OUTLINE FOR TORTS II: Prepared by J. William Snyder, Jr. Term: Spring 1993 Text: Dobbs, Torts and Compensation: Personal Accountability and Social Responsibility (1985 & Supp. 1990). Instructor: Professor Zelenak NOTE: This outline was originally prepared for my own private study, and it is based primarily on my own class notes, handouts, and excerpts from the textbook, either in paraphrase or direct quote. When possible, I tried to indicate material that has been directly quoted, but it is possible that some material from the textbook has been directly quoted without indication. I. Medical malpractice A. Res ipsa loquitur 1. Layperson res ipsa: No expert witness is required to testify as to the standard of care; a layperson is capable of determining that more likely than not the defendant did something negligent. 2. Expert res ipsa: An expert witness must testify as to the standard of care since a layperson is incapable a determining that more likely than no the defendant did something negligent. 3. Ybarra v. Spangard a. Plaintiff was given an appendectomy. When he awoke after the operation, he experienced severe neck pain that radiated down his arm. Is seemed clear that someone did something wrong (layperson res ipsa). b. The problem was that there was no way of fingering which one of the defendants or the precise instrumentality that caused the injury. Defendants argued that since plaintiff could not finger the precise defendant and the precise instrumentality that was responsible for his injury, his claim should not lie. Plaintiff was under the case of several doctors and nurses during the operation and immediately afterwards. Additionally, plaintiff was unconscious when the injury occurred, so it is impossible for him to determine which defendant and instrumentality was the cause. So, the trial court permits the plaintiff to use res ipsa. [More likely than not, at least one of the defendants knew what happened, so in order to smoke that person or persons out, res ipsa was permitted. A code of silence might have existed among the defendants to protect the guilty party, so the court threatens to hold them all liable unless the "start talking." c. The case is similar to Summers v. Tice (two defendants who negligently fired towards a flock of birds, and one of them hit the plaintiff, but because both were using the same ammunition, it was impossible to tell which one fired the injuring shot. Since one person was innocent but also obscured the true cause, the court holds that both can be held liable for the injury.) Here, the cause in fact of the plaintiff's injury is obscured, so all are held liable. The difference is that both the defendants in Summers were negligent, but here not all of the defendants could be found negligent. d. Suppose they all say (believably) that they did not know what happened? Should they all be held liable? I don't think they should. However, this case came up again on this very issue. The court ruled that even under such circumstances the defendants still can be held liable. e. Why not hold just the respondeat superior liable. Well, there are 2 respondeats superior (the hospital and the performing surgeon, whose assistants are his de facto servants and he is liable for their actions.) I would argue both respondeats could be held jointly and severally liable. B. Informed consent 1. Informed consent is a doctrine under which a doctor can be held liable for damages for performing an procedure upon a patient without informing the patient of a serious risk which comes to pass as a result of the operation. This doctrine arose out of the intentional tort of battery, since lack of consent to a touching is part of the prima facie case for battery and since uninformed consent is ineffective consent. However, it has since developed past its battery origins and now extends to failure to warn of risks for NOT undergoing a recommended medical procedure. Theoretically, the doctrine applies even when the operation is successful since battery is a dignitary tort. However, the doctrine is now treated as a theory of negligence, so the maxim "no harm, no foul" applies. 2. The two competing standards for determining what risks the doctor must divulge to the patient before the patient's consent can be effective. [No court holds that a doctor must inform her patient of all risks associated with a procedure, even those that are so remote that they can safely be ignored.] a. The "materiality" standard: Harnish v. Children's Hospital (1) Plaintiff consents to an operation to remove a neck tumor, but the physician fails to inform the plaintiff that there was a risk that the hypoglossal nerve, the nerve that controls tongue motion, might be severed. During the operation, the nerve is severed, and the plaintiff loses all motion of her tongue. She sues the physician, contending that had she known the risk she would never have consented to the operation, and that the doctor was negligent in failing to inform her of the risk. (2) The court holds that physicians are under a duty to disclose in a reasonable manner "all significant medical information" which a reasonable person would consider to be material to the decision of whether or not to undergo the procedure (Materiality test). The determination of materiality is one that laypersons can make without the assistance of expert testimony. (3) The physician has a limited privilege not to disclose certain risks if in her "sound medical judgment" disclosure would worsen the patient's medical condition or render the patient unfit for the procedure. (4) On the issue of causation, the plaintiff must prove that both she and a reasonable person would have refused to undergo the procedure had the risk been disclosed. (5) The materiality standard is more compatible with the bulk of negligence law in general. b. The customary standard: Woolley v. Henderson (1) Plaintiff's back operation resulted in some complications arising from risks inherent in the procedure. The plaintiff's doctor had failed to warn the plaintiff of the risks before the operation. (2) The court holds that physicians need only disclose those risks that are customarily disclosed in the medical profession. The standard of care must be established by expert testimony. (medical malpractice standard). (3) This standard is much more in line with medical malpractice in general. c. Pro and con for each standard (1) Pro "materiality" standard: Harnish (a) The patient is the one who will be undergoing the procedure, so should the standard be based more upon what the patient would have done had she been informed of the risk? (b) Our culture values personal autonomy highly. We believe people have an inherent right to preserve their own personal integrity. Indeed, morally significant consent is explicit and informed, not "tacit" and hypothetical. (2) Pro "customary" standard: Woolley (a) Doctors usually know what is best for the patient. (b) Fits in well with the rest of medical malpractice law. Accordingly, it can provide a physician with an absolute defense. (c) Avoids the problem with unreasonable patients. (d) Jury control. d. What if the patient does not want to know the risks? Should this be regarded as reckless behavior and treated as a strike against the plaintiff? (Recall Harnish's limited therapeutic privilege of non-disclosure.) e. What is the patient is unreasonable in the evaluation of the risk and the doctor knows it? (risk aversive patient) Should not the doctor respect that and inform accordingly? The RPS can serve as a substitute for more detailed info on the patient. f. What if most patients are unreasonable? Is the RP the typical person? No, since the RP is a hypothetical paradigm that may or may not represent the typical person. A typical person standard allows us to respect personal autonomy more than with the RPS. g. But-for causation: Supposing the doctor did disclose the risks to the patient, would it have changed the result? A subjective test points us towards patient-specific standards while an objective test points us more towards RP tests. Logically the test should be subjective only since our goal is to respect personal autonomy. However, the plaintiff is likely to lie on the witness stand in order to get her recover, so the courts have required an additional showing that a reasonable person would have refused to undergo the procedure as well. Granted, witness credibility is within the province of the jury, but the objective test has the appeal of greater jury control. [The McPherson case on page 333 where the court adopted the subjective test was legislatively overruled and the objective test reimposed.] h. Truman v. Thomas: Plaintiff repeatedly declined to have a pap smear, but her physician never advised her of the risks of not having one done. She later died of cervical cancer, and her estate sued her doctor. The court held that his failure to disclose that risk was negligent. This case represents a departure from the battery model of the informed consent doctrine. [Should the doctor have inferred from her refusal that she did not know the risks?] i. There may be no duty to disclose risks that are common knowledge, like infection. C. Tort and medical malpractice reform 1. Good Samaritan statutes: Virtually all states have enacted legislation absolving professionals (and people in general in some states) of liability for ordinary negligence when they render aid in an accident. Liability is permitted only for wilful misconduct or possible gross negligence. These statutes encourage rescuers to stop and lend aid. Otherwise, potential rescuers are deterred from assisting because of the possibility of massive tort liability. 2. Substantive changes in the law a. Plaintiff must show actual negligence in medical malpractice (no res ipsa) b. Local, not national, standard of care. c. SOL has a strict limit d. Medical contracts SOF: In order for a malpractice claim on the basis of a contract to lie, the contract must be in writing. e. Informed consent claims are strictly limited 3. Remedial changes a. Caps on physician liability. b. Collateral source rule abolished: damages against physician are reduced if the plaintiff has collected on a claim with her insurer. 4. Procedural changes a. Malpractice claims must be submitted to arbitration or other screening process before they can proceed to trial. 5. Insurance changes: some states allow physicians to band together to provide insurance for their number. 6. Might statutes limiting health care provider liability be unconstitutional under state statutes, like the host-driver statutes? 7. Is strict liability coupled with caps on liability in the future? II. Nonfeasance A. At CL, there was no general obligation to help others, even if the life of another was in danger and that person's life could be saved with no risk to the rescuer. (i.e. No duty to save a drowning person you see while walking on the beach.) B. Common justifications for the common law rule 1. You are not negligent, even if there is no risk to you 2. Slippery slope argument: If we obligate one person to assist in a given situation, where do we stop? 3. Cause in fact problems: no way to tell for sure if the rescue would have been successful. 4. Our society values individual liberty highly. Our society is organized around the principle that negative claim rights are more valuable than positive claim rights, those claim rights requiring the assistance of others. This is in accordance with the theory of Natural Rights, which is the closest thing our society has to an official political philosophy. [Do what you want...except..."] Cf. John Locke. C. Necessary distinction: Pure nonfeasance, where there is no obligation to act, and negligent "nonfeasance" where there is an omission is a larger set of acts giving rise to duties of care. i.e. it is a culpable omission, not nonfeasance, to fail to put on the brake to avoid rear-ending someone. D. Yania v. Bigan 1. Defendant was a strip miner whose equipment has created several deep gashes in the ground. One of these gashes was filled with 8-10 feet of water. The plaintiff's deceased and some others came on the defendant's land to discuss a business proposition. Defendant then asked his guests to help him activate a pump to pump out the gash. Apparently, defendant taunted and incited plaintiff's deceased to jump in the water. He did so and drowned; Bigan failed to assist. Yania's wife has sued the defendant for wrongful death. The plaintiff pleads negligence, charging defendant for enticing Yania to jump in and for failing to try to save him after he did so. 2. Enticing Yania to jump: The court seems to hold this was no negligent, and moreover, Yania, as a 33 yr old adult in full possession of his mental faculties, was negligent in jumping in. Additionally, Yania's act was an intentional supervening cause, thus depriving plaintiff of a proximate cause. Clearly there is a CIF, but no proximate cause. 3. Failure to aid: Nothing in the facts suggests that the two were in a special relationship that would give rise to a duty to aid. - If we altered the facts slightly, a special relationship might arise (1) Child (2) Mental incompetent (3) Deliberate deception 4. It occurred to none of the parties to consider that there might have been a duty of care to business invitees who are injured on the premises. Unfortunately, such a duty might apply only to negligent invitees, and not to invitees who commit intentional acts and injure themselves [Should we be liable to someone who intentionally sticks his hand in the meat slicer?] E. South v. National RR 1. Plaintiff was injured in a collision between his truck and the defendant's train. The train's engineer refused to cover the plaintiff with his new parka because he did not want to get blood on it (it was a cold night, and the plaintiff was seriously injured). Defendant sought to exclude sections of the engineer's deposition which it considered to be inflammatory and prejudicial. 2 grounds a. Irrelevant: If the engineer had no duty to aid, then such evidence is irrelevant. b. Inflammatory and prejudicial: The testimony makes the engineer out to be a cold and heartless SOB. 2. The court adopts the Restatement's 322, which states that one who negligently or innocently injures another and who has knowledge that his conduct has caused the injury and the injured person is left in a dangerous state and vulnerable to further harm, then he has a duty to exercise reasonable care to prevent further harm to the injured person. Breach of the duty makes one liable for any ensuing harm. - This duty has long been held to exist for negligently caused injuries, but the Restatement extends it to innocently caused injuries as well. Here, the defendant has not been shown to be negligent, so a stiffer rule is needed to hold it liable. 3. Accordingly, the court decides the evidence is relevant. 4. Is 322 a good rule? Is the moral distinction between an innocent bystander and an innocent participant all that great? Well, an innocent participant is at least involved and in a position to render timely assistance. It also avoids the slippery slope argument by drawing a clear and fast line. 322 is reconcilable with Bigan since Bigan was not a cause at all of Yania's death. F. Special relationships: Farwell v. Keaton 1. Farwell and Keaton were good buddies who were out for a night on the town. After harassing some girls and after the girls complained to some male friends of theirs, the two were pursued by the girls' friends. Keaton got away, but Farwell took a severe beating. Keaton found Farwell under a car, put him in the back of his car, put some ice on his wounds, and allowed him to go to sleep. Keaton continued to drive around instead of seeking medical assistance. He finally left Farwell outside Farwell's grandparents' house without telling anyone where Farwell was. Farwell was found in the morning and given medical care, but his injuries were so great that he died 3 days later. His survivors sue for his wrongful death. 2. While there is no duty to render assistance, if one does render assistance, one is under an obligation to do so using ordinary care. If you negligently injure the victim or leave the victim in a worse position than when you found him, you are liable for misfeasance. 3. The court also finds that since they were buddies on a social outing, there was a special relationship between the two giving rise to an implicitly duty to help one another should the one of the get into trouble. [Compare to Beardsly in criminal law, where the court declined to find such a relationship between 2 lovers.] 4. But-for cause analysis: would someone else have come along and helped? We can't tell for sure because Keaton obscured the causality. G. Exceptions to the nonfeasance rule 1. In general, the explanations for the exceptions to the nonfeasance rule are so strange that it appears that courts do not like the nonfeasance rule. a.  322 (Natl RR) b. Special relationships (Farwell) 2. DeShaney v. Winnebago County Department of Social Services a. A boy living with his father was being beaten on a regular basis. DSS had considerable notice that the boy was being beaten, but DSS did nothing. The boy was not removed until he was severely beaten. The boy and his mother sue the state for deprivation of liberty without due process. b. By a vote of 6-3, the S.Ct. decides that this case poses no constitutional issue. The Court reasons that the DPC cannot be construed to impose affirmative obligations upon the state to protect persons against deprivation of life, liberty, or property by private actors. Instead, the purpose of the DPC was to protect persons for state power (thus the state action requirement attached to the DPC.). Nor does the court believe that any sort of "special relationship" was created between Joshua and the state akin to the relationship between prisoners and the state (Estelle) or institutionalized mental; patients and the state (Youngberg) since there was no restraint or other control exercised over Joshua. The Court however concedes that DeShaney may have a claim under state tort law under Restatement (2d)  323. c.  324 (1) Actually hurt a person through negligence (2) Left person in a worse situation after rendering aid. d. The S.Ct. uses reasoning analogous to that used in the CL. The Court concludes that DSS did not leave him in a worse situation because they only sent him back to the same situation. (?) e. The Court appears to pass over a contradiction between  324b and the commentary on it: "worse position" vs. "same peril". DES effectively shut everyone else out of the picture. What would have happened had DSS not existed? (Is the person worse off than if you never had acted? Hard to say). H. Contract and tort 1. Thorn v. Deas a. Plaintiff and defendant owned a ship. Defendant promised to buy insurance on the ship, but he failed to do so. The ship sinks, finds out that the boat was not insured, and sues the defendant. Plaintiff sues for 1/2 of the interest in the boat. The trial court awarded the plaintiff the damages he sought, but the App.Ct. reversed under two theories. (1) No contract existed because of the lack of consideration (2) No tort was committed because of the rule against liability for nonfeasance. b. But what if the defendant negligently attempted to procure insurance and failed to procure it? If the plaintiff could have proven this, he might have had a claim against the defendant. c. Promissory estoppel ( 90) had not yet matured into a viable legal theory. d. What about a tort claim? Nonfeasance (1) Making and breaking a promise (2) Special relationship between the two parties. (a) Co-ownership (b) Taking charge 2. Mobil v. Thorn a. Plaintiff was Mobil Oil corporation, and the defendant was a gas station owner/lessee. Mobil was suing for money owed on the lease and for petroleum products. Defendant counterclaimed for injuries that occurred on the premises. The roof leaked and caused the floor to become slippery. The lessee slipped and was injured. Lessee gave notice to Mobil of the problem, but Mobil did nothing. b. While the parties clearly had a contract right for repair of the leased premises and that duty was clearly breached, the real question was whether that contract right gave rise to a tort duty. c. This question brings up the difference between general and special damages (1) General damages: standard contract (expectation and reliance) damages. Liability for these is clear. (2) Special damages: tort-type damages. Liability for these is not so clear. Under the rule of Hadley v. Baxendale, special damages cannot be recovered unless the other party has notice or is put on notice that they might be incurred. d. CL rule: tort actions cannot be predicated on contract provisions to effect repairs. This rule has been abrogated by statute with regard to residential leases. e. Whether you are suing under a contract theory for tort type damages or in tort under a duty that arose via contract is critical because the SOL for contract and tort claims differs. f. Is the CL duty any better? Here, the landlord is only liable for contract damages. Is the tenant the least cost avoider? (Not in my opinion). Zelenak believes that the landlord is the least cost avoider. Accordingly a tort duty should be imposed on Mobil in order to encourage it do make repairs. 3. What if the contract itself caps consequential damages (liquidated damages)?: DCR v. Peak Alarm a. This case involved a contract to supply a burglar alarm system in the plaintiff's store. The store was burglarized, and the alarm failed to work because the burglar had deactivated it. The plaintiff sued the defendant for negligence, but the defendant defended on the grounds that their contract contained a provision limiting damages to $50. b. The court saw that case as a tort case and ignored the liquidated damages clause, opting instead to impose a general duty of care. c. Should the plaintiff be able to bargain away tort rights by contract? (Express AR?) d. Since a burglar alarm is a "good" within the meaning of the UCC, the plaintiff potentially had a claim based on implied warranties. However, in all likelihood, the seller had disclaimed all the implied warranties. 4. Moch v. Rensselaer Water a. Defendant water company was under a contract with the city to supply water to the city, including water for the fire hydrants. The city was to pay the defendant $42.50 a year per hydrant (not a huge amount of money). The water pressure fell below contract specifications, and a fire broke out in the plaintiff's warehouse. It burned down because there was not enough water pressure to put out the fire. b. Plaintiff sued the water company under 2 theories (1) 3PB contract: plaintiff argues that the water contract was for the benefit of third parties, including him. If the parties intended for the contract to benefit 3rd parties and if parties intend for the contractor to be liable to third parties, then third parties can sue the contractor for breach. Cardozo rejects this argument. Finding for the plaintiff would have turned the water company into an insurer who would be unable to cover potential losses of "claimants" with the $42.50 per year it collects on the fire hydrants. Additionally, there is no express intention on the part of the defendant to be liable in tort to third parties (individually). Given the low rate of compensation, it would not be reasonable to assume this obligation. (2) CL tort: The alleged tort was "failure to provide adequate water pressure." Cardozo rejects this argument as well, stating that this case involves non-actionable nonfeasance. (Nonfeasance is a "nothing", but "nothing" can be something!) c. Counterargunment: Knowledge of hydrant caused reliance on the part of the plaintiff and discouraged him from taking any further protective steps. Is he any worse off? Would the same thing had happened if the defendant had never existed? Well, the person would have contracted for water from someone else who would have done it right in all likelihood. d. Suppose plaintiff could point to an exact negligent act? i.e. suppose a spillway was left open, cracked valve, etc. These are still mere nothings. e. There is not much talk about "fault" in contract since breach of contract is "strict liability", whereas tort is based on fault. Contract liability is also limited liability. f. The plaintiff tried to combine contract strict liability, but he sought special (tort) damages. The court is not fond of this attempt- not fair to the defendant. So, the court might have been persuaded by evidence of active negligence, but probably not. g. Insurance perspective: Should the defendant be made an insurer? (1) If we are going to make them the insurers, should they not be permitted to charge more, but they certainly did not collect premiums to cover past harms. (2) When tort liability is used to impose insurance- type damages, the reason is usually that insurance is not available. (3) Real insurance is strict liability (i.e. it burned and it wasn't arson). (4) Tort "insurance" (a) fault (b) Causation (CIF and prox cause) (c) Was the water pressure up to specs. h. The only advantage to holding water company liable encourages them to be more careful. 5. Williams v. City of North Las Vegas a. A piece of metal came into contact with a 12000 V power line, killing the plaintiff. The city was under a contractual duty to inspect the lines. The city defended on the grounds that they "didn't do anything." b. The court holds the city liable, construing the contract as for the benefit of the general public. c. Without the contract, the power company would be liable for misfeasance, but the city would by "guilty" of only nonfeasance. d. Restatement  452(2): It is permissible to shift duties of safety by contract. (However, there seems to be some public policy limit to shifting duties in some circumstances.) e. Allowing a nonfeasance defense would diminish public safety. f. Proximate cause analysis: not foreseeable to the company that the city would not inspect the lines. 6. Florence v. Goldberg a. The plaintiff's mother had been walking him to school, but she stopped after seeing that a crossing guard had been stationed near the school. One day, the crossing guard was sick and could not work. The police do not find a replacement, and the plaintiff is injured while trying to cross the street. b. This case involved no express promise. It is almost akin to PE/reliance. Also, it is similar to  322- Plaintiff is worse off than if the defendant had not acted at all. The duty is imposed by "something, inducing reliance on something other than a contract. c. Problem: Suppose a family sends its child to school without walking her to school, even if there is no crossing guard: There is no liability if the child is injured (No CIF or prox cause). Without reliance, no CIF. d. Is there an affirmative obligation to provide crossing guards? It seems so only if there is reliance. Accordingly, this case is inconsistent with Thorne v. Deas. e. Riss v. NYC: The city is under no obligation to provide police protection. 7. Guenero v. Copper Queen a. Illegal aliens take their kids to a private hospital for emergency treatment. The hospital refuses to give treatment. Under CL, there is no duty to provide care to a person. b. The court finds a statutory duty to provide emergency care to the public. Public policy demands that hospitals provide emergency care to anyone who might need it. The court also discusses reliance. The statutory duty is similar to negligence per se. I. Duty to protect against the intentional torts of others 1. Nallan v. Helmsley-Spear a. Nallan, who had been fighting corruption in his union, is shot in Leona's lobby. The guard was not on duty at that moment. b. Nallan invoked 2 theories of liability (1) Violence upon 3rd persons was foreseeable, so the defendant was negligent in not taking affirmative steps to prevent such dangers. (2) "Taking charge" brand of special relationships giving rise to a duty of care. c. The jury returned a verdict against Nallan, finding that although there was negligence, an attack upon a 3rd person was not foreseeable (a contradictory response?). d. The owner of property open to the public must use reasonable care to ensure the safety of persons who come upon the property as business invitees. Corollary: duty to take affirmative steps to protect business invitees from intentional torts when such torts are foreseeable based on past experience. e. Restatement rule  344 (1) Possessor of land (2) Open to the public (3) is liable for harm caused by (4) intentional harmful acts of others that are foreseeable (5) and for failure to exercise reasonable care to (1) discover that such acts are being committed or are likely to be committed, or (2) To give adequate warning to invitees or to take other preventative steps against such intentional acts of violence. (6) Landowner must have reason to know based on past experience that such acts are likely. Only then must the landowner take affirmative countermeasures, like hiring security guards. f. Fact analysis (1) 107 reported crimes in the bldg, 10 of which were crimes against the person [but was a mob-style "hit" foreseeable?]. (2) No evidence any of them took place in the lobby. (3) But the jury could have found that such an act in the lobby was foreseeable, and further, that the defendant failed in its obligation to provide protection. [Proximate cause giving rise to a duty of care.] (4) Possible respondeat superior theory if attendant was negligent in his duties. (5) But they still might not be liable for temporary withdraw unless they meet the Moch and Goldberg tests. g. The plaintiff must prove (1) Defendant undertook to provide security (2) Defendant was negligent in not performing that duty (3) Defendant's undertaking put plaintiff in a worse position than he would have occupied had the defendant taken no action at all. (4) Was plaintiff lulled into a false sense of security by the defendant's inaction, and more importantly, was a feeling of security justified by the defendant's actions? h. It seems that our discussion of proximate cause that one is not required to foresee the intentional torts of others must be qualified in light of Nallan and  322. According to Nallan, if one is a landowner of land open to the public and he can reasonably foresee the possibility of intentional torts being committed upon persons on the land, then he is under a duty to take reasonable steps (act like an RP) to discover the commission or conditions of such acts and to warn people upon the property or take other steps to prevent harm from coming to them by way of such acts. Accordingly, this duty may require a landowner to not only foresee but also to prevent the commission of intentional torts upon the property, thus giving the plaintiff his proximate cause should the defendant breach the duty. In this way, the case appears to be similar to Deridian v. Felix Contracting i. Unfortunately for Nallan, he brings his danger with him (efficient intervening cause). j. Is there a special relationship that gives rise to a duty of care? If not, then the defendant is "guilty" of nonfeasance only. That duty of care can be found in the landowner/business invitee relationship, as the invitee is owed a duty of reasonable care. k. Misfeasance involves a duty of care which can arise from a special relationship (relational duty). i. **** Virtually any duty of care question can be recast as a proximate cause question (surprise, surprise!) Whenever we ask questions about duties of care and proximate cause, the inquiry is the same: do we want to impose liability in this situation? j. Arguments for the defendant in Nallan. (1) Duty should be only for risks peculiar to the bldg, not risks peculiar to the plaintiff (casting the nature of the harm in narrow terms: were assassinations peculiar to the bldg? No, that risk followed him around.) (2) Dillon (limited damages): There is but for causation, but what he was deprived of (a few more minutes of life) was not worth much. (3) Proximate cause: were assassinations foreseeable? No. Cast the nature of the harm narrowly, as opposed to broadly (like violence). l. You would want to avoid a contributory negligence argument in this case because most states now have replaced CN with CpN, so not only would you be conceding that you owed a duty of care, you would stand to pay the plaintiff at least something. 2. Goldberg v. Housing Authority of Newark a. Milk delivery man is attacked while making a delivery in a housing project. b. Questions of duty are questions of law and are decided by the judge. Whether that duty has been breached (negligence) is a question of fact for the jury. c. The duty of care: (1) "known, separate, and localized hazard" (2) Business draws trouble making persons (3) Business creates a risk by posing special temptations or chances to perform criminal acts. This case fits none of these. Imposing a duty would impose a vague and nebulous duty of care. It would corrupt the elements of negligence and causation. 3. Butler v. Acme Markets a. The court comes close to overruling Goldberg. b. Nallan, Butler, and  344 are the general rule. 4. Parish v. Truman: a poorly decided case a. Plaintiff was a social guest in the defendant's house at 10:00 at night in a high crime neighborhood. Defendant failed to warn plaintiff about the high crime rate. Someone knocked at the door, the defendant opened the door, and 3 men entered looking for drugs and money. The plaintiff was shot 3 times. The plaintiff sued the defendant for negligence, alleging that the defendant owed him a duty of care to warn and protect him from such harm. b. The court found no special relationship that would give rise to a duty of care. It deemed the host/licensee relationship insufficient to give rise to a duty of care. c. This is not pure nonfeasance in the sense that it was a pure nothing: the defendant opened the door without first determining who was at the door. He clearly acted in a negligent manner given the nature of the neighborhood. 5. How to establish that a LL has a duty of care to protect tenants against the intentional torts of other upon the property. a. Lease/contractual duty. However, the damages in this instance will be consequential damages. (1) Tort damages are more of the essence of the contract. (2) It is not really reasonable to expect the plaintiff to "repair and deduct". (Mobil v. Thorn. b. Statues/CL/Building code. However, you have to establish that the statute/rule is a safety statute/rule before you can press it into service against the landlord. c. Reliance: Suppose security of some kind exists at the time you leased the building, but the LL later discontinues that service. Can a reliance argument be made? Well, it might be difficult for you to move to an apartment complex that does offer security, and that might constitute reliance. Does the LL have you over a barrel in that respect? d. CL duty imposed by law: The law may impose an affirmative duty to provide for minimal security under the special relationship theory (LL/tenant). Public policy demand that a duty of care be imposed upon the landlord. Counterargument: (1) What is the extent of the duty? The imposed duty is fairly vague. (2) How is the cost to be reflected in the rent? e. Question: Why is the duty of a LL to provide safety to her tenants still vague while the duty of a hotel owner to provide security to his guests is well established? (1) Hotel guests are generally unfamiliar with the area in which they are staying. Also, they may not be around long enough to learn about the area. Thus, they are generally in a more vulnerable situation than tenants of apartment buildings. (2) Higher transaction costs. 6. Rosales v. Stewart a. A 10 year old boy is killed by a shot fired by a guy who lived in the house across the street. The guy's landlord had reason to know this guy liked to discharge firearms periodically in his back yard. The plaintiff sues the landlord. Problem: looks a lot like a case of nonfeasance. b. Plaintiff's theory of negligence: Landlord failed to evict the tenant once he found out that he was conducting dangerous activities on the land. c. The court finds that the landlord was under a duty to 3rd persons to remove dangerous conditions on the land, even if that meant getting rid of the tenant. (3PB special relationship). 7. Tarasoff v. Regents of University of California a. Client of a psychologist tells the psychologist that wants to kill his girlfriend, Tatiana Tarasoff. The doctor tells the campus cops, but he does not tell Tarasoff, nor does he take any steps to have Tarasoff protected. Poddar, the client, ends up killing Tarasoff. Tarasoff's family sues. Problem: finding a special relationship between the Doctor and Tarasoff. b. The court imposes liability. The court recognizes that there are two competing goals and policies at work in this case (1) Safety to 3rd parties (2) Absolute confidentiality (a) Promotes free and open discussion that can be therapeutic and can lead to better treatment. (b) Encourages coming forward to get treatment. (c) Intrinsically good (noninstrumental value). c. The court rejects the noninstrumental value argument. Since the person who was about to be harmed was readily identifiable, it is easier to reject the noninstrumental argument than in a situation where the harm is hypothetical and in the abstract (i.e. the guy who says he wants to kill somebody, but he is not sure who.) d. The court adopts a hybrid-medical malpractice standard as opposed to a strict RPS: "reasonable therapist standard". If the therapist determines that under "applicable professional standards" that the client poses a serious danger of violent activity towards others, then the therapist has a duty to exercise reasonable care to protect foreseeable victims of that danger. e. Custom is an absolute defense: if you guess and you guess wrong, you still have an absolute defense. f. Suppose the custom is absolute confidentiality? In that situation, the court might have taken Judge Learned Hand's view that an entire industry might be negligent (T.J. Hooper). g. Tarasoff and AIDS: Should a health care professional who knows that patient has HIV and that the patient intends to have unprotected sexual relations or is going to engage in other high risk behavior have a duty to inform the patient's sexual partners of the test results? (1) Clear guidelines are needed for health care professionals on disclosure. Legislatures have jumped in an provided some standards. For example, some states have made it permissible to disclose the results to the person's spouse, though disclosure is not required. (2) NCGS  130A-135: positive HIV tests are absolutely confidential unless, under  130A-145, the results are being reported to a public health agency or disclosure is authorized by consent or court order. Does this sufficiently protect health care professionals? It may, but does it protect the general public? I don't think so. h. Would a less formal relationship fall under the ambit of Tarasoff? How about the relationship between a bartender and his customer? If friend/friend (Farwell v. Keaton) is enough to give rise to a duty of care, should not the bartender/customer relationship give rise to one as well? Olsen suggests that the relationship must be more formal. 8. Soldano v. O'Daniels a. Bartender at the Circle Inn refuses to allow a rescuer to use the phone to call the cops about an altercation at the Happy Jack saloon across the street. b. The court agrees that there is no relationship between the plaintiff and the defendant, nor is there any relationship between the defendant and the risk (creation of the peril?) However, the court reexamines the pure nonfeasance rule: When nonfeasance constitutes a "callous disregard for human life" and when rendering aid would impose a minimal burden, then the court should impose liability. (But suppose there is a pay phone on the premises that requires no money to call 911?) c. Does the court's holding abrogate the nonfeasance rule? The holding of the case is radical is you take it seriously. d. Other more plausible theories for arriving at the same conclusion of finding a duty of care: (1) Duty not to interfere with a rescuer. (2) Necessity/"Punch 'n Pay" a la Ploof v. Putnam: Minimal trespass in order to perform a rescue. e. However, this court is more concerned with public policy in allowing emergency phone calls, and this court indicate no such duty exists on private persons (Contra Ploof). The duty is imposed only upon public businesses. 9. Liability of servers of alcohol to persons injured by the persons they serve. a. Olsen v. Copeland (1) This was a wrongful death action filed by Olsen's survivors against a drunk driver and the owner of the bar that served the driver alcohol shortly before the accident. Copeland, the owner of the bar, demurred to the complaint. (no legal duty of care). (2) The court concludes that Copeland was under no duty of care to the plaintiff. The court gives 6 reasons for its conclusion. (all of which are pretty lame) (a) Injury is too remote from the negligent act. (b) Damages are disproportionate to the negligent act. (c) The injury is not foreseeable (not only is this not true, but it is exactly the same argument as in (a).) (d) The duty of care would be "too burdensome" to the defendant. (This argument begs the question and is the same argument as in (b). Additionally, society's values have changed with regard to these two arguments.) (e) Possibility of fraudulent claims (f) Slippery slope argument that liability could snowball. (But, we use proximate cause to cut off liability). (3) The court feels that the driver is the real party at fault, and that any attempt to shift liability by holding the parties J&S liable would shift it away from the real person at fault. However, this is simply not true. By permitting the tavern owner to collect full indemnity from the driver, the driver would end up paying the entire damage award, and the tavern owner ends up paying only if the driver is insolvent. (4) Imposing liability on tavern owners might make their liability insurance premiums increase, but those increases will be reflected in the higher prices of alcohol, so the external costs of alcohol consumption will be internalized to some degree. (5) Imposing liability would also encourage bars not to serve intoxicated persons. (6) The plaintiff in this case had a large obstacle to overcome: proximate cause. The defendant could always argue that the driver's act of drinking and then getting behind the wheel of a car was an intervening or superseding cause, thus cutting off liability. (6) This case has been overruled, and in Wisconsin, commercial servers of alcohol can be held liable to the victims of the drivers they serve. (7) Many states have so-called "Dram Shop Acts" that make purveyors of alcohol liable to the victims of drunk drivers. b. Social host liability (1) Why should we hold commercial sellers of alcohol liable to the victims of the drivers they serve, but not hold social hosts liable? (a) Social hosts are generally not experts in determining if someone is too intoxicated to be served another drink. (b) Social hosts have less control over the alcohol that is served (open bars, etc) [A pretty bogus argument.] (c) Excessive burden (d) Social hosts do not profit from serving alcohol. (Maybe not in cash, but how about intangible profit, like good will?) (2) Trends regarding social host liability (and liability for commercial sellers of alcohol.) (a) Typical statutes (1) Alcohol licensees: may not serve intoxicated persons by statute (This is clearly a safety statute.). However, this statute does not cover social hosts. (2) No one may serve alcohol to an underage person. (b) CIF problems: Which drink is the one that makes the person drunk? The last drink served may not have been the but for cause. However, courts have often reversed the burden of proof to the defendant seller to prove that the drink(s) he served was/were not the but for cause of the drunken state. (c) Excused violations of the statute (1) Interpret the statute in such a way to say it was not violated. (a la Tedla v. Ellman) (2) If you did everything a RP would have done to comply with the statute, then the court may excuse the violation. (d) Hart v. Ivey: social host liability in NC. (1) A social host served an underage guest. (2) The court holds that violating  18B- 302 cannot be held up as negligence per se because it is not a safety statute. The statute exists to protect underage persons from themselves. (3) But, the court finds a CL duty not to serve alcohol to an intoxicated person when it is foreseeable that the person will be driving. (4) NC is on the vanguard of the law in this holding. It stands to dramatically alter the behavior of servers of alcohol across the state. (5) How to live with the Hart v. Ivey rule if you want to throw a party and serve alcohol. (a) Buy single event liability insurance. (b) Provide rides/accommodations for intoxicated guests (c) Hire a bartender to monitor the flow of alcohol. (d) Don't have the party! (TOTALLY BOGUS! (e) What if the driver sues the server? (1) CN/AR/CpN Problem: If you have invoked CN, you will have to deal with the last clear chance (last sober chance) defense to the charge of CN. Also, you may have to deal with a charge of wilful/wanton misconduct on the defendant's part. Additionally, you may have to deal with a Bexiga-type argument that the server had a duty to protect the driver from his own CN, especially when the sort of CN is foreseeable. However, this may be inconsistent with a duty for the benefit of 3rd persons. (2) Your own fault! (3) No duty of care or no proximate cause (intervening/supervening act). c. Fuller v. Standard Stations (1) Defendant gas station sells gasoline to a drunk driver and the driver got into an accident. The victim sues the gas station for negligence. (2) The victim's theory of negligence: Negligent entrustment of a car to a drunk driver is deemed negligence for supplying the instrumentality of harm. Here, the putative instrumentality is the gasoline the defendant sold to the driver. (3) The court opts for the traditional rule of no liability in this situation [no special relationship.]. III. Strict liability A. Respondeat superior/Vicarious liability 1. Under the theory of RS, an employer is liable for the torts of his employees committed during the scope of employment. 2 limitations on the doctrine are readily apparent. a. Employer vs. Independent contractor b. Scope of employment 2. RS is an amalgam of SL and negligence a. Employer need not have done anything wrong, but b. Liability is hinged upon a showing of negligence on the part of the employee by the plaintiff. 3. In theory, the employer is entitled to seek indemnity from the employee, but the employer rarely seeks it a. The employee may be insolvent and unable to come up with indemnity money. b. Seeking indemnity tends to poison the employer/employee relationship. 4. Policy examination: Why have RS? a. Economic efficiency: RS tends to internalize the external costs of doing business and spreading those costs among those who can more easily bear them. Suppose a given business inflicts $100 in accident costs. If the employer is not made to pay, then those costs are external to the employer. $60 in training costs would avoid the accident, but if RS is imposed and the employer is held liable for $100, then the employer will find it cheaper to spend $60 to avoid the costs. Society is better off by $40. [Problem: can't the employer be held negligent for not providing training? Hand formula: B < PL] b. Also, it is easier to prove employees negligent than it is to prove employers negligent. c. Suppose training costs are $150. Now, in theory, we have a different result between RS and ordinary negligence. Also, the employer has no incentive to incur the training costs. d. When employers pass the costs along to the customer and the demand falls, less of the product that causes the harm is consumed, and that is good. e. Fairness: since business & customers benefit from a risky activity, it is fair that they should help bear the costs of the activity. f. Cost spreading/insurance: Everyone should pay a little bit rather than making an injured person pay the whole cost of an accident. g. Econ arguments for absolute SL, but RS has not gone that far since it still requires negligence in order to trigger liability. 5. Hinman v. Westinghouse a. In this case, a LA policeman was injured by the defendant's employee while the employee was driving to work. The employee was entitled by contract for compensation for commuting time and costs. b. 2 questions (1) Was the employee acting within the scope of employment (a) Time & place (b) Furtherance of employer's interests (2) Are there exceptions to the "goings and comings" rule? c. "Goings and comings" rule: The employer is not liable for accidents that occur during the commute to and from work. d. The employee in this case was a union member under a union contract under which he got paid for time he spent commuting. e. The court adopts an economic based argument: by reaching out into other labor markets and by paying commuting costs, the employer incurs some benefit, and so it should have to bear the extra costs associated with that benefit. 6. Edgewater Motel v. Gatzke a. The employee in this case was a "24 hour man" for a chain of restaurants. One night while filing out his time sheet in his motel room, he lit up a cigarette. After falling asleep, the room caught fire. The fire spread to other parts of the motel, causing extensive damage. b. The key question is whether the employee was acting within the scope of employment when he was smoking. c. This court sides with the jurisdictions that hold that smoking is within the scope of employment, and it lays down a rule to that effect. Smoking is associated with business, since it can help employees work better, and work makes smoking more dangerous since the stress of the job may make the employee smoke more carelessly. 7. RS liability for intentional torts: Employers are liable for the intentional torts of their employees only when the work provides the opportunity or incentive for loss of temper. The risk must be sufficiently associated with the employment to be within the scope of employment. (i.e. a bouncer in a bar.). The shift is to foreseeability (prox cause) from intentionality in this situation. 8. The "borrowed servant" rule: Kastner v. Toombs a. In this case, Toombs, the parent employer, lent one of his employees, a backhoe operator, to Clearwater, the temporary employer. Clearwater ordered the employee to dig a trench, and the employee warned that the trench he was asked to dig would likely cave in; Clearwater told him to dig it anyway. Kastner was injured when the trench caved in. The question is which employer can be held liable as the RS. b. Under the CL borrowed servant rule, the employer who borrows the servant is liable, not the parent employer. c. The AK court does not care for this rule since it allocates the costs only to one employer when the costs should be allocated to both employers. (Control vs. Risk theory) d. Control theory does not help here, since it depends upon how broadly you construe "control over the employee". In this sense, it is also question begging. e. The court opts for a contribution/indemnity approach. The plaintiff should be able to recover from either- we can figure out how much each should pay later. This is similar to the Olson v. Copeland distinction, except this court gets it right. f. Could not the shifting liability by contract rule be used here to justify the borrowed servant rule? Answer: These parties did not contract to shift liability. 9. Independent contractor/employee distinction: Leaf River v. Harrison a. Leaf River operated a sawmill, and it contracted with McDonald to cut and haul timber. One of McDonald's trucks was involved with a collision with the plaintiff, and the plaintiff was seriously injured. Plaintiff sued Leaf River based on an RS theory. b. There is no clear cut line between when a person is considered an employee and when a person is considered an independent contractor, but there are some major indicators. (1) Right to control the details of the work. (2) Regular payroll payments to the servant. (3) Separate business/skill level (own capital, employees, # of different contracts with others.) c. The distinction also shows up in tax law, because whether someone is an independent contractor or an employee determines who has the responsibility of sending Social Security taxes to the government. So, don't forget tax cases if you are trying to find out what class to fit a tortfeasor into. d. Why the distinction? (1) A party who is injured ought to be entitled to 1 and only one deep pocket. This plaintiff was already able to collect $100,000 from McDonald, the limit on McDonald's insurance policy. (2) Control theory still pervades the law in this area. e. Why focus only on one business? Under risk/benefit analysis, should not both parties to the contract bear the cost of the tort since they both benefit from the activity? f. The court finds that since Leaf River did not supervise McDonald or any of his employees, that McDonald used his own equipment, that McDonald was paid on the basis of volume units of production, that McDonald paid his own workmen, regulated their time, that McDonald financed his own operation, and McDonald controlled the physical management of the equipment and the workmen, and because McDonald was required by the terms of the contract to carry his own workmens' comp insurance, that McDonald was an independent contractor, and so Leaf River was not liable under an RS theory. 10. Nondelegatable duties- inherently dangerous activities: Boroghs v. Joiner a. Defendant was a farmer, and he hired a pilot to crop dust his fields. The pilot dusted the fields with the chemical Endrine, and the chemical contaminated the plaintiff's fish pond. Plaintiff sues defendant under an RS theory. b. Independent contractor considerations (1) Not on the payroll (2) Pilot had his own equipment (3) No detailed control over the operation (4) The pilot had special skills in a particular area (5) Separate business c. Normally, this would be the end of the case since it seems clear that the pilot was an independent contractor based on the above considerations. However, since the court believes crop dusting is an inherently dangerous activity, the court imposes liability upon the farmer. d. Imposing liability in this situation imposes liability on the farmer even though he was not negligent. This holding is extremely close to imposing SL on employers. (It is possible to deem the farmer negligent for allowing the crop duster to use Endrine). e. The court is trying to say that there must be negligence in the picture, but they put the negligence on the farmer. Should they not look to the servant instead? If the farmer is negligent, there is no need to invoke RS. f. Other non-delegatable duties (1) Statutory duties to provide safety for others. (2) Maintaining safety on land open to the public. 11. Becker v. Interstate Properties a. Plaintiff was severely injured on a job site when a truck ran over his pelvis. Interstate was the general contractor, and Wood-Pine was the subcontractor. (Plaintiff worked for Wood-Pine). Wood-Pine employed Windsor, and its employee drove the truck which injured the plaintiff. In looking for someone to sue, the plaintiff has to look for someone with money and liability. (1) Driver of the truck? NO (2) Windsor? NO: it is insolvent and does not have a lot of insurance. (3) WP? NO: His only remedy against WP would be in workers comp. (4) IP? YES. b. Problem: the negligence is too far removed from IP since the tort was committed by the employee of an independent contractor. c. So, the prudent thing to do is to flip to the Restatement and to find an exception to the independent contractor rule. On grounds of pure policy, there ought to be liability. By hiring financially responsible subcontractors, you pay more though you are not liable yourself since the subcontractor's insurance costs will be reflected in its bid. Thus, the contractor will end up bearing some of the cost. It is cheaper to hire financially irresponsible subcontractors absent liability, so there is no incentive to hire financially responsible contractors. Since this is an inefficient result, tort law should step in and react. NJ courts have reacted under the Majestic rule d. Majestic rule: 3 exceptions to the independent contractor rule. (1) Contractor retains control over the activity that gives rise to the negligent act. (2) The independent subcontractor is incompetent. (3) Inherently dangerous activity. Invoking Majestic helps the plaintiff explain policy considerations to the court and gives it a precedential peg upon which it can hang its decision. Thus, it can claim it is making its decision within the framework of existing tort law. e. Becker talks up (2), and he relies on discussion in Majestic concerning losses caused by financially irresponsible subcontractors. f. The court also discusses the three policies of spreading costs, minimizing losses, and assuring that risks are borne by those who benefit from them. Accordingly, the court reverses the summary judgment that was entered for the defendant developer. g. Analogy to corporations: Normally, the corporate entity protects the shareholders from liability for the corporations acts. However, when the corporation is insolvent or when a corporation is owned completely by another corporation, then the court may "pierce the corporate veil" and hold the shareholders personally liable for the corporation's acts. B. Strict liability in the history of tort law 1. In the 20th century, tort law came to be based on fault. But, fault was not always central to tort law. At early CL, strict liability reigned supreme. 2. The first recognized tort was the tort of trespass. It had 2 elements: a. Force b. Directly imposed to person or property 3. The orthodox view was that once the elements of the tort were established, the defendant was held SL for the harm incurred by the plaintiff. a. Weaver v. Ward: Plaintiff and defendant were involved in a mock battle, and defendant injured the plaintiff. Under one interpretation, the defendant claimed that the injury was not his fault, but the court responded that fault was not required. Under a second interpretation, the defendant claimed that the injury was not inflicted on purpose, and the court responded that intent was not required and that negligence was enough. According to the court, extraordinary care operates as a defense, so there is not absolute SL. 4. Trespass on the case was a tort similar to trespass except for 2 key differences a. Direct force was not required b. Negligence is required and the plaintiff must prove it. 5. Brown v. Kendall and the introduction of fault into trespassory torts. a. The defendant was beating his dogs with a stick, and as he drew back to hit one of his dogs, he clipped the plaintiff in the eye. The defendant claimed it was not his fault, and the plaintiff responded, "So what? this is trespass, and the defendant is to be held SL if the 2 elements are met." b. The court decides not only that the defendant was not at fault, but that fault has always been an element of trespassory torts. The court in effect changes the law without looking like it is changing the law. c. Why did the court change the law? Most likely, industrialization is the reason. The very face of society was changing with the advent of the industrial revolution, and old CL rules like SL for trespassory torts were unsuitable for an industrialized society. Additionally, refusing to impose a requirement of fault could have opened up budding industries to a slew of claims for injuries to employees, thus inhibiting the growth of industry. However, the court chooses a fact situation that could have occurred at early CL to change the rule regarding SL liability for direct application of force to person or property. Why? (1) Christopher Columbus Langdell and his theory tha law was a science, like geology, and that all you had to do was to go out and find out what the law is. Accordingly, the court was not free to say it was changing the law. Instead, they had to make it look like they were actually discovering the true law and not making new law. (2) If this had been an RR case, it would have been obvious what the court was doing. This was it looks like what the court is doing is legitimate. d. Tort law of yesteryear: Inaction was favored over action. In pre-industrial society, there was no special value placed on action per se. You acted at your own peril, and the claim of "He hurt me" was enough to impose liability. e. During and after industrialization, public values towards the value of action changed. Action became preferred over inaction. Action was equated with progress in industrial society, and accordingly, you acted at another's peril since if you did not act negligently, you had a defense to any claim of injury due to your acts. f. The expansion of the railroads was critical to the development of this country, but the RR's also inflicted massive amounts of direct force onto people. Tort law was standing in the way of economic progress. The courts became wary of imposing SL on the railroads for fear that SL would drive the RR's out of business and destroy the economic expansion of the country. g. In effect, Brown v. Kendall gave a subsidy to the RR's. The external benefits of RR's seemed to outweigh the external costs, so subsidy seemed prudent. h. In an accident involving an RR train and a buggy that occurs through the fault of neither party, whom you impose the burden of the costs of the accident depends on whether you believe the costs should be "buggy costs" or "RR costs" Under old trespass law, the costs become "RR costs", but under Brown v. Kendall, the costs become "buggy costs". If you are partial to the principle of 1st in time, then you are likely to deem the costs to be RR costs. But, if you think progress is better, then you are likely to view the costs as buggy costs. (Buggies are standing in the way of progress, so they ought to bear the costs of their continued existence.) i. SL for criminal trespass was retained. This was not a logical distinction, but rather it was a value judgment. j. SL for animal trespass (1) England and minority of US: SL for animal trespass. (2) Western states: No SL: free range laws. In these states, if cows trample over your rose garden, the courts are likely to view the costs as "rose garden costs" and refuse to impose liability upon the owner of the cows. Thus, the cost of putting up a fence to keep out the cows should be borne by the owner of the rose garden. In England, these costs would be deemed cow costs, and the owner of the cows would bear the cost of putting up the fence. 6. Nuisance law: another SL holdout a. Bamford v. Turnley (1) Defendant was burning bricks in a kiln upon his property. The fumes pervaded the plaintiff's house, so the plaintiff sued to enjoin the defendant from burning bricks in the kiln. (2) The plaintiff sued for nuisance instead of trespass because the interference was with his beneficial use and enjoyment of the property, not with his exclusive possession of the property. (3) The court does not believe reasonableness is a factor in nuisance law. Instead, it is based on SC, not negligence. Nuisance law retained SL/SC/intent. Once informed that your activity is causing your neighbor woe, then you are SC that you are harming your neighbor. (4) Suppose that burning bricks yields $100 of benefit to the defendant and $40 of cost to the plaintiff. In this situation, the defendant should be permitted to continue burning bricks so long as he pays off the plaintiff (punch 'n pay a la Ploof). [However, punch 'n pay applies only in SC cases. The Hand Formula applies in cases of negligence.] Imposing money damages would internalize the costs, but an injunction would have the effect of stopping an economically efficient activity. Fairness points towards compensation, but efficiency points towards allowing the activity to continue. Therefore, money damages are appropriate, but an injunction would be inappropriate. (5) Defendant made the Hand Formula argument, and the argument was rejected. (6) Kiln/neighbor <----------> Ship/dock No injunction ------------ privilege/no eviction But damages ------------ necessity, but must pay damages (7) Why the distinction between risk (negligence) and substantial certainty with regard to how we treat them? (a) Economic efficiency may justify imposing the burden of a risk, but not the certainty of a risk. (b) Moral distinction between risk and substantial certainty. (8) Hyp: $100 of benefit to the defendant, but $120 of damage to the defendant. (a) Damages would be enough to stop the activity (and an injunction would work as well if it was deemed necessary). (b) But if the court gets it wrong and imposes no damages or injunctions, the parties will bargain in order to reach the right result. Defendant will be willing to pay, and plaintiff will be willing to accept, a "bribe" somewhere between $100 and $120 to discontinue the offensive activity. (9) Joint costs arising out of incompatible land uses. Is the $40 worth of damage that is being caused to be a "house cost" or a "kiln cost"? If you think it ought to be a house cost, you will not impose liability, but you will impose liability if you think that it is a kiln cost. How to decide? (a) Do we want to promote or discourage brick burning? (is brick burning economic development?) (b) 1st in time = 1st in right. The opinion opts for this justification (10) Baron Bramwell: The appropriate standard is reasonableness consistent with the use of the land. "Common ordinary use of the land" is the exception. (11) Now, if the plaintiff moved into an area where kilns had been operating for some time, then he would have "come to the nuisance," and an action probably would not lie. But, is this the right result? (Cf. next hypothetical) (12) Hyp: Suppose that a city grows to an extent that it takes in a feedlot which had previously been on the outskirts of the city. The area around the feedlot is now a suburban residential area, and the residents would like to see the feed lot shut down. A benefit of $100 inures to the owner of the feed lot, but $150 of costs are imposed on the neighbors. If the courts do not interfere, the residents will probably bribe the feed lot owner to shut down and move somewhere else (the free rider problem aside for a moment). If the matter goes to court, then efficiency indicates an injunction ought to be granted, but fairness (1st in time=1st in right) weighs in favor of allowing the feed lot to remain in operation. Additionally, the granting of an injunction would give the plaintiffs a windfall since they bought their property at reduced prices and now can sell it for much more than they paid for it. Furthermore, with several hundred land owners, you run into the free rider problem in either the "bribery" or "lawsuit" scenario. So, the market would fail to cure the problem. (13) Matrix: Victim 1st Perpetrator 1st Perp use Bamford: if the Suburb moving to inefficient harm > benefit, the feed lot: then damages or buy and injunction and injunction is needed Perp use Bamford: damages no damages/no injunction efficient but no injunction. (14) When efficiency and fairness point in the same direction, the problem may be easy to solve. Injunctions are appropriate in the first case, but damages are appropriate in the second. (?) b. Rylands v. Fletcher (1) Defendant is operating a mill, and he builds a pond over an old mine shaft (unbeknownst to him, because the ground appeared to be solid). The ground gives way, and water flood the plaintiff's mine. (2) There is no indication of negligence, nor is there any indication of intent or SC. Any liability will be STRICTLY SL: REAL SL. (3) Baron Martin favors negligence (a) Not a trespass, since the application of force is not direct enough. (b) Not an nuisance, since it was not harmful to the senses. Nuisance analysis usually rests on continuous/persistent invasions of little particles (not all at once or intermittent). (c) No fault So, no liability. (4) In the Exchequer Chamber, Judge Blackburn poses the argument that if you bring a dangerous but fleeting entity onto the land, then you are SL if it escapes. You bring the entity onto the land at your own peril if it escapes. He synthesizes a new rule from a string of old cases (a typical technique in common law reasoning). (a) Animal trespass (b) Leaky privy (c) HCl case involving the escape of Cl2. (d) Water In all these cases, the defendants were held SL. Accordingly, the defendant should be held SL. (5) In the House of Lords, the court affirms, but with different reasoning. The court talks about the difference between non-natural uses vs. natural accumulations. In the former, a defendant is SL to a neighbor if the substance escapes. In the latter, there is no liability for escape. (a) Unique location of a natural resource/ economically efficient use. (b) 1st in time = 1st in right (c) Nature of the substance (d) Common usage in the area Here, an impoundment of water is a non-natural use, so the defendant should be liable. (6) The House of Lords's rationale is a much better rationale than the one provided in the Exchequer Chamber. Also, it has a good policy justification: internalizing external costs. (7) Rylands was not well received in the US. This case expands the scope of SL at a time when negligence was taking over tort law. (8) The Exchequer Chamber's opinion favors inaction, and its answer harkens back to medieval times. (9) The underlying assumption is that the uses of the land are incompatible. What happens when fairness and efficiency point in opposite directions? Then the coal miners should have to pay off the mill pond owner to move somewhere else or they should have to go to court to get an injunction. c. Turner v. Big Lake (1) Defendant was an oil driller in TX who kept salt water in ponds upon his property. Plaintiff/farmer instituted a lawsuit when the salt water escaped and damaged his land. Plaintiff invokes Rylands to bolster his case. (2) The TX court rejects the "bringing upon the land" talk in Rylands, but the court seems to follow the House of Lords's reasoning regarding non- natural uses. Economic efficiency mandates that oil be given priority over farming. You can farm most anywhere, but you can't drill for oil anywhere. d. Sullivan v. Dunham (1) Plaintiff was killed by a flying stump blasted into the air by the defendant. (2) What is the liability for harm caused by blasting? (a) Liability in trespass for injuries to the person due to blasting (but would the blaster be liable under Brown v. Kendall). (b) Rylands (non-natural use) It looks like the plaintiff is without a theory of legal liability. (3) But, the court employs a bit of sleight of hand: Trespass to a person now requires fault, but trespass to land is still SL. So, the injury is incidental to the trespass to the land because flying stumps are direct applications of force. The court eschews liability for vibrations, since that is not a direct application of force. e. Exner v. Sherman Power (1) Plaintiff suffers concussion damage from defendant's blasting, and plaintiff sues. (2) The court finds no practical difference between concussion damages and flying stumps, and so it imposes SL. (3) Can these two holdings be made consistent. f. Restatement rule: The principle that the Restatement has distilled from these cases is that blasting is an ultrahazardous activity that carries SL. (Restatement (2d) of Torts  519 & 520. Ultrahazardous activities have 6 characteristics according to the Restatement. (1) High degree of risk (2) High likelihood of great harm (3) Inability to eliminate the risk (4) Extent to which the activity is not a common usage. (5) Inappropriateness of the activity (6) Hand formula: B < PL Though the considerations point towards a negligence analysis, but the analysis does not focus on how the blasting is conducted, but rather on the negligence associated with blasting itself. This is negligence on a broader scale, and it is much more influenced by policy judgments. Accordingly, we let judges decide such questions as matters of law. g. Hyp: Suppose a crop dusting plane crashes into a neighbors property. The only damage caused is by the impact, and no damage is caused by the chemicals used. Is there a defense even though the state recognizes  519 & 520? (1) Distinguish the cases: Crop dusting is inherently dangerous activity because of the poison sprayed through the air, but because of any likelihood that the plane might crash. (2) Proximate cause analysis/foreseeability might get the defendant off the hook. Negligence per se analysis might work as well (not the class of harm envisioned by any statute). (3) According to  519, SL is limited to the kind of harm the court originally envisioned. h. Apprehension on the expansion of SL: Caril v. City of St. Paul (1) Plaintiff is injured during a high speed chase conducted by police. (2) The court rejects the plaintiff's abnormally dangerous activity label for HS chases. However, Zelenak thinks the court will come to accept this argument at some point. The value and propriety of HS chases is being questioned. The court may begin ruling that HS chases are ultrahazardous except to chase and apprehend violent felons. 7. SL for defective products a. History: Manufacturers could always be pursued on a negligence theory, but the courts imposed the requirement of Privity of Contract (P/K). Accordingly, many people injured by defective products were barred from recovery. (1) Privity stopped with the retailer. Consumers were not considered to be in privity with the mfr. (2) Children, spouses, and friends of the consumer were not deemed to be in privity with the mfr. either. Tort analog: proximate cause/foreseeability: the courts cut foreseeability off with the first purchaser. Gradually, the courts started to chip away from the P/K requirement. Winchester & MacPherson. In the latter of the two cases, the focus moves decidedly towards foreseeability and negligence. Within a few years of MacPherson, most states had adopted its holding. b. Early SL theories (1) Express warranties of safety (entitling the beneficiary to consequential damages): Breach of the warranty gives one an SL claim. Unfortunately, breach of warranty is a contract theory, and one is not only limited to contract damages, but also the privity requirement remains in effect. (2) Implied warranties, such as the UCC warranties of fitness for a particular purpose and merchantability. Under UCC  2-314, breach of one of the implied warranties is SL, but the privity requirement remains in force. c. An early inroad into the privity requirement: liability for tainted food. Liability was predicated on a 3PB theory, not privity of contract. d. Some states have eliminated the privity requirement with regard to implied warranties. (Hennigsen) e. Other courts have adopted the Restatement SL liability for defective products in tort. However, NC has not adopted the Restatement position. Negligence, warranty, and privity are still viable in NC for liability for defective products that injure/kill. f. Exploding bottle cases (1) Escola v. Coca Cola (a) Plaintiff, a waitress, was injured by an exploding Coke bottle. The plaintiff sued under a res ipsa theory of liability, and judgment was entered for the plaintiff on that theory. (b) NC has not adopted Escola. In order to use res ipsa in NC for a products liability case, you must prove a "similar occurrence" involving the same product and the same alleged defect. Otherwise, use of res ipsa is not permitted. (c) Under a strict res ipsa theory, the plaintiff must show that the instrumentality that caused the injury was under the defendant's control, and additionally, that the sort of injury does not occur in the absence of negligence. If the plaintiff meets this burden, then the burden shifts to the defendant to prove himself not negligent. (d) Justice Traynor wants desperately to impose SL for defective products that injure. (e) Difference between res ipsa and SL (1) In theory, the defendant can avoid liability if he can prove himself not negligent. Fault is still crucial to a res ipsa case, but the inquiry is delayed until later in the process. SL forestalls inquiries into fault. (f) Traynor's remarks: (1) Public policy demands that responsibility for injuries due to defective products be fixed upon the party who can best reduce the hazards. (2) But is this really true? Suppose that $60 of harm is expected from exploding Coke bottles that are defective through no fault of the manufacturer. It would cost $100 to find the bottles, but it would be certain that the bottles would be found. According to the Hand formula, no liability should be imposed. (3) However, suppose a project could be instituted for $5 that would create a 10 percent chance that the risk would be eliminated. When the $60 expected cost is discounted by 90 percent ($6 damage that would be caused by the Coke bottle that was detected as a result of the project), then it seems clear the imposing liability might encourage the company to institute the research project. (4) Unfortunately, such an argument is just too speculative to have a chance at persuading a jury. (5) Traynor: more safety research is encouraged when SL is imposed instead of liability only for negligence. (g) SL has the property of internalizing external costs. Accordingly, prices will rise to reflect the increased costs, and so the market will punish the producer of the unsafe product and force the producer to either discontinue the product or to correct the defect in the product. (h) Another argument: it is better for everyone to pay a little more so that those who are injured are assured of compensation. In this respect, SL is a type of insurance. But is this really true? Administering "tort" insurance is expensive. Additionally, this sort of insurance is compulsory- should we be forcing people to buy insurance? Finally, tort liability includes damages for P&S. Should we make people purchase P&S insurance when no one would purchase it if given the choice? (2) Lee v. Crookston Coca-Cola Bottling (a) This case involved an exploding Coke bottle, but with two twists. (1) The state had adopted SL for products, but (2) The injured person was a waitress, not a consumer.  402A on its face applies only to users or consumers. Under that analysis, the waitress is only a bystander. (b) The courts have tacitly refused to apply the language strictly. Instead, the courts have applied a strict foreseeability analysis. (c) In NC (1) Res ipsa is out unless you can show a similar occurrence. (2) Implied warranty still carries the requirement of P/K. But even under the doctrine of relaxed privity, innocent bystanders are still not covered. (3) But, who is a buyer? Fortunately in NC, buyers for resale are deemed to be buyers, so the waitress would have had a COA in NC. (d) If this claim were for negligence, the plaintiff would have had to prove the following: (1) The product was defective when the mfr. relinquished control over the product. (2) The defect was due to the fault of the mfr. (e) However, in SL the plaintiff need only prove that the product was defective at the time when the mfr relinquished control over it. (f) Problem: How do you prove the product was defective when it left the manufacturer's control? (1) Eliminate all other possibilities (mishandling or temperature shock to the bottle). The evidence tends to negate these possibilities. (2) Then ask for res ipsa. (g) A defective product is a product which is unreasonably dangerous for its intended purpose. Looks like negligence, but negligence is certainly not what Prosser intended when he drew up  402A. Prosser intended a consumer expectation standard: was the product as safe as a reasonable consumer would have expected it to be? (h) The defect in this case was a non-generic defect, since the defect was peculiar to this particular Coke bottle and not to Coke bottles generally. The normal Coke bottle is the standard, and it's an easier standard to meet. Rationale: even if you think you want to impose liability for negligence, you may come close to doing that by imposing SL rather than negligence. The common situation is that the mfr was negligent, but that negligence would be hard to prove. Accordingly, SL snags defendants who were negligent anyway. The not-so-common situation is when the defect in the product is not due to negligence. (i) Hyp: 100 instances of non-generic defects: 10: defect not due to negligence 90: defect due to negligence 30 of the 90: plaintiff cannot prove negligence, even with res ipsa. * Imposing SL will yield results that are better than that which could have been achieved using negligence. More mistakes are made under the negligence standard. (In our hypothetical, 30 negligent defendants escape liability if a negligence standard is used. If SL is used, 10 non-negligent defendants are held liable, but the overall number of mistakes is lower with an SL standard.) g. Warranty (1) Express warranty: Privity of contract is required in NC, but the mfr is liable to the purchaser, family, household servants, and guests. Innocent bystanders are excluded. The requirement of privity is relaxed somewhat (2) Under the implied warranty of merchantability, the NC Products Liability Act prescribes the following: (a) Privity requirement is relaxed even more. (b) Can sue the mfr. (c) Family, household servants, guests, and employees can sue without meeting the privity of contract requirement. Bailees are not covered, nor are innocent bystanders protected. (3) Retailer's implied warranty liability. (retailers are generally speaking in privity with the purchaser. In NC, liability can be imposed only in 4 situations. (a) Opportunity to exercise of a right to inspect would not have revealed the defect. (b) The seller causes the damage (c) Mfr. not subject to personal jurisdiction. (d) Mfr. is insolvent. For the most part, retailers cannot be held liable under an implied warranty theory. (4) Harshest rule: 6 year Statute or Repose in addition to the SOL: You may not bring a personal injury or wrongful death action if the product is purchased more than 6 years before the accident. (The SOL for negligence claims in NC is 3 years, but the SOL for breach of warranty claims is 4 years.). h. Greenman v. Yuba Power Products (1) In this case, the CA S.Ct. adopts SL tort liability for defective products that injure. The plaintiff in this case sued under a warranty theory. (2) The plaintiff ran into two problems with the warranty theory: (a) No privity of contract: Plaintiff's wife was the one who bought the Shopsmith power tool. (b) Plaintiff also did not give notice of the breach of warranty until 10.5 months after the accident. CA statute required notice within a reasonable time. (3) The CA S.Ct. drops the warranty fiction along with the privity and notice requirements that accompany warranty theory. (4) Restatement (2d) of Torts  402A reflects Greenman by calling for SL in tort for defective products. (5) What is missing from the opinion: coverage for third parties. Comment o of  402A discusses this point and indicates that coverage for third parties was not reflected in the cases at the time. However, the majority rule on the subject extends protection to innocent bystanders. (6) In NC, the relaxed privity requirements would kick in and help out the plaintiff somewhat, but he would have still been bound by the rest of warranty law. i. Defect replaces negligence as the trigger of liability for defective products. (a) Defect is a much more efficient trigger than negligence. It makes adjudication of disputes involving defective products easier. (b) Two types of defects (1) Mfg. defects: Unique to the item. SL imposes liability whether the mfr. was negligent or not. (2) Design defects: The defect is in the very design of the product and is not peculiar to the particular item that injured the plaintiff. Is there really a difference between defective design and negligence? If there really is none, then SL for products is not the revolution it was touted to be. j. The limits of SL for defective products: Moorman Mfg. v. Nat'l Tank (1) Plaintiff sues for economic loss due to a defect in a storage tank. He seeks tort damages. (2) In contract, the plaintiff would get cost of repairs and possibly lost profits. Obviously the allure of tort damages encouraged the plaintiff to sue under a SL for products theory. (3) The Ct. declines to extend SL tort liability from its personal injury (and damage to property) origins into liability for economic loss. The Ct. rules that these cases should be dealt with in contract, not tort, and the defendant will receive the protections of contract law (privity, notice, etc.) If the plaintiff wanted protection against economic loss, he should contract for it. He could get protection either by express or implied warranty, but he would have to bargain for the protection. (4) Why the distinction? (a) Value judgment: We want people to be compensated for personal injuries due to defective products so much that we are willing to knock down most of the barriers to recovery. Making sure persons are compensated for economic loss is less compelling. (b) We consider protection against personal injuries is so important that we will not require people to bargain for it. (c) But, should not damage to property fall on the contract side of the line? k. Design/generic defects: (1) Leichtamer v. AMC (a) Plaintiff sues defendant for injuries sustained because of a defective roll bar in a jeep. The presence of a roll bar implied that the jeep would be safe in a roll over situation. The jeep in question was involved in a front-to-back roll over, and the roll bar gave way during the rollover. The rollbar was apparently designed to protect the occupants during side-to-side rollovers. (b) The court applies the consumer expectation test and asks if the product was as safe as an ordinary consumer would have expected it to be. (c) The court thinks that AMC created the expectation of safety in front-to-rear rollovers. (This case is similar to the situation in Florence v. Goldberg where nonfeasance was converted into misfeasance. (d) Must actual reliance on the representations be proven? Common sense: By looking at the bar, you should be able to see it is not built to withstand a front-to-back rollover. However, the implied message could be that front-to-back flipovers are not likely. (e) Second collision doctrine: If a passenger collides with the interior part of a car during an accident, the rule was that there was no liability for injuries caused by that "second collision" with regard to a defective condition. The rationale was that the car was made to be safe for its intended use, but since crashes are not intended, the car company should not be liable for injuries caused by "secondary collisions." This doctrine no longer exists. (f) New rule: liability is imposed for second collisions. Though collisions are not an intended use of the product, they certainly are foreseeable. (g) Related doctrine: CN for failing to wear a seat belt. At CL, there is no ipso facto problem to imposing CN per se. However, in NC, the legislature precluded use of the seat belt statute to impose CN per se. (h) The argument that mfr's should not have to foresee the negligence of 3rd parties though such negligence is foreseeable: (1) Has been rejected with regard to mfr's liability. (2) But, it has been accepted with regard to a non-seat belt wearing passenger. (2) Knitz v. Minger (a) Plaintiff was injured by a dye press manufactured by the defendant. The press was activated by a foot pedal, but there were no safety provisions to keep the operator from activating the press while the operator's hands were in harm's way. Two of the plaintiff's fingers were amputated by the press when she accidentally activated the foot pedal while moving the pedal. (b) Negligence does not seem to be a viable theory in light of Temple. Also, the plaintiff was familiar with the danger. (c) Holding: A product's design is defective if (1) It is more dangerous than an ordinary consumer would expect it to be when used in the manner the manufacturer intended it to be used. (Consumer expectation test). (2) The benefits of the design do not outweigh the risks of the design. (Risk/utility analysis). The defect in this case was a design defect under both the Consumer expectation test and the risk/utility test. (Is the risk/utility test any different from negligence? The court thinks so, but that is hard to see, as the analysis smack of the Hand formula.) (3) Cochran v. Brooke (a) Plaintiff was suffering from severe arthritis, and so her doctor prescribed chloroquinine in order to treat her arthritis. This drug was known to cause visual blurring. In the plaintiff, the drug eventually caused total blindness. (b) Here, the non-generic defect is in the plaintiff (her unusual sensitivity to the product) and the generic defect is in the product. So, if you have a problematic product, should there be liability if it injures someone? (c) Comment K: Some products cannot be made totally safe, but risk/benefit analysis dictates that the product should be marketed. Accordingly, no liability should be imposed for the reasonably dangerous cases where the product causes injury. (cost spreading/insurance) (d) When must the defendant have been aware of the dangers of the product in order to impose liability? At the time the product is distributed or at the time of the trial? If SL can be imposed only if the defects are known at the time the product is first distributed, then SL is not much different from negligence. Should hindsight matter? (e) The situation in this case is similar to informed consent. But does the defendant have a CIF defense? ("I'm going to take the drug even though I know the risks.") (f) Cost internalization: (1) A warning of the dangers would force the patient taking the drug to internalize the costs. It would allow the patient to make an informed choice. (2) Overinternalization and the lack of jury control. It is possible to overinternalize external costs. (3) Should the costs be "patient costs" or "drug costs"? Which is the real "cause" of the accident? (4) SL taken to extremes: Beshada v. Johns-Manville (a) This case is a consolidation of six personal injury and wrongful death actions by persons exposed to asbestos or their survivors. The injured persons contracted asbestosis and several other disorders associated with asbestos exposure. Defendants argued that no one knew the dangers of asbestos at the time these victims were first exposed. (b) The defect in this product is generic, so if SL is imposed in this case, will there really be any difference between SL and negligence? (c) If we believe the NJ S.Ct., there is (1) The court uses hindsight: the danger of asbestos was unknown and unknowable in the 1930's, but now we know the risks. (2) The court then applies the knowledge we have about asbestos now to a 1930's defect and imposes liability. Here, liability is REALLY strict because fault is completely absent from the picture. (d) Beshada still employs risk-utility analysis, but it employs information not known at the time of original distribution of the product. (e) Three arguments for imposing Strict SL as applied to this case. (1) Risk spreading/insurance: The costs associated with the product should be spread to all users. But, it is hard to insure for risks you cannot know exist. Also, why stop with asbestos. Shouldn't the rule be expanded to cover all Comment K type situations? (2) Cost internalization: The people who benefit from the product, especially the product's producers, should help bear the external costs of the product or at least take account of the costs when dealing with the product. However, it is difficult to internalize a risk you do not know about. CI assumes you can match the risk with the product creating the risk, but instead DI just forces a company into bankruptcy. (3) Accident avoidance: The manufacturer is the least cost avoider. The manufacturer should also be encouraged to engage in R&D programs to identify, reduce, and eliminate any risks. But, the court essentially asks the company to do R&D to discover unknown methods to discover an unknown defect. Is this really feasible? (4) Proof problems: The court thinks talk of what was scientifically unknowable is way over the jury's head. It thinks that the jury would have a difficult time ascertaining whether one was negligent 50 years ago would be extremely difficult. (f) Beshada certainly is not the majority rule, and it may not even be the rule in NJ. A majority of courts hold that manufacturers are not responsible for errors in hindsight, but manufacturers can be held liable for not warning about defects that arise later. Whether a recall or warning is required depends on the circumstances: Beshada has been limited to its facts, and no liability is imposed for unknown and unknowable risks for products other than asbestos. (5) The "Pinto" case: Grimshaw v. Ford, 174 Cal.Rptr. 348 (1981) (a) Ford Motor Co. knew at all levels that there was a danger of gas tank explosion in Ford Pintos involved in rear end collisions at speeds of less than 20 mph. A $15.30 modification would have increased the protection to 30-34 mph. Ford was trying to hold costs down in order to keep the price of the car below $2000. (b) The court employed scathing language about the immorality of balancing money against lives. But doesn't the Hand formula do just that? The court does not seem to mean literally that. Instead, the court seems to be decrying a particularly callous choice Ford made to pay off accident claims rather than invest $15.30 in each new Pinto to increase the car's safety. (c) The danger of overinternalization: Internalizing more than the actual costs. Is the Pinto case an example of underinternalization or overinternalization? (6) Barker v. Lull Engineering (a) Plaintiff was an inexperienced operator of a high industrial loader. He was injured when an uneven load tipped the loader over. The loader contained no protective canopy to protect the operator in the event of a fall. (b) The court imposes the burden upon the defendant to perform a risk-benefit analysis. Once plaintiff proves proximate cause, the burden shifts to the defendant to show that the benefits of the product outweigh the risks. (R-B analysis is extremely similar to Hand formula negligence analysis). (7) Wilson v. Piper Aircraft (a) This was a wrongful death action arising out of an accident involving a plane manufactured by the defendant. The crash was caused by a carburetor that iced up. There was proof presented at the trial that had a fuel injector been used in lieu of a carburetor, the accident probably would not have happened since fuel injectors do not tend to freeze up in the way that carburetors do. (b) Under Barker, the plaintiff gets to the jury, but the OR court declines to shift the burden of proof the defendant to show that R-B analysis does not weigh against marketing the product with the alleged design defect. The court keeps the burden on the plaintiff to show poor R-B analysis. (8) Are these the kind of questions a jury is competent to answer? We are essentially asking jurors to become experts in aircraft engineering. (9) There is also the problem of polycentricity: the ramifications of one design change on other design decisions. (10) Todd suggests we hold manufacturers liable only for gross mistakes. The plaintiff should have to show that the alternative design was a lot better than the design actually used. (11) A stronger case for not going to the jury. Hyp: your car rolls over, and you are injured. You sue the manufacturer for not including a roll bar in the car, and that failure to do so was a design defect. This case should not get to the jury. By and large, the public does not want roll bars in cars. There is a societal assumption of the risk by not demanding that cars contain rollbars. Rollbars are not even optional extras on most cars. (12) Obviousness of a danger: Should a warning be required? By using the obviously dangerous product, does the plaintiff assume the risk? Is the product defective when it has an obvious danger? Does the danger itself serve as the warning? The traditional answer to these questions is that a defect is not automatically removed even if the danger is obvious. However, a product may be so dangerous that is should not be marketed at all with the defect. A bill introduced in the Senate in 1984 would have declared that a product is not unreasonably dangerous for lack of warnings if the danger is obvious. However, a product with 15 warnings might still be too dangerous to market. (13) Brock v. Merrill Dow Pharmaceuticals (a) This case involved a claim by a daughter of a mother who had been given the drug Benedictin during the mother's pregnancy in order to alleviate morning sickness during pregnancy. The drug was alleged to have caused birth defects by the drug. (b) The plaintiff attempts to use expert witnesses who performed epidemiological studies on the drug. The study compared populations of pregnant women who had children at the same time to see if there was a correlation between exposure to Benedictin and an increased risk of birth defects. According to the expert, there was a relative risk of 1.5, but the confidence interval (margin of error/sampling error) included 1. (c) The court holds that if the confidence interval extends to or below one, then the plaintiff has failed to meet her burden of proof. Although the court does not say it, it seems to insist on a confidence interval of 95% (We are 95% sure that the true value is within a given range). Since this case is being tried in the tort system where the plaintiff ordinarily must only prove her case by a preponderance of the evidence, should not the required confidence interval be only 51%? Is the burden the court imposes too tough? (d) Comments (1) The plaintiff in this case could only come up with statistical evidence. (2) Other evidence might have worked better, like a chemical study of the effects of the drug. (3) Animal studies might have worked better as well. (4) State of the Art defense (5) Risk-benefit: This may be a Comment k situation where even though a product has a known risk, the benefits of having the product on the market outweigh the product's risks. But is curing morning sickness worth the risk of birth defects? (e) Assuming the entire confidence interval is greater than 1, what arguments might the defendant still have? (1) No CIF (2) Correlation does not imply causality. Suppose mothers who suffer from morning sickness have an increased risk of having a kid with birth defects (spurious results). However, you can control for the suspected factor. (f) Plaintiff still might argue that the defendant failed to warn the plaintiff of the risks associated with the drug. A warning may be all that is required if this is a Comment k situation. (g) On/off nature of traditional CIF analysis works well in isolated tort situations, but it does not work well in mass tort situations. If there is only a 1/3 risk that Bendictin was responsible for increased birth defects in the sample population, no plaintiff will recover anything under traditional tort rules, but if there is a 2/3 chance that Bendectin was responsible, then the all the plaintiffs will get full recovery. The solution is to impose proportional damages, possibly in a class action context. However, this would have to be done by statute. Damages would equal full damages discounted by the risk. The defendant will end up paying for the damage is actually caused. (h) The ALI proposes essentially the same solution: (1) Below 20%: no one receives compensation (2) 20%-80%: proportionate damages (3) Above 80%: full compensation to all (i) AIDS hypothetical: Suppose there is a delay in the development of the disease. Damages will be based on increased risk, emotional distress, and health monitoring. However, the courts have a tendency to say, "Come back later if you get it." (14) Hyp: A car maker makes and installs a passive restraint system in the vehicles it manufactures. Although there is a different way to design it, the units installed are of such an awkward design that the owners of the vehicles disable the systems. A driver is injured and now wants to sue the car maker on a design defect theory. (a) Suppose a passenger is injured: does the passenger have a prima facie case? (1) The manufacturer would attempt to say there is no proximate cause in that the owner's disabling of the system was a supervening cause of the accident and additionally that disabling of the system is not a foreseeable act. (2) However, under the modern rule, it would be foreseeable that an people might disable awkward and uncomfortable safety systems. (b) Suppose the driver of another car with a comfortable passive restraint system disables the system and the driver is injured in an accident. The proximate cause argument may lie here since is may not be foreseeable that drivers would disable comfortable passive restraint systems. (no defect). (c) Does the ease of disabling the mechanism have a role in the inquiry? In order to make the product non-defective, it may not be enough to make it non awkward. You may also have to make it difficult to disable. (15) Product misuse: Misusing the product which caused the injury may destroy the plaintiff's case by negating an element of the prima facie case. (a) Proximate cause: Reid v. Spodone Machine: Defendant manufactured a guillotine type cutting machine for cutting blocks of molded plastic. Earlier models of the machine had a safety device which required the operator to press two buttons simultaneously in order to operate the machine. When workers fashioned a bar to press the buttons simultaneously, the manufacturer moved the buttons to the side. However, workers began operating the machine in pairs in order to avoid walking around to the side of the machine. Plaintiff had 3 fingers amputated by the device and now sues. Defendant argued that the employer knew of the two-person operation practice but took no steps to stop it. This argument was rejected. The court found that moving the buttons to the side could encourage 2 person operation (Cf. Bexiga). Such misuse was foreseeable. (b) No defect/no duty of care: Hughes v. Magic Chef: Plaintiff was severely burned when a gas stove installed in his home exploded. Plaintiff had just had his gas tanks filled, but one of the pilot lights in the stove was not reignited. Gas built up and exploded when plaintiff attempted to use the stove. The court finds that misuse of the product is not an affirmative defense, but rather it is an element of the plaintiff's own case. The plaintiff must prove that the product was more dangerous than a reasonable consumer would have expected the product to be. l. Affirmative defenses (1) Restatement  402A (a) CN [CpN] is not a defense (b) AR is a defense so long as the plaintiff voluntarily encountered a known danger. (2) Bowling v. Heil (a) This case involved a defective lifting system on a dump truck. When the lift system stalled, plaintiff leaned under the raised bed of the truck to investigate the problem. Shortly thereafter, the bed came falling down upon the plaintiff, killing him. (b) Question: Did the plaintiff's acts constitute CN? Plaintiff's act is somewhere between CN and AR. (c) "Known danger": What is the danger? Was it the generic danger of climbing under a raised dump truck bed? Or was the danger caused by a defect? (d) The court thinks the defect was the cause of the danger. In this respect, the court interprets "defect" narrowly. (e) The case ends up depending upon an all or nothing proposition that depends on whether or not the plaintiff knew about the "danger" or not. (Zelenak does not care for this distinction). (f) Possible explanation:  402A came out before the advent of comparative negligence. The writers of  402A were interested in expanding liability. Would the section have been written differently had CpN been around? (3) Daly v. General Motors (a) Plaintiff was thrown from his car and killed in a crash. The latch on the car door was defective. However, plaintiff neither had his seat belt on nor did he have the car door locked. (b) Critical question under Comment n: did the plaintiff know about the defect. If so, then there is AR and recovery will be barred. If not, then he is only CN and he will be allowed full recovery. (c) The CA. S.Ct. dumps Comment n and applies "equitable apportionment". The case is analyzed as comparative negligence, not whether he knew about the defect. (d) Another question: how to do this: comparing fault with no fault. This court assumes it can do it. (1) Comparative causation (2) Is SL just negligence in disguise? (Justifications for SL for products on page 582) (e) How does NC come down on all of this? (1) CN is a complete bar under negligence and warranty theories (2) Statute provides no liability for physical alteration without authorization from the manufacturer. (3) Use of the product against an express and adequate warning is a complete bar to recovery. The user must have been aware or should have been aware of the warning. Even is the warning is of a type the user is usually aware (ladder hypothetical). In NC, this is irrelevant. (4) 3 hypotheticals in reference to CN/CpN in SL products. (a) The jurisdiction allows comparative negligence. Plaintiff bites into what turns out to be a wormy candy bar. Should a claim of CpN by the defendant be allowed? No- such a defense would almost certainly be struck. (b) Ladder (Normal ladder with a warning label - 250 lb limit.) Plaintiff, a 350 lbs man, goes up it anyway after reading the warning label. (1) Restatement: AR (voluntarily encountering a known danger) (2) NC: CN would apply and it would totally bar the plaintiff from recovering anything. (3) CA: Has the mfr. fulfilled its duty of care. If this was unforeseeable misuse, there would be no proximate cause. If no defect, then that would be a total bar to recover (the trigger has not been activated). (CA's CpN statute includes AR.) (4) A clothes iron has an automatic shut off which fails. The plaintiff leaves the iron in a horiz position for 15 minutes, and the iron starts a fire that burn down the plaintiff's house. (A) Although a claim of CN is possible, plaintiff could always invoke Bexiga and argue that the defendant had a duty to foresee the plaintiff's CN. (B) Should Bexiga be applied in a CpN state? (1) Applying CpN does not make the duty illusory. (2) Put the liability on the most deterable actor: the Mfr. (5) Cigarette litigation (Cippolone v. Liggett Group) (a) Rose Cippolone, a woman who had smoked since 1942, contracted lung cancer and died in 1984. Before her death, she sued the Liggett Group under several theories alleging that Liggett was ultimately to blame for her contraction of lung cancer. (b) Cippolone invoked 4 theories: (1) SL for failure to warn (2) SL for a per se defect based on risk- benefit analysis (3) Express warranty (4) Fraud/misrep: wilful concealment of the health risks of smoking, and deceitful advertising that included claims that smoking was healthy. (c) L&M's were advertized by Arthur Godfrey, and almost everyone in America trusted him. Godfrey read from a medical report that said smoking was healthy. (d) In 1970, Congress enacted a provision preempting state tort law claims against manufacturers of cigarettes based on failures to warn so long as the cigarettes bore the required statutory warning. (e) Plaintiff argued that the statutory language preempted claims based on state statute or administrative law, not CL. Additionally, plaintiff argued that the provision applied only to claims for failure to give adequate warning in advertizing. (f) The S.Ct. ruled: (1) CL is covered by the preemption language. (2) Failure to warn claims are barred after 1970. (3) Claims based on per se defects (negligent research and testing) in cigarettes are not barred, but this is not the best theory in the world to proceed under. (4) Claims based on express warranty are not strictly preempted because there is no statutory duty upon the mfr. to make express warranties. (5) Claims based on fraud & misrepresentation as well as claims for concealment are not barred as these could be predicated upon duties not related to advertizing. (g) Risk/utility analysis: Should the jury be permitted to consider the argument that cigarettes are defective per se? (1) No: on this issue, the court should punt to the legislature. Such a holding would have broad sweeping public ramifications and the economy. Courts would understandably be reluctant to put cigarette companies out of business. The legislature is the better forum for all the arguments to be heard and all of the issue to be considered. The legislature is also accountable to the voters, while by and large judges are not. (2) Scott's argument: should we not let the plaintiff make the risk/utility analysis, like we allow persons who go to see baseball games to make their own risk/utility analyses? (Rollbars in cars: let those who want them have them installed). (3) Counterarguments. (A) The counterargument in on the smoking issue is passive smoking. (B) Paternalistic argument: a consumer may be aware of all the risks and may want to stop but can't because she is addicted to cigarettes. Seeing advertisements in magazines may cause relapses. (Is paternalism necessarily bad? It is a bit of a pejorative term.) (C) Applying NJ law, the 3d Cir. held that if a danger is so inherent in a product and the danger is so well known in the community, then there is no liability on the part of the manufacturer. (h) Problems of continuing to smoke after preemption. (1) Hyp: The trial court permits a pre- 1966 failure to warn claim. *** CIF problems: how does a plaintiff prove by preponderance of the evidence that harm was caused by the pre-1966 smoking as opposed to the post-1965 smoking? *** The way out: substantial factor analysis (Anderson (cited in the opinion), Landers, and Summers). (2) Counterargument: Plaintiff could argue that the pre-1966 smoking got her hooked, and accordingly, the mfr. continued to have responsibility for that addition after 1965. 8. SL for services a. This subject must be analyzed under two separate headings. (1) Product/service hybrids (2) SL for services generally b. Assume we have a system that treats products and services differently (SL for products, negligence for services). c. Newmark v. Gimbel (1) Plaintiff goes to her beautician to have her hair permed. The beautician recommends a new permanent product, and the plaintiff allows the beautician to use it. The product burns her scalp, causing dermatitis. (2) Question: must she prove negligence or can she sue under SL tort or even under a warranty theory? (3) The court rules that if she bought the product, took it home, and gave herself the perm, the defendant beautician would have been SL as a retailer. Accordingly, since there is no real difference between buying the product for home use and having the product applied on the defendant's premises, the beautician is liable since he applied it. (4) However, the court still must deal with Magrine v. Krasnica. In that case, a dentist injected the plaintiff with novocaine, but the needle he used was defective and broke off under the plaintiff's skin. Plaintiff sued the dentist under an SL theory as a "retailer" of the needle. The court ruled that SL was not an available theory and refused to hold the dentist SL for the defective needle. (a) The court distinguishes Magrine from the instant case. (1) Professional vs. commercial enterprise (the court does not believe beauticians are "professionals" in the same sense that health care providers are. (2) Necessity vs. luxury: Health services are necessities while hair care services are luxuries. (b) Does the distinction make sense? How would the court deal with silicone breast implants installed for cosmetic purposes? d. Why not have SL for services? Applying the arguments for SL for products (1) Risk spreading: Did the provider perform the services on a broad enough scale to justify cost spreading. More than likely, no. (2) Cost internalization (3) Consumer expectations of safety (4) Proof of negligence: is it really too difficult to prove negligence in the performance of pure services? (5) Defect trigger: It would be difficult to find a defect in a service without also showing negligence. But in Maguire, the defect was easy to detect. e. Power companies have been held SL for damages caused by power spikes. f. Liability for "defective blood" containing HIV. (1) Is giving blood a "service" or supplying of a "product"? The distinction matters because it will determine whether there is SL or only liability for negligence. (2) Does the blood bank act as a "middle man" in that it performs a service for the true suppliers (human beings)? (3) Policy arguments: (a) Is SL a good policy idea in this situation? (1) Risk spreading/insurance: Would the risk spreading be broad enough? If so, should we make people purchase P&S insurance through the increased cost? (2) Overinternalization of costs? (3) Do we want to drive this product off the market? NO: The demand for blood is inelastic; blood is a "Comment K" type product. Under a risk/utility analysis, the product should stay on the market because the benefits outweigh the risks. (4) By imposing SL, would we encourage development of a new and better test for the HIV virus and not just the antibodies? (The current method for testing for HIV is designed to detect the antibodies generated to attack the virus, not the virus itself. Accordingly, if someone has recently been exposed to the virus but donates blood before antibodies have been formed, the HIV test may not detect the presence of the virus in the blood.) (b) The service/product debate also comes up in tax law. Under federal income tax law, you may deduct the value of goods you donate to charitable organizations but not the value of services. The IRS's position is that giving blood is a service, and therefore you may not deduct the value of the blood you donate from your taxes. (4) United Blood Services v. Quintana, 827 P.2d 509 (Colo. 1992). (a) Plaintiff was infected with the AIDS virus by a blood transfusion with blood supplied by the defendant. The screening test for blood was primitive at the time; few if any questions were asked of donors. Industry custom at the time was to do damn little. (b) The court cites a CO statute providing that providing blood to hospitals for transfusions is providing a medical service, not a sale, so SL is not available in that situation. (c) The plaintiff wanted to put an expert witness on the stand to testify in her favor that the entire custom was negligent and that the defendant could have asked more and better questions as well as performed surrogate testing. (d) The central question in the case was whether the defendant was to be held to the medical malpractice standard of case (custom is an absolute defense) or the ordinary negligence standard of care (custom is not an absolute defense). (e) The court opts for a malpractice standard, since the statute designates providing blood as a medical service. (But does this make any sense? No professional akin to a doctor is involved.) (f) However, the court ruled that plaintiff can put experts on the stand to attack the prevailing standard of care as "unreasonably dangerous". Custom turns into a rebuttable presumption of no negligence. (If applied to the whole of medical malpractice law, the holding of this case is a radical departure from the prior law on the subject.) (g) NC's position: (1) N.C.G.S.  130A-148E: Blood banks are not liable for supplying HIV infected blood provided they have complied with prescribed screening procedures. (a) Aggressive questioning (b) Antibody test (2) Normally, compliance with a regulatory scheme is relevant but not conclusive. But this statute makes compliance with a regulatory scheme an absolute defense. Otherwise, plaintiff could argue ordinary RP negligence. (3) The remaining question is whether the defendant might fall victim to a warranty theory in this state. IV. Practical problems in tort litigation A. Settlement 1. Why don't all cases settle? a. Prospect of a higher recovery at trial. (Or plaintiff has nothing to lose by going to trial.) b. Attorneys disagree over the "price" of a case. c. But to make the determination of the price of a case, you have to (1) Develop the facts of the case (2) Research the law (3) Evaluate the intangibles, like the judge, the jury, the witnesses, the plaintiff and the defendant. d. Plaintiff might rather have cash in hand now rather than taking the chance of getting a higher recovery. e. Why are plaintiff's generally risk aversive? The answer lies in marginal utility theory: the marginal utility of the first $100,000 may be higher than that of the next $100,000. f. But, defendants can be risk aversive as well. h. Attorney's fees may also play a role in the determination as well. Fixed contingent fees encourage lawyers to encourage plaintiffs to settle early. i. In NC, evidence of a traffic conviction is not admissible as evidence unless the defendant plead guilty. Why? Well, given the penalties involved, there is no real incentive to litigate a traffic case as fully and as vigorously as a tort action for damages. 2. Crosby v. Southeast Zayre a. Plaintiff trips over a stocking float in the defendant's store and sues for damages. The store's manager on duty admitted fault, sent the plaintiff to the hospital, and offered to pay her medical bills. The plaintiff seeks to have the manager's statements admitted into evidence. b. The court rules that offers of settlement and offers to pay expenses are not admissible. Why? (1) Deeming the evidence to be admissible would tend to discourage settlement offers, and settlement is a goal of the judicial system. (2) Possible jury prejudice against a plaintiff who turns down a settlement to go to trial. (3) The judicial system does not want to discourage the rendering of humanitarian assistance. But, this was in fact an admission of liability, so it was admissible. You can offer to pay medical expenses without admitting fault, but here, the manager admitted fault as well. c. Why would a defendant go ahead and pay an injured plaintiff instead of keeping the financial "screws" on? (1) Good will/public relations (2) Warm fuzzies with the plaintiff (3) Keep the injuries from getting worse, for that would likely increase the defendant's liability later on. 3. Zelenak's matrix: Li : Negligent P/Negligent D - Result: CpN AMA : Negligent D/2s Negligent D- Result: comparative principles Daly : Negligent P/SL D - Result Comparative fault/equitable apportionment Safeway : Negligent D/SL D- Result: Equitable apportionment (Safeway is a synthesis of AMA and Daly). 4. Improvident settlements: avoiding releases when the settlement turns out to have been an unwise move. a. Gleason v. Guzman (1) Plaintiff was struck by a vending machine that fell on her head. Plaintiff's guardian settled and gave the defendant a release when it appeared as though the injuries would not be severe. Plaintiff developed epilepsy later on and tried to have the release set aside so she could sue the defendant for damages for her newly discovered condition. (2) 2 conflicting interests are at stake in this case: (a) For the defendant, the issue of finality is central. (b) For plaintiff, the issue is fair compensation. (3) The court distinguishes between unknown injuries (present or past facts) and unknown consequences (future facts). To get rescission, the plaintiff must prove that the mistake was due to a mistake of a past or present fact, not on future facts. (a) If the mistake is due to an unknown injury, a mistake in diagnosis, rescission is available. (b) If the mistake is due to an unknown consequence, rescission is not available (mistake in prognosis). (4) How to make the decision in this case: How common is epilepsy in these sorts of cases? (5) Is prognosis part of the diagnosis? According to Judge Hand, no absolute line can be drawn between the two. (6) Contract law focuses on mutual mistake (Really? Cf. UCC) (7) The contract itself contemplated a mistaken prognosis. Under its terms, the plaintiff is out of luck. (8) However, the court refuses to construe the terms of the release that broadly. (Is the term a term of an adhesion contract? Not strictly speaking). (9) The reasoning and decision of the court are highly dubious. (10) From the plaintiff's POV, this is a good rule: "I get money now, and if things turn out bad, I can sue and get more money." From defendant's POV, this is a bad rule because he can no longer rely on the settlement release as the final resolution of the dispute. (11) Plaintiff might also have a medical malpractice claim for a crummy diagnosis/prognosis. (There is almost always someone you can sue who has money to pay a judgment.) B. Contribution & indemnity 1. In cases where two defendants combine to create a single indivisible injury, the defendants will be held J&S liable. The plaintiff will be allowed to collect from each defendant an amount up to the amount of the judgment, but the plaintiff will not be permitted to recover more than the total judgment. Accordingly, one defendant could conceivably be made to pay the entire judgment. 2. Now, if a plaintiff collects the entire judgment from one defendant, can the first defendant collect anything from the second defendant? a. At CL, contribution/indemnity among J&S tortfeasors was not permitted. This rule first originated in intentional tort cases, but the rule found its way into negligence law. b. Most every state now allows contribution among J&S tortfeasors. A defendant who has paid more than his share may collect pro-rata contribution. In a case with 2 J&S defendants where one has paid the entire judgment, the other defendant can be made to pay 50% of the judgment to the first defendant so that each defendant ends up paying 50% of the judgment. c. In some situations, one defendant may seek total indemnification from the other defendant. This is true in several situations: (1) RS (2) SL: retailers may collect indemnity from the mfr. (3) Other cases of derivative liability. 3. The law stood this way until the advent of comparative negligence. In those states, CpN put pressure on the pro-rata rule. a. Am. Motorcycle Assoc. v. Superior Ct.: According to the CA S.Ct., comparative contribution is possible under the CpN regime. Defendants will continue to be held J&S liable, but if one defendant ends up paying for more than his share of the fault, then the other defendant can be made to pay the first defendant so that the parties end up paying according to their comparative fault. Retaining J&S liability places the risk that one of the defendants is insolvent upon the other defendant(s). AMA tried to argue that CpN had effectively abolished J&S liability, but the CA S.Ct. balked at that argument. b. Steps in the inquiry (1) What is the plaintiff entitled to recover in light of his own negligence? (2) If plaintiff collects more than the defendant A's share of the remaining damages from A, how much can A recover from Defendant B? 4. Joint and Several liability (J&S) a. Basic rule: When 2 defendants act to cause a single indivisible harm/injury, each is liable for the entire harm so long as it is not possible to divide up the injury among the defendants. If allocation of the injury among the defendants is possible, there will be no J&S liability. b. Safeway v. Nest-Kart (1) Plaintiff was injured when a shopping cart owned by Safeway and manufactured by Nest-Kart broke and fell on her. She sued Safeway for negligence and SL, and she sued Nest-Kart for SL (J&S liable). The jury found Safeway liable under both theories and found N-K SL. It allocated the "fault" 80%/20% against Safeway. Safeway paid 80% of the $25,000 judgment, and then it moved that N-K be required to pay 30% of the judgment to Safeway so that each defendant ended up paying its pro rata share. N-K obviously objected. (2) The court rejects criticism that it is comparing apples and oranges when it compares the percentage liability between a negligent defendant and a SL defendant. The court thinks the difference between the two is conceptual and not a practical distinction. It combines the principle announced in AMA that J&S defendants can be made to contribute among one another until each ends up paying according to his respective fault with the principle of Daly that it is possible to allocate "fault" between a negligent plaintiff and a SL defendant. (3) Zelenak recants: It is possible after all to allocate responsibility based on comparative causation. Indeed, the element of proximate cause implicitly exemplifies the belief that some causes count more than others, but prox cause works in an on/off fashion. Comparative causation, on the other hand, acts more like a dimmer switch. c. Market share liability (1) Sindell v. Abbott Labs (a) Defendants manufactured a drug called DES that was designed to prevent miscarriages. Unbeknownst to the manufacturer and the FDA, the drug increased the risk of vaginal and cervical cancer in daughters of mothers who took the drug. The side effect had a long latency period (10-12 years). (b) The problem: several hundred companies manufactured the drug, and because of the long latency period, there was no way to finger which manufacturer made the particular pills which the plaintiff's mother took. Accordingly, there is a major CIF problem. (c) The plaintiff argues that under the doctrine of Summers v. Tice the burden should be shifted to the defendant to prove that their drug was not the one the plaintiff's mother took. Since one defendant obscured the causal party by its acts, both should pay unless the non responsible party can prove he was not the one at fault. The court likes the argument, but it has to modify the Summers rule to fit this case. *** Thinking like a lawyer: concluding that the case relevant to a case where a person is injured from side effects of a drug is a case involving 2 quail hunters. (d) Paradigm: CIF problem: multiple defendants who engage in a risk creating activity injure the plaintiff. The true CIF is obscured by the presence of multiple defendants. (e) Distinguishing Summers (1) Was Summers merely a "smoking out" case? Should that make a difference? (2) Should the number of defendant's make a difference? Would Summers have come out the same had there been three defendants? Probably so. (f) Market share liability (1) Several liability only: NOT J&S (Each defendant will be liable to the plaintiff only for its share of the damages. (2) The risk of an insolvent defendant is shifted to the plaintiff, so the plaintiff might not get a full recovery. (3) Defendant's liability is limited to its proportionate share of the market at the time the mother took the drug. (4) An ambiguity in this opinion was cleared up in Brown v. Superior Court. (g) Several liability is attractive in this situation. (1) Overall the DES cases, each defendant will ultimately pay according to the amount of damage it actually caused. But under J&S liability, defendants, especially deep pocket defendants, are likely to pay more than their actual responsibility. (2) These defendants are SL while the Summers defendants were negligent. We have fewer problems holding a negligent defendant liable for the whole harm than we would holding a SL defendant liable for the entire harm. If it should come down to a choice between making a negligent defendant or an innocent plaintiff bear the loss, the negligent defendant should bear the loss. (Are the defendants in this case negligent anyway? Proving a defect in the product is easier than proving negligence.) (h) What if one of the hunters in Summers fired more than one shot? What if one of the defendants in this case had a greater market share than the others? (i) Suppose there are only 2 DES manufacturers: D1 has 25% of the market share, and D2 has 75% of the market share. The background risk of cancer is 10/1000, and the risk with the drug is 20/1000. There is a 50% chance of CIF. A preponderance of the evidence standard might justify holding D2 entirely liable. Should Mkt. share liability be applied in this case? (1) As far as plaintiff is concerned, she does not care as long as she gets full recovery. (2) If market share liability is imposed, all defendants will end up paying for the amount of harm they caused over the entire population. (j) 3 shot D vs. 1 shot D. (1) Should we hold the three shot defendant liable for 75% of the harm (either directly or through contribution?) (2) However, this case lacks the pervasive nature of the DES situation. The number of defendants is higher as is the number of victims. (2) Hymowitz v. Eli Lilly (a) In another DES case, the court opts for national market share, arguing that other formulas did not work very well. (1) There is enough information produced by DES litigation from which a market share analysis can be generated. (2) The right result will still be reached if all states adopt a national market share approach. (b) Geographic and temporal market share/aggregate market share. (3) What if D1 (25%) could prove that the mother did not take pills manufactured by it? The court would still hold them liable. However, that result does not extend to the whole of tort law. (4) Rehash of the Bendectin cases: Suppose the background risk of birth defects is 10/1000 and the risk with the drug is 20/1000. With these figures, there is a 50% chance of CIF. The ALI suggests that in this situation, proportionate liability should be applied. The court should allow the defendant to pay 50% of the total damages. Over the entire population of Bendectin cases, the defendant will end up paying for the amount of harm it caused. This is almost market share liability, except for the other factor is an act of God and not another company. (5) Suppose the different drugs leave signature defects. If this is true, then the Bendectin problem does not arise. (6) Combining Bendectin with the DES cases: Hyp: 10- Injuries attributable to the background risk 5- Mfr #1 5- Mfr #2 Resulting liability: 50% of 50%, or 25% of total damages per manufacturer. d. Settlement and J&S liability: the Perkins and Parrott hypotheticals (1) Perkins (a) P- will settle for $100K for both claims. DA- thinks he is not liable and will not pay more than $10K in settlement DB- thinks a judgment of $100K-150K is likely, but also that a judgment of > 200 is possible (b) Suppose you represent DB and you estimate the following: (1) J&S liability is likely (2) A judgment for $100K-$150K is likely (3) Possible judgment for $200K (4) The jurisdiction adheres to the pro rata contribution rule (c) Plaintiff is willing to settle for $100K. The questions are whether to accept the settlement, and if we accept the settlement, do we want a release or a covenant not to sue from the plaintiff. (d) The worst case scenario: (1) >$200K judgment (2) DA is not liable at all, making you liable for the whole thing. (e) Release vs. covenant not to sue (1) At CL, if the plaintiff executes a release, plaintiff gives up his claim against both J&S defendants. (2) The way around this last feature of the release was to enter a covenant (contract) not to sue. By executing this document, plaintiff does not give up his right to sue the other J&S defendant. (f) Zelenak says in this situation, DB should settle for $100K, get a release, and then sue DA for contribution. (2) Parrott: just the opposite of Perkins (a) DA believes damages may go as high as $900K, but DA's insurance policy limit is $300K. DA wants to avoid a claim of contribution. P wants to settle with A and still sue B, but you want to avoid contribution. (b) Here, the proper course of action if you represent DA is to use the covenant not to sue. (c) Why would the ins. co. want to settle for the $300K policy limit? (1) The court might find liability beyond the policy's limits out of spite for the defendant's failure to settle within the policy limits. (d) How does DA protect himself from a contribution claim by DB? (1) Include a Pirringer agreement in the covenant. A Pirringer agreement is a covenant that a plaintiff will not attempt to collect more that DB's pro rata share from DB. Accordingly, if DB has paid his pro rata share, in this case $450K, he will not be able to seek contribution from DA. (e) Under CA Stat.  877, if Defendant 1 settles: (1) Defendant 2 gets credit for Defendant 1's settlement, but (2) Defendant 2 has no right of contribution against Defendant 1. Under this statute, there is no need for a Pirringer agreement. e. The general problem: over and under settlement (1) Oversettlement Fault Settlement/judgment P DA 10% $100,000 settlement DB 90% $100,000 total damages as found by the jury DA will now want to seek contribution in the amount of $90,000 from DB since DB was responsible for most of the fault and DA has already paid all of the damages. (2) Who gets the benefit of the $90,000 mistake? Three approaches (a) Pro rata approach (Cartel case) (Pirringer agreement) DB gets only pro rata credit for DA's percentage of the fault. DB will end up paying $90,000. Plaintiff gets to collect $190,000. Plaintiff thus gets the benefit of the mistake and also encourages plaintiffs to settle. (b) Pro tanto approach (dollar credit). DB gets a dollar for dollar credit for DA's settlement. DB ends up paying nothing. DB thus gets the benefit of the mistake. (c) Pro tanto plus contribution approach (Waddle) After DB pays nothing, DA can now sue for contribution despite the fact that he settled (DA will seek $90,000). DA will thus be released from the detriment of the settlement. Accordingly, this approach encourages defendant to settle, as he can always get out of a bad settlement. (3) Undersettlement Fault Settlement/judgment P DA 40% $10,000 settlement DB 60% $100,000 total damages as found by the jury (a) Pro rata: DB pays $60,000, and P recovers $70,000 total. Plaintiff thus gets the shaft and is forced to take $70,000 when actual damages are $100,000 (b) Pro tanto: DB will pay $90,000 after dollar credit for DA's settlement. DB gets the detriment of the undersettlement (this seems unfair). (c) Pro tanto + contribution: DB owes $90,000, but DB gets contribution from DA to the point of his actual fault- $30. DB ends up paying $60,000, and DA ends up paying $40,000. This approach is not fair to the settler, and additionally, it fails to respect the settlement. (4) Why would P settle out with DA on the cheap? (a) He may have thought he had a bad case against DA. (b) He needs cash immediately, and DA is his best source. (c) DA is borderline insolvent and that is all he has in either cash or insurance funds. (5) If P goes to trial, J&S liability lets him get $90 from DB and $10 from DA. The pro rate rule does not encourage settlement in this instance and even encourages going to trial. (6) If you settle under the pro rata rule, you give up J&S liability (a drawback). C. Tort reform and damages 1. Aspects of tort reform we have already encountered a. Market share liability (Pro Plaintiff in that it weakens traditional CIF requirements). b. Removal of J&S liability by statute: Pro Defendant. 2. Who should bear the risk of insolvency a. Hyp Fault Plaintiff should get/Dx should pay Plaintiff 10% $90 D1 40% $40 D2 50% $50 b. What if D2 is insolvent? (1) Under the traditional rule of J&S liability, Plaintiff can collect $90 from the solvent defendant, D1. Accordingly, D1 bears the risk of D2's insolvency. (2) Several liability only: D1 pays only $40, so Plaintiff bears the risk of D2's insolvency. c. Some states have drafted statutes imposing several liability across the board. NC has retained J&S liability, as have other states. d. A possible compromise: split the risk of insolvency (1) Traditional pro rata-type split: Plaintiff collects from D1: $40 + 1/2($50) = $65 (2) Split on the basis of comparative fault: Plaintiff collects from D1: $40 + .80($50) = $80 e. In NC, where CN still is the law, the risk of insolvency is spear = J&S liability. f. CA statute: Distinguishes between economic and noneconomic damages. (1) For economic damages, like medical expenses and lost wages, J&S liability is retained. (2) For noneconomic damages, like P&S and hedonic damages, several liability is imposed. * Although this may seem at first to put the risk of insolvency on the lawyers, it really does not since the lawyers will end up collecting their 1/3 from the plaintiff's economic damage award. ** Suppose in a given situation, P has no fault, D1 is responsible for 60% of the fault, and D2 is responsible for 40%. Now suppose that plaintiff argues there is no comparative fault as between the plaintiff and the defendants, so the defendants are J&S liable. However, the defendants would respond that the statute says comparative fault, not comparative negligence. Reading the statute in the way plaintiff suggests would defeat the intent of the legislature. g. Suppose that D2 is semi-broke and could only pay half of his several liability. Knowing this, P sues only D1. What can D1 do to avoid getting stuck with the entire damage bill? * D1 can implead D2 by cross-complaint (similar to a Rule 19 motion). 3. Setoff a. Setoff in cases where both parties are insured: Jess v. Hermann (1) P & D were involved in a car wreck, and each claimed against each other for damages. Jess suffered $100,000 in injuries and was 40% at fault. He is therefore entitled to $60,000. Hermann suffered $14,000 in damages, but was 60% at fault. He was thus entitled to a judgment of $5,600. The court the set off the two awards and awarded Jess $54,400. Both parties appealed the ruling. (2) The App.Ct. rules that in situations where both parties are insured, set off does not accomplish its purpose of saving time by eliminating the need for an exchange of checks. Rather, the insurance companies would be paying off, not the individuals. If set off were permitted, the insurance companies gain and both parties lose. (a) Jess gets a lesser amount and he has to pay the balance of the $60,000 out of his own pocket. (b) Hermann recovers nothing. The parties paid for insurance protection, so they ought to receive the benefits. The court holds that set off is inappropriate when the parties are insured. (3) In NC, the answer to the problem would have been even simpler: Since both parties are guilty of CN, both recover nothing. b. Setoff and settlement (1) Fikes v. Johnson (a) Fikes's insurance company pays Johnson for a release. Fikes then sues Johnson (b) Fikes did not consent to the settlement, so he is not bound by it. (c) So, even in a CN state, the parties may still end up recovering from one another. There is an incentive to exchange money based on the prospect of CN. (2) Keith v. Glenn (a) Facts (1) K & G crash (2) K's insurer pays G $1250 for a release (3) K sues G, invoking Fikes in his favor. (4) G counterclaims, offering credit for his settlement. (5) K pleads the release as a defense to G's counterclaim. (6) G says that K may not both ratify and reject the release. (b) Holding (1) If K pleads the release, he ratifies it and therefore K loses his own claim. (2) If K does not plead the release, he retains the right to press his own claim, but he is subject to G's counterclaim minus the $1250 credit. K's Ins co will also refuse to pay off any judgment. (c) K's dilemma: give up my insurance or my claim? In Jess v. Herman, the parties got both their insurance and their claims. If J v. H is a good rule, then K v. G. is a bad rule. (3) Graci v. Damon (a) This was a slick attempt to apply the literal language of a modified CpN statute: "against defendant against recovery is sought." Fault was allocated as follows: P: 30%; D1: 50%;D2: 20%. D2 claims that since P's negligence is more than his negligence, P should be barred from recovering against him. P argues that his negligence must be compares against that of all defendants in the aggregate, not one by one. (b) The court points to a statutory rule of construction that words in the singular are meant to include the plural as well, and it points to legislative action to amend the statute in concluding that the intent of the legislature was to require the court to compare the negligence of the plaintiff with that of all the defendants taken together. (4) Workers' comp hypothetical: Suppose in a given case, fault is allocated as follows: P: 30%; D1 (employer): 50%;D2 (mfr. of machine on which P was injured): 20%. because of workers' comp exclusivity, D1 drops out from the suit. As between P and D2, P is more negligent, but as between P and D1 & D2, the defendants are more negligent. When an employer who is protected by the workers comp exclusivity provision is involved, which universe of fault do we look at? Once Graci v. Damon is adopted, modified CpN becomes pure CpN as long as you have enough defendants, as it is more likely in those circumstances for the plaintiff's negligence to be below 50%. 4. Recoverable damages in personal injury actions a. The standard schedule of recoverable damages (1) Reasonable medical expenses (past & future) (a) Must be proven (b) Future damages will be estimated (c) Payment will be in a lump sum (the traditional rule: otherwise there might be no finality to an action as the courts would be clogged with rehearings on increased expenses.) (2) Lost earning capacity (past & future) (3) P&S (4) Other specifically identifiable harm attributable to defendant's negligence b. What happens if the estimates of future damages are off by a significant amount? (1) Nothing happens: the judgment is final. If the case goes to trial, the plaintiff is stuck with the jury award. c. How to adjust for future expenses (1) $100,000 in ten years is not worth $100,000 now. The proper award is an amount of money that when invested at prevailing interest rates and taking inflation into account will yield $100,000 in 10 years. (2) The interest rate used is normally known as the discount rate. Plaintiff will argue that interest rates are likely to be low over the 10 year period so the amount awarded will be higher. Defendant will argue that interest rates will be high so what he will have to pay will be lower. (a) Figuring the discounted award: two methods (1) Simple interest (effective annual yield) P + I = PRT + P Where: P = Principal (the unknown we will solve for) I = Interest R = Rate (effective annual yield) T = Time If we want the plaintiff to have $150,000 in ten years (assuming 0% inflation and an effective annual yield of 17.18% [10% compounded interest]), then this is how the equation will look. $150,000 = P(.1718)(10 years) + P 150,000 = 2.718P $55187.64 = P (2) Compounded interest Pe(r)(T) = $150,000 Where: P = Principal e = Exponential function r = Rate (compounded interest) T = time Assuming an interest rate of 10% per year for 10 years, here is how the equation will look: Pe(.10)(10) = $150,000 P(2.718) = 150,000 P = $55187.64 (3) Inflation: a rise in the general level of prices. For example, if the annual rate of inflation is 4%, then the amount of money required to purchase something for $100,000 in 1993 will be $148,000 in 2003. (4) 2 arguments in to help the jury arrive at a figure for P&S damages: (a) Per diem: "How much money would you take per minute to suffer the kind of pain the plaintiff is suffering? 50 cents a minute? That works out to $X per year." The per diem argument tends to generate large awards. (1) Some courts do not allow per diem arguments to be made on the grounds that they are prejudicial. (2) But others, including NC, believe the per diem argument is a perfectly legitimate form of argument. However, the jury may refuse to buy the argument. (b) Golden rule (a) What would it cost to hire a proxy (say, a juror) to suffer the same pain & injuries? (b) Almost universally, this argument is barred as prejudicial. d. Hedonic damages: The flip side of P&S. "Loss of the enjoyment of life." (1) For example, if a plaintiff who loved to ski now has injuries that prevent her from ever skiing again, then she may recover damages for loss of the ability to ski. (2) McDougald v. Gerber (1) The plaintiff's injuries in this case induced a coma, and her attorneys sought to collect hedonic damages. (2) The court holds that in order to recover damages for the loss of enjoyment of life, a plaintiff must be aware of that loss. Since she is comatose, she cannot possibly be aware of her loss of enjoyment of life, so she may not recover hedonic damages. Awarding hedonic damages in this instance would not serve a compensatory purpose, so the damages should not be allowed. (3) What purpose do these damages serve? (a) Lure for attorneys to take cases of this kind. (b) Cost internalization? (c) Deterrence, both specific and general. (4) Pre-death P&S in wrongful death actions is awarded to the survivors of the deceased, and accordingly, it is subject to the same objection Judge Wachtler has to hedonic damages for comatose plaintiffs. (5) Two possible approaches to the jury instructions. (a) Come up with a P&S award that includes hedonic damages. (b) Come up with P&S damages and hedonic damages separately. Plaintiffs will prefer this instruction. But even if is a true statement of the law, it may argue for the plaintiff too much. 5. Damages available in wrongful death actions a. Schedule of damages (1) Lost earnings (2) Pre death P&S (3) Medical expenses (4) Funeral (5) Loss of companionship *** Hedonic damages are NOT recoverable! Does this make any sense? b. Criminal law aside, from an economic standpoint if you are going to negligently run into someone, it makes sense to either hit them hard enough to kill them or to back up and "finish 'em off" since the damages in wrongful death actions are lower than those in personal injury actions. [Not so fast! Backing up to finish someone off turns what was a negligent tort into an intentional tort for which punitive damages are available.] 6. Punitive damages a. Up until now, we have talked about compensatory damages, which are intended to compensate plaintiffs for loss, both economic and non-economic. b. Punitive damages are not intended to compensate plaintiffs, but rather to punish defendants and deter them and other from engaging in similar behavior in the future. c. Usually, defendant must have a bad state of mind in order for punitive damages to be awarded. But, is awarding punitive damages appropriate SL products cases? (1) Yes, but only if you can prove fault, (fraud, misrep, malice, etc.) or a particularly bad state of mind. (2) No if the basis of the manufacturer's liability is only SL. d. Some states ban or limit punitive damages (1) WA- Punitives banned unless authorized by statute. (2) GA- $250,000 cap. (3) VA- $350,000 cap. (4) FL- 3X actual damages. But most states have no express limitations on punitive damages. e. Defendants subject to awards of punitive damages do not have some of the same protections accorded to criminal defendants. (1) Proof beyond a reasonable doubt. (2) Double jeopardy protection: In the GL case, reference was made to the profits on all vehicles sold, but that proof can be used in other cases as well. Possible countermeasures to avoid self-imposed jury prejudice. (a) Tell the judge about previous punitive damage awards and let the judge remit the jury award as needed. (3) No protections from unconsititutionlly high damages and vague standards. (4) 8th Amendment (5) No maximum penalty. f. Taxation of punitive damages (1) Federal law exempts damages awarded "on account of personal injuries" from taxable income. However, the IRS interprets this statute as applying only to compensatory damages. Accordingly, it takes the position that punitive damages are taxable. However, a taxpayer could make a plausible argument that since the damages were recovered all in the same suit, then the punitive damages ar "on account of personal injuries" under an "arising out of" analysis. (2) Congressional amendment: Punitive damages based on non-physical injuries are taxable, but it said nothing about punitive damages awarded for physical injuries. g. Constitutional dimensions (1) Haslip (a) An AL statute authorized RS liability for punitive damages. The jury awarded the plaintiff $200K in compensatory damages and $840K in punitive damages. Defendant appeals the award of punitive damages as a violation of the DPC. (b) The S.Ct. ruled as follows: (1) Punitives are a centuries old aspect of tort law. (2) The history of the 14th Amendment indicates that it was not intended to slap new restrictions on punitive damages. (3) But, the court says that punitive damages might be too high in some instances. The Court looks to the procedural protections accorded to defendants. (A) Jury instructions: The Court upholds as constitutional the standard that punitive damages are intended to punish and deter. The Court indicates that it does not believe such a vague standard is unconstitutional when measured against other similarly vague standards used in tort law whose constitutionality is unquestioned, like RPS and P&S damages. (B) Remittur is possible (C) Appellate reduction (4) Punitives that are 4X the amount of actual damages do not cross the line into unconstitutionality. (5) This tepid statement from the S.Ct. on the permissibility of punitive damage awards has confused lawyers and judges alike. Federal and state courts are frustrated by the S.Ct's reluctance to take on the matter and by their terse treatment of it. (2) TXO v. Alliance (a) This case involved an attempt by the plaintiff to slander the title of the defendant to certain mineral rights. The jury though the plaintiff's behavior was abominable and awarded punitive damages. (1) $19,000 in compensatory damages. (2) $10,000,000 in punitive damages. Plaintiff appeals to the WV S.Ct. (b) In an opinion by Justice Neely, a justice who has shamelessly proclaimed that he loves to redistribute income from rich out of state defendants to poor in state plaintiffs and will do so given the opportunity if for no other reason than to get himself reelected, the WV S.Ct. upholds the award of punitive damages and pokes a bit of fun at the US S.Ct.'s handing of the issue as well. (c) Neely distinguished between two sorts of defendants upon whom punitive damages have been imposed: "Really mean" defendants and "Really stupid" defendants. (1) In the case of "really mean" defendants, punitive damages as high as 500:1 have been upheld as permissible. The plaintiff in this case falls into this category. (2) In cases of "really stupid" defendants, there are more limits. 5:1 is usually the limit. (d) Punitive damages enable plaintiff to act as private attorneys general in going after defendants that the criminal justice system could pursue but has not. 7. Actual damages and tort reform (1) Limitations on P&S damages: since P&S damages are compensatory, you can make an argument that such limits are taking away something the plaintiff is entitled to, and is therefore being deprived of property without due process. (a) CA: P&S damages in medical malpractice cases are limited to $250,000. (b) MD: P&S damages are limited to $350,000 for all torts. (c) TX: $500,000 cap on P&S damages in medical malpractice cases except in cases where medical expenses are very low. (Reaching into lost wage awards). (d) CO: Damages are limited to $1,000,000 total damages, including $250,000 non-economic damages. In its discretion, the court can allow a larger damage award. (2) Some of these provisions have been struck down as unconstitutional under state constitutions. (a) Open courts provisions (b) Right to jury trials (c) State EPC's (3) These statutes were brought on by a tort reform movement during the 1980's, especially in the realm of medical malpractice. During that time, a crisis was perceived over the skyrocketing cost of medical malpractice insurance. State legislatures responded with damage caps, especially on P&S awards. What was to blame for the crisis? (a) Outrageous tort awards (b) Ins. co. mismanagement. (4) Other reasons for limiting P&S damages (a) Should people be forced to purchase P&S insurance? Ultimately, patients pay for P&S insurance through higher medical insurance premiums, but no one goes out any buys 1st party P&S insurance. (b) Paternalistic argument: P&S damages encourages plaintiffs to suffer more to collect higher damage awards and may prolong/postpone recovery until after the award. (c) P&S is a windfall to the plaintiff, and the plaintiff ends up squandering the award. According to an ABA journal article, 90& of windfall damage awards are squandered within 5 years. However, the real remedy for this problem is to eliminate the lump sum payment rule and pay the plaintiff in installments. An even better idea would be to put the entire award into escrow and pay the plaintiff as he needs the money. 8. Taxation of damages: a. Medical expenses, lost wages, and P&S are exempted from federal taxation. b. The rational behind exempting lost wages from federal taxation is not clear. However, one possible rationale has to do with the lump sum rule: all the plaintiff's lost wages for past and future work will be awarded at once. If they were subject to taxation, the plaintiff would end up paying more tax on the wages than he would have had he earned the money in due course. (Knocking him into a higher tax bracket). * One way to think about it: Don't tell the jury the award is tax free. However, though the jury will award a judgment for damages that reflects gross income, the lawyer will get what the plaintiff would have had to pay in taxes on the wages. In effect, the rule that awards of lost wages are not taxable results in a subsidy for lawyers. 9. Collateral Source Rule (CSR): Payment from collateral sources (non-defendant) are NOT deducted from damage awards. a. Does this result in double recovery? It may since the incentive is to run up medical expenses so you will end up with a higher damage award, which of course, will be a windfall. (How about subrogation to the insurer?) b. Rule of thumb for insurance adjusters: P&S damages are figured as a multiple of medical expenses: 2 to 3 times by way of settlement. c. Alternatives (1) CSR/No subrogation: Plaintiff gets a windfall, as he gets double recovery. Under the older rule, the plaintiff gets to keep the extra proceeds. (2) Subrogation: Plaintiff collects from his 1st party insurer. and the insurer steps into the shoes of the plaintiff and gets to sue the defendant in his stead and gets to keep enough of the judgment to satisfy what it has paid out to the plaintiff in satisfaction of the plaintiff's claim. (3) Abolish the CSR: Defendant's insurer gets to keep the benefit of the windfall. d. Subrogation is a contract question, but in NC there is a presumption of no subrogation in health insurance contracts. e. Pro- Why should Plaintiff not get the benefit of his bargain for insurance? He has paid the premiums, so he ought to be able to reap the benefits. f. Con- Why should Plaintiff burden the tort system with what is essentially a strike suit for cash. Besides, insurance protects you if the other party is insolvent. Additionally, he would still get the benefit of the insurance is the CSR were not in effect. Typically, his recovery from the insurance company will be quicker and require less proof than his potential recovery from the defendant. g. NC has not abolished the CSR. Any right of subrogation to the insurer is a contract matter. V. Workers' Compensation A. Situation in the American workplace in the late 19th century. 1. Brown v. Kendall required fault to be proven for direct applications of force, formerly a SL tort. 2. The "Unholy Trinity" of CL defenses (CN, AR, Fellow-servant Rule (FSR)) operated to keep injured workers from pressing claims against their employers for on the job injuries. a. The FSR was the worst member of the "Trinity", and it was based on assumptions that were basically false. According to the FSR, if you are injured on the job by the negligence of a fellow worker, you have no COA against the employer because you assumed the risk of your co-worker's negligence when you started working with him. However, (1) No real choice but to quit your job to avoid working with your negligent co-worker. (2) The worker cannot can his negligent co-worker. (3) The co-worker may have never screwed up before. (4) You may have never had any contact with your co- worker before (say, because he had transferred in from another store just before the accident). b. But is the FSR really unfair? Without the FSR, the employer would be liable under an RS theory, but the courts have often shifted the loss to the employee under the rationale that as between an innocent plaintiff and an innocent defendant, the loss should stay with the party who incurred it. 3. Alternatives a. Insurance b. Internalization of the injury costs to promote efficiency. 4. Insurance was the prevailing view at the genesis of workers comp in this country. 5. Form of the insurance a. Guaranteed recovery: no need to prove fault b. Worker loses her right to sue in tort under the exclusivity provision. c. Cannot get P&S damages and lost wage awards are discounted, but medical expenses are covered fully. d. CL defenses are abolished, including the FSR. e. Injury need only be work related. f. The state requires employers to purchase workers comp insurance and to pay the premiums. g. Periodic payments are made instead of a lump sum award. h. You may still sue your employer for intentional torts (and in some jurisdictions for SC torts) outside of the workers comp scheme and still file your WC claim. i. You still may sue other J&S defendants, like manufacturers of work tools. 6. WC does not apply at all to a. Domestic workers b. Casual workers c. Extremely small employers d. Farm workers B. Workers comp is much like SL for defective products. In SL products, "defect" replaces "negligence" or "fault" as the trigger of liability. Likewise, in WC, injury "arising out of and in the course of employment" is the proxy for fault. The two systems differ in this key respect: in SL products, "defect" serves as a good proxy for negligence because defects, either mfg. or design, usually arise by way of negligence. Accordingly, using "defect" as the trigger of liability snags most of those manufacturers who could have been found negligent without snagging an undo number of non-negligent mfrs. Additionally, the entire slate of tort remedies remains available to the person claiming SL products liability. In contrast, the main goals in WC are to provide the employee with a guaranteed source of recovery, but in exchange for a lesser damage award and the loss of the right to sue in tort. The employee is assured of some compensation, but costs are also held down. In this respect, WC is much more like insurance that SL products. C. "Acting outside the course of employment" is a sort of quasi-CN defense, and violating a statute relating to safety on the job, if construed as acting outside the course of employment, is a sort of quasi-CN per se defense. But, in order to keep WC to its stated goal of eliminating the CL defenses, such quasi-defenses should not be permitted. D. If WC does not apply, you face ALL CL defenses to negligence, including the dreaded FSR, CN, and AR if the jurisdiction has not abolished or modified the defenses. The FSR has not been abolished in NC, so if you are a farm worker injured by the negligence of a fellow employee, you haven't a prayer of recovering from your employer on the basis of RS. E. CA WC problems: Sky high premiums 1. Claims for job related stress. (NC is rough on claims for stress.) 2. Fraudulent filing of WC claims and running up of medical expenses. a. "Stress mills" b. TV ads soliciting persons who MIGHT have WC claims. c. "Cappers" who stake out the unemployment offices and recruit recently laid off employees to file WC claims. F. Is there an employer/employee relationship at all? All WC statutes have statutory definitions of employers and employees. G. WC is administered by an administrative board. Preliminary findings are made by an ALJ who sits without a jury. The Commission reviews the findings and determines the award, if any. The parties have the right to appeal into the courts if they are dissatisfied with the results. However, the parties are stuck with the findings of fact of the ALJ unless those findings are "clearly erroneous." H. Course of Employment and the related question of proximate cause. 1. Jaeger Baking v. Kretchmann a. While walking from a bus stop to defendant's bakery where the plaintiff was about to go on a night shift, plaintiff was mugged on the sidewalk in front of the bakery. He seeks WC recovery. b. Commuting rule (Goings and comings rule) (Borrowed from RS law): An employee is not acting within the course of employment when he is coming to work or is leaving work. *** Though this rule is borrowed for RS law (and tax law), not all RS "scope of employment" rules apply in WC. c. Amendment to the WC statute: When an employee is going from the employer's parking lot to the place of work across a public area, the employee is within the course of employment for WC purposes. d. Plaintiff argues that this created a "special hazard doctrine." The legislature was responding to an invitation from the courts to amend the statute to cover employees walking on public property between a parking lot and a work area. Under a narrow reading of the statute, the employee must be coming from or going to a parking lot maintained by the employer. Plaintiff argues that the narrow reading would lead to absurd results. e. The court rules that the line has to be drawn somewhere, and the legislature has drawn the line by statute. Plaintiff WC claim is denied. f. Confusing point about this case: The rule established by the statute and this case draws two lines. In the morning, the line is entering the employer's parking lot, and in the evening, the line is leaving the employer's parking lot. But the real test is whether you are acting within the course of employment, not whether you are on the employer's premises. (Consider the employee of UPS who delivers packages all day long, and accordingly is not on the premises much during his work day.) (1) What about lunch? General rule: if you are eating lunch on the premises and you are injured, you are covered by workers comp. However, if you are off the premises eating lunch and you are injured, you are not covered by WC. (2) Generally, the shorthand "Premises" test is not the true test for WC coverage. 2. Union Colliery v. Industrial Commission a. Plaintiff's deceased was a coal miner who was killed while riding a full car of coal up a vertical shaft. Doing so was a direct violation of a safety statute. b. At CL, plaintiff would have been barred from recovery by CN per se. c. Employer argues that since the employee was in violation of a safety statute that he was no acting within the course of employment. d. The court sees through this argument and sees that by barring recovery on the grounds the employer suggests, the CL defenses would have surfaced again in a different form and would have thus defeated the purpose of WC. Accordingly, the court rules that the plaintiff is entitled to recovery despite the fact that the deceased was in violation of a safety statute. 3. McCarter v. La Rock a. Plaintiff is injured by a WWI souvenir shell that was being housed in a building near the work site. b. Clearly, there is but for cause, but the court bars WC recovery on the grounds of no proximate cause. The court believes that WC retained the CL notions of causation, including proximate cause. c. Proximate cause in this instance does NOT mean "foreseeability." Instead, hindsight is enough to satisfy the proximate cause requirement: foreseeability is not required. If the risk is incidental to the job (at least in hindsight), then the employee is within the course of employment. d. In this case, the employee was not put at any increased risk over that incurred by persons within the radius of the bombshell (in other words, the danger zone created by the bombshell encompassed more than the work site. e. Accordingly, the worker is denied WC coverage. 4. Filitti v. Lerode Homes Corp. a. Plaintiff-worker is hit on the head by part of a falling cornice stone overhanging the work area. Plaintiff seeks WC recovery, and the employer invokes McCarter. b. The court distinguishes McCarter. In McCarter, the increased risk was to the general public. In this case, the increased risk was to the job area. c. Hyp: suppose the cornice stone was hanging over the sidewalk and the plaintiff was injured there. Is there proximate cause? Well, there is an increased possibility that he will have to put himself in the position of increased danger. The distinction is difficult to handle. 5. State Industrial Commissioner v. Leff a. An explosion knock a wall of a building onto the plaintiff while he was on the job. b. In a terse opinion, the court permits recovery under Filiti. The court has subtly eliminated proximate cause as a requirement in WC. 6. Two different rules as to the risk necessary to have a WC claim a. Positional test: but for cause is required, but proximate cause is NOT required. (1) Pro-positional risk test: The test is simple. It is also more like a test used for insurance liability, and it allows for broad compensation. Also, if we are serious about getting rid of a duty of care in WC, and since any proximate cause question can be rephrased in terms of a legal duty of care, maybe the prox cause requirement should either be eliminated or curtailed. b. Increased risk test: both CIF and Proximate cause are required. (1) Pro-increased risk test: The positional risk test stands to overinternalize costs. 7. Horseplay cases a. Carvalho v. Decorative Fabrics (1) Plaintiff was injured when a co-worker discharged an airhose in the proximity of the plaintiff's rectum as a prank. (2) The court distinguishes between two cases. (a) If the victim does not participate in the horseplay and he is injured, the he is clearly covered. (b) But if the victim does participate in the horseplay, then three further questions must be asked. (1) Was the horseplay a substantial deviation from work? (2) Was the horseplay commingled with job performance? (3) Was the horseplay expectable or customary? (3) Rubber band case: The horseplay took place during the job, and it was expectable. (4) Industrial mixer case: The horseplay occurred after hours and was not expectable. (5) The court allows recovery under the circumstances of this case. 8. Injuries during company outings. like company ball games. a. Three hypotheticals (1) "Recess" example: This is enough like eating lunch on the premises to allow WC coverage. (2) Company picnic (3) Company team sports * These last two are the harder questions, and there are cases on the books that go both ways. WC coverage will depend on how intimately the company is involved with the activity. Considerations (a) Who is footing the bill? (b) Is there pressure to attend/play (c) Does the company get any advertizing value out of the game? (d) Who is organizing it? b. Chilton v. Bowman Gray, 262 S.E.2d 347 (N.C. App.). : A doctor broke his ankle playing volleyball at a party to greet new residents. The Ct of App. ruled that the injury was not job related. 9. Batteries at work a. Angry subordinate who lashes out at his superior. Yes, recovery should be permitted under both the increased risk and positional tests. b. Mugging conducted by a stranger (1) Positional test: yes (2) Increased risk test: It will depend on the facts of the case. Was the worker working at night or in a dangerous area? c. Jealous husband who shoots his wife for her infidelity (no relation to work) (1) Positional test: No real connection between work and the injury. There is nothing special about being at work, as the husband could have shot her just as easily somewhere else. No but for cause. (2) Increased risk test: No d. Jealous husband of a wife who is having an affair with a coworker. (1) Positional test: Since there is but for cause, yes. (2) However, a good argument can be made that the affair was a substantial deviation from work, and therefore the affair is not within the course of employment. * Turn of the screw: suppose the affair goes on the premises during work hours and the employer knows about it and allows it to go on. Coverage should be clear in this instance. I. Accident, Injury, and Disease 1. VA Electric & Power Co. v. Cogbill a. Plaintiff one day has to sit in a hard chair instead of her normal soft chair, and also she has to bend over. Her back gives out while she is at work, and so she seeks WC. b. The court denies her recovery. It finds that there was no "accident", one of the triggers for WC liability. According to the court, and "accident" is a "sudden mechanical or structural change in the body." The paradigm: "Something hit you." 2. Three NC cases a. Trudell-HVAC/ installer of heating and AC ducts strains his back. No accident. b. Poe/ roofer whose knee gives out. The court holds there was no accident. c. Griffits/ ruptured disk from lifting. The court again held there was no accident; nothing "hit you." 3. In VA and NC, there are two ways to qualify for "accidental" injury a. External force- "getting hit by something" b. Different or unusual exertion outside the scope of normal job activities (like lawyers getting blisters while chasing ambulances.) **** NC has amended its definition of "injury" to include as "accidental" back injuries that occur during normal exertion. Accordingly, a furniture mover who throws out his back has a WC claim in NC. 4. What is going on? The narrow definition is a response to a legitimate concern about people coming to work with unusual susceptibilities. Is the injury to be a cost of the job or a cost of the susceptibility? (Cf. Thin Skull rule. The difference: The employer has to be liable in the 1st place. The thin skull rule applies AFTER liability has been established. 5. Second injury fund: This fund was established to cover injuries to workers who had unusual susceptibilities to injury that might cost the employer more in WC premiums. Suppose a worker who has one eye is injured, and the injury destroys his one good eye. As someone who is totally blind, he is entitled to recovery for total blindness, but the same injury in a normal human would result only in damages for partial blindness. In order to keep employers from discriminating against such workers for WC reasons, the second injury fund was established to make up the balance caused by the worker's thin skull. The SIF is maintained by a tax on all employers. 6. Another approach: a. Dillon: Though you were injured during the course of employment, what you lost was not worth very much. b. Replace "accident" with "increased risk" version of proximate cause. Such a modification might result in a different result in the 3 NC cases, but Ms. Cogbill would still lose. c. Occupational disease: NC added OD coverage in 1935: N.C.G.S.  97-53 (1) Originally, the statute had an exclusive list of covered occupational diseases. If you had one, you were covered; if you didn't have one, you were not covered. (2) In 1971, NC amended  97-53 to include a catch all phrase that effectively enacted the "increased risk test", but only for occupational diseases. d. What is the essence of "disease"? (1) Not limited to germs or other biological diseases. (2) Chemical diseases are included. (3) Blisters e. Is this a stupid distinction? Why should recovery depend on the injury/disease distinction. (Accidents are required for recovery for injuries, but only an increased risk over that of the general population is needed to trigger liability.) 7. Rehash: There are two triggers for WC liability in NC a. Accident (1) Sudden unexpected external force (something hit you) (2) Not in the normal course of the job (lawyer moving heavy boxes) [NC back injury exception] b. Occupational disease: a risk that is greater than that incurred by the general public to the particular disorder. 8. Hyp: a worker who has gotten severe blisters on his feet at work that keep him from working seeks WC recovery. The worker's best bet would be to argue the blisters are an occupational disease. NC's list explicitly provides coverage for blisters gotten from work tools (shoes are probably not work tools) and a catch all phrase enacting the increased risk test. An argument can be made that if the legislature was crazy enough to list blisters on hands as OD's, then blisters on the feet should qualify as OD's as well. J. Last injurious exposure test 1. Rutledge v. Tultex Corp. a. Plaintiff was a textile worker who worked a 4 different cotton mills. She was exposed to a lot of cotton dust, and she also smoked. She contracted chronic pulmonary obstructive disease and sought WC. b. What should be done with a disease partly caused by job and part caused by a special susceptibility (in this case caused by the plaintiff's smoking)? Should the injury be a cost of the job or a cost of the susceptibility? c. NC et al.: as long as the job increased the risk of the injury, you are covered. 2 tests (1) Significant causal factor (2) Increased risk d. Assuming you have satisfied the test with regard to 1 employer, does it make a difference if you work for more than 1 employer where you are exposed to the harm? (1) By statute: in cases of multiple employers whom all exposed the employee to the same health risk, the employer with whom the employee had the last injurious exposure is liable for the entire injury, even if the causal factor is insignificant. (2) The last injurious exposure rule works out to be fair over the long haul. Situations where you were the major causal factor but not the last injurious exposure will balance out with those cases where you were not the major causal factor but you were the last injurious exposure. (3) The last injurious exposure rule is similar to the market share liability rule announced in the DES cases. The difference: In mkt share liability, liability is divied up according to the market share among the defendants. However, under the LIE rule, full liability is imposed upon the last employer. e. Part of the goal of WC is to remove the roadblocks to recovery and to divvy up the injury among all the employers would be difficult to do if not impossible. f. Do we reach fairness more quickly under this approach? Should the LIE rule be replaced with a percentage of time rule similar to mkt share liability? g. Can LIE be applied fairly in the DES cases? (Nationwide lotteries for DES defendants would pose major DPC problems!) h. Thinking of WC as insurance makes this rule seem more fair (UCC case). i. The beauty of LIE is that it is appears to be a neat, clean trigger of liability. However, it may not be as neat a trigger as we think (Cf. the UCC case). Also, the doctrine poses problems in Bracke v. Baza'r, where the LIE employer could not be held liable on a technicality. The court makes a split hair distinction between a sudden sensitization + activation vs. aggravation of the by subsequent employers, and it uses that distinction to hold the previous employer liable. j. NC case: Cross v. Blue Cross: Plaintiff worked for Blue Cross processing medical insurance claims. She claimed that she suffered from a job related stress disorder and demanded WC. The court examined her personal life and found that 2 family members had died recently, she had an abortion, and she had broken up with her boyfriend. Accordingly, she failed test (1) since work was not a significant causal factor in her claimed injury. Also, the court hints that she also flunks (2) since she did not show that her job created an increased risk of stress over that already incurred by the population. (The NC courts and the legislature are very wary of job related stress claims.) K. When WC is not the exclusive remedy 1. In most states, WC is not the worker's exclusive remedy when the employer is guilty of an intentional tort, like a battery. In other states, the decision is left to the courts. 2. Johns-Manville v. Superior Court a. Plaintiff worked for Johns-Manville handling asbestos. The company repeatedly told him that there were no increased health risks from working with asbestos when they had hard evidence to the contrary. He eventually developed asbestosis, but the company did not tell him or his doctor that asbestos might have been the cause of his condition, nor did the company report the employee's condition to the government. b. The defendant argues that J-M, (1) Fraudulently concealed the health risks associated with asbestos. (2) Fraudulently concealed vital health information from him and his physician as soon as he came down with asbestosis, and that information would have alerted his physician as to the exact nature of the ailment, and (3) Fraudulently concealed the condition from the government by failing to report it. c. The defendant argues: (1) The statute says nothing about an exception for intentional torts, and (2) The statute specifically provides that employers are to be penalized $10,000 for wilful and wanton misconduct. Accordingly, it maintains that defendant is barred from suing the employer in tort for fraud and that the employee's exclusive remedy is WC. d. The court draws a narrow exception to the exclusivity provisions of the WC statute. If (1) The employer's purpose is to injure the worker (battery), or (2) The employer acts fraudulently after the injury and that fraud aggravates the injury, then WC is not the employee's exclusive remedy, and he may sue the employer in tort. e. J-M knew since 1924 of the risks of exposure to asbestos. f. The court distinguishes between pre injury SC and Post injury aggravation. (1) In the case of the former, there is no purpose to injure, so the worker's exclusive remedy is WC. (2) In the case of the latter, there is intent to harm, so there is no exclusivity. g. The court's interpretation of the WC statute is particularly dubious. The court justifies its decision by saying that it does not believe the legislature meant to include such acts under the exclusivity provision. h. What is going on? The court thinks it is the "tort czar" and it thinks it is still administering CL. 3. Woodson v. Rowland: The NC substantial certainty/trench cave in case. Under its holding, NC tort law is more generous to plaintiffs than CA tort law. 4. Do we want the intentional tort exception? Yes, intentional torts are on the border between tort and criminal law, and in criminal law the overriding focus is the moral condemnation of the community. To make an employee's exclusive remedy for an employer's intentional torts WC would frustrate that goal. (Hamlet fire and SC). *** Should we go for the CA exception (purposeful conduct/fraud after the injury) or go with the NC rule (SC torts are not subject to the exclusivity provision). *** Objection to the NC approach: SC has a tendency to fade into negligence. [Not if you restrict the SC to wanton disregard for the value of human life/risk of serious injury] 5. Intentional torts of coworkers a. Well, even if you get past the exclusivity provision, don't you still have to deal with the other problem of RS liability (no liability for the intentional torts of other employees). The solution peculiar to out facts: If the action was taken in furtherance of the business, then you can make it over the CL hurdle and sue the employer. (i.e. supervisor striking an employee for failing to do a job correctly.) 6. "Injury by accident" shows up twice in WC. a. Exclusivity b. Coverage (election of remedies) (The plaintiff's in Woodson chose not to pursue a WC claim because they feared that by doing so they would concede that the injury was accidental. The court indicates that fear was unfounded. The could have pursued both and taken a set off for the amount of the WC recovery. (1) The court does this by defining "accident" for purposes of coverage: {An unlooked for and unanticipated application of force} (Worker's benefit, Worker's viewpoint, accident). (2) But on the exclusivity side, the POV will be that of the employer. Here, intentional tort <> accident. "Accident" ends up meaning two different things depending upon which part of the statute you are looking at. (VERY slick reasoning). 7. Doctrine of Dual Capacity a. Hyp: suppose you work for Coca Cola, and while you are on lunch you buy a Coke bottle that explodes in your hand, causing injury. You sue under an SL theory, but Coke responds that since the injury arose during the course of employment your exclusive remedy is WC. (1) As plaintiff, you would argue the doctrine of dual capacity and argue that there were two relationships involved: employer/employee and manufacturer/consumer. (2) Here, the fact that you were drinking a bottle of Coke while on lunch is a fortuitous consequence. (3) But suppose the employer gave you the Coke, or suppose even further your job is to taste Coke in bottles. b. States are split on the doctrine of dual capacity, but it does seem reasonable. 8. Tort claims against third parties a. When is a third party so identified with the employer to make the worker's exclusive remedy WC? (1) Co-workers (2) NC: "and those conducting his business." except for intentional torts. b. Pleasant v. Johnson (1) A co-worker drives a truck at the plaintiff to see how close he can get without actually hitting the plaintiff. He hits the plaintiff and the plaintiff sues the co-worker for damages. (2) The court holds that there is no exclusivity when the third party's conduct is wilful, wanton, or reckless. c. Insurers who inspect and screw up: Is there exclusivity or can the employee pursue a separate tort claim against the insurer? (1) Key question: is the insurer so identified with the employer so as to fall within the exclusivity provision? (2) The a US Dst. Ct. applying NC law issued 2 opinions on the subject, one finding exclusivity, and the other finding no exclusivity. (3) Even supposing no exclusivity, the ins. co. could always argue they owed no duty of care to the plaintiff. However, the plaintiff could counter with a reliance or 3PB theory. d. How do we mesh WC with the worker's tort claim against the third party? (1) Lorenzetti hypothetical: Worker is injured while driving in connection with her job. The worker collects WC (medical expenses and lost wages to the tune of $6,000) and then sues the negligent driver in tort. (a) In most cases, the WC claim gets paid off quickly and simply. (b) The tort claim takes longer, but in this case it results in a $10,000 judgment. (1) Question 1: Does the driver only have to pay $4,000 out of the $10,000 judgment? NO- under the COLLATERAL SOURCE RULE. (2) Questions 2: Does the fact that the employer has also paid entitle the employer to reimbursement? Almost all WC statutes say yes. It is also possible for the employer to be subrogated to the plaintiff's right to sue the third party in so far as it is necessary to satisfy the WC payments. (2) US v. Lorenzetti (a) Problem: What happens when the tort judgment is for a different type of damages? L was injured by D while on official business for Uncle Sam. He collected the Federal version of WC (FECA) and then sued the driver in tort in PA. Under PA No-Fault accident law, L had to look to his own insurer to cover economic damages (medical expenses and lost wages up to $15,000), but he could still sue in tort for noneconomic damages. He sued and recovered an $8,500 settlement. (b) No-Fault statutes (1) Medical expenses and lost wages must be covered by your own insurer for small economic damage claims (In PA, up to $15,000 for lost wages + medical expenses) The claim is removed from the tort system (2) Plaintiff can still pursue non- economic damages in tort. (c) The government then demanded that L pay back the $2,000 he got from FECA. L refuses and argues that since the judgment was only for P&S, and the statute is only intended to protect against double recovery. He has not gotten double recovery for his medical expenses and lost wages, so he should not have to pay. (d) The US S.Ct. unanimously rules that (under a literal reading of the statute) the statute requires reimbursement. (e) Is this fair? (1) In most cases, the jury awards a lump sum and does not distinguish between the two types of damages. But, it is possible to instruct the jury to distinguish between the two types of damages in its verdict? (2) What about settlement and collusion: if the parties settle, part of the terms of the settlement could be to designate the settlement as entirely non-economic damages (3) L still gets a $6,500 windfall. (3) Lambertson v. Cincinatti Corp. (a) Plaintiff arm is crushed by a press made by the defendant. He collects $8,000 from his employer, sued the mfr of the press, and gets a judgment. The jury allocated fault as follows: (1) P: 15% (2) D: 25% (3) E: 60% The jury fixes damages at $40,000, deducts 15% for the plaintiff's negligence, and sticks D with the balance of $34,000. Defendant is barred from seeking contribution from E, and moreover, E may seek reimbursement from D. (b) The court adopts the PA approach to the problem: allow contribution from the employer up to the amount of his WC liability. The court also states that any further adjustment in the law will have to come from the legislature. (c) Four possible solutions to the problem #1 #2 #3 #4 E Pays 24,000 0 8000 8000 D Pays 10,000 34,000 26,000 10,000 P Gets 34,000 34,000 34,000 18,000 (d) D would like choice #1, since he will be able to recover contribution from the employer up to the amount of the employer's comparative fault. However, #1 is unfair to E. To make E pay contribution would destroy the limited liability of WC. (e) E would like #2 (no contribution + reimbursement), but that would be unfair to M who is forced to shoulder the entire burden of E's negligence. (f) Is there a compromise? Yes: allow contribution up to the amount of WC liability. This is the solution the court adopts. (g) A fourth possibility is to get rid of the assumption that P must get $34,000. After all, P is part of the WC "bargain" and therefore he should have to bear some of the burden. D should pay his several liability share, and E should pay his WC share. The result is a lesser recovery for P. Additionally, it tends to undermine P's right to recovery from the third party. L. Opting out 1. In some states, employers may "opt out" of WC and allow themselves to be sued in tort by their employees. But though employees will have to prove negligence, the "Unholy trinity" of CL defenses will not apply, and the employer can be made to pay tort damages as well. Some businesses have opted out and enjoyed success with their decision, like the hotel in Texas.