towards regulation.  (Merrill and Schizer lump insolvency and escaping suit together—“identifying a defendant sufficiently solvent to pay damages”—and fold these considerations into their above-mentioned “settlement costs” factor.)  Merrill and Schizer follow Shavell in applying an exclusively economic method of analysis of tort law, one that does not consider compensation of injured plaintiffs (or otherwise repairing harm) as an independent factor.  Moreover, the authors do not address interest-group theories of regulation—a significant limitation of Shavell’s analysis, taken up by others—and likely significant when considering the oil and gas industry’s repeat interactions with the state regulators.

In Products Liability Preemption: An Institutional Approach, I suggested an extension of the Shavell framework to address the federalism (state versus national regulation) and institutional (court/jury versus agency decisionmaking) dimensions.

Merrill and Schizer address each of these aspects in turn.  Framing the federalism inquiry in familiar terms—“whether a uniform solution is likely to be optimal”—Merrill and Schizer opt for pragmatism, with a recommendation to keep the regulatory center of gravity in the states as opposed to fashioning a new federal regime.  The gist of their argument here is path dependence—namely, given the traditional primacy of states in oil and gas regulation, state regulatory commissions have a head start in terms of developing best practices regulations, whereas a federal regime would have to be developed from scratch, as “the federal government has played almost no role in regulating oil and gas production on private land.”

Likewise, with respect to the institutional choice among legislature, administrative agency, or court, Merrill and Schizer again herald historical practice; indeed, they go further to suggest that “[i]nstitutions that have regulated issues in the past will have a presumptive claim to do so in the future, based on their expertise, their relationships with important interest groups, and their natural inclination to protect their turf.”  Merrill and Schizer might have devoted more attention to this issue, one that is highly contested in litigation over stringently regulated products such as medical devices and pharmaceuticals.  For example, in the context of the question of liability for fracking-caused water contamination, they conclude that “any water contamination causally attributable to the violation of a best practices regulation should be considered negligence per se and should result in liability.”  In so doing, they skirt a key question: who should decide—agency or jury/court— whether such a regulation has been violated.  Here, I am far less persuaded by Merrill and Schizer’s argument that, in the face of pervasive uncertainty, policymakers should necessarily defer to the existing alignment of institutional authority.

However, the authors effectively highlight two additional factors that should guide regulatory choice in the face of uncertainty: “the magnitude of the expected harm,” and “the novelty of the relevant technology.”  To my mind, these are inter-related.  At the core is the need for a dynamic regulatory response, one that generates additional information about potential risks and stimulates innovation to reduce these risks.  Merrill and Schizer suggest that “[w]ithout experience, we generally will be better off with some form of ex post regulation. . .  It took experience to design (and mobilize popular support for) regulations addressing . . . unexpected problem[s].”  They provocatively suggest that “steam boilers, organ transplants, and other novel technologies” fit the bill where liability regimes created incentives to develop better information.  (Here, they implicitly confront Jerry Mashaw’s contrary thesis that tort liability in the 19th century did little either to improve steamboat safety or to lead to effective regulation.)

Merrill and Schizer’s framework would benefit from a dose of empirical support.  Their innate faith in tort law as a means to encourage risk-reducing innovation—based on their belief that “products liability law has transformed the way consumer products are designed, and CERCLA has had a similar effect on waste disposal”—wades into sharply contested waters that lack strong empirical foundations.

But, in the course of developing a highly fact-specific, institutionally-grounded regulatory strategy for addressing the risks posed by hydraulic fracturing, they have enriched Shavell’s classic theoretical framework with consideration of novel risks associated with the latest innovations and, in these ever-changing contexts, the dynamic, information-forcing role that tort liability can play.