Saint Louis University Law Journal

Spring, 1991

*623 TORT LAW AND PRIVATE ORDERING

Michael I. Krauss [FNa]

Copyright © 1991 by the St. Louis University School of Law; Michael I.

Krauss

I. PREAMBLE: A TALE OF TWO TORT LAWS

A. Courvoisier v. Raymond (1896) [FN1]

Defendant Courvoisier was asleep in his bed in the second story of a brick building in South Denver, Colorado. His jewelry store occupied a portion of the first floor of the structure. Certain parties began pounding on the jewelry store door, awakening Courvoisier shortly after midnight. When Courvoisier asked what they wanted, these parties insisted upon being admitted, and when Courvoisier refused to comply they used "profane and abusive epithets" toward him. [FN2] Unable to gain admission, they broke some signs on the front of the building and then entered by another opening. Passing upstairs, they began knocking on the door of a room where Courvoisier's sister was sleeping. Courvoisier partially dressed himself and with his revolver, expelled the intruders from the building. At this point the intruders were joined by two or three others at the rear of the store. To frighten the group away, Courvoisier fired a warning shot. Unfortunately, instead of retreating, the intruders passed to the street in front, throwing stones and brickbats at Courvoisier, who fired a second shot and then a third shot into the air.

The shooting attracted the attention of plaintiff Raymond, a police officer who was at the tramway depot across a dark street. With two deputies, Raymond started toward Courvoisier. The deputies stopped to arrest the rioters and Raymond rushed toward Courvoisier, simultaneously calling out that he was an officer and that Courvoisier should stop shooting. When Raymond put his hand in his pocket, [FN3] Courvoisier *624 shaded his eyes and taking deliberate aim, fired, causing the injury to Raymond. At trial, Courvoisier stated: "[A]s I looked ... I saw this man put his hand to his hip pocket. I didn't think I had time to jump aside, and therefore turned around and fired at him. I had no doubts but it was somebody that had come to rob me, because some weeks before Mr. Wilson's store was robbed. It is next door to mine." [FN4]

The Colorado Supreme Court reversed the lower court judgment in favor of the plaintiff. It stated that if a reasonable man would have believed his life was in danger, then the shooting of this innocent "attacker" was justified and no tort liability ensued.

B. Obstetrics and Gynecologists v. Pepper [1985] [FN5]

Prior to treating its patients, Obstetrics and Gynecologists, a clinic, required patients to sign a standard agreement that provided that all disputes arising between the parties be submitted to independent binding arbitration. Under the agreement, both parties expressly waived their right to a jury trial. The arbitration procedure is substantially faster and cheaper than jury trials: it also typically results in awards that are more favorable to the defendant than 1980s medical malpractice jury trials. Generally, the fees charged by clinics whose contracts contained an arbitration clause are lower than fees charged by comparable clinics whose contracts did not contain such clauses. [FN6]

Following the standard procedure of the clinic, the receptionist gives patients the arbitration agreement along with two information sheets and informs her that any questions concerning the agreement will be answered. Patients must sign the agreement before receiving treatment; the physician signs later. If the patient refuses to sign the arbitration agreement, the clinic refuses treatment.

On November 28, 1979, plaintiff Pepper entered the clinic to obtain a prescription for an oral contraceptive. An arbitration agreement was signed; however, Pepper later disclaimed any recollection of either signing or reading it but admitted the signature was hers. The contraceptives were accompanied by a detailed written warning of the possible side effects of the pills, including the risk of stroke. Eight months after receiving her prescription, Pepper suffered a stroke that left her partially paralyzed. She sued Obstetrics and Gynecologists, claiming that it should have refused to prescribe the contraceptive because of her peculiar medical history. The defendant moved to stay the lawsuit *625 pending binding arbitration.

The Nevada Supreme Court affirmed the lower court's judgment that the arbitration agreement was an "adhesion contract," that the plaintiff was a weaker party who had "no choice as to its terms," and that the agreement was "unduly oppressive." [FN7] The motion to stay was rejected and a jury trial granted.

It is frequently useful in legal analysis to spotlight complicated theoretical issues by citing cases. These two tort stories contain seeds for much of the following discourse on the connection of Tort Law with liberty and coercion.

II. COGITATIONS ON THE NATURE OF TORT LAW

Dire losses occur in life. Sheriffs are shot. People get sick and die. Others are struck by lightning. People walking on university campuses have their lives devastated by rapists. Kind, gentle merchants go bankrupt or "lose their shirts" when savvy competitors set up shop next store. Nice people have car accidents and one driver emerges miraculously uninjured while another is crippled for life. Consumers purchase cars in Europe only to learn that the ship transporting it to the United States has perished because of an act of war, an unexpected iceberg, or the pilot's drunkenness.

In each of these cases, indeed in all cases in which losses occur, a mature legal system must determine whether the natural victim [FN8] of this injury may transfer the loss to some other person. This is typically done through tort and contract law. Both constrain our liberties, but do so in very different ways.

Contract law, to paraphrase a classic liberal paradigm, [FN9] arises from man's realization that natural liberty, [FN10] if unaccompanied by binding cooperation, will result in a self-sufficient life that is "solitary, poor, nasty, brutish and short." [FN11] From this realization springs the deep and meaningful paradox that liberty is most meaningfully implemented when it is voluntarily traded away. Though man may not alienate his *626 freedom entirely, [FN12] he can and indeed must parcel bits of it off if he wishes to participate in a social life. By doing this, of course, he produces consumer surplus that results in wealth for his fellows [FN13] while at the same time receiving from the latter more than he gives up--according to his own, freely determined function of values. Contract law is thus all about voluntary obligations, or limits on liberty, which are necessary if liberty is to be satisfactorily consummated. This unfamiliar nexus of contract law and liberty is at the source of many of the most acute doctrinal disputes in contract law. [FN14]

Tort law concerns liberty in a different way than does contract. Like contract law, tort law results from voluntary acts. A reflex act cannot result in liability in classical tort theory. [FN15] Also like contract law, tort law produces legal obligations. Courts force both tortfeasors and recalcitrant contractual debtors to sacrifice their property [FN16] or part of their liberty.

Tort law differs from contract law, however, in that contract law *627 involves voluntary acts designed to result in a loss of liberty. When a contract is concluded, some risk has been intentionally purchased and sold and some obligation deliberately assumed. [FN17] When a tort is committed, however, the liability-incurring act is typically not undertaken with the intention of incurring an obligation. [FN18] Whereas in contract law parties apportion risks before losses occur, in tort adjudication a tribunal will allocate among the parties the cost of a perilous event ex post facto. In this sense, parties do not freely consent to tort obligations. This important point deserves emphasis. In no meaningful way can a negligent tortfeasor be said to consent to compensating her victim. Commensurately, the victim of a non- negligent or insolvent tortfeasor does not consent to not being compensated for her injury. Both tort liability and absence of liability are independent of meaningful consent. [FN19] Tort law is in some ways more like criminal law than contract law. [FN20]

Since the interface between contract and tort will resurface throughout this paper, it is useful to note their inevitable technical interdependence. [FN21] Imagine a world where all persons susceptible of having conflicting interests could negotiate with each other without cost. In this transaction-cost-free universe, [FN22] an array of contracts would voluntarily *628 allocate the risks of persons' interactions among themselves in a Pareto-optimal way. [FN23] For example, motorists wishing to travel at high speed could negotiate risks among themselves, and could purchase from slower motorists and pedestrians a promise to keep off the streets at the appropriate time in exchange for suitable payment. If an accident occurred, the sharing of its costs would be determined entirely by these contracts, which will have allocated foreseeable risks and provided a default rule for unanticipated perils. If a suit arises, it would be a contract suit, provoked by interstitial ambiguity or by the failure of a party to keep her word. In a free society, the court's role would consist of interpreting the contract--by determining which risks each contracting party assumed--and of holding the recalcitrant debtor to the freely agreed upon payment. [FN24] Of course, ex post, this debtor would prefer not to have taken on the risk she had been "paid" to assume. Given that the accident has indeed happened, she will consider her ex ante compensation inadequate. This is natural; we all prefer to get something for nothing. If this ex post desire were judicially implemented, however, it would follow that Pareto-superior [FN25] contractual allocations would be ineffectual. In essence, contract would be of no legal value. This would frustrate the "autonomy of the will" conception of man. [FN26]

Of course, our world is not the fluid utopia sketched above. "Collisions" of interests, or accidents, occur between parties that could not have efficiently contractually allocated the risks of their behavior. Some such collisions are literal ones: those on the public road. [FN27] Others concern use of public land, water, or air resources.

*629 The early common law of contracts was acutely sensitive to the resemblance of tort and contract as means of allocating risks, and to the moral and economic preferability of the latter when available. As fifteenth century England's merchant trade grew, courts began to hear complaints against persons professing a particular skill who had botched their jobs: for example, a complaint against a carpenter who built a house that caved in shortly after its completion. A new action called trespass for deceit gradually developed from the basic tort action of trespass. Courts typically assigned the risk of a cave-in to the builder, reasoning that plaintiff's rights had been trampled upon in much the same way as if a stranger had walked onto plaintiff's estate and smashed the building. To quote a foundational opinion: If a carpenter [agrees to] make me a house good and strong and of a certain form, and he makes a house which is weak and bad and of another form, I shall have an action of trespass on my case. [FN28]

Note that the court borrows tort terminology. This is a classic recognition that both tort and contract assign risks, and that contract law--voluntary, ex ante acceptance of risks--expands, and tort--involuntary, ex post assignment of risks--shrinks as technology permits free people to get together and exchange rights. Through cases like these, the legal systems of free societies gradually elaborated rules of interstitial interpretation of contracts, positing default allocations of risks unless parties explicitly or impliedly stipulated otherwise.

This notion of "interstitial interpretation" bears fleshing out. One can imagine a spectrum of contractual explicitness. At one extreme--radical formalism--only formal explicit contractual clauses would be enforceable. At the other extreme are "hypothetical contracts," characterized by wholesale judicial imposition of "contractual" obligations to which rational parties would have consented, even though there is absolutely no indication of express or implied consent.

The idea of enforcing explicit contracts with implied terms discoverable through typical interpretive methods denotes the concept of "interstitial" obligations. This concept transcends radical formalism, but falls significantly short of endorsing hypothetical contracts. Interstitial interpretation mandates court enforcement only of contracts that are actual in parties' minds, though it requires courts to complete actual contracts where necessary, "filling in the blanks" through traditional exegetic and hermeneutic methods. This distinction between implied and hypothetical is quite important jurisprudentially. Enforcement of the former is dictated by respect for liberty, whereas resort to the latter disavows individual liberty by imposing socially-maximizing allocations *630 on quite possibly unwilling parties. [FN29]

A liberal defense of "radical formalism" is conceivable. Such a defense would consist of a critique of including implied promises in the class of valid contractual obligations. A deontological argument for radical formalism is as follows:

1. Imprecision in contractual terms may sometimes be a deliberate way for one party, who may be endowed with greater information about the state of the facts or the law, to get a concession without paying for it. In these cases there is no real meeting of the minds, since A expects that B is unaware that a particular clause will probably turn to A's advantage: A consciously refuses to "fess up" to B for fear that B would refuse to contract at the proposed "price." [FN30]

2. It may well be that to require disclosure by A would be inappropriate from an efficiency perspective if required disclosure reduced B's incentive to collect information. [FN31] Similarly, to force all contractual terms to be spelled out would be very expensive. But, even if true, this response is not available to a non-consequentialist, liberty-based defense of contract.

3. Liberty would, then, be better served by radical formalism, according to which a contract is regarded as a request from contracting parties to the state to coercively enforce only explicit mutual promises. Nothing merely implied could thus be deemed to call for coerced enforcement.

The response to this defense of radical formalism is conspicuous. Parties in fact do not generally desire to be forced to spell out all possible contingencies by contract. [FN32] If parties prefer that the judicial reader infer the obligations probably intended, as opposed to merely socially desired obligations, then a legal system that thwarts this desire is not a legal system respectful of liberty.

Contract provisions of European Civil Codes provide prime examples of classical liberal backdrops for contracts. These sections provide non- compulsory [FN33] assignments of risk, based on an analysis of customary transactions. The assignments are designed to lower transaction costs. Parties can "buy into" the default code procedure cheaply and write simple contracts, or they can draft their own fully contingent contract. *631 In the French Civil code, contract law occupies nearly 200 articles, while Delict--tort law--is contained in only five. The 2200-article Quebec code, [FN34] inspired by the Code Napoleon, establishes that "obligations can be incurred through contracts or delicts." Delicts are deliberately placed after contracts, as they are seen as a morally subordinate source of obligations. Delicts are discussed in only four articles. The primary operative article states simply: Every person capable of discerning right from wrong is responsible for the damage caused by his fault to another, whether by positive act, imprudence, neglect or want of skill. [FN35]

The common law reaches similar results, although it has done so more slowly and less efficiently. [FN36] Both systems carved out clear exceptions for those unable to bind themselves by contract--minors and the feeble-minded. Judicially imposed "tort-like" allocation of risks remains the rule for them until they attain the moral status of adults. This judicially imposed allocation resembles "hypothetical contracts" in that it abstracts from subjective desires. And, of course, tort would remain for areas in which contract was simply not feasible.

Clearly, as free society progressed, both express and implied contracts became the prime allocator of risk while tort allocation of "hypothetically" agreed-to risks receded to a secondary, but necessary, position.

III. TWO MODELS OF TORT LAW

Using Weberian methodology, [FN37] it is possible to set up a continuum of "ideal" images of tort law as they relate to these underlying premises of political philosophy, then briefly trace the presence of these ideal types throughout the history of Western tort law. [FN38]

At one pole we find what may be entitled a moral tort system. A moral tort system presupposes the wickedness and technical infeasibility of attempts to socially engineer the course of human conduct. [FN39] Far from being a master planner, the court here is seen as a *632 necessary but non-omniscient arbiter between two citizens having a disagreement. One of these citizens has suffered a loss and wishes to shift it to the other. If the court decides to transfer this loss, it must have reasons for doing so that the parties understand. Indeed, the reasons must [FN40] appeal to common values, for the court is incapable of supplementing these values with Platonic decrees. This appeal to values is simultaneously an appeal to the intelligence of free and responsible people. It communicates that people may avoid tort liability by learning from their experience and conforming to common values. In a Kantian sense, [FN41] this kind of tort law treats parties as ends. It tolerates no ex ante interference with people's liberty unless they have consented to limitations of their liberty [FN42] or have manifested their intention to violate other peoples' rights. [FN43]

At the other pole of this continuum is an amoral tort system with very different premises. This view ascribes to tort law no necessary moral content and makes no appeal to social values. It sees tort law as a means of manipulating sanctions through commands, in Skinnerian [FN44] fashion, so as to achieve a social optimum which by definition the court believes it can locate. This paradigm is of a constructivist [FN45] and positivist tort law. People potentially affected by--and readers of--judgments *633 need not morally "internalize" [FN46] them any more than the rat "internalizes" the structure of its maze. In a Kantian sense, this system treats parties as means to a social end which the court has discovered and believes is good. Liberty is of secondary, if any, importance. There is, additionally, no particular requirement that the planner's social optimizing be corroborated by customary opinion or morals.

Note that this tort system accommodates both prior regulation of behavior and after-the-fact liability for conduct. [FN47] The choice between these two methods is a constructivist, technical one. If a regulator possesses enough information, she should issue commands in advance. If not, additional information provided in each case will supply indications of the socially optimal solution. There may in fact be a "natural" preference for ex ante regulation, for at some point information will become "thick" enough to permit efficient prior control of behavior.

The first ideal type of tort law is portrayed by the historical bases for liability. In Anglo-American law, two distinct types of acts could lead to tort liability. On one hand, individuals were liable for damages that ensued when they deliberately and knowingly performed an act that violated another person's property rights. [FN48] This is the rubric of intentional torts, of which trespass, assault, and battery are the most well-known. [FN49]

Many American law students study Vosburg v. Putney [FN50] as their first case in torts. In that case, a pupil kicked or touched a companion in the classroom after order had been called. The "kicker" had no desire to cause injury. Unbeknownst to him, however, the "kickee" was recovering from an infection in just the spot were contact occurred. The blow reactivated his wound, eventually leading to permanent impairment. The defendant was held liable for the entire injury since he had knowingly violated the plaintiff's person, despite his lack of knowledge of the plaintiff's "egg-shell skull" status. In an interesting aside, the court suggested that its decision might have been different had the *634 kick occurred during recess on the playing field. [FN51]

The underlying propositions of Vosburg merit elaboration. Clearly the court felt that plaintiff, regardless of his fragility, possessed a right to bodily integrity. Sitting peacefully in his seat in class after order had been called, he had given no sign, express or tacit, that he had yielded this right. His presence on the playing field during recess, on the other hand, might have conveyed an implied authorization to engage in usual, accepted, on- the-field roughhousing. The court emphasized that a crucial factor in the case was defendant's intention to strike plaintiff. Had their bodily contact been accidental, the court's reasoning would have been vastly different.

Vosburg symbolizes the moral content of the law of intentional tort. Individuals possess rights that may not be traded off by the court. Deliberate violation of these rights by a responsible person [FN52] is a tort [FN53] and requires that the tortfeasor make good for all damage caused. [FN54] *635 This requirement implies that the court did not accept a utilitarian defense. For example, defendant might have argued that the plaintiff was the "least-cost-avoider" [FN55] of the damage, as he alone knew of his injury and could have stayed home or worn a special leg brace designed to protect the tender spot until healing was complete. Thus, wealth could arguably have been maximized if the plaintiff had protected himself, or at least if he had advertised his disability. If the court had allowed this sort of a defense against an intentional kick, it would in essence have denied plaintiff's property right in his leg, substituting for it a consequentialist liability rule. [FN56] On the other hand, consent--express or implied, as by the plaintiff's presence on the playground--to abandonment of property rights is possible and would bar compensation. Such consent would be part of a contract reallocating the risk of damage to the leg.

The paradigm of Vosburg is of free individuals who own property which, absent their consent, [FN57] may not be deliberately taken by anyone else.

Most disputes resulting in tort litigation are not the result of intentional torts. Most 'collisions' are both accidental and unintended by all parties. The moral stance of the law of intentional torts doesn't concern such cases. [FN58] Who should bear the loss here? For our purposes, two possible solutions may be distinguished.

One solution, divorced from common-sense morals, identifies causation as the sole determinant of liability. It suffices, it is thought, [FN59] to *636 determine who harmed whom; the author of the harm is then held liable to the sufferer, even if the former's act is innocent or morally appropriate. [FN60]

Another opinion holds causation as a necessary but not a sufficient criterion for tort liability. This alternative refuses to transfer accidental losses from the "natural" victim to anyone else unless the proposed transferee has misbehaved. This is, of course, the negligence standard. It is more morally- laden than its strict-liability alternative.

Some writers feel that American common law initially instituted strict liability as the rule for accidental torts, and only relatively recently reverted to negligence. [FN61] Some of these authors thus see the drift towards absolute liability as a return to the origins of the common law. [FN62] This thesis would, if true, put the common law at odds with Civil law countries, virtually all of whose Natural-Law-inspired nineteenth century civil codes clearly established negligence as the basic rule of liability. [FN63] Many socialist authors view these codes as bourgeois tools. To these authors, the rise of the negligence standard in American tort law was a subsidy for the protection of infant industries that would have been unable to prosper had they been forced to compensate those whose lives they ruined. [FN64]

The thesis that negligence supplanted strict liability as the basis for unintentional torts can be attacked as being historically confused. The basic problem arises from the formulary system unique to common law pleadings. [FN65] Forms of action permitted royal courts to assert dominance over baronial tribunals following the Norman conquest. If a subject could pigeon- hole his complaint against a fellow citizen into one of the royal forms of action, then, upon payment of the appropriate fee, the Chancellor's representative would issue a writ to the local constable ordering the defendant to be brought before the King's court, where *637 law common to the land would be administered. For political reasons relating essentially to the shifting balance of power between King and lords, the number of forms of action became limited. Trespass was the main form of tort action, since it was related to crimes committed on land. Ultimate title to all land was vested in the King, validating royal authority. The writ of trespass gradually "fossilized," and in the fourteenth century a political compromise authorized the new writ of Trespass on the Similar Case, destined to cover trespasses in which the harm did not result "directly" from physical force. [FN66]

When old cases are read to determine whether strict liability or negligence was the operative rule of liability, the problem of disingenuous pleadings--caused by plaintiff's obligation to phrase the facts so as to satisfy a form of action and defendant's accompanying duty to shape facts to satisfy an accepted formulary defense--is often an insuperable obstacle to understanding. For example, if negligent conduct by X directly results in physical harm to Y, the appropriate remedy was an action to trespass. "Negligence" was never mentioned in the direct pleadings. Whatever the real facts, it was alleged, under pain of dismissal of the suit for lack of jurisdiction by royal courts, that "defendant assaulted, beat, and wounded the plaintiff with force and arms." [FN67] If the defendant wished to invoke his lack of negligence as a defense, his written defense would simply deny that the damaging act ever happened! [FN68] Orally, the jury would hear claims of negligence and lack of negligence, and would make its decision based on the parties' behavior. But to get to the jury, a very different written record was conceived.

For centuries, then, the law relating to accidents was suppressed. What transpired before the jury was not entered on the record. In the casebooks, the question of negligence presented itself only in exceptional cases in which, by mistake, the defendant invoked his lack of fault by special plea in answer to the claim of trespass, instead of denying that the accident ever occurred and then waiting to present the defense of lack of negligence to the jury. These mistakes [FN69] resulted in a *638 rejection of the defense as unfounded in law since the court officially had jurisdiction only to decide whether a trespass act had or had not occurred. Clearly, negligence might well be a basic rule of tort law, but to invoke it to the jury one had to indulge in word games in the written record. [FN70]

Nevertheless, clues to the omnipresence of the negligence rule remain. [FN71] For example, suits for the wounding of a horse were frequently taken against blacksmiths, who responded in the written pleadings with denials that the incident ever occurred! Clearly, the true dispute was whether the blacksmith had negligently shod a horse, but the claim had to be formulated to abstract from the negligence.

When finally the courts tired of these games and decided that trespass would henceforth be reserved for intentional torts, [FN72] the action of case was at last used to try other tort suits using a negligence standard.

American scholarship duplicated these English findings. Professor Gary Schwartz read and analyzed every nineteenth century tort case decided in California and New Hampshire. Not only did he find widespread indications that negligence was an operative principle of tort law, he also found no proof for the Marxian subsidy thesis. [FN73] Indeed, the first cases to explicitly invoke negligence involved individuals, not corporations. [FN74] When the clutter of the forms of action is cleared away, classical tort law essentially evaluates conduct. Indeed, once the forms of action were abolished, allegations of negligence spread from the writ of "Case" to all ordinary declarations in tort which did not allege intentional invasion of rights.

The virtue of the negligence rule is that it respects man's character as a moral animal, free to act but obliged to do so with as much concern for his neighbor's welfare as for his own. Only a negligence rule makes questions of causation, linking human action to results, meaningful. Holmes made this abundantly clear in The Common Law:

An act is always a voluntary muscular contraction, and nothing else

*639 ....

When a man commits an assault and battery with a pistol, his only act is to contract the muscles of his arm and forefinger in a certain way, but it is the delight of elementary writers to point out what a vast series of physical changes must take place before the harm is done.... Not only natural causes, but a living being, may intervene between the act and its effect. Gibbons v. Pepper, [FN75] which decided that there was no battery when a man's horse was frightened by accident or a third person and ran away with him, and ran over the plaintiff, takes the distinction that, if the rider by spurring is the cause of the accident then he is guilty. In Scott v. Shepherd [FN76] ... trespass was maintained against one who had thrown a squib into a crowd, where it was tossed from hand to hand in self-defence until it burst and injured the plaintiff. Here even human agencies were a part of the chain between the defendant's act and the result....

Now I repeat, that, if principle requires us to charge a man in trespass when his act has brought force to bear on another through a comparatively short train of intervening causes, in spite of his having used all possible care, it requires the same liability, however numerous and unexpected the events between the act and the result. If running down a man is a trespass when the accident can be referred to the rider's act of spurring, why is it not a tort in every case ... seeing that it can always be referred more remotely to his act of mounting and taking the horse out?

Why is a man not responsible for the consequences of an act innocent in its direct and obvious effects, when those consequences would not have followed but for the intervention of a series of extraordinary, although natural, events? The reason is, that, if the intervening events are of such a kind that no foresight could have been expected to look out for them, the defendant is not to blame for having failed to do so....

The difference taken in Gibbons v. Pepper ... is not between results which are and those which are not the consequences of the defendant's acts: it is between consequences which he was bound as a reasonable man to contemplate, and those which he was not. Hard spurring is just so much more likely to lead to harm than merely riding a horse in the street, that the court thought that the defendant would be bound to look out for the consequences of the one, while it would not hold him liable for those resulting merely from the other; because the possibility of being run away with when riding quietly, though familiar, is comparatively slight. If, however, the horse had been unruly, and had been taken into a frequented place for the purpose of being broken, the owner might have been liable....

To return to the example of the accidental blow with a stick lifted in self-defence, there is no difference between hitting a person *640 standing in one's rear and hitting one who was pushed by a horse within range of the stick just as it was lifted, provided that it was not possible, under the circumstances, in the one case to have known, in the other to have anticipated, the proximity. In either case there is wanting the only element which distinguishes voluntary acts from spasmodic muscular contractions as a ground for liability. In neither of them, that is to say, has there been an opportunity of choice with reference to the consequence complained of--a chance to guard against the result which has come to pass. A choice which entails a concealed consequence is as to that consequence no choice.

The general principle of our law is that loss from accident must lie where it falls.... [R]elatively to a given human being anything is accident which he could not fairly have been expected to contemplate as possible, and therefore to avoid.... If this were not so, any act would be sufficient, however remote, which set in motion or opened the door for a series of physical sequences ending in damage; such as riding the horse, in the case of the runaway, or even coming to a place where one is seized with a fit and strikes the plaintiff in an unconscious spasm. Nay, why need the defendant have acted at all, and why is it not enough that his existence has been at the expense of the plaintiff? The requirement of an act is the requirement that the defendant should have made a choice.... Unless my act is of a nature to threaten others, unless under the circumstances a prudent man would have foreseen the possibility of harm, it is no more justifiable to make me indemnify my neighbor against the consequences, than to ... compel me to insure him against lightning. [FN77]

Another virtue of the negligence standard is that it regulates the relationship between persons on the basis of equality. It requires an objective comparison of the ex ante risk and the cost of prevention. [FN78] Ceteris paribus, the greater the risk of injury and the more serious the amount of potential harm to strangers, the more care will be taken by a *641 moral person. [FN79] The defendant must implicitly acknowledge not only that the persons he might affect have property rights, but that their interests have the same claim to consideration as do his own. If it is assumed that strict liability has a moral content, these persons cannot insist that their holdings are more valuable than the defendant's freedom.

Furthermore, by measuring the risks and costs objectively, a tortfeasor is precluded from invoking her subjective capacities as justification for a preferential vantage point for the determination of her relationship with others. A motorist rounds a bend to find obstructing her path two objects, a prize animal and a cheap piece of furniture, one of which she must inevitably strike. Would we blame the motorist for directing her car towards the less valuable object? But what of the owner of the cheap furniture, who placed a high subjective value on it? Symmetrically, a tort victim is precluded--as she should not be in a low transaction cost, contractual situation [FN80]--from invoking the high subjective value she places on her lost property to limit the tortfeasor's freedom. [FN81]

Along with a negligence rule, three other elements seem inherent to a moral, liberal approach to tort law.

First among these is the requirement of causation. In a liberal society, it is clear that negligent behavior alone cannot establish liability. Tort law must locate dividing lines between cases where man is liable for harm suffered by others and those where he is not liable. The act for which a tortfeasor is sued must cause injury if tort is to be distinguished from state regulation of human behavior via welfare legislation and criminal law. [FN82] The requirement of causation in tort law is *642 an expression of the transitivity of the defendant's injuring the plaintiff. [FN83]

The causation component of a moral tort system poses sticky problems in some limited cases. In Summers v. Tice, [FN84] for example, the plaintiff was accidentally injured by one of two hunters who negligently shot in his direction. The plaintiff was unable to identify which gun launched the pellet that pierced his eye. [FN85] He nonetheless obtained a verdict against both defendants, who were held obliged to prove that his shot did not cause the harm. [FN86] This "alternate liability" appears justified when one considers that defendants were hunting together [FN87] and were both negligent. It seems appropriate to transfer to them the burden of disproving causation, because their wrongful actions hurt the plaintiff [FN88] and because such a move eliminates the moral hazard of multiple tortfeasors misbehaving together and thereby avoiding tort liability. [FN89] On the other hand, it is clear that had evidence revealed that the pellet came from one defendant's gun, the other would have been exonerated. [FN90]

*643 A corollary of the causation requirement is that joint and several liability [FN91] only be granted in limited cases, [FN92] and for "collective torts" in which joint action causes damages. [FN93] Holding two people liable for damage when, at most, one of them has acted wrongfully, is incompatible with the moral character of tort law. [FN94]

Tort law should play second fiddle to contract law because only parties are able to consummate their rights; this is not the role of the state. [FN95] If two parties allocate risks between themselves by valid contract, there is no role for tort law. If tort law becomes the judicial means to alter contracts then its property/liberty nexus will have been turned topsy-turvy. The Gynecologists and Obstetrics case [FN96] is a situation in which contract is present and should dominate. Courvoisier [FN97] is an example in which recourse to contract is impossible, and tort properly governs.

Tort law should be concerned with correcting injustices caused by a tortfeasor's damaging abuse of his liberty. Thus, a tort action victim should never receive an award greater than the damages she has suffered. Punitive damages in tort, [FN98] a distinctly American phenomenon, [FN99] impart a criminal tint to tort law. This phenomenon converts a system of private ordering to one of state regulation. [FN100]

*644 The United States is also virtually alone in its refusal to allow winners of tort suits to recover court costs from losers. This means that in the absence of punitive damages, any compensation received will necessarily be insufficient compensation. Likewise, contingent fee arrangements, also virtually unique to the United States, ensure that successful plaintiffs will receive some fixed fraction short of full recovery. Both these factors make punitive awards attractive as a way to approximate full compensation. [FN101]

Finally, for all practical purposes the United States is alone in its insistence that tort liability be essentially the domain of the jury. Arguably jurors view punitive damages as a lottery that they themselves may win someday, especially when the defendants are corporate bodies. [FN102]

IV. THE SHIFT OF MODELS IN MODERN TORT LAW

Many recent developments in tort law can be understood as depicting paradigmatic shifts whereby the moral idea of tort, centered on property and individual freedom, is abandoned in favor of a tort system that is a component part of a constructivist, regulatory, public-order legal structure. This section offers illustrations of this paradigm shift.

A. Products Liability Law

Many products liability suits are essentially contract problems. If I think my new car is a "lemon," I also think that the seller and the manufacturer have misperformed the (implied) contractual obligation to deliver the promised goods. [FN103] Tort law more appropriately gets involved when no explicit or implicit contractual link, for example, no agreed-upon allocation of risks, binds the victim to the tortfeasor.

In Thomas v. Winchester, [FN104] a package of the poison belladonna *645 was incorrectly labeled as a therapeutic drug by its manufacturer, who sold it to a pharmacy. The latter sold it to Thomas, who gave it to his wife. She ingested it and was injured. The manufacturer was, uncontroversially, held liable to the woman. It is obvious that the manufacturer knew the pharmacy would resell the drug, and that the implied warranty to the pharmacy about the product's contents was destined to benefit the ultimate consumer. [FN105] In MacPherson v. Buick, [FN106] the defective wheel of a brand new car collapsed, injuring its driver. Again, if the legal jargon is cleared away it becomes clear that the car was not as represented implicitly or explicitly by Buick, [FN107] and that such representation was relied upon by the plaintiff.

Holdings like these seem agreeable to the moral paradigms of tort and contract depicted above. A shift in paradigm occurs, however, in a series of New Jersey and California judgements [FN108] based on illiberal scholarship of the 1950s and 1960s. [FN109] Influential law professors like Friedrich Kessler disparaged contracts as necessarily iniquitous products of "unequal bargaining power" resulting, therefore, in oppression of weak consumers by strong manufacturers. [FN110] Regulation of human conduct became a favored substitute for private ordering to these authors. If the legislator would not accomplish this then the courts could by substituting tort judgments for contract law. Tort theory was revolutionized as an instrument of state planning. Leading authors like Fleming James [FN111] and William Prosser [FN112] insisted that absolute liability *646 would serve as a cheap risk-spreading device favoring poor consumers unable to purchase first-party insurance.

This theory, based on incompetent notions of what insurance is, [FN113] has triumphed today. Products liability has become an immoral attempt to implement public ideas about distributive justice, rather than an effort to enhance private ordering through corrective justice. The central thrust of enterprise liability--the underpinning for strict liability doctrine--is its indifference to moral-based notions of assigning responsibility for harm. The litany that modern cases focus "upon the safety of the product, rather than the reasonableness of the manufacturer's conduct" [FN114] masks the fact that liability for products has abandoned any search for careless behavior in favor of an impersonal taxing/redistribution system.

Thus transformed, this subset of tort law has, inter alia, had the following effects:

1) Extended liability for defective manufacture where the product is different from manufacturer's representation to liability for defective design where the product is exactly as represented by the manufacturer, but remains unduly dangerous. [FN115] "Defective" here is loosely defined. It seems that a design is defective if a jury, uneducated as to engineering trade-offs, thinks it would have designed the product differently. So Honda has been held liable for putting "lightweight materials" in its cars although the plaintiff admitted that he had purchased the car for the fuel economy the light weight helped achieve. [FN116]

2) Tort law has refused to allow consumers to assume risks inherent in product consumption. A trespasser who dives head-first into a four-foot- deep, above-ground pool, has collected from the pool's manufacturer for its failure to warn adequately of the risks of such activity. [FN117] A ladder manufacturer instructing buyers to place the ladder at a 75 degree angle against a wall is held liable when a user places the ladder at a more dangerous angle and falls. [FN118] A mother is *647 allowed to reach the jury with her claim that a peanut butter manufacturer breached its "duty to warn" her that her baby might choke if its mouth was filled with the product. [FN119]

As insurance analysts know, impossibilities of adequate risk aggregation, along with intense adverse selection [FN127] and moral hazard [FN128] problems, make third-party insurance vastly less efficient than first-party insurance. [FN129] By reducing the amount of efficient insurance available, products liability law has thus increased risk in many ways. [FN130] If a new ladder with a huge, built-in "insurance" premium is too expensive, some consumers will keep rickety old ladders. Liability suits have precluded insurance for--and thus the economical manufacturing of--safe intra-uterine devices (IUDs). It is estimated that 160,000 unintended pregnancies will result from their non- availability. These pregnancies will in turn provoke 88,000 abortions that are far riskier than any IUD side-effects. [FN131] Again, utilitarian considerations of minimizing risk reinforce the previously discussed moral objections to prohibiting people from self-determining their future.

These increases in risk are the direct result of judicial replacement *649 of private evaluation, acceptance, and trade of risk by public regulation. [FN132] By refusing to tolerate that individuals might choose "dangerous cheap" cars as opposed to risking employment, pocketbook, and health by having no car at all, courts in essence adopt a "let them purchase a Mercedes" mentality. Of course, individual car owners quite rationally seek payouts even in excess of the huge insurance premium already bundled into their purchase. Pending suits brought by injured motorists seek liability of auto manufacturers who chose not to equip their cars with Supplemental Restraint Systems, also known as "air bags." These bags are of marginal utility for drivers who buckle their seat belts. Airbags may in fact increase risk if they encourage unbuckled driving, because they offer no protection for lateral collisions. [FN133] Repeated lawsuits, if successful, would nonetheless "regulate" airbags into existence, thereby increasing the price of cars and the unemployment rate, and keeping unsafe clunkers on the road as if regulated by a government agency.

B. Medical Malpractice

Judicial constructivism has largely emptied medical malpractice law of its moral and corrective content. As the Anderson [FN134] and Obstetrics [FN135] cases imply, many courts seem dissatisfied with the lack of universal government paid health insurance. The same simplistic reasoning that concluded that manufacturers could cheaply insure against accidents substitutes doctors' liability insurers for first-party health plans. Despite demographic evidence that people are healthier than ever, [FN136] medical malpractice suits increased by over 1,300% from 1963 to 1986. [FN137]

Inefficient "preventive medicine" such as excessive testing and extensive paper trails are not iron-clad protections against liability when patients' treatments are unsuccessful. Troublesome "wrongful life" *650 cases, [FN138] in which the child plaintiff claims that a "right" to have never been born was violated by defendant's non-diagnosis of an abortion-provoking birth defect, present evidence of what one author has called "a revolution of rising expectations." [FN139] Medical care consumers refuse to be held, and courts refuse to hold them, to contracts whereby in exchange for lower prices they forgo access to inefficient insurance. [FN140] Warnings that treatments occasionally have unavoidable side-effects are also randomly held to be insufficient, thereby depriving their authors of the economic security such warnings would afford. [FN141]

C. Environmental Torts

Constructivist desires to help consumers, coupled with scary revelations about multifold causes of diseases like cancer, [FN142] have led to products liability type environmental torts. Mass environmental tort cases often arise from workplace problems, despite the complaint that conditions of work are par excellence and contractually negotiated in consideration of the price paid. In the classic case of Smith v. Baker & Sons, [FN143] Lord Bramwell couched his dismissal of one such suit in the language of contract interpretation:

The plaintiff here thought the pay worth the risk, and did not bargain for a compensation if hurt: in effect, he undertook the work, with its risks, for his wages and no more. He says so. Suppose he had said, "If I am to run this risk, you must give me 6s. a day and *651 not 5s." and the master agreed, would he in reason have a claim if he got hurt? Clearly not. What difference is there if the master says, "No, I will only give the 5s."? None. I am ashamed to argue it.

Implicit in Bramwell's statement is a vision of tort described several times in this article; if the parties have not re-allocated risks voluntarily, then there must be a moral reason for the judge to shift losses from their natural victims. This vision is absent from suits complaining that worksite presence of asbestos, dust, or even cigarette smoke has enhanced the risk of contracting cancer. [FN144] Surely it is the case that having a job, when compared to unemployment, substantially decreases the risks of illness and death!

Moral reasons were arguably present in the "Love Canal" dispute with negligent Hooker Chemical, [FN145] although the damages claimed may seem high. Indeed, had residents obtained advance knowledge of Hooker's intent to let toxic poisons flow onto their property, the residents could arguably have obtained an injunction prohibiting the activity. [FN146] Was this moral basis for loss transfer present in the "workplace" Agent Orange case, [FN147] where 2.4 million persons, including United States veterans, families, foreign veterans, and others, settled their claims against seven chemical company defendants for $180 million, only hours before the huge class action was to begin? [FN148] Is hostile Viet Cong fire from leafy jungles preferable to assuming a trace risk of illness? [FN149]

Principal doctrinal victims in environmental tort cases have surely been proximate causation and damages. The former has rapidly been *652 cast off in the face of data that human dietary intake of "nature's carcinogens" is likely to be over 10,000 times higher than the involuntary intake of man-made ones. [FN150] Theories have been proposed [FN151] to allow partial recovery when risk of any given harm is increased, as opposed to probably caused, by toxic materials. [FN152] These theories would, additionally, allow suits to be taken for increased risk whether or not "maturation" had occurred, before it is even known whether plaintiff has even contracted the disease in question. [FN153]

In this way the havoc wreaked on causation affects traditional tort requirements that damages be suffered. Suits for "cancerphobia" [FN154] are distinct from claims for damages generated by the disease itself. Cancerphobia suits intellectually represent a means to sue ex ante for the creation of a risk.

These suits are facilitated by new rules of procedure that encourage the consolidation of many small claims into "common question class actions." Such procedural rules are not objectionable if the basic structure of tort law requiring fault and causation are maintained. When the basic structure is abandoned, the common question class action permits citizens to band together as regulators seeking to convince a judge to fine through damage awards and perhaps eliminate as economically *653 non-viable business activities that provoke fears. [FN155]

Intermingling and interdependence of public and private concerns break down the remedial, moral structure of private law. Most people are victims of the very nuisances they help create and from which they profit. Class actions notwithstanding, it seems intolerable that, at the limit, everybody be allowed to sue everybody. Should one individual be allowed to collect from all users and manufacturers of automobiles for the enhanced risk due to their gasoline emissions? The alternative to dealing with these problems through some warped version of tort, is to deal with it self-consciously as a problem of public law. [FN156]

V. EX POST VS. EX ANTE: SUGGESTIONS FOR REFORM

Tort law has an important function in any privately-ordered society that has not reached the ideal of completely specified rights and instantaneously negotiated contracts. If applied as intended, tort law symbolizes the juridical equality of all property holders and the Kantian *654 moral values embodied by an 'inverse Golden Rule.' [FN157] Since freedom and juridical equality typically coincide with wealth maximization, tort law may also be shown to be efficient in the Paretian sense of that term. [FN158]

As private ordering has receded and the demand for public allocation of resources increased, the structure of tort law has been invaded. [FN159] Instead of being a supplement to contract, tort has displaced contract. [FN160] The continued use of tort terminology results in a chaotic legal structure.

The law of contracts appears incoherent in its protection of human freedom. After an accident has occurred, when the occurrence--but not the future effects--of an injury has become certain, contract law allows for settlement of a tort claim. Certainly over ninety-nine percent of all tort claims result in the conclusion of an enforceable contract before final judgment. But if consumers are able to assume a risk of future damages in return for present compensation after an accident occurs, why are they increasingly precluded from doing so [FN161] before the occurrence? Does the idea prevail that people are inherently irrational before being injured but become rational afterwards? This does not meet my intuitions, nor have I seen empirical evidence of it. I see no reason to allow settlements on the one hand, while prohibiting contractual assumption of risk or waiver of tort liability on the other. [FN162] Civil law systems still allow contracts whereby tort claims are waived ex ante. Such contracts are enforced unless the tortfeasor is guilty of faute lourde. [FN163]

Given the incoherence of the present system, several authors have advocated overt returns to the primacy of contract. Presumably, overt *655 appeals that people be allowed to assume risks are unrealistic.

Jeffrey O'Connell has been promoting a general statutory scheme to encourage settlement programs that are established before accidents but that are not binding on accident victims until an express ratification is made after the injury has occurred. [FN164]

Interestingly, Robert Cooter and Steven Sugarman have proposed the creation of a state-regulated market in "unmatured tort claims." [FN165] This would in effect go beyond classic tort doctrine, which allowed tort rights to be waived in contracts between the eventual tortfeasor and victim. Cooter's proposal would allow victims to enforceably "sell" their tort right to anyone, not just to the eventual tortfeasor. This would eliminate problems of monopsony and so- called "unequal bargaining power" that are arguably reasons for the present reluctance to enforce waivers. The economics of this proposal are relatively simple and follow from tort or insurance discrepancies due to the high loading costs [FN166] and the uninsurable nature [FN167] of several types of damages in present-day tort law. For relinquishing her right to sue, the victim would receive enough to allow her to buy much more first-party insurance than she currently gets through the third-party tort system. Likely buyers of these rights would be insurance companies. They could purchase the waivers in quantity and process them through a clearinghouse not unlike futures markets. Indeed, the price that insurers would "pay" under this plan could conceivably be a discount on the first-party policies they offer. [FN168] In this way, victims could get broader accident coverage at a lower real cost.

Both these proposals, and others like them, [FN169] are thinly disguised ways to rehabilitate contract, and to return tort to its previous confines. A first-best solution would recognize that the root question involves our choice of paradigm, that is, our ideas about tort and private ordering.

END OF DOCUMENT