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Global Liability Issues
Vol. 2 February 2002


How should the Law of Products Liability be Harmonized? What Americans Can Learn from Europeans

ENDNOTES

  1. Raoul Berger Professor of Legal History, Northwestern University School of Law, Professor of Business Law, Kellogg School of Management, Northwestern University, Associate Research Fellow, Institute of United States Studies, University of London.
  2. The key authority was California Supreme Court Justice Traynor’s opinion in Greenman v. Yuba Power Products, Inc., 377 Pl.2d 897 (Cal. 1962) (en banc), and the holding in that case made its way into the general law of torts through the American Law Institute’s Restatement (Second) of Torts, Section 402A (1965), which provides, inter alia, that “One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property . . . [even though] the seller has exercised all possible care in the preparation and sale of his product . . .”
  3. For the celebration of those rules by the famous torts scholar William L. Prosser, see, e.g. William L. Prosser, The Fall of the Citadel (Strict Liability to the Consumer), 50 Minn.L.Rev. 791 (1966). For a typical example of judicial employment and expansion of the doctrine, see. e.g., Lovelace v. Astra Trading Corp., 439 F.Supp. 753 (D.C.S.D.Miss. 1977) (Explaining the doctrine of 402A and extending it to apply to the case of bystanders injured by products.)
  4. The amount of such a tax on American industry and American consumers is staggering. One study reported in 1989 concluded that: “$80 billion annually is attributable directly to litigation costs and increased insurance premiums [to deal with the threat of litigation] with another $300 billion annually attributable indirectly to the [torts liability] crisis.” William A. Worthington, The “Citadel” Revisited: Strict Tort Liability and the Policy of Law, 36 S.Tex.L.Rev. 227, 249 (1995)[Hereafter referred to as “Worthington.”). After observing that sporting goods manufacturers estimate that 15 percent of the costs of their products is spent to cover the risk of litigation, and that manufacturers of football helmets put the figure at 55 percent, machine tool manufacturers at ten percent, and fifteen to twenty percent for step-ladders, Worthington concludes that “This cost burden acts as a mandatory tax on American manufacturers and as a surcharge on American consumers.” Id., at 250.
    For another estimate of the size of the Tort “tax,” see the recent study, Tillinghast-Towers Perrin, Tort Costs Trends: An International Perspective, (New York, New York, 1995), which concluded that the cost of the United States Tort system for 1994 was $152 billion. This figure, according to this study, has increased 125% over the past ten years. The study also noted that between 1930 and 1994 U.S. tort costs have grown almost four times faster than the overall rate of growth of the U.S. economy. The Tillinghast-Towers Perrin 1995 study also concluded that the U.S. tort system was the most expensive in the industrialized world, and that U.S. tort costs were 2.2% of U.S. Gross Domestic Product (GDP), a figure substantially higher than that of other developed countries studied and two and a half times the average of those studied. Finally, this study observed that the U.S. tort system returns less than 50 cents on the dollar to those damaged, and that less than 25 cents of each dollar represents actual economic loss to claimants.
  5. See note 4, supra. See also Testimony of Lester Brickman before the Subcommittee on Telecommunications, Trade and Consumer Protection of the Commerce Committee of the House of Representatives Hearing on Liability Reform, April 30, 1997 (“The tort tax is every bit as real as the sales tax and aggregates about 150 billion dollars a year; as a percent of GNP, it averages 2.2 times the tort costs of most European countries.”)[Hereafter referred to as “Brickman.”) See also, on the American “litigation explosion,” Walter K. Olson, The Litigation Explosion: What Happened When America Unleashed the Lawsuit (1991)(Detailing the harm done by the litigation explosion to America in general and American industry in particular, and highlighting the abusive tactics used by American litigators.]
  6. Worthington, supra note 4, at 229. (“Rather than a respected institution, our tort system now has the aura of a high-jackpot lottery.”) See also the authority cited for Worthington’s statement, in his note 4, “Ruth Marcus, Are Punitive Damage Awards Fair to Firms? Supreme Court Finally Agrees to Referee High Stakes Disputes, Wash. Post, Sept. 23, 1990, at H1,H4 (stating that ‘punitive damages ‘have made civil litigation sort of like the lotteries you have in so many states’’)(quoting [now United States Solicitor General] Theodore B. Olson).”
  7. For a description and history of the movement toward “strict liability” in the European Community and the manner in which products liability rules apply in the different countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, and the United Kingdom), see generally Commission of the European Communities, Report from the Commission on the Application of Directive 85/374 on Liability for Defective Products, COM (2000) 893 final, Brussels, 31.1.2001 (Hereafter, “Commission Report.”). Directive 85/374, issued on 25 July 1985, “introduced in the Community the principle of objective liability or liability without fault. According to it, any producer of a defective movable must compensate any damage caused to the physical well-being or property of individuals, independently whether or not there is negligence on the part of the producer.” Id., at 5. Directive 85/374 provided for periodic review of the law of member states with regard to products liability, and also provided for some variation among the law of member states. Id., at 5. In 1999, the Commission adopted a “Green Paper on Liability,” which contained proposals for modifications of the law of products liability, in a direction which generally would have imposed greater liability on manufacturers, and asked for comments from all interested parties as to how the 1985 Directive had worked in practice, and to what extent it ought to be modified. Id., at 5-6. According to the Commission Report issued after the receipt of comments on the Green Paper. These comments are available at: http://europa.eu.int/comm/internal_market/en/goods/liability/replies.htm.
    The Commission Report indicated that the law of products liability in the European Community was generally in harmony with the 1985 Directive, and that the Directive, “functions properly in practice.” Id., at 8. The Commission Report did note, however, that because of the United States “legal framework of which US product liability law forms part,” according to figures presented by Belgian industry, “the US legislation [regarding products liability, which presumably includes common law doctrines] renders exports from Europe to the United States two times (for textiles and steel), five times (for food stuffs) and ten times (for pharmaceuticals) more expensive than exports to other countries.” Id., at 9.
    The Commission Report did not recommend changes in the 1985 Directive, but did recommend further study of the “economic impact for industry, insurance companies, consumers and society as a whole . . . of introducing producer liability also in case of development risk and of eliminating maximum financial limit for serial incidents.” Id., at 29. These measures would, of course, impose further liability on manufacturers.
  8. See generally Sandra N. Hurd & Frances E. Zollars, Product Liability in the European Community: Implications for United States Business, 31 Am. Bus. L.J. 245 (1993) (Explaining all the reasons why even if the European Community were to adopt a rule of strict products liability damage judgements recoverable in Europe by plaintiffs would be significantly less than they would be in America) .
    For other evidence that the strict liability regime in the European community is significantly less costly than the American regime, see, e.g. Gregory Bond, In Search of Balance Between Science and Societal Concerns in Shaping Environmental Health Policy, March 12, 1999, a presentation at the First Annual Isadore Bernstein Symposium, “Environmental Health Policy: Whither the Science?” (University of Michigan School of Public Health)(www.dow.com/environment/reports/speech4.html), stating:
    Far and away, the U.S. has the highest tort costs. To further illustrate the point, in 1996, Dow [Chemical Corporation] in the U.S. spent one dollar on litigation expenses for every 160 dollars of U.S. sales, whereas in Europe we spent one dollar on litigation for every 40,000 dollars in sales. There is essentially no difference in the types of products we are selling that can account for this cost differential. I have responsibility for advising on risk management for Dow products globally, and my European, Canadian, Asian and Latin American colleagues just cannot comprehend our complex U.S. legal justice system where people can win huge financial judgments based on emotions and absent any scientific facts. Additionally, the litigation environment in which we operate has a tendency to stifle critical self-analysis.
    A quick mathematical calculation will indicate that in 1996 Dow was spending 250 times as much (figured as a percentage of sales) in litigation expenses in the U.S. as compared to Europe. Dow’s most recent figures indicate that the gap has narrowed from the 1996 ratio to a point where Dow spends $1.00 on litigation costs for every $71 in sales, but in Europe the figure is $1.00 on litigation for every $7,000 in sales. In rough figures, then, Dow now spends 100 times as much (as a percentage of sales) in the U.S. as it does in Europe, though both in the United States and Europe the amount that must be spent for litigation as a percentage of sales is increasing dramatically. [Marsha Rabiteau, Presentation to the Steering Committee of the Institute for Legal Reform of the United States Chamber of Commerce (January 11,2000) (quoting a speech by the general counsel of Dow Chemical].
  9. For a study of how American products liability law, and, in particular, its rule of “strict liability” hurts American firms chances for competing in the global marketplace, and results in a failure to market some goods in this country, see, Alfred W. Cortese, Jr. & Kathleen L. Blaner, The Anti-Competitive Impact of U.S. Product Liability Laws: Are Foreign Businesses Beating Us at Our Own Game? 9 J.L. & Com. 167 (1989). Cortese and Blaner observe, for example, that as a result of the increased exposure to damage judgements in the 1970’s and 1980’s “U.S. businesses have paid insurance costs that were twenty to one-hundred times higher than their foreign competitors.” Id., at 182.
  10. Id., at 180-181, noting that while U.S. firms may be strictly liable in U.S. Courts not only for the products they sell here, but also for the products they sell abroad, foreign firms, even if they may have some exposure for the goods they sell here, will most likely not be liable for the products they sell abroad, and thus they will have a competitive advantage, because of lower overall costs, over U.S. firms. This may enable them to offer goods at lower prices than can American firms, and thus drive American firms out of business. It appears that this has happened already “in the U.S. sporting goods and pharmaceutical industries, where foreign manufacturers have completely taken over the markets for hockey equipment, trampolines and other gymnastic equipment, (footnote omitted) as well as the markets for certain vaccines and contraceptive devices.” Id., at 188.
  11. See generally Commission Report, note 7, supra.
  12. The idea that harmonization of American civil law with that of other countries in a manner that reduces the excessive verdicts and other foibles of the current American tort system is beginning to penetrate the consciousness of legal scholars. See, e.g. Rene Lettow Lerner, International Pressure to Harmonize: The U.S. Civil Justice System in an Era of Global Trade, 2001 B.Y.U.L.Rev. 229 (arguing for the need for such harmonization).
  13. On the unpredictability of the American law of strict products liability, see, e.g., Worthington, supra note 4, at 230 (“By its very definition, strict tort liability arises irrespective of conduct. [footnote omitted] It has no moral foundation on which to distinguish conduct which is acceptable from that which is unacceptable. Decision making is random, and conduct is judged ex post rather than ex ante. As a result of its philosophical failure, the doctrine [of strict products liability] lacks the moral foundation and predictability necessary to command either respect or obedience.”)
  14. For a discussion of the kind of risks the United States faces because a foreign corporation victimized by an excessive tort judgement might seek a remedy under NAFTA, see Michael I. Krauss, NAFTA meets the American Torts Process: O’Keefe v. Loewen, 9 Geo. Mason L. Rev. 69 (2000)(Discussing a case where a Canadian corporation which suffered a $500 million adverse verdict in a Mississippi torts case sought a remedy against the United States under NAFTA) .
  15. Hurd & Zollars, supra note 7, at 254.
  16. For statements that the failure of the Clinton Administration’s health-care initiative was a “spectacular failure,” see e.g. Jules Witcover, Taking stock as Clinton’s time runs out; Legacy: Bill Clinton’s record is a mixture of good intentions and bad judgment, with the economy providing an antidote for poisonous personal behavior, The Baltimore Sun, January 15, 2001, P.1M, Barbara J. Saffer, White Women not Wild about Hillary; Pollsters Wonder how She Can Win without Big Shift, The Washington Times, December 7, 1999, P.A1, Al Kamen, Sunday in the Loop, The Washington Post, September 19, 1999, Sunday Magazine, P.W04.
  17. As this is written there are efforts in the Congress and in the White House to pass a patient’s “bill of rights.” It is unclear whether this effort will be successful, and it is equally unclear whether, even if such a bill passes, it will help or hurt the effort to stem deleterious litigation. For the machinations over the probably forthcoming patients’ bill of rights, see, e.g. Robert Novak, G.W. Bush Shows his Tough Side to Congress, Augusta Chronicle, August 8, 2001, P.A04 (indicating that the President will get what he wants), John F. Dickerson et. al. Bush’s Two Sides; Working the Hill on HMO Reform, he can be Dazzling, or Bafflingly Distracted. But Can He Win?, Time, August 6, 2001, P.20 (discussing the issues, and asking whether the President can succeed in getting a Patients Bill of Rights that restricts lawsuits against HMO’s.)
  18. It is the normal rule in tort cases that the only damages that ought to be recovered are those needed to make the plaintiff whole. According to the “collateral source rule” as it is now administered in American Courts, however, evidence of benefits flowing from a “collateral source,” such as health care insurance, are inadmissible to reduce damage recovery from defendants, because “The defendant wrongdoer should not . . . get the benefit of payments that come to the plaintiff from a ‘collateral source’ (i. e., ‘collateral’ to the defendant).” 2 Harper and James, The Law of Torts, 1343, Section 25.22.” Pryor v. Webber, 263 N.E.2d 235, 236 (Ohio 1970). The reason for the rule evaporates, however, where the defendant will pass on costs to consumers and others, and where punitive damages and other features of the civil justice system are operating in a manner injurious to society as a whole.
  19. The attempt to eliminate the “collateral source rule,” in Ohio, for example, was recently struck down by the Ohio Supreme Court, in a lamentable decision frustrating Ohio Civil Justice Reform. Ohio Academy of Trial Lawyers, 715 N.E.2d at 1062,1089-90 (Ohio 1999). For criticism of the Ohio decision, see, e.g., Jonathan Tracey, Note: General Law Issue: Ohio Ex Rel. Ohio Academy of Trial Lawyers v. Sheward: The End Must Justify the Means, 27 N. Ky. L. Rev. 883 (2000) (the court improperly “twisted two constitutional rules to invalidate the law.”)
    The frustration of Tort Reform measures by courts would appear to re-impose significant economic costs on consumers and on the economies of states that have passed such measures. According to Thomas J. Campbell, The Causes and Effects of Liability Reform: Some Empirical Evidence. National Bureau of Economic Research, Inc. Working Paper # 4989 (1995), when states pass such civil justice reform measures, there are productivity increases of from 7 to 8% in the state, and increases in employment of from 11 to 12%, and if multiple tort reform measures are passed increases can range from 10 to 20% for productivity and employment. Conversely, Campbell found, when states pass measures that increase potential tort liability such as comparative negligence rules or rules requiring the payment of prejudgment interest, there are significant decreases in productivity and employment.
  20. Hurd & Zollars, supra note 7, at 254.
  21. See, e.g. Roger Clarke, Books, The Independent (London), August 18, 2001, Features, P. 11, briefly commenting on Jonathan Harr’s book Funeral Wars, and noting “how [Harr] represented a Biloxi undertaker in his battle against an aggressive Canadian funeral parlor conglomerate. The resulting massive damages award ruined the company and made the Wall Street Journal wonder about the future of US business in the shadow of this unpredictable ‘American Tort monster’. [Concludes Charke:]This pretty straightforward account [of Harr’s] will convince you that the downfall of America lies in its uncontrollable litigation culture.”
  22. See, e.g. Greg Torode, Courtroom Circus a Poor Way to Solve Leadership Crisis, South China Morning Post, November 19, 2000, P.12 (“It is, of course, all a sign that America’s politics reflects its society. America boasts more lawyers per head of population than any other nation and is probably easily the most litigious.”) Dick Feagler, Playing the Game: Wheel of Misfortune, The Plain Dealer (Cleveland), April 18, 2000, P. 1B (“The law schools of America annually disgorge more lawyers into our population than any reasonable citizenry can absorb. These lawyers emerge, on the make, into a world full of competition. Naturally, they are hungry to earn back their law school tuition and make enough extra to strut with their peers.”) For an attempt to argue that we don’t have too many lawyers or too much law see Marc Galanter, Too Many Lawyers? Too Much Law?, 71 Denv. L. Rev. 77 (1993).
  23. The most notable recent example of the argument is Gerald N. Rosenberg, The Hollow Hope : Can Courts Bring About Social Change? (University of Chicago Press, Paperback Ed., 1993).
  24. For the frustration of Americans with their legislatures, see, e.g. Thomas Gais & Gerald Benjamin, Public Discontent and the Decline of Deliberation: A Dilemma in State Constitutional Reform, 68 Temple L.Rev. 1291 (1995). For some commentary on the tension between courts and legislatures as law-makers, and the concomitant separation of powers problems, see, e.g., Susan Thompson Spence, The Usurpation of Legislative Power by the Alabama Judiciary: From Legislative Apportionment to School Reform, 50 Ala.L.Rev.929 (1999), Marci A. Hamilton, Discussion and Decisions: A Proposal to Replace the Myth of Self-Rule With an Attorneyship Model of Representation, 69 N.Y.U.L.Rev. 477 (1994)(Arguing that legal scholars’ notions that the courts should act to remedy legislative failures to act flows from an incorrect conception of the legislative role), Bernard W. Bell, R-E-S-P-E-C-T: Respecting Legislative Judgments in Interpretive Theory, 78 N.C.L.Rev. 1254 (2000)(Arguing that Courts, under the guise of “interpretation” should not usurp the legislature’s role), Hans A. Linde, Monstanto Lecture: Courts and Torts: “Public Policy” without Public Politics?, 28 Val. U.L.Rev. 821 (1994)(Arguing that the formulation of public policy ought to be for legislatures, and that when courts set aside tort reform measures they may be acting improperly). For the general argument that courts in the twentieth century, particularly the federal courts, have usurped the Constitutional role assigned to legislatures, see Stephen B. Presser, Recapturing the Constitution: Race, Religion and Abortion Reconsidered (1994).
  25. See generally Worthington, supra note 4, and sources there cited.
  26. See Brickman, quoted in Note 5, supra.
  27. For the suggestion that it is the American lawyers who have benefited from American torts law, see, e.g., Worthington, supra note 4, at 263-264: “In the end, perhaps only the legal profession has truly benefited from Justice Traynor’s great experiment.” For further sources in support of Worthington’s claim see those cited in his footnote 170, and, in particular his quotations of two English judges: “In decrying the magnitude of contingent fee awards received by American attorneys, Lord Denning declared that, to his ‘English eyes,’ the American contingent fee system ‘savoured of champerty.’ [citation omitted] Lord Shaw observed: ‘It is notorious in the United States that the scale of damages for injuries of the magnitude sustained by the plaintiff is something in the region of ten times what is regarded as appropriate by the conventional standards of the courts of [England].” See also Brickman, supra note 5.
  28. See, to similar effect, Stuart Taylor Jr., Paying Reparations for Ancient Wrongs is Not Right, The National Journal, April 7, 2001, Legal Affairs, P.1005, Vol.33, No.14 (Observing, making an analysis much like that in the text, that “When we seek to punish corporations, we actually punish ourselves, because we’re the ones [as investors and consumers] who end up paying.”)
  29. See, e.g. Jennifer Fischl-Kruger, Gold Funds Are Glittering As Stock Market Lags, Investors Business Daily, August 24, 2001, P.B2 (Most investors in the recent market have lost money, except for those who invested in gold), Tom Walker, Buying Opportunities Set Stage for Recovery of Bull Market, Atlanta Journal and Constitution, July 2, 2001, P.1S (Noting the widespread damage suffered by investors, but suggesting that buying opportunities now abound, and the end of the Bear market may be near.)
  30. For some reports on why the dot-com boom went bust, see, e.g. Gary Hoyle, Revising the Script in E-Commerce Class, Toronto Star, August 16, 2001, P.K03 (The dot-coms went bust because managers hadn’t learned the basics of management), Tom Walker, Business Press: The “New Economy” Receives Second Look, Atlanta Journal and Constituiton, August 14, 2001, P.3C (Reviewing a special issue of Business Week reporting that the Dot-Com’s went boom because of “irrational exuberance”), Matthew Lynn, Come the Retribution, Sunday Business, August 12, 2001, P.19 (Noting the allegation that the villains in the dot-com boom and bust “are the global investment banks who stand accused of pumping up the boom, peddling absurdly over-inflated shares and pushing mergers that left companies burdened with debts that will in many cases prove ruinous.”)
  31. Hurd & Zollars, supra note 7, at 254.
  32. “The typical contingent fee paid by an American client ranges from 25% to 50%, depending on the stage of the case at the time of resolution [footnote omitted]. A limit of 25% generally exists for cases settled before trial. [footnote omitted]. A fee of one-third or 30% of a judgment is standard for cases tried. [footnote omitted]. A 40% to 50% fee could be paid to an attorney if [he or] she was required to appeal [footnote omitted] or undertake other proceedings following judgement [footnote omitted.].
    “However evidence exists which suggests that many attorneys obtain standard fees of 40% and 50% in cases settled before trial.” Angela Wennihan, Let’s Put the Contingency Back in the Contingency Fee, 49 SMU L. Rev. 1639, 1643 (1996).
  33. Ibid.
  34. For the notion that the contingency fee system has resulted in inflated “pain and suffering” damage figures which amount to fraud, see, e.g. Brickman, supra note 5.
  35. For general discussion of the operation of contingent fees, see, in addition to Brickman, supra note 5, Lester Brickman et.al., Rethinking Contingency Fees (Manhattan Institute, 1994), and Olson, supra note 5, at 31-50 .
  36. Hurd & Zollars, supra note 7, at 254.
  37. See generally, F.B. MacKinnon, Contingent Fees for Legal Services (1964).
  38. For the history of contingent fees in America, see, e.g., Peter Karsten, Enabling the Poor to Have Their Day in Court: The Sanctioning of Contingency Fee Contracts, A History to 1940, 47 DePaul L. Rev. 231, 248 (1998).
  39. See, e.g., Philip H. Corboy, Contingency Fees: The Individual’s Key to the Courthouse Door, 1976 Litig. 27 (1975-1976) (Arguing that without contingency fees most people would not be able to get into the courthouse).
  40. See generally Brickman, supra note 5.
  41. See, e.g. Brickman, supra note 5 (Observing that the contingency fee system “yields plaintiffs’ lawyers well in excess of 18 billion dollars annually – wealth which is redistributed throughout the political and judicial process to purchase protection from public scrutiny [of contingent fee arrangements].”
  42. Settling for “nuisance value” means that the defendant settles at a sum that would be less than it would have to pay even to defend a claim against it in which it would eventually prevail. It is the price it has to pay to make the “nuisance” of the meritless lawsuit disappear. See, e.g., David J. Sokol, The Current Status of Medical Malpractice Countersuits, 10 Am.J.L.&Med.439, 445 (1985)(Stating that the contingency fee system “encourages lawyers to accept cases without any preliminary investigation in the hope that the case can be settled for its nuisance value.”)
  43. This assumes, of course, that such legislation would not, upon some pretext, be declared “unconstitutional” by some Court relying on state or federal constitutional grounds. As this has happened in other areas of civil justice reform, the possibility cannot be completely discounted. For the alarming trend of state supreme courts’ declaring civil justice reform measures “unconstitutional” on what may be dubious grounds, see, e.g., Stephen B. Presser, Separation of Powers and Civil Justice Reform: A Crisis of Legitimacy for Law and Legal Institutions, 31 Seton Hall L.Rev. 649 (2001), and sources there cited.
  44. Information on the scope and the deleteriousness of contingency fees does seem to be available. See, e.g. Brickman, note 5, supra, but it has not yet penetrated the public consciousness. As Brickman observes:
    By design, we know less about the hourly rates effectively being charged by the top third of the contingency fee bar than we do about the earnings of professional athletes; that is no accident. Contingency fee lawyers routinely obtaining these fees generally do not participate in bar-sponsored surveys of lawyers’ incomes. They know better. Stealth sheathing obscures the connection between their enormous hourly rates, the effect such fees are having on the tort system and the increasing irrelevance of injury rates to recoveries.
    Brickman, supra note 5 (unpaginated).
  45. See, e.g. Stephen Glover, Exposed: Blair’s Balderdash about Europe, Daily Mail (London), May 1, 2001, P.13 (indicating that German Chancellor Gerhard Schroeder defends a proposed European superstate on the grounds it would be more “democratic.”), Martin Woollacott, Comment & Analysis: There is a dying fall about the political life of the west: The generation that reinvented postwar Europe is passing on, The Guardian (London), November 24, 2000, P.24 (Urging that reforms of the European Community be made in a democratic direction), Patrick Bishop, Shake-Up Plan for Government of EU, The Daily Telegraph (London), June 17, 2000, P.15 (Reporting on a plan by two French politicians to rework the government of the European Union in order to make it more democratic and comprehensible to its citizens).
  46. Hurd & Zollars, supra note 7, at 254.
  47. Ibid.
  48. For the development of the “American Rule,” in distinction to the “English Rule,” see, e.g. John F. Vargo, The American Rule on Attorney Fee Allocation: The Injured Person’s Access to Justice, 42 Am.U.L.Rev. 1567 (1993).
  49. Vargo, supra note 48, at 1635, also notes the thinness of the empirical data on the fee-shifting issue.
  50. For the need of some very successful Plaintiffs’ lawyers to conceal their success, particularly with contingency fees, lest the public rise up against them, see Brickman, supra note 5.
  51. According to Vargo, supra note 48, at 1588, there are over 200 federal statutes and 2000 state statutes which provide for “fee shifting” to the winner where an important public policy, such as the discouraging of the deprivation of civil rights, is involved. Vargo also notes exceptions to the “American Rule” in the United States that have been applied through contractual arrangements, through doctrines such as the “common fund” or “substantial benefit” rules, and in cases where enforcement is sought of a contempt ruling or where one party has been proceeding in bad faith. Id., at 1578-1587. There is, then, a substantial foundation on which a “loser-pays” system could be erected in this country.
  52. Unfortunately for the argument made here, most of the precedent for the abandonment of the “American Rule” detailed in Vargo, supra note 48, is limited to recovery for successful plaintiffs, but what is now probably needed in America is a full “loser pays” rule like that employed in England. For arguments that we need such a rule, see, e.g., Olson, supra note 5, at 37-38, 46, 64-65, 328-329, Albert A. Ehrenzweig, Reimbursement of Counsel Fees and the Great Society, 54 Cal. L. Rev. 792, 794-800 (1966), Gregory A. Hicks, Statutory Damage Caps Are an Incomplete Reform: A Proposal for Attorney Fee Shifting in Tort Actions, 49 La. L. Rev. 763, 782-800 (1989), Howard Greenberger, The Cost of Justice: An American Problem, an English Solution, 9 Vill. L. Rev. 400, 414 (1964), William B. Stoebuck, Counsel Fees Included in Costs: A Logical Development, 38 U. Colo. L. Rev. 202, 211-18 (1966) (suggesting statutory reform that would provide attorney’s fees to prevailing party); Comment, Court Awarded Attorney’s Fees and Equal Access to the Courts, 122 U. Pa. L. Rev. 636, 637-55 (1974), and other sources cited in Vargo, supra, note 48, in Notes 15 and 210.
  53. Hurd & Zollars, supra note 7, at 254.
  54. Ibid.
  55. For a report on some empirical studies regarding discovery, that find a more frequent and extended occurrence in products liability cases, see Judith A. McKenna and Elizabeth C. Wiggins, Empirical Research on Civil Discovery, 39 B.C.L.Rev. 785 (1988).
  56. For an additional study of litigation costs, paying special attention to the expenses of discovery, noting the propensity on the part of defendants to settle to avoid such costs, and reaching a conclusion that “Our tort system’s current imposition of high litigation costs is not only inefficient, but also unfair to defendants,” See Jonathan T. Molot, How U.S. Procedure Skews Tort Law Incentives, 73 Ind.L.J. 59, 108 (1997).
  57. This is strongly suggested, for example, by William Nelson’s study of New York Civil Procedure reforms in the twentieth century, which he describes as tracking federal civil procedure reforms, with both sets of reforms tending to favor the interests of litigating plaintiffs. William E. Nelson, Civil Procedure in Twentieth-Century New York, 41 St. Louis L.J. 1157 (1997).
  58. Hurd & Zollars, supra note 7, at 255.
  59. Ibid.
  60. See, e.g., Victor E. Schwartz, Mark A. Behrens, and Leah Lorber, Tort Reform Past Present and Future: Solving Old Problems and Dealing with “New Style” Litigation, 27 Wm.Mitchell L.Rev. 237 (2000) (Noting the need to restructure the battle for civil justice reform to meet the challenge of state judges who throw out civil justice reform laws on dubious constitutional grounds). For further criticism of these decisions see, e.g. Presser, supra note 43, George L. Priest, The Constitutionality of State Tort Reform Legislation and Lochner, 31 Seton Hall L. Rev. 683 (2001), and Victor Schwartz, Judicial Nullification of Tort Reform: Ignoring History, Logic, and Fundamentals of Constitutional Law, 31 Seton Hall L. Rev. 688 (2001), but see Robert S. Peck, In Defense of Fundamental Principles: The Unconstitutionality of Tort Reform, 31 Seton Hall L. Rev. 672 (2001)(Attempting to defend state courts findings that tort reform measures are unconstitutional.)
  61. As “punitive damages” were recently described in useful student comment:
    Punitive damages awards essentially serve the same purpose as fines and penalties, which are imposed “to punish or deter conduct that violates public policies of the state or federal government.”[footnote omitted] In addition to this specific deterrence factor, punitive damages are often used to send a social message of general deterrence. The imposition of punitive sanctions “signals to the entire community that certain socially harmful behaviors will not be tolerated.
    Meghan A. Crowley, From Punishment to Annihilation: Engle v. R.J. Reynolds Tobacco Co. – No More Butts – Punitive Damages Have Gone Too Far, 34 Loy. L.A. L. Rev. 1513, 1514 (2001). That’s the theory, at least. The practice is probably different. Thus, in America:
    Punitive damages are penal in nature and are supposedly awarded only if the jury finds the defendant acted maliciously, outrageously or wantonly. [footnote omitted] However, studies show that juries award punitive damages even when they find no willful misconduct by the defendant. [footnote omitted]. A recent GAO Study of five states found that appellate courts reversed punitive damage awards in 100 percent of the cases in which they had been awarded. [footnote omitted]
    Cortese and Blaner, supra note 8, at 177.
  62. See, e.g. Crowley, supra note 61, at 1514 (“since the late 1970s, there has been an ‘unprecedented [increase in both the amounts and the] numbers of punitive awards in ... mass tort situations.’ [footnote omitted] As a result of this phenomenon, it seems the purpose of punitive damages awards is progressing from punishment to annihilation.”)
  63. See, e.g. BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
  64. For the story of the limited successes and some failures of civil justice reform efforts in the area of punitive damages and other topics discussed here, see, e.g. Schwartz, Behrens, and Lorber, supra note 60.
  65. See, e.g. Cortese and Blaner, supra note 8, at 177. See also Hurd & Zollars, who say “The jury system in the United States has been credited with responsibility for unreasonably high damage awards; that problem does not exist in the EC.” Hurd & Zollars, supra note 7, at 255.
  66. Hurd & Zollars, supra note 7, at 255.
  67. Cf. Jeffrey Abramson, 1998 U.Chi.Legal F. 125 (“People vote their demographics on juries every bit as much as they do in other voting contexts, so the best we can do is to represent groups fairly on the jury according to their share of the local population.”)
  68. And it has actually been done. See note 28, supra (article by Stuart Taylor, Jr.).
  69. For the difficulties in conceptualizing corporations, even for legal academics, see, e.g. Gregory A. Mark, Comment: The Personification of the Business Corporation in American Law, 54 U.Chi.L.Rev. 1441(1987).
  70. The best of the bunch is probably John Gresham, The Runaway Jury (1996)(Through essentially ideological arguments, a nefarious juror gets his colleagues to bring in the first billion dollar judgment against a tobacco company.)
  71. The recent machinations involving suits against asbestos companies, tobacco companies, and even Microsoft are good examples of that kind of demagoguery.
  72. See, e.g., Marshall Shapo, Changing Frontiers in Torts: Vistas for the 70’s, 22 Stan. L. Rev. 330, 333, 334-335 (1970) (Arguing that the law of torts “must be made to deal more explicitly with the question of what large enterprises and other clusters of power owe to the individual caught in their coils,” and that the law of torts ought to develop in a direction that “will present an analogue of recent developments in constitutional law, focusing on legal checks on private groups that act with power governmental in function.” For a sharp criticism of this proposed academic use of the law of torts for political purposes, see James A. Henderson, Jr., Expanding the Negligence Concept: Retreat from the Rule of Law, 51 Ind.L.J. 467, 523 (1976), where he explicitly criticizes Shapo’s argument and states of such proposals, “These are commentaries which tend to speak of the common law torts judgment as a tool of harassment in modern political warfare, and whose disregard for judicial integrity approaches recklessness.”
  73. For a discussion of some of these efforts, and perhaps a bit too much alarm expressed at the possible erosion of the jury’s prerogatives, see Alan Howard Scheiner, Note: Judicial Assessment of Punitive Damages, The Seventh Amendment, and the Politics of Jury Power, 91 Colum L.Rev. 142 (1991). See on this point Scheiner, supra note 73. For some examples, see the Trial of the Seven Bishops, the Zenger Trial, and the Henfield Trial, excerpted in Stephen B. Presser and Jamil S. Zainaldin, Law and Jurisprudence in American History 10-27, 31-54, 181-188 (4th ed. 2000), the accompanying comments and sources there cited.
  74. For the history of the jury see, e.g. Scheiner, supra note 73, and sources there cited.
  75. On this point see generally Oliver Wendell Holmes, Jr., The Common Law, Chapter One (1881), and Morton J. Horwitz, The Transformation of American Law 1780-1860, 85-101 (1977).
  76. See, e.g. NLRB v. Jones & Laughlin, 301 U.S. 1 (1937), where, on similar grounds, the Seventh Amendment Right to Jury trial claim regarding damage judgements by the NLRB was rejected by the Supreme Court, since there were no NLRB proceedings at common law. This argument about the American common law has to be qualified with the suggestion in Horwitz, supra note 76, that there may have been a time when American liability under the American common law of torts was not fault-based. Holmes disagreed, however, believing that torts in America always had to do with fault. There does not seem to be consensus on this issue among American legal historians. See generally Robert J. Kaczorowski, The Common-Law Background of Nineteenth Century Tort Law, 51 Ohio St. L.J. 1127 (1990)(Indicating that we may never know whether the nineteenth century American tort law was exclusively fault-based, but arguing generally that the law of torts in America in the nineteenth century required actors to behave in a community-dictated reasonable manner.)
  77. Hurd & Zollars, supra note 7, at 255. This is implicit rather than explicit in Hurd & Zollars, as they only note that “because there is no contingent fee system [in the European Community], there is no danger that damage awards will be increased, as it is alleged happens in the United States, in order to cover the attorney’s contingent fee.” Ibid.
  78. Ibid.
  79. For the strong arguments against strict liability, see Worthington, supra note 4 and for a prediction that the doctrine is doomed, see David G. Owen, The Fault Pit, 26 Ga. L. Rev. 703, 723 (1992) (“The Great Strict Liability Experiment in products liability has mostly proved a failure, and its continuing decline, although sometimes wavering, appears inevitable.”) quoted in Worthington, supra note 4, at fn. 3.
  80. For the widespread adoption of the notion of “enterprise liability” throughout the United States in the second half of the twentieth century, see, e.g., George L. Priest, The Invention of Enterprise Liability: A Critical History of the Intellectual Foundations of Modern Tort Law, 14 J. Legal Stud. 461, 518 (1985). For a typical statement by a state court, see, e.g. West v. Caterpillar Tractor Co., Inc. 336 So.2d 80, 92 (Fla.1976) (“The obligation of the manufacturer must become what in justice it ought to be – an enterprise liability . . . .The cost of injuries or damages, either to persons or property, resulting from defective products, should be borne by the makers of the products who put them into the channels of trade . . .”)
  81. The classic argument to this effect is Walter. W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto [3d ed., 1990).
  82. Horwitz, supra note 76.
  83. See generally Stephen B. Presser, Piercing the Corporate Veil Ch.1 (1991, updated annually).
  84. An excellent summary of the problem is to be found in Worthington, supra note 4, at 246-247. As he explains:
    While not the sole culprit, strict tort liability has been a significant contributor to the decline in competitiveness of American industry. Product innovation is discouraged. [footnote omitted]. Discovery and creative theories of liability discourage variance from the status quo. Vast resources are diverted from research and development to pay the spiraling cost of defending lawsuits. The availability of liability insurance, once accepted as a given by the doctrine’s founders, is either unavailable or available only at extreme cost or on limited terms. Products are withdrawn from the market, and, in some instances whole industries have disappeared as a result of the threat of litigation [footnote omitted]. In an ever-increasing global economy, American industry is taxed by a doctrine unknown to the rest of the world. [footnote omitted]. Statistical and anecdotal analyses fail to measure the true depth of the effects of strict tort liability, but merely portray what has been lost. The products not produced, the factories not built, the jobs not created, the medicines not developed – these are the immeasurable costs.
  85. This development is chronicled in James A. Henderson Jr. & Theodore Eisenberg, The Quiet Revolution in Products Liability: An Empirical Study of Legal Change, 37 UCLA L. Rev. 479 (1990), and Theodore Eisenberg & James A. Henderson, Jr., Inside the Quiet Revolution in Products Liability, 39 UCLA L. Rev. 731 (1992). See also Worthington, supra note 4, at 271-280, and sources there cited, for the argument that America is returning to a “fault-based” rather than a “strict liability” system.
  86. There seems to be no doubt that difficulties in applying 402A from Restatement of Torts (Second) led to revisions in Restatement of Torts (Third) with regard to products liability. For this reason it seems safe to suggest that a concern with excessive verdicts recovered by plaintiffs played a role, and that the provisions in Restatement of Torts (Third) are somewhat more defendant (manufacturer) friendly, particularly in the area of design defects and product safety warnings, where the Restatement (Third) basically seeks to return the law of torts to a fault-based or negligence standard. There is a strong debate over this in the law reviews, however. For the suggestion that Restatement (Third) is a very balanced approach to the problem of products liability, see Victor E. Schwartz, Symposium on the American Law Institute: Process, Partisanship, and the Restatements of Law: The Restatement (Third) of Torts Products Liability: The American Law Institute’s Process of Democracy and Deliberation, 26 Hofstra L. Rev. 723 (1998). For the charge that the proposed draft went too far in the direction of moving away from strict products liability, see, e.g. Marshall S. Shapo, In Search of the Law of Products Liability: The ALI Restatement Project, 48 Vand.L.Rev. 631 (1995), and for the suggestion that Restatement (Third) went some distance toward appropriately exploding the doctrine of strict products liability, but did not go far enough, see, David G. Owen, Defectiveness Restated: Exploding the “Strict” Products Liability Myth, 1996 U.Ill. L. Rev. 743. For the Restatement Reporters’ defense of the line they drew, and the process they were engaged in, see James A. Henderson, Jr. & Aaron D. Twerski, Postscript: Arriving at Reasonable Alternative Design: The Reporters’ Travelogue, 30 U.Mich. J.L.Ref. 563 (1997), and Aaron D. Twerski, Inside the Restatement, 24 Pepp.L.Rev. 839 (1997).
  87. Crowley, supra note 61, at 1515.
  88. See, e.g., Presser, supra note 43.
  89. Stephen B. Presser, et.al. White Paper: The Case for Judicial Appointments (Federalist Society for Law & Policy 1999).
  90. See, e.g., Philip H. Corboy et. al., Illinois Courts: Vital Developers of Tort Law as Constitutional Vanguards, Statutory Interpreters, and Common Law Adjudicators, 30 Loy. U.Chi.L.J. 183, 244 (1999)(Arguing that courts should function as a “lawmaking partner” with the legislature.)
  91. Probably the most famous critic of legislatures along these lines is Richard Posner. See, e.g. See, e.g. Richard A. Posner, Killing or Wounding to Protect a Property Interest, 14 J. Law & Economics 201 (1971) (early expression of Posner’s theories), Richard A. Posner, Economic Analysis of Law (1973) (the first edition of Posner’s law and economics casebook, which developed his critique of legislatures and praise of judges along a broad spectrum of doctrines), Arthur A. Leff, Commentary: Economic Analysis of Law: Some Realism About Nominalism, 60 Va. L. Rev. 451 (1974) (criticizing the first edition of Posner’s casebook, in large part because of its dim view of legislatures), and Richard A. Posner, The Economic Approach to Law, 53 Tex. L.Rev. 757 (1975) (defending his views against Leff and other critics). See also Richard A. Posner, Overcoming Law (1995) (a more recent elaboration and defense of Posner’s views).
  92. For some sober reflections on the linkage between judicial law-making and massive expenditures by trial lawyers and others in judicial elections, see Justice Robert Young, Reflections of a Survivor of State Judicial Election Warfare, 2 Civil Justice Report 1 (June, 2001, Center for Legal Policy at the Manhattan Institute).
  93. For example, “In his October 3, 2000, debate with Bush, Gore stated: ‘Governor Bush has declared . . . that he will appoint justices in the mold of Scalia and Clarence Thomas . . . I would appoint people that have a philosophy that I think will be quite likely [to be opposite those of Scalia and Thomas].” Quoted in Richard A. Posner, Breaking Deadlock: The 2000 Election, the Constitution, and the Courts 167, 167 n.19 (2001).
  94. See, e.g. Kimberly A. Pace, Recalibrating the Scales of Justice Through National Punitive Damage Reform, 46 Am.U.L.Rev. 1573 (1997) (Proposing and setting forth the rationale for a federal statute to reduce punitive damages).
  95. The two most important cases indicating reluctance on the part of the Supreme Court to support broad federal action based on the commerce clause when it interferes with traditional state prerogatives regarding law-making are U.S. v. Lopez, 514 U.S. 549 (1995) (Invalidating the Federal Gun-Free School Zones Act), and U.S. v. Morrison, 120 S.Ct. 11 (1999)(Invalidating portions of the federal Violence Against Women Act). For some commentary on the Supreme Court’s current and future federalism jurisprudence, indicating that concern over federalism will lead the court carefully to review Congressional legislation to see if it trenches on traditional state powers, see, e.g., Michael Peter Hatzimichalis, Sovereignty, Federalism, and Property in the Balance: A Paradox in the Making, 8 J.L. & Policy 707 (2000) (Generally praising the Court’s “new federalism”), Peter M. Shane, Reuschlein Lecture: Federalism’s “Old Deal:” What’s Right and Wrong with Conservative Judicial Activism, 45 Vill. L. Rev. 201 (2000) (generally critical of the Supreme Court), Susan Bandes, Book Review: Erie and the History of the One True Federalism: Brandeis and the Progressive Constitution: Erie, the Judicial Power, and the Politics of the Federal Courts in Twentieth-Century America. By Edward A. Purcell, Jr., 110 Yale L.J. 829 (2001)(Arguing that there is no such thing as “the one true federalism,” and that there are different federalisms for different times). Even though the Supreme Court may now be inclined narrowly to construe Congress’s commerce clause powers, there may still be some freedom to act in the products liability area. It is not unprecedented, even recently, for Congress to step in. When there was a recent threat of strict products liability, and pharmaceutical companies were refusing to produce the swine flue vaccine, Congress acted to limit the manufactures’ liability, and the manufacturers resumed production. Worthington, supra note 4, at 247.


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SUMMARY:
Professor Presser argues that if America is to remain an economic superpower, we must curb America's penchant for expensive litigation. In the U.S., Dow Chemical Corporation estimates that it spends $1 on litigation costs for every $71 in sales, while in Europe their litigation costs dwindle to $1 for every $7,000 in sales. Europe has escaped an American style litigation explosion by erecting barriers to frivolous litigation. Unless similar barriers are created in the U.S., American companies face a competitive disadvantage in global markets relative to European manufacturers, who operate in a less litigious legal environment.

TABLE OF CONTENTS:

INTRODUCTION: HARMONIZATION, STRICT PRODUCTS LIABILITY, AND THE LITIGATION TAX

A POLITICAL AND SOCIAL CLIMATE WHICH DISCOURAGES LITIGATION

THE ERECTION OF “BARRIERS” TO LITIGATION

Contingent Fees

Loser Pays Winner’s Attorney’s Fees

Discovery Discouraged

Lower Damage Judgements

Punitive Damages

Non-use of Juries

Lower Expectations

RECONSIDERING STRICT LIABILITY

CONCLUSION: ACHIEVING HARMONIZATION AND RETHINKING THE JUDICIAL ROLE

ENDNOTES

 


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