Tuesday, April 19, 2011
Andy Popper (American) has posted two pieces to SSRN. First, Capping Incentives, Capping Innovation, Courting Disaster: The Gulf Oil Spill and Arbitrary Limits on Civil Liability :
Limiting liability by establishing an arbitrary cap on civil damages is bad public policy. Caps are antithetical to the interests of consumers and at odds with the national interest in creating incentives for better and safer products. Whether the caps are on non-economic loss, punitive damages, or set for specific activity, they undermine the civil justice system, deceiving juries and denying just and reasonable compensation for victims in a broad range of fields.
This paper Article postulates that capped liability on damages for offshore oil spills may well have been an instrumental factor contributing to the recent Deepwater Horizon catastrophe in the Gulf of Mexico. More broadly, it argues that caps on damages undermine the deterrent effect of tort liability and fail to achieve economically efficient and socially just results.
Whatever happened to H.R. 4678, The Foreign Manufacturers Legal Accountability Act? While at first the bill looked like it would sail through, vocal and well-funded opposition from foreign manufacturers and their U.S. representatives placed its future in doubt – and ultimately killed the bill. Gross sales of foreign manufactured goods in the U.S. exceed two trillion dollars annually. Conservatively, there are tens of millions of defective, dangerous, and in some instances deadly goods produced abroad for sale in U.S. markets (e.g., Chinese dry-wall, toxic levels of lead paint on toys, contaminated pet food, allegedly lurching cars, infant cribs that to give rise to the prospect of strangulation, etc.). Because of the complex post-Asahi minimum contacts puzzle, many of those producers are not subject to tort liability in state courts regardless of the fact that their products are dangerous and likely to be sold in the U.S.
H.R. 4678 would have required foreign manufacturers of certain products and component parts to designate a registered U.S. agent to accept service of process in a state where the manufacturer has a substantial connection either through importation, distribution, or sale of its products.
This was a simple, elegant, and appropriate step forward. It would have leveled the civil liability landscape, stripping foreign manufacturers of an unfair advantage over domestic manufacturers and addressing a powerful but understandable anomaly in our legal system. By making possible litigation against those who place into the stream of commerce defective goods, the bill would have triggered the corrective justice incentive mechanisms of the tort system. When you create the realistic possibility for liability, you activate incentives to make safer and more efficient products.
All too many foreign manufacturers selling products in the United States have secured the rich financial benefits of the U.S. marketplace without being subject to U.S tort law. A simple and wise legislative initiative could have changed that, leveled the playing field for U.S. businesses subject to tort law, and in so doing, protected U.S. consumers. Unfortunately, politics and self-interest stood in the way.