Legal and Regulatory Environment of Business 18th Edition Pagnattaro Solutions Manual

Legal And Regulatory Environment Of
Business 18th Edition Pagnattaro

Solutions Manual
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Chapter 10 - Torts Affecting Business
Chapter 10
Torts Affecting Business
Learning Objectives
The purpose of this chapter is to introduce students to noncontractual civil wrongs as they apply
to business. The chapter develops the main categories of torts: intentional torts, negligence torts,
and strict liability torts. Products liability is covered under strict tort liability. Through
assignment of rights and duties, the law affects the way wealth is distributed in society. Use the
tort chapter, and the recent changes in tort law, to illustrate this aspect of the law. Consider that
the role of tort law in a property-based legal system is both to compensate owners for trespasses
on what they own (including in that broad sense, ownership of themselves) and to define the
boundaries of what they own, especially as they own the uses of their resources. As resource uses
are defined by the courts (or legislatures) as legally wrong, wealth is redistributed.
References
• Carroll, Stephen J., Assessing the Effects of Tort Reform. Rand Corp. (1987).
• Collin, Thomas J., Punitive Damages and Business Torts. ABA (1998).
• Dobbs, Dan and Paul Hayden, Torts and Compensation. West (2005).
• Epstein, Richard A., Cases and Materials on Torts. Aspen Pub. (2008).
• Friedman’s Practice Series—Torts eBook. Precedent Press (2005).
• Glannon, Joseph W., The Law of Torts: Examples and Explanations, 3d ed. Aspen (2005).
• Hans, Valerie P., Business on Trial: The Civil Jury and Corporate Responsibility. Yale
(2000).
• O'Connell, Jeffrey, Tort Law: No-Fault and Beyond. M. Bender (1976).
• Schwartz, Victor E., et al, Prosser on Torts, 11th ed. Foundation Pr. (2005).
• Schwartz, Victor E., et al, Torts: Cases and Materials, 10th ed. West (2001).
• Stapleton, Jane, Product Liability. Butterworths (1994).
• Williams, C. Arthur, Workers’ Compensation Systems Around the World. (1991).
Teaching Outline
I. Introduction
Emphasize:
• That legally a tort is a civil wrong other than a breach of contract.
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• That behavior that constitutes a tort is called tortious behavior.

• Sidebar 10.3—“Tort or Crime? Or Both?”
II. Intentional Torts (LO 10-1)
Emphasize:
• That intent is defined as the desire to bring about certain results.
• Sidebar 10.1—“Types of Intentional Torts”
• Sidebar 10.4—Often the same circumstances can lead to several torts
A. Assault and Battery
Emphasize:
• The civil distinction between assault and battery.
• That “illegal” means that touching is done without justification and without the consent
of the person touched.
• Case 10.1: Harper v. Winston County 892 So.2d 346 (Ala. Sup. Ct. 2004)
Cases for Discussion:
1. A fraternity hazing instance involving the paddling of a pledge led to a tort action for
battery.
2. An award of $275,000 in compensatory damages for false imprisonment and battery
against the District of Columbia and two city police officers was not excessive when the
plaintiff was a 38-year-old black man who held two Masters’ degrees, who had served
as a Peace Corps volunteer, and who had never been arrested. The plaintiff was
suddenly accosted by plain-clothes officers, subjected to degrading remarks, and kicked
into a marked police car that was driven to a robbed bank. When the officers learned
that the plaintiff was not the robber, he was nevertheless booked for assault. The
plaintiff was confined to bed for a week recovering from the injuries suffered. District
of Columbia v. Gandy, 450 A.2d 896 (1982).
B. Intentional Infliction of Mental Distress
Emphasize:
• That intentional infliction of mental distress is a battery to the emotions.
• That usually, one who sues on the basis of an intentional infliction of mental distress
must prove that the defendant’s outrageous behavior caused not only mental distress but
also physical symptoms, such as headaches or sleeplessness.
• How this tort can occur in the workplace.
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1. Walters v. Mintec/International, 53 LW 2488 (CA3, 1986).
In this case a hoist drum broke, which killed one workman and injuring another.
Held: The second workman could sue under strict product liability for the physical
manifestations of the emotional injury caused by the death of the first workman.
2. Ellington v. Coca Cola Bottling Co. of Tulsa, 809 P.2d 69 (Okla. App. 1986).
The plaintiff became physically ill after drinking from a soft drink bottle containing
what appeared to be a worm bit but was in fact a piece of candy.
Held: The plaintiff may recover for psychologically induced injury. Although there
must be physical suffering, it need not precede the psychological injury.
3. St. Elizabeth Hospital v. Garrard, 730 S.W.2d 649 (Tex. 1987).
Parents sued a hospital and a doctor for mental anguish due to the improper disposal of
their stillborn infant.
Held: Texas joins seven other states in permitting negligent infliction of mental distress
without a showing of physical symptoms of injury.
4. Hustler Magazine v. Falwell, 108 S.Ct. 846 (1988).
Hustler magazine parodied minister Jerry Falwell by showing him having sex with his
mother in an outhouse.
Held: The first amendment prohibits claims for intentional infliction of mental distress
arising from constitutionally protected parody.
C. Invasion of Privacy
Emphasize:
• That the tort of invasion of privacy is one that is still in the early stages of legal
development.
• That as the statutes and court cases recognize it, the tort at present comprises three
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principal invasions of personal interest. An invasion of any one of these areas of interest
is sufficient to trigger liability.
• That before using anyone’s picture or name, an advertiser must obtain a proper release
from that person to avoid possible liability.
• Case 10.2 Ehling V. Monmouth-Ocean Hospital Service Corp. 872 F.Supp. 2d369
(D.N.J 2012)
1. After the plaintiff modeled lingerie at Hipsters, a social club for large women and men
who admire them, her picture appeared in Plumpers, an adult magazine featuring large
women. The picture was accompanied by an article that described the Hipsters’
gathering as 5,000 pounds of “Sex-Starved Fatties.” In 2000 a jury in Marietta, Georgia,
awarded the plaintiff $800,000 for invasion of privacy and defamation. Is there a free
press and speech issue here? Did the plaintiff become a “public figure” by modeling?
2. Mendosa v. Time Inc., No. 87-0371 L (2/23/88).
A man claiming to be the subject of a famous Life magazine photo showing a sailor
kissing a nurse on V-J day sued when the publisher offered to sell copies of the photo.
Held: The photo comes within the coverage of a state law forbidding the unauthorized
use of a person’s likeness or name for trade purposes.
3. Eddy v. Brown, 54 LW 2477 (1986).
An employee sued his employer for disclosing to several of his co-workers that he was
undergoing psychiatric treatment.
Held: Such disclosure was not of sufficiently public nature to constitute invasion of
privacy under Oklahoma law. However, an employer’s disclosure of employee’s
paranoid condition to other employees, which disclosure violated company’s own
internal standards, did state a cause of action under Massachusetts’ right to privacy
statute. Bratt v. IBM (CA1, 1986).
D. False Imprisonment and Malicious Prosecution
Emphasize:
• The relationship between false imprisonment and the problems of merchants with
shoplifters.
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• That malicious prosecution, also known as false arrest, arises from causing someone to
be arrested criminally without proper grounds.
E. Trespass
Emphasize:
• That the famous British constitutional historian Frederick Maitland wrote, “Trespass is
the fertile mother of actions.” By this he meant that many of our modern day causes of
action in tort—like battery—come from trespass.
• How trespass can be a crime as well as a tort.
Case for Discussion:
1. Lloyd Corp. Ltd. v. Leheiffen, 57 LW 2685 (1989).
When a few people entered a shopping center to gather signatures for a petition to
initiate public lawmaking, the owner sued to enjoin them from continuing to enter.
Held: The Oregon Supreme Court held that a strong public interest will be seriously
injured if the signature-gathering activity is completely blocked. Substantial
interference with commercial activity may be enjoined, but solicitation of signatures
does not in and of itself constitute substantial interference. A blanket injunction is
denied, however the trial court may issue an injunction imposing reasonable restrictions.
Dissent: The majority has overruled over 100 years of good trespass injunction law.
F. Conversion
Emphasize:
• The definition of conversion.
• That conversion deprives owners of their lawful right to exclude others from such
resources.
1. Ryno v. Tyra, 752 S.W.2d 148 (1988).
The plaintiff, an automobile buyer, agreed to buy the defendant car dealer’s BMW
automobile for $125,000. The defendant then proposed a “double or nothing” wager on
a coin flip. The plaintiff won the coin flip, whereupon the defendant handed the plaintiff
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the keys to the car and said, “It’s yours.” The defendant also gave the plaintiff the
German title to the car. Several times subsequently the defendant worked on the car,
each time returning it to the plaintiff. Finally, however, he kept the car. When the
plaintiff sued, the defendant argued that the wager was a jest.
Held: The Texas Court of Appeals held that the defendant is guilty of conversion. The
defendant made a gift of the car to the plaintiff.
2. Steenbergen v. First Federal S&L of Chicasha, 56 LW 2378 (1987).
An S&L allowed the plaintiff’s estranged daughter to pick up and cash a check held for
the plaintiff.
Held: The S&L is liable for conversion.
G. Defamation
Emphasize:
• The distinction between slander and libel.
• That because of the First Amendment, special rules regarding defamation apply to the
new media.
• Why plaintiffs’ verdicts in defamation cases are frequently overturned on appeal.
• How defamation has a higher standard (statement must be made with “malice”) for
public figures. See Sidebar 10.2.
Additional Matters for Discussion:

• Libel-defense lawyers assert that they are seeing an increase in defamation suits against
newsletters and other small publications.
• Procter & Gamble Co. fired Don Hagler, accusing him of trying to steal a telephone and
posted notices on eleven bulletin boards depicting him as a thief. Hagler sued and a jury
awarded him $15.8 million for defamation.
• A California jury awarded actress Elke Sommer $2 million for defamation because
actress Zsa Zsa Gabor and her husband told German publications that Sommer was a
broke Hollywood has-been.
• A jury awarded employee Jean Ransdell $5.5 million against her former employer Russ
Berrie & Co. for defamation for telling other employees that she had been fired because
she had padded sales orders.
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1. Philadelphia Newspapers, Inc. v. Hepps, 106 S.Ct. 1558 (1987).
The defendant newspaper published accusations that plaintiff, who owned snack stores,
was connected to organized crime. A Pennsylvania statute required that a defendant
prove the truth of defamatory statements to escape judgment.
Held: Although the plaintiff is a private figure, he cannot constitutionally recover

damages without providing that the defamatory statements are false.
2. Bose Corp. v. Consumers Union, 104 S.Ct. 1949 (1984).
The plaintiff sued Consumers Union for publishing an article stating that sound from
the plaintiff's speakers tended to “wander about the room.”
Held: Appellate judges may exercise independent judgment in evaluating the record for
actual malice in spite of the Federal Rules of Civil Procedure that allow a court to set
aside a trial court’s findings of fact only if it is “clearly erroneous.”
3. McDonald v. Smith, 53 LW 4789 (1985).
The respondent was being considered for a U.S. attorney’s position. Petitioner wrote
letters to President Reagan, with copies to other government officials, accusing
respondent of “violating civil rights,” committing “fraud and conspiracy,” and engaging
in “extortion of blackmail.” Respondent failed to get the U.S. attorney’s position and
sued petitioner for $1 million. Petitioner asked for judgment on the pleadings, claiming
that the First Amendment’s petition clause gave him an “absolute privilege” to write his
letters.
Held: No such absolute privilege exists. The petitioner can be held in damages for libel
if “malice” consistent with N.Y. Times v. Sullivan is shown.
4. Brown & Williamson Tobacco Co. v. Jacobson, 56 LW 2147 (1987).
The commentator for a Chicago TV station asserted that Viceroy cigarette advertising
deliberately attempted to relate cigarette smoking to “pot, wine, beer, and sex” in order
to attract young smokers.
Held: Compensatory and punitive damages of $3 million were appropriate since there
was clear and convincing evidence that the defendants acted with actual malice,
knowing the falsity of the assertions.
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5. Dun and Bradstreet v. Greenmoss Builders, 105 S.Ct. 2939 (1985).
Credit reporting firm Dun & Bradstreet issued a false credit report to plaintiff’s
creditors. Thereafter D&B issued a corrective report, but plaintiff was dissatisfied and
sued anyway. When the jury awarded compensatory and punitive damages, the case was
appealed on the constitutional issue of whether the First Amendment requires a showing
of “actual malice” before damages can be awarded against a nonmedia defendant.
Held: The Supreme Court held that the reduced value of commercial speech involving
no matters of public concern warrant these damages.
H. Fraud
Emphasize:
• That a fraud is an intentional misrepresentation of a material fact that is justifiably relied
upon by someone to his or her injury.
• That fraud applies in many different situations.
• That an individual can also prove fraud by giving evidence that another individual has
harmed him or her by failing to disclose a material (important) hidden fact. Discuss
when one is under a duty to disclose or not to conceal.
• That following the financial collapse that began in 2007, hundreds of plaintiffs filed
fraud lawsuits against banks, other financial institutions, and various of their executives
based on concealment.
• That fraud is a broad term that is used in many different areas of law.
• See Sidebar 10.3—“Tort or Crime? Both?”
1. A jury awarded Food Lion $5 million for fraud and trespass when ABC reporters
misrepresented themselves in order to get jobs and do a story on Food Lion’s alleged
sale of out-of-date meat.

• According to the Insurance Research Council, as many as one-third of all auto bodily
injury liability claims appear to involve fraud (inflated or phony claims). Many
companies now use a software program called “Colossus” to compare accident claims
with a database of similar cases and to recommend settlements or to detect fraudulent
claims (see WSJ, 1/3/03).
• Fraudulent claims in the aftermath of Hurricane Katrina were estimated at $1 billion.
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I. Interference with Business Relations
Injurious Falsehood
Emphasize:
• That trade falsehood, sometimes called trade disagreement, is a common business
tort.
Intentional Interference with Contractual Relations
Emphasize:
• How intentional interference with contractual relations might occur.
Additional Matter for Discussion:

• Procter & Gamble filed injurious falsehood lawsuits against a number of individuals
that alleged that the defendants were spreading statements that P&G was associated
with satanism. P&G also announced that it would remove its moon-and-stars logo
from its products to help stop the satanism rumors.
1. On her TV show, Oprah Winfrey made statements questioning the eating of beef in
light of “mad cow” disease. Texas cattle interests sued her for trade disparagement.
The jury found Winfrey not liable. Point out the free speech issues.
2. To emphasize the extent and seriousness with which business firms seek out
information about other firms, share with the class “Call It Mission Impossible Inc.—
Corporate-Spying Firms Thrive,” WSJ, 8/3/00, p. B1. Note that the Economic
Espionage Act of 1996 makes theft of trade secrets a federal felony. Is raiding
garbage theft? Probably, yes if it is on private property. Otherwise, no.
III. Negligence (LO 10-3)
Emphasize:
• That the second major area of tort liability involves unreasonable behavior that causes
injury is called negligence.
• Sidebar 10.5—“Elements of Negligence”
A. Duty of Care
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Emphasize:
• That a critical element of all tort cases is duty.
• The distinction between duty that arises out of conduct and duty to avoid injury through
nonconduct.
• Case 10.3: Iannelli v. Burger King Corp. 200 N. H. Lexis 42 (N. H. Sup. Ct. 2000)

• Dr. Conrad Murray was convicted of involuntary manslaughter in the death of Michael
Jackson. Point out how Dr. Murray’s medical malpractice led to a criminal conviction.
1. Garofalo v. Lambda Chi Alpha, 616 N.W.2d 647 (2000).
A student died while taking the fraternity pledge at a fraternity house following
excessive consumption of alcohol. His estate sued the fraternity.
Held: The Iowa Supreme Court held that no showing of facts establish a special
relationship.
2. Hamman v. Maricopa County (1/19/89).
A stepfather brought his stepson in for psychiatric evaluation. The treating psychiatrist
said the stepson was harmless and refused to admit him. The psychiatrist did not refer to
the stepson’s previous psychiatric hospital records, which would have shown that he
was jealous of his stepfather. The stepson was released and subsequently attacked the
stepfather, who sued.
Held: The Arizona Supreme Court held that a psychiatrist has the duty to exercise
reasonable care toward foreseeable victims of a dangerous patient, not just to specific
third parties against whom the patient has made specific threats.
3. Leesley v. West, 16 PSLR 301 (1988).
A woman claimed that a drug caused her to have severe internal bleeding. She sued the
pharmacy for failing to warn her of the dangers.
Held: The pharmacy has no duty to warn. Only the prescribing physician has that duty,
says an Illinois appellate court.
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4. Many colleges are being sued by students who injure themselves. The plaintiffs rely on
the special relationship between college and student and argue that the colleges should
have protected them better.
5. Wright v. Webb, 56 LW 2319 (1987).
A woman was criminally assaulted in a motel parking lot. She sued the motel for
negligence for failing to protect a business invitee.
Held: A business investor had no duty to protect absent knowledge that criminal
assaults are taking place or are about to take place. There was no previous history of
criminal assaults near the motel. But lawsuits suing business owners for inadequate
security are increasing.
B. Unreasonable Behavior—Breach of Duty
Emphasize:
• Judge Learned Hand’s definition of negligence (unreasonable behavior).
• Sidebar 10.6—“Medical Malpractice Crisis”
Examples of Negligence
Emphasize:
• That the failure to exercise reasonable care can cost a company substantial sums.
Willful and Wanton Negligence
Emphasize:
• That a special type of aggravated negligence is willful and wanton negligence.
• The significance of this type of negligence is that the injured plaintiff can recover
punitive damages as well as actual damages.
• Sidebar 10.6—“Strip Search Hoax Costs McDonald’s $6.1 Million”
1. In 1999 the accounting firm Ernst & Young LLP agreed to pay Cendant Corp. $335
million to settle a negligence lawsuit alleging that the firm failed to detect an accounting
fraud by CUC International, which was later acquired by Cendant. The lawsuit
specifically alleged that Ernst & Young failed to review quarterly reports by CUC
subsidiaries, did not require adequate documentation, and failed to review the
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company’s general ledgers.

• According to the Institute for Medicine of the National Academy of Science (1999),
medical malpractice accounts for between 44–98 thousand patient deaths annually.
C. Causation in Fact
Emphasize:
• The definition of cause in fact. Point out that courts leave questions of cause in fact
almost entirely to juries.
• The concept of joint and several liability.
1. Mitchell v. Gonzales, SO18678 (1992).
A boy who could not swim had ridden a surf-board craft into a lake with an older friend.
The boy drowned. The estate sued the friend and the friend’s parents for lack of proper
supervision. The jury was instructed that the death must not have occurred “but for” the
negligence.
Held: The California Supreme Court held that the defendants’ conduct must only be a
“substantial factor” in bringing about the harm.
2. The New York Court of Appeals adopted the market share liability theory in Hymowitz
v. Eli Lilly and Co. (4/4/89).
3. Zafft v. Eli Lilly and Co., No. 65685, 9/11/84.
Held: The Missouri Supreme Court ruled that persons alleging injury from DES cannot
sue DES manufacturers without identifying which particular manufacturer in fact
caused the plaintiff’s injury.
4. Minnich v. Ashland Oil Co., 53 LW 2468 (1985).
In a case involving two sellers of a flammable chemical, the Ohio Supreme Court ruled
that when the plaintiff was unable to identify which of the two companies sold the
chemicals that exploded and burned him, both sellers could be held liable under the
concept of alternative liability since both had failed to warn of the chemical’s danger.
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5. Abel v. Eli Lilly and Co., 343 N.W.2d 164 (Mich. 1984).
The Michigan Supreme Court in a DES case ruled that when the plaintiff brings all
possible tortiously acting defendants into court, but only one defendant actually caused
plaintiff’s injury, that the burden shifts to the defendants to prove that they did not cause
the injury. Otherwise, they have joint and several liability.
D. Proximate Causation
Emphasize:
• That defining proximate causation in terms of foreseeable risk creates further problems
about the meaning of the word foreseeable.
• Sidebar 10.8—“Explosion on the Long Island Railroad”
1. McPeake v. William T. Cannon, Esq. (1/26/89).
A man was convicted of rape and immediately jumped to his death through a courtroom
window. The family of the man sued his lawyer for negligence.
Held: a Pennsylvania Superior Court held that whether or not the lawyer botched the
deceased’s defense, the suicide was unforeseeable and thus not proximately caused by
the lawyer’s conduct.
2. Isaacs v. Huntington Memorial Hospital, 53 LW 2464 (1985).
The California Supreme Court overruled prior California cases that had established the
rule that a land owner is not required to anticipate criminal activities on his or her
property unless there had previously been such activities on the property. The particular
case involved a doctor who was shot during a robbery attempt in a hospital parking lot.
The doctor alleged inadequate security measures against the hospital and showed
evidence that the hospital was located in a high crime area. The California high court
held that it was not necessary for prior instances of criminal activity to have occurred in
order that this instance be foreseeable.
E. Defenses to Negligence
Contributory Negligence
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Emphasize:
• How the doctrine of contributory negligence has been modified by comparative
responsibility. Ask the students what meaning this has to the business community.
Assumption of Risk
Emphasize:
• The distinction between assumption-of-the-risk and contributory negligence. Use the
two doctrines to explain how legal doctrines sometimes overlap.
1. Law v. Superior Court, 56 LW 2416 (1988)
The plaintiff was injured in an automobile accident and sued the defendant. The
defendant argued that the plaintiff’s lack of seat belt use should be considered in
reducing damages under Arizona’s comparative negligence law. The plaintiff argued
that lack of seat belt use did not cause the accident.
Held: The lack of seat belt use enhanced the injury and may be considered in the
comparative negligence evaluation.
2. Lowe v. Estate Motors, Ltd., 56 LW 2108 (1987)
An automobile passenger injured in an accident sued the manufacturer of the

automobile for defective design and uncrashworthiness. The manufacturer raised the
passenger’s comparative negligence in failing to wear a seat belt.
Held: The failure to wear a seat belt in Michigan is appropriately considered by the
jury both in determining comparative negligence and in evaluating the design of the
automobile. Oregon decided a similar way in Dahl v. Bayerische Motoren Werke, 16
PSLR 81 (1987).
3. Martin v. Johns-Manville Corp., 14 PSLR 11 (1986).
An asbestos-injured plaintiff sued.
Held: The trial judge properly instructed the jury that they could reduce a judgment
award by the percentage of the plaintiff’s disability attributable to cigarette smoking.
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4. Murray v. Ramada Inn, 56 LW 2517 (1988).
The plaintiff was injured while diving into a motel swimming pool.
Held: The adoption of comparative fault abrogates the assumption of risk in

Louisiana.
5. Insurance Co. of North America v. Pasakarnis, 415 So.2d 447 (Fla. 1984).
Defendant’s car struck plaintiff’s. Plaintiff was thrown from his car and injured.
Held: by the Florida Supreme Court: Jury should be allowed to consider the fact that
plaintiff was not wearing his seat belt to reduce plaintiff's damages recovery under
comparative fault principles.
6. Almost all states have adopted comparative responsibility in one of its forms.
However, the Supreme Court of Alabama specifically rejected it and kept
contributory negligence as a bar to recovery.
IV. Strict Liability in Tort
Emphasize:
• That strict liability is a catchall phrase for all legal responsibility for injury-causing
behavior that is neither intentional nor negligent.
A. Strict Products Liability
Emphasize:
• That a major type of strict tort liability is strict products liability, for the commercial sale
of defective products.
• That there are two kinds of defects: production defects and design defects.
• That under strict products liability, contributory negligence is not a defense but
assumption of the risk is.
• That in recent years many states have changed or modified the rules of product liability.
Sidebar 10.9—“Tort Reform”
• That currently in most states, design defect cases are decided according to
reasonableness standards.
• Case 10.4: Branham v. Ford Motor Co. 701 S.E.2d 5 (S.C. Sup. Ct. 2010)
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• Asbestos litigation continues to be a product-liability mainstay. Said W.R. Grace &
Co.’s senior litigation counsel: “Virtually every company involved in traditional basic
industries is a potential defendant in asbestos litigation.” A January 27, 2003, article in
the Wall Street Journal reports that there was once over 3000 products with asbestos in
them. Currently, there are some 8000 companies named in asbestos litigation with over
200,000 pending claims.
• In 1999 American Home Products Corp. agreed to pay as much as $3.75 billion to settle
some 6000 lawsuits over the diet drugs Pondimin & Redux, which are part of the
combination drug known as “fen-phen.” Fen-phen use was related to heart-valve disease
and an often fatal lung condition. Not included in the settlement were 100 of the most
serious cases that could cost ATP as much as $1 billion.
• According to Tellinghaust-Towers Perrin the U.S. tort system is the world’s most
expensive, accounting in 1995 for 2.2 percent of Gross Domestic Product. According to
a 1995 study from the National Bureau of Economic Research, Inc., in states that pass
tort reform productivity and employment rise by 7 to 12 percent.
• In 2003, there were more than 10,000 mold-related lawsuits pending.
• For a look at one possible products liability trend, try “Trial Lawyers’ Next Target: The
Paint Industry,” WSJ, 10/18/99, p. A49 concerning lead-based paint. According to the
New York Times, 9/6/03, silicosis lawsuits are growing by tens of thousands.
B. Ultrahazardous Activity
Emphasize:
• That in most states, the courts impose strict liability in tort for types of activities they
call ultrahazardous.
• Sidebar 10.10—“The Great Molasses Flood”

• Some states have labeled certain breeds of dog, such as Rottweilers and Pit Bulls to be
dangerous animals. Would a student still be comfortable owning one of these in light of
the potential liability?
C. Other Strict Liability Torts
Emphasize:
• How the increase in dram shop act cases illustrates changing social attitudes.
• Strict liability for common carriers and the five defenses available to common carriers.
IV. Damages (LO 10-3)

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Emphasize:
• Why “the crucial controversy in personal injury torts today” is the area of damages.
• For dramatic examples of the size of recent awards, refer to Sidebar 10.11.
A. Compensatory Damages
Emphasize:
• That the purpose of compensatory damages is to make the plaintiff whole again, at least
financially. Discuss the three major types of loss included under this type of damages.
• That currently, compensatory damage awards for pain and suffering are very
controversial.
• Discuss how cases with strange-sounding facts and damages lead to run-away-litigation
stories. One of the best-known such cases occurred in 1994 when a New Mexico
woman was awarded $2.7 million after suing McDonald’s for burns suffered when
coffee she bought at a drive-through window spilled in her lap. A judge later lowered
the award to under $500,000. Before trial, the plaintiff had offered to settle the case for
$20,000. McDonald’s had heated the coffee to 190 degrees in spite of the fact that
coffee is normally drunk at 120-130 degrees. McDonald’s had received over 700
complaints regarding the superheated coffee. In 2000 a plaintiff in Knoxville, Tennessee,
sued McDonald’s, alleging that an “extremely hot” pickle from a hamburger
permanently scarred her chin.
B. Punitive Damages
Emphasize:
• When punitive damages are awarded.
• That presently, there is much controversy about how appropriate it is to award punitive
damages against corporations for their economic activities.
• That most companies carry liability insurance policies that reimburse them for “all sums
which the insured might become legally obligated to pay.”
• That almost no other country in the world except the United States permits civil juries to
award punitive damages.
• Sidebar 10.12—“Punitive Damage Guidelines”

• Judges often reduce punitive damages. In one case a Wisconsin court reversed a $94
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million punitive damage award to the families of three ironworkers killed when a crane
collapsed during construction of Miller Park, the baseball stadium. The court ruled that
the defendant was negligent but not intentional in finding it too windy to install a piece
of the stadium’s retractable roof the day the workers were killed. In another case a
California state court jury ordered General Motors to pay $4.9 billion, mostly in
punitive damages following a gas tank explosion in their 1979 Malibu. The trial judge
reduced the award to $1.2 billion. It was appealed further.
• A survey of 10,278 tort trials found that punitive damages were imposed in only 3.3%
of the 4,879 trials won by the plaintiff.
• A study published in the Cornell Law Review concludes, contrary to common
assumption that judges rather than juries are more likely to side with plaintiffs in several
major tort categories of litigation. The study examined 16,858 federal cases from 1979–
1989 involving personal injury, including auto accidents, medical malpractice, and
products liability. E.g., in product liability cases plaintiffs won 48% of the time in non-
jury trials but only 28% before a jury. The size of the awards was approximately equal
for both non-jury and jury situations.
Answers to Review Questions and Problems
Intentional Torts
1. Assault and Battery
The employee can sue her employer for battery by showing that the touching was unwanted
and offensive.
2. Intentional Infliction of Mental Distress
In business, intentional infliction of mental distress tort has most commonly followed the
firing of an employee.
3. Invasion of Privacy
The three invasions are (1) misappropriation of a person’s likeness, (2) intrusion of a
person’s physical solitude, and (3) the public disclosure of highly objectionable, private
information about a person.
4. False Imprisonment and Malicious Prosecution
False imprisonment is the intentionally confining of a person against his or her will and
10-18
without a privilege. Malicious prosecution involves filing criminal charges against someone
without a legal basis for doing so. It most frequently arises in shoplifting cases.
5. Trespass
From the tort perspective, the homeowners might pursue the tort of trespass. Note: They
may also have a nuisance claim (See Chapter 7).
6. Conversion
Universal is strictly liable to Bartley even for an act of God if the goods are converted.
Moving them from one warehouse to another without permission constitutes conversion.
7. Defamation
The comments made by Joan constitute defamation. If they are true, the defendant may use
the affirmative defense of truth. Otherwise, the defendant is likely liable.
8. Fraud
In suing for the tort of fraud, the plaintiff’s advantage is that he or she can obtain damages,
including punitive damages.
9. Interference with Business Relations
The individual can sue for damages for intentional interference with contractual relations.
The individual might also seek an injunction to prevent Sly from competing against his or
her company using these employees.
Negligence
10. Duty of Care
a. No. One has no legal duty to warn in this case without establishing a special
relationship.
b. Yes. In a place of employment, the special relationship between employer and
employee places a duty of care on the employer to warn the employee.
11. Unreasonable Behavior—Breach of duty
10-19
In litigation, the jury determines if the defendant’s behavior is unreasonable.
12. Causation in Fact
a. It means that there is no single causation for any event.

b. The judge instructs the jury that to be causation in fact, the causation must contribute
“materially” to the injury.
13. Proximate Causation
The issue in proximate causation is not whether the causation is a material contributing
factor, but whether it is a “foreseeable” cause.
14. Defenses to Negligence
The plaintiff will be entitled to a $150,000 award.
Strict Liability in Tort
15. Strict Products Liability
On the one hand is the issue of whether the door latch’s design is “defective.” On the other
hand is the issue of Joe’s comparative responsibility for the accident because of his failure to
wear a seatbelt.
16. Ultrahazardous Activity
Philips Phosphate is strictly liable because of its ultrahazardous activity of artificially

maintaining a large body of fluid.
17. Other Strict Liability Torts
The five instances in which common carriers are not strictly liable for damage to transported
goods are: (1) acts of God; (2) acts of an alien enemy; (3) acts of a public authority; (4) the
inherent nature of the goods; and (5) misconduct of the shipper.
Damages
18. Compensatory Damages
10-20
(1) Past and future medical expenses; (2) past and future loss of earnings; (3) past and future
economic loss.
19. Punitive Damages
Bob can recover compensatory damages. If he can prove willful and wanton negligence,
Bob can also recover punitive damages.
Business Discussion #1
1. Is the intruder liable for what he has done?
The intruder is civilly liable in tort for trespass and battery. He has also committed several
crimes.
2. Do you have legal responsibilities to Sharon and Darryl?
The owner of University Heights Apartments has a special relationship (landlord-tenant)

with Sharon, hence he or she has a duty to take reasonable steps to protect her. Particularly if
the sliding glass door lock was inadequate and there have been prior breaking and entering
incidents or incidents of assault in the neighborhood, the owner may be liable for negligence.
Darryl may be entitled to worker’s compensation for his injuries since his injuries seem to
arise out of and in the course of employment. If Darryl is not covered by worker’s
compensation, he, too, may be able to sue the owner successfully for negligence.
3. What should you consider doing at your apartments?
The owner should consider improving door locks, adding security lights, etc. If the area is
problematic, hiring security guards or an agreement with local law enforcement regarding
increased patrols should be considered.
Business Discussion #2
1. Has Mayfair done anything legally wrong?
Mayfair’s material nondisclosure concerning the likely strike is under the circumstances a
fraudulent concealment.
2. Is your legal remedy against Mayfair limited to breach of contract?
10-21
No, fraud is an intentional tort and is a cause of action separate from breach of contract.
3. Will you be able to get damages from Mayfair other than a refund of your prepayment?
Explain.
Yes, if you prove fraud, you may be entitled to punitive damages.
10-22

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Legal And Regulatory Environment Of

Business 18th Edition Pagnattaro

• That behavior that constitutes a tort is called tortious behavior.

II. Intentional Torts (LO 10-1)

A. Assault and Battery

Cases for Discussion:

B. Intentional Infliction of Mental Distress

Cases for Discussion:

1. Walters v. Mintec/International, 53 LW 2488 (CA3, 1986).

3. St. Elizabeth Hospital v. Garrard, 730 S.W.2d 649 (Tex. 1987).

4. Hustler Magazine v. Falwell, 108 S.Ct. 846 (1988).

Cases for Discussion:

2. Mendosa v. Time Inc., No. 87-0371 L (2/23/88).

3. Eddy v. Brown, 54 LW 2477 (1986).

D. False Imprisonment and Malicious Prosecution

Case for Discussion:

1. Lloyd Corp. Ltd. v. Leheiffen, 57 LW 2685 (1989).

Cases for Discussion:

1. Ryno v. Tyra, 752 S.W.2d 148 (1988).

2. Steenbergen v. First Federal S&L of Chicasha, 56 LW 2378 (1987).

Held: The S&L is liable for conversion.

Additional Matters for Discussion:

Cases for Discussion:

1. Philadelphia Newspapers, Inc. v. Hepps, 106 S.Ct. 1558 (1987).

Held: Although the plaintiff is a private figure, he cannot constitutionally recover

2. Bose Corp. v. Consumers Union, 104 S.Ct. 1949 (1984).

3. McDonald v. Smith, 53 LW 4789 (1985).

4. Brown & Williamson Tobacco Co. v. Jacobson, 56 LW 2147 (1987).

5. Dun and Bradstreet v. Greenmoss Builders, 105 S.Ct. 2939 (1985).

Case for Discussion:

Additional Matters for Discussion:

I. Interference with Business Relations

Intentional Interference with Contractual Relations

Additional Matter for Discussion:

Cases for Discussion:

III. Negligence (LO 10-3)

Additional Matter for Discussion:

Cases for Discussion:

1. Garofalo v. Lambda Chi Alpha, 616 N.W.2d 647 (2000).

2. Hamman v. Maricopa County (1/19/89).

3. Leesley v. West, 16 PSLR 301 (1988).

5. Wright v. Webb, 56 LW 2319 (1987).

B. Unreasonable Behavior—Breach of Duty

Willful and Wanton Negligence

Case for Discussion:

company’s general ledgers.

Additional Matter for Discussion:

Cases for Discussion:

1. Mitchell v. Gonzales, SO18678 (1992).

3. Zafft v. Eli Lilly and Co., No. 65685, 9/11/84.

4. Minnich v. Ashland Oil Co., 53 LW 2468 (1985).

Cases for Discussion:

1. McPeake v. William T. Cannon, Esq. (1/26/89).

2. Isaacs v. Huntington Memorial Hospital, 53 LW 2464 (1985).

Cases for Discussion:

1. Law v. Superior Court, 56 LW 2416 (1988)

2. Lowe v. Estate Motors, Ltd., 56 LW 2108 (1987)

An automobile passenger injured in an accident sued the manufacturer of the

3. Martin v. Johns-Manville Corp., 14 PSLR 11 (1986).

An asbestos-injured plaintiff sued.

4. Murray v. Ramada Inn, 56 LW 2517 (1988).

Held: The adoption of comparative fault abrogates the assumption of risk in

IV. Strict Liability in Tort

A. Strict Products Liability