Professional Documents
Culture Documents
GOALS OF THE
TORT LAW SYSTEM
GOALS
Goals of the Tort Law System
• Compensate victims for loss – i.e., restore victims to the
position they would have occupied had the tort not occurred
• Deter acting in socially irresponsible ways
• Spread the cost of injury among members of society
• Expose corruption, incompetence, and other forms of
misconduct
GOALS
Questions Tort Reformers Consider
• Are these goals viable? That is, should they all be goals of the
tort law system?
• If so, is the tort law system as presently structured effectively
meeting these goals?
HISTORICAL ROOTS
CHANGING GOALS
and
A SWINGING PENDULUM
HISTORICAL ROOTS
Before and Including World War I
• Before the end of World War I, the tort law system tended
to protect defendants at the expense of plaintiffs.
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HISTORICAL ROOTS
After World War I to 1960s: Progressive Reform
• After World War I, in an attempt to make the system fairer to
plaintiffs and to right society’s wrongs, legislatures and
courts developed progressive pro-plaintiff, no-fault
approaches to tort law.
Examples:
• Strict liability
• Workers’ compensation systems
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View of tort law system:
• Tort law system = “Karmic
adjuster” that rights society’s
wrongs through a type of social
engineering
HISTORICAL ROOTS
1960s - 1980s: Classical Reform
Perceived problems
• Late 1960s: Medical costs were rising sharply. Many people
blamed the increase on medical malpractice claims.
• Late 1970s: The premiums for manufacturers’ liability
insurance policies were rising.
• Late 1980s: Insurance companies were canceling or refusing
to renew insurance policies held by high-risk policyholders.
HISTORICAL ROOTS
1960s-1980s: Classical Reform
Reforms
• To address the perceived problems, legislatures and courts
implemented “classical” tort reforms, which occurred in two
main waves.
• Wave 1 (1970s): State legislatures
enacted laws limiting the potential
malpractice liability of healthcare
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providers.
HISTORICAL ROOTS
1960s-1980s: Classical Reform
Reforms: (continued)
• Wave 2: State legislatures enacted laws that . . .
• Eliminated or restricted joint and several liability;
• Capped a plaintiff’s recovery of non-
economic damages (e.g., pain and
suffering, mental anguish) in certain
types of cases;
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• Reestablished sovereign immunity;
• Permitted defendants to pay out
damages awards on a periodic basis;
• Penalized plaintiffs who filed frivolous
lawsuits; and
• Mandated alternative dispute resolution.
HISTORICAL ROOTS
1960s-1980s: Classical Reform
View of tort system
• Tort law system = means of
deterring potential tortfeasors
from engaging in risky behavior
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TORT REFORM TODAY:
FOUR CONCERNS
If rejection occurs and the case goes to trial, and if the ultimate judgment is
“significantly less favorable” to the opponent than the settlement offer or demand,
the litigant who invoked the settlement statute/rule is entitled to recover his or her
litigation costs incurred after the rejection.
4 • If the rejecting party is the plaintiff, the ultimate judgment is “significantly less
favorable” when its amount is less than 80% of the amount of the rejected offer.
• If the rejecting party is the defendant: the ultimate judgment is “significantly less
favorable” when its amount is more than 120% of the amount of the rejected
demand.
IMPLEMENTATIONS
Damage Award Caps
Texas’s settlement statute and rule
• Procedure (continued)
If the ultimate judgment is “significantly less favorable” than the rejected settlement
offer or demand . . .
• And the rejecting party is the defendant, the court will add the plaintiff’s litigation
costs in the judgment against the defendant.
• And the rejecting party is the plaintiff, the court will offset the amount of the
defendant’s litigation costs against the amount of the defendant’s liability to the
5 plaintiff.
The amount of these litigation costs cannot exceed the amount of the plaintiff’s
original recovery before the addition or offset of those costs. In other words:
• If the rejecting party is the plaintiff, offsetting the defendant’s litigation costs
cannot reduce the plaintiff’s original recovery to a negative amount; and
• If the rejecting party is the defendant, adding the plaintiff’s litigation costs cannot
more than double the plaintiff’s original recovery.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages
• Purposes:
• To punish the defendant for especially egregious wrongdoing
• To deter others from engaging in similar behavior
• Common criticisms of exemplary (punitive) damages:
• They inhibit product development because manufacturers will fail to
develop new and useful products for fear of potential litigation.
• They lead to excessive litigation by plaintiffs, who hope to receive
settlements from defendants wishing to avoid the expense and risk
of litigation.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Common criticisms: (continued)
• They unfairly benefit plaintiffs with windfalls intended to punish
tortfeasors and thus encourage litigious behavior.
• They hamper medical practice and business by increasing the cost
of insurance. More specifically;
• In medical practice, exemplary damages:
• Victimize doctors, who serve socially useful functions.
• Inhibit doctors as a group from taking potentially helpful risks.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Common criticisms: (continued)
• They hamper medical practice and business (continued)
• In products liability cases, exemplary damages:
• If awarded against corporations, punish the corporation’s
shareholders, not the actual wrongdoers;
• Do not serve the associated goals of punishment and deterrence;
• Are not necessary to achieve optimal product safety;
• Are incompatible with fault-free theories of strict liability and breach of
warranty;
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Common criticisms: (continued)
• They hamper medical practice and business (continued)
• In products liability cases, exemplary damages: (continued)
• Cause over-punishment, adverse social/economic consequences;
and
• Cause cases to be overvalued because punitive damages are a wild
card in the sense that they make it difficult for corporations to predict
their exposure.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Counterarguments, according to some studies:
• The frequency and magnitude of exemplary damages awards have
changed little from 1962 to 1987.
• Exemplary damages award were neither excessive nor frequent
over five states from 1985 to 1987.
• In some of the nation’s largest counties, exemplary damages are
awarded in only 3.3% of all cases, and judges are more likely than
juries to award them.
• Note: in Texas, only juries may award exemplary damages.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Counterarguments: (continued)
• Exemplary damages are awarded more frequently in intentional tort
cases and in business and contract disputes than in personal injury
litigation.
• Roughly half of all exemplary damages awards are reversed or
reduced post-verdict.
• Southern states account for more than 50%, and Western states
for about 20%, of all non-asbestos exemplary damages awards.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Counterarguments: (continued)
• From 1965-1990, Texas led the nation in exemplary damages
awards, whereas six states awarded no punitive damages in any
personal injury or product liability case.
• Exemplary damage awards peaked in most states between 1981
and 1985.
• Five states account for almost half of all exemplary damages
awarded in medical malpractice cases, whereas 11 states did not
have a single exemplary damages award in a medical malpractice
case from 1963 to 1993.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• McDonald’s “hot coffee” case
• Facts
• 79-year-old Stella Liebeck, while sitting in the front passenger seat of
her grandson’s car, purchased a cup of coffee from a McDonald’s drive-
through window.
• She secured the cup between her legs and removed the cap to put
sugar and cream in the coffee. The cup tipped over and spilled hot
coffee on her inner thigh and genital and groin area, resulting in third-
degree burns.
• She was in the hospital for eight days, required skin grafting, was
disabled for two years, had scarring, and incurred $20,000 in medical
bills, which McDonald’s declined to pay.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• McDonald’s “hot coffee” case (continued)
• Evidence at trial
• McDonald’s Corporation mandated that its coffee have a temperature of
180 to 190º Fahrenheit – hot enough to cause third-degree burns in two
to seven seconds.
• From 1982 to 1992, McDonald’s had over 700 claims and lawsuits
regarding the temperature of its coffee.
• According to its quality control manager, McDonald’s required its coffee
to be maintained at around 185 degrees and did not intend to reduce
the temperature.
• According to its human-factors engineer, the issue of hot coffee burns
was statistically insignificant when compared to the billions of cups of
coffee McDonald’s sells each year.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• McDonald’s “hot coffee” case (continued)
• Jury award:
• $200,000 in compensatory damages, which was reduced by her own
20% of responsibility
• $2.7 million in exemplary damages, which the trial court judge reduced
to $480,000
• Appeal: the parties settled for an undisclosed lesser amount before
the appellate court ruled on the case.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Examples of reforms
• Statutory caps. Some states (including Texas) have enacted
statutory caps on exemplary damages awards.
• The Texas Damages Act, CPRC § 41.008, caps exemplary damages
awards in most cases at the greater of the following:
Sum of:
or
$200,000
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Examples of reforms (continued)
• Affirmative defenses. For example, in North Dakota, an award of
exemplary damages against a manufacturer in a products liability
case is improper if the product complied with federal or
administrative regulations or was certified by a federal agency.
• Tenders to state. In some states (not Texas), exemplary damages
are tendered in whole or part to the state instead of to the plaintiff.
IMPLEMENTATIONS
Damage Award Caps
Exemplary (punitive) damages (continued)
• Examples of reforms (continued)
• Bifurcated trials
• In some states (including Texas), courts may conduct bifurcated trials
(two-phase trials) to avoid the prejudice that punitive-related evidence –
such as evidence of the defendants’ net worth – may have against the
defendants during the liability (e.g., negligence) phase of the trial.
• The phrases of a bifurcated trial are the following:
• Phase 1: liability phase (determination of whether the defendant committed
the underlying tort)
• Phase 2: exemplary damages phase (determination of whether exemplary
damages should be awarded and, if so, in what amount)
IMPLEMENTATIONS
Modification of Joint and Several Liability
Introduction
• Joint and several liability = in a multiple-tortfeasor case
involving a single, indivisible harm, the liability of any one, any
selected group, or all of the tortfeasors for the full amount of
that harm, depending on the plaintiff’s election
IMPLEMENTATIONS
Modification of Joint and Several Liability
Historical assessment
• Progressive era reformers approved of joint and several liability
because, in their view, it:
• Distributes losses among defendants instead of plaintiffs; and
• Provides plaintiffs with full compensation for their injuries.
IMPLEMENTATIONS
Modification of Joint and Several Liability
Historical assessment (continued)
• Classical era reformers opposed joint and several liability
(which they called the “deep-pocket” theory) because, in their
view:
• Joint and several liability unfairly allows plaintiffs to go after
defendants with maximum financial resources even if those
defendants have minimal culpability.
• Plaintiffs should bear the risk of insolvent defendants in multiple-
defendant actions just as they bear the risk of an insolvent
defendant in a single-defendant action.
IMPLEMENTATIONS
Modification of Joint and Several Liability
Historical assessment (continued)
• Classical era reformers: (continued)
• Joint and several liability increased insurance costs because it
precluded insurance companies from being able to accurately
predict potential liability.
IMPLEMENTATIONS
Modification of Joint and Several Liability
Other criticisms
• Because of the various statutory comparative negligence
schemes (“proportionate responsibility” in Texas) in force in
many states, joint and several liability is no longer necessary.
• Joint and several liability increases taxes and reduces services
for municipalities because municipalities, as “deep pockets,”
are held liable even when their comparative fault is relatively
low.
IMPLEMENTATIONS
Modification of Joint and Several Liability
Examples of reforms
• At least 35 states have either abolished or modified their joint
and several liability doctrines. For example, some states have
restricted the application of joint and several liability to:
• Certain types of torts (such as torts involving hazardous wastes)
• Texas takes the approach by imposing joint and several liability on all
joint tortfeasors – that is, persons who, acting in concert with each other,
tortiously cause the plaintiff a single, indivisible harm.
• Certain types of damages (such as economic damages but not
noneconomic damages)
• Cases in which the plaintiff is fault-free
IMPLEMENTATIONS
Modification of Joint and Several Liability
Examples of reforms (continued)
• For example, some states have restricted the application of
joint and several liability to: (continued)
• Cases in which a defendant is found to have a percentage of fault
of at least a specified amount (Texas’s approach)
• Texas takes this approach regarding concurrent tortfeasors – that is,
persons who, acting independently of each other, tortiously cause the
plaintiff a single, indivisible harm. A concurrent tortfeasor has joint and
several liability only if his or her percentage of responsibility is 51% or
more.
IMPLEMENTATIONS
Modification of Joint and Several Liability
Impact of abolishing the doctrine
• According to the textbook’s author:
• Empirical research has shown an increase in litigation in states that
have abolished joint and several liability.
• Possible reasons for the increase:
• The abolition reduced incentives for defendants to promote safety
because they were exposed to a lesser risk of payment.
• As a result of the abolition, plaintiffs must bring a separate action
against each tortfeasor to collect the value of all harm suffered.
IMPLEMENTATIONS
Discouragement of Frivolous Lawsuits
• Court-imposed sanctions
• In federal courts:
• Federal Rule of Civil Procedure 11 allows U.S. District Courts to
sanction parties and/or their attorneys who file frivolous lawsuits.
Sanctions can include reimbursing the opposing party for its litigation
costs, including attorney fees.
• U.S. Circuit Courts of Appeals and the U.S. Supreme Court have their
own procedural rules permitting sanctions for frivolous appeals.
• In Texas courts:
• Texas Rule of Civil Procedure 13 is the Texas counterpart to the federal
rule.
• The Texas Rules of Appellate Procedure allow Texas appellate courts to
sanction parties who file frivolous appeals.
IMPLEMENTATIONS
Discouragement of Frivolous Lawsuits
• “Loser pays” laws
• American rule = under American common law, the losing party in
a civil lawsuit is not required to compensate the winning party for
attorney fees incurred in the litigation unless a statute specifically
authorizes that recovery.
• Statutory attorney fees = attorney fees that a statute authorizes the
winning party to recover
• British rule (a/k/a “loser pays” law) = under British law, the losing
party is required to compensate the winning party for at least some
of the attorney fees incurred in the litigation.
IMPLEMENTATIONS
Discouragement of Frivolous Lawsuits
• “Loser pays” laws (continued)
• Some argue that the U.S. should adopt the British rule to deter
plaintiffs from filing frivolous lawsuits. However, the British rule may
actually increase the administrative costs of the judicial system.
Reasons:
• Under the American rule, a key incentive for parties to settle their
disputes before trial is to avoid incurring the attorney fees that preparing
for and participating in a trial would require.
• Under the British rule, this incentive disappears for parties who are
confident of winning their cases since the fees would be recoverable if
they win.
IMPLEMENTATIONS
Other Implementations
• Modification of the collateral-source rule
• Statutes of repose
• Rules of discovery requiring disclosure of facts and evidence
relevant to the parties’ claims and defenses
• Court-ordered alternative dispute resolution (ADR)
• Immunity of employers to suits by injured employees under
workers’ compensation laws
• Mandatory automobile liability insurance
• Structured settlements
• Restrictions on statutory waivers of sovereign immunity
• Limitations on recovery of statutory attorney fees