Monday, October 3, 2022
Luke Meier has posted to SSRN Achieving True Strict Products Liability (But Not for Plaintiffs with Fault). The abstract provides:
Under modern tort law, the strict product liability cause of action does not impose true strict liability. This Article suggests that this development can be traced to an analytical difficulty: How to prevent a plaintiff with fault from being able to take advantage of the strict liability standard? Courts have not developed a satisfactory doctrine that both imposes true strict product liability on manufacturers while simultaneously preventing plaintiffs with fault from recovery on this claim. In the absence of a better idea, courts have (mostly) retreated from a true strict product liability standard. This Article offers a solution to this analytical riddle: A simple change to the current comparative fault jury instructions would allow jurisdictions to impose strict product liability on manufacturers while simultaneously preventing plaintiffs with fault from recovering on a strict product liability claim. This is all that is necessary for jurisdictions that are inclined to put the “strict” back in the strict product liability cause of action.
Wednesday, September 28, 2022
Thursday, September 22, 2022
Mike Wells has posted to SSRN Absolute Official Immunity in Constitutional Litigation. The abstract provides:
Absolute official immunity blocks recovery for constitutional violations that occur in the course of legislative, judicial, prosecutorial, and testimonial functions, no matter how egregiously the officer has acted. The basic policy underlying the doctrine is that constitutional litigation will produce unacceptable social costs, mainly by discouraging officials from acting boldly and effectively in the public interest. It may be necessary to sacrifice the vindication of constitutional rights and deterrence of violations in some circumstances, but the Court’s broad function-based limits give too much weight to the costs of constitutional remedies and pays too little attention to the vindication and deterrence benefits. Shifting from the crude function-based approach to a more nuanced cost-benefit methodology would make good sense—and all the more so because the shift would align the Court’s doctrine with the values it has identified as underlying official-immunity law. Of particular importance, such a reform would support the recognition of multiple exceptions to present-day absolute-immunity rules, thus better serving the overarching remedial goals of constitutional tort law.
Thursday, September 15, 2022
Morgan Savige & John Fabian Witt have posted to SSRN Foreseeability Conventions. The abstract provides:
How has the foreseeability standard survived its critics? Law relies on foreseeability to solve hard legal problems in a vast array of doctrinal fields. But for a century and more, critics have pilloried the standard as hopelessly indeterminate. Decisionmakers, observe the critics, can characterize virtually any consequence as either foreseeable or unforeseeable. It all depends on how one tells the story. This Article explains the conundrum of foreseeability’s puzzling persistence by offering a novel account of how foreseeability has flourished in fields like tort, contract, and crime. Foreseeability has survived and flourished, the Article proposes, not because it carries determinate meaning (it does not), but because lawyers, judges, and juries have established fixes or hacks -- what in this Article we call foreseeability conventions -- to settle what would otherwise be intractable foreseeability problems. Foreseeability conventions work because they give the concept meaning in particular fields and in discrete situations, furthering the law’s basic goals in especially thorny categories of recurring cases. We describe two types of conventions: storytelling or narrative conventions, on the one hand, and per se conventions, on the other. We offer salient illustrations, relying especially on the law of torts, showing how the law substitutes rough-hewn proxies for impenetrable foreseeability questions. In closing, we propose that the conventions strategy for resolving indeterminacy is widespread and even pervasive in the law. We observe, too, that the conventions strategy is being put to use today in solving controversial, high-profile legal problems in our age of political and cultural division – even as social fracture risks undermining the tacit agreements on which doctrinal conventions rest.
Wednesday, September 14, 2022
Barbara Pfeffer Billauer has posted to SSRN An Introduction to Using Genetics in Defending Legal Cases: a Legal Defense Grounded in Genetics--Is DNA-Testing the Magic Wand to Winning (Or Losing) a Negligence Case?. The abstract provides:
An introduction to the use of genetic markers and mutations to defend causal claims in toxic tort cases, exemplified by recent use in asbestos cases.
Monday, September 12, 2022
Linda Mullenix has posted to SSRN Aggregationists at the Barricades: Assessing the Impact of the Principles of the Law of Aggregate Litigation. The abstract provides:
In 2004 the American Law Institute began work on THE PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION, finally published in 2010. The Principles was addressed to legislatures, administrative agencies, attorneys, private actors, and courts concerning multiparty, multiforum litigation. A purpose of the Principles was to suggest best practices for these institutions and actors.
This essay describes the Principles in the historical context when complex litigation began to dominate federal dockets in the 1980s. It discusses the emergence of a cohort of aggregationists dedicated to liberalizing federal procedure to support, enhance, and encourage the speedy and efficient resolution of complex litigation. The Principles built upon a longstanding ALI concern with the burgeoning and rapidly changing judicial crisis relating to the resolution of complex litigation. The Principles suggested substantial changes in existing class action jurisprudence and judicial case management, recommending more robust embrace of liberalized aggregative procedures. Initially, the Reporters advocated for a root-and-branch revision but, as the essay documents, the final Principles reflected more modest compromises. The essay thoroughly canvasses the proposed recommendations and the subsequent embrace of the proposals.
This essay concludes that while the Principles project has left its mark, courts and legislative bodies still have not addressed or resolved many issues the Principles identified. Since publication most judges seem comfortable with prevailing jurisprudence and not especially interested in rewriting procedural doctrine governing complex litigation. The Principles has not resulted in a root-and-branch revision of aggregate procedure. Rather, reception of the Principles suggests that a more incremental approach to legal reform has prevailed, and the efforts of the avid aggregationists must await another day.
Apart from questions whether the Principles fulfilled its stated purpose, this essay explores fundamental questions about the Institute’s role in moving the law in certain directions based on the goals of committed actors. On one interpretation, the Principles represented a well-intended effort to provide judges with guidance “where there was little established law.” On another, perhaps more problematic view, the Principles represented the desires of actors who, frustrated by judicial resistance to aggregate litigation, used ALI auspices to change the law in a desired direction. These questions go to the heart of the ALI’s role in guiding attorneys, judges, and rulemaking bodies in furtherance of civil justice. Whether the liberalization of aggregate procedure is a desirable goal is a normative question that the ALI Principles project assumed but did not address.
Monday, September 5, 2022
Ronen Avraham & Ariel Porat have posted to SSRN The Dark Side of Insurance. The abstract provides:
When insurance works properly it provides insureds with optimal incentives to prevent losses, alongside coverage for losses that could not be prevented efficiently. But insurance has an overlooked dark side to it as well. Insurers employ various tactics to shift losses to their insureds or to their victims in order to minimize their own costs instead of reducing their insureds’ losses. Worse, insurers might also act to increase or maintain long term risks, ensuring the future of the insurance business that can’t exist without risks. To this end, we suspect, insurers engage in anti-competitive practices and trigger harmful behaviors of their insureds or third parties, in order to increase demand for insurance coverage. Policymakers should be aware and critical of insurers’ perverse incentives that counteract the interests of the insureds and society.
Wednesday, August 31, 2022
John Goldberg has posted to SSRN Torts in the American Law Institute. The abstract provides:
The American Law Institute (“ALI”) has devoted much attention to tort law. This attention has come in different forms. This chapter labels these, respectively: “ALI in the Mode of Appellate Court,” “ALI in the Mode of Law Reform Commission,” and “ALI in the Mode of Think Tank.” Each of these can be placed along a spectrum of ambitiousness with respect to law reform. None is unambitious. But Appellate Court Mode is tethered to doctrine, Think Tank Mode is untethered, and Law Reform Commission Mode lies somewhere in between. One might suppose that the ALI’s promise – which enables leading academics, in consultation with members of the bench and bar and others, to undertake long-term, large-scale research projects – resides in work at the more ambitious end of the spectrum. However, based on an admittedly impressionistic survey, I will suggest that, in the domain of tort law, the Institute has had important successes when proceeding in the manner of an appellate court, and has courted trouble when operating in the other modes.
Thursday, August 25, 2022
Keith Hylton has posted to SSRN Mutual Optimism and Risk Preferences in Litigation. The abstract provides:
Why do some legal disputes fail to settle? From a bird’s eye view, the literature offers two categories of reasons. One consists of arguments based on informational disparities. The other consists of psychological arguments. This paper explores the psychological theory. It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements. The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation. The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.
Wednesday, August 24, 2022
Greg Keating has posted two pieces to SSRN. First, Form and Function in Tort Theory. The abstract provides:
Contemporary tort theory is a contest between instrumentalism and formalism. The prominence of instrumentalism is no surprise. American tort theory was born in the work of Oliver Wendell Holmes and his views were resolutely, if elusively, instrumentalist. Until very recently, economic views have dominated contemporary discussions of tort law in the American Legal Academy, and the economic analysis of torts is uncompromisingly instrumentalist. The rise of formalism, by contrast, is surprising. Legal realism swept over American legal thought long ago. Ever since, formalism has been treated more as epithet than as credible position by American legal scholars. In contemporary tort theory, though, formalism has roared back to life and struck some powerful blows against instrumentalism. Tort, these neo-formalists argue, is not an instrument for the pursuit of independently valuable ends. It is an institution whose norms are constitutive of just relations among persons. The bipolar, backward-looking form of the ordinary tort lawsuit has been the fulcrum that critics of economic analysis have used to pivot tort theory away from economic instrumentalism. That form, prominent tort theorists have persuasively argued, instantiates a backward-looking morality of responsibility, not a forward-looking morality of regulation. But the formalist enterprise has its own weaknesses. For one thing, formalist tort theory has tended to reshape tort law in ways that beg the questions that the theory purports to answer. For another, just relations among persons are a matter of substance as well as form. In the case of tort law, just relations require that tort law identify and safeguard those interests urgent enough to justify imposing reciprocal responsibilities of care and repair. We cannot, therefore, pull the rabbit of a convincing conception of tort law out of the hat of the field’s formal structure. What tort theory needs is two-pronged theory—theory that can both make sense of form and—by attending to tort law’s role in safeguarding our urgent interests from impairment and interference at each other’s hands—also illuminate tort law’s independently significant substance.
Second, Enterprise Liability. The abstract provides:
In American tort law “enterprise liability” is a response to the profound transformation of the social world brought about by modern industrial, technological society. In this world, most accidental harm is not the random byproduct of isolated individuals going about their idiosyncratic existences in civil society. Instead, the harms and wrongs characteristic of modern social life are the inevitable, and predictable, byproduct of the basic productive activities of modern life. Enterprise liability expresses the idea that responsibility for these harms and wrongs should be absorbed by the activities that engender them, and then be distributed across all those who benefit from those activities —not left on the individuals who happen either to inflict or to suffer them. This chapters seeks to explains the institutional logic of, and normative justification for, enterprise liability, and to show how and why it constitutes a distinctive regime of responsibility.
Thursday, August 18, 2022
Ken Abraham & Ted White have posted to SSRN Doctrinal Forks in the Road: The Hidden Message of The Nature of the Judicial Process. The abstract provides:
This Essay was prepared for a Symposium at the Yale Law School, celebrating the one-hundredth anniversary of The Nature of the Judicial Process, the published version of four lectures Judge Benjamin Cardozo delivered at Yale Law School between February 14 and 18, 1921. Revisiting these lectures presents a challenge to the contemporary reader. That challenge is to imagine how the lectures could have generated the strongly affirmative reaction that they apparently did. In this Essay, we seek first to recover that reaction and to juxtapose it against our initially far less enthusiastic response. We then identify a feature of the lectures that was not remarked upon when they were first published and has not been emphasized since: Cardozo’s examination of how appellate judging is frequently about whether to extend what he called a doctrinal 'path', or not to extend that path. If the path is extended, existing doctrinal propositions are treated as governing not only the case at hand, but also as applying to an expanded set of potential future cases. But if the path is not extended, the doctrinal principles embodied in a set of previous cases are deemed inapposite to the current case, and a developing doctrinal path is truncated, thus limiting its application to future cases.
We then show how Cardozo employed the concepts of doctrinal paths and 'forks in the road' in several of his most famous torts cases. We conclude that when Cardozo’s discussion of those concepts is understood as one of the principal contributions of The Nature of the Judicial Process, the lectures can be understood to be of lasting as well as historical significance.
Tuesday, August 16, 2022
Jenny Wriggins has posted to SSRN The Color of Property and Auto Insurance: Time for Change. The abstract provides:
Insurance company executives issued statements condemning racism and urging change throughout society and in the insurance industry after the huge Black Lives Matter demonstrations in summer 2020. This time period presents a crucial opportunity both for examining insurance as it relates to race and racism, including history and current regulation, and for actual, overdue changes in insurance in the U.S. Two of the most important types of personal insurance are property and automobile.
Part I begins with history, focusing on property insurance, auto insurance, race, and racism in urban areas around the mid-twentieth century. Private insurers deemed large areas of cities where African Americans lived to be “blighted” and refused to insure all homes in these areas, despite lacking clear evidence of increased risk. This created a property insurance crisis in the cities. Affordable automobile insurance in areas such as Harlem was hard to come by; complaints of race discrimination went back to the 1930s.The federal government got involved in the late 1960s after state and local remedies were insufficient. The federal Urban Property Protection and Reinsurance Act of 1968 (UPPRA) was aimed to incentivize private insurance companies to enter the urban market and to support states in establishing plans (known as Fair Access to Insurance Requirements or FAIR Plans) that would require companies to cover a certain amount of risk in urban areas.
The UPPRA and FAIR plans led to a robust urban property insurance market at minimal cost to the government and industry, Part II finds. The federal program later was discontinued and largely forgotten, probably due to its success. This forgotten history tells us that insurance markets have not functioned in a neutral way and that for long periods companies did not sell property insurance based on objective neutral data but based on at least in part on racial prejudice. It further shows that the federal government can play a socially positive rule in insurance markets without miring the government in taking on the entire risk or costing taxpayers huge sums. Yet the reform measures did not end redlining or challenge many of the equity issues involved in insurance. Property and auto insurance companies have shifted in recent decades from explicit race-based exclusions to the use of facially neutral practices for pricing and underwriting such as algorithms, machine learning, and credit scores. However, insurance antidiscrimination law (which is largely state law) has not kept pace. No federal law directly bans race discrimination in auto insurance, and federal housing antidiscrimination law has not been consistently applied to housing insurance practices which have a disproportionate impact on racial minorities.
Three reforms would improve current practices, Part III asserts. First, insurance regulation should require more disclosure with requirements parallel to those of the Home Mortgage Disclosure Act. Insurers should be required to collect and disclose specific data on insurance applications and declinations, membership in protected groups, and other information. Second, a private cause of action should potentially be made available for insurance discrimination when insurance practices lead to a disparate impact on African Americans and other racial minorities. Third, insurance regulation should be shifted away from rate regulation which currently serves no useful purpose; this would make more room and time for the other proposed reforms which might lead to long overdue changes in property and auto insurance regulation and practices.
Friday, August 12, 2022
Monday, July 25, 2022
Dov Fox has posted to SSRN Medical Disobedience. The abstract provides:
The conscience regime that governs American healthcare is broken. When physicians or pharmacists deny treatment by appeal to their heartfelt convictions, conscience laws in most states shield them from being fired or disciplined. In many, they can’t be held liable for malpractice or prosecuted for endangering patients, however badly they needed care, or serious the resulting harm. Refusers don’t even have to tell patients which procedures are medically indicated, let alone help them to access those options elsewhere. So long as refusers invoke conscience, they almost always go scot-free. There’s virtually no such protection for clinicians who have equally conscientious reasons to perform interventions that their employer or state rules out.
Emboldened by the Supreme Court’s recent decisions in Little Sisters of the Poor and Dobbs, hospitals and legislatures increasingly prohibit services from abortion, emergency contraception, and long-term birth control to puberty blockers, advance directives, and aid-in-dying. Now clinicians are laying their careers and freedom on the line to supply these forbidden forms of care. The treatments that they seek to provide bear crucial differences, to be sure. Some the law prohibits, others it permits. Some are safer, or more effective, than others. Some require facilities and staff. Others, a prescription pad. Some fall squarely within the medical norm. Others push its boundaries, or cross them. These particulars matter. But they also miss a simple fact: Providers honor patients’ wishes, while refusers override them. Yet only refusers’ conscience counts. This asymmetry selectively burdens conscientious providers and drives desperate patients underground.
Fixing this regime demands principled reforms, tailored to distinct levels of authority: the employer and the state. To offset the costs of workplace exemptions, this Article proposes disclosure mandates and objector fees for conscience-claiming clinicians, and distancing measures for the institutions that employ them to mitigate the expressive harms that come from accommodating practices they oppose. The stakes differ when doctors and nurses defy government restrictions. This Article introduces a partial excuse that would take the edge off of the penalties that otherwise attach to certain practices that clinicians undertake in the name of conscience. This limited defense of “medical disobedience” would afford modest space for dissent and debate that a pluralistic democracy needs, in negotiating the controversies of our time, to adapt to moral change from within. That compromise also equips us to resolve the long-simmering tension between the practice of medicine and the rule of law that has reached a boiling point today.
Thursday, July 21, 2022
Patricia Cain has posted to SSRN Taxation of Tort Damages. The abstract provides:
Under Section 104(a)(2) of the Internal Revenue Code, damages for personal injury can only be excluded from income in cases in which the plaintiff is physically injured. If the plaintiff instead suffers emotional distress from the injury, even if the distress is so great that it results in physical injury or physical sickness, then all damages are taxable. This “physical injury” or “physical sickness” requirement was added to Section 104(a)(2) in 1996. This article, as many before it have done, questions the wisdom of that intended bright line. It does so by exploring the history in tort law of the treatment of emotional distress injuries, which used to require a physical injury for recovery. Tort law has moved beyond that strict requirement, whereas tax law seems to have moved backwards. Interestingly, the physical injury does not need to be that of the taxpayer. Wrongful death and loss of consortium damages are excluded even though the taxpayer’s only injury is an emotional one. Finally, the article questions the soundness of a recent Ninth Circuit opinion, Blum v. Commissioner, upholding a Tax Court opinion, that ruled that malpractice damages could not be excluded because the lawyers did not physically harm the plaintiff. They paid her the damages, however, to reimburse her for the damages she would have won from the hospital she had been suing for physical injuries. Since the malpractice settlement was “in lieu of” an award for physical injury damages, it would seem the better alternative would be to exclude the settlement payment under Section 104(a)(2).
Monday, July 18, 2022
Tim Lytton has posted to SSRN Using Insurance to Regulate Food Safety: Field Notes from the Fresh Produce Sector. The abstract provides:
Foodborne illness is a public health problem of pandemic proportions. In the United States alone, contaminated food sickens an estimated 48 million consumers annually, causing 128,000 hospitalizations and 3,000 deaths. Nowhere is this crisis more acute than in the fresh produce sector, where microbial contamination in growing fields and packing houses has been responsible for many of the nation’s largest and deadliest outbreaks. This Article examines emerging efforts by private insurance companies to regulate food safety on farms that grow fresh produce.
Previous studies of using insurance to regulate food safety rely on economic theories that yield competing conclusions. Optimists argue that insurance can promote efficient risk reduction. Skeptics counter that insufficient information regarding the root causes of contamination renders insurance impotent to reduce food safety risk. This Article adds a sociolegal perspective to this debate. Based on interviews with insurance professionals, the Article documents how, notwithstanding limited information, underwriters employ a variety of techniques to encourage compliance with government food safety regulations and conformity to industry standards. These techniques include premium discounts for clients who adopt state-of-the-art food safety practices, coverage exclusions for high-risk activities, and loss control advice about how to avoid contamination.
Insurance plays a growing and potentially transformative role in advancing food safety. Government food safety regulation has traditionally been hampered by inadequate inspection resources. This Article advocates expanding insurance to fill oversight gaps in the U.S. food safety system, and it offers specific recommendations for how to nurture emerging markets for food safety coverage.
The findings presented in this Article have implications for understanding how insurance regulates risk more generally. Economic analysis of many well-established types of insurance—for example, life, health, homeowners, and auto—emphasizes the role of actuarial data in pricing premiums, determining coverage limits, and informing loss control advice. However, the underwriting professionals in this Article who describe their efforts to improve food safety on farms tell a different story. They operate in an emerging market with a low volume of claims and a dearth of actuarial data. Three aspects of their work stand out. First, underwriting in this area is more impressionistic than economic analysis assumes. When assessing the risk of microbial contamination on farms, underwriters rely more on their intuitions about a farmer’s competence and on media coverage of high-profile foodborne illness outbreaks than on actuarial data. Second, the mindset of these underwriters is more administrative than economic. They think in terms of regulatory compliance and standards conformity rather than optimal risk reduction. Third, farm size determines the role of insurance in managing risk. High-premium coverage for larger farms provides more underwriting resources for risk management than low-premium policies priced for small farms. These findings suggest that although economics explains the logic of insurance as form of risk regulation, understanding how underwriters regulate risk in practice, especially in emerging markets, requires attention to professional judgment, bureaucratic thinking, and resource constraints.
Friday, July 15, 2022
Saturday, July 9, 2022
Bohdan Karnaukh, a Ukrainian tort scholar, has written a note about a recent opinion of the Ukrainian Supreme Court on the availability of tort actions against Russia for torts/crimes against Ukrainian citizens. The abstract provides:
The jurisdictional immunity of a state means that the state cannot be involved as a defendant in a case considered by a foreign court. In Ukraine, the rule on the jurisdictional immunity of a foreign state is enshrined in Art. 79 of the Law of Ukraine ‘On Private International Law’. Until 14 April 2022, the Ukrainian Supreme Court rigidly applied the provisions of the said article and recognised the Russian Federation’s immunity with regard to claims brought by Ukrainian citizens seeking compensation for harm caused by the armed conflict that commenced in 2014. Yet shortly after 24 February 2022, when Russia’s aggression against Ukraine entered a new phase, i.e., the phase of full-scale war, the Supreme Court changed its mind.
This note addresses the ruling of the Ukrainian Supreme Court of 14 April 2022 in case no. 308/9708/19, where the Court held that the Russian Federation could not plead immunity with regard to tort claims brought by the victims of the Russia-Ukraine war. In reaching this conclusion, the Court relied on the territorial tort exception enshrined in the European Convention on State Immunity (Basel, 16 May 1972) and the UN Convention on Jurisdictional Immunities of States and Their Property. Though neither of the two conventions has been ratified by either Ukraine or the Russian Federation, the Court found that these conventions indicate a general tendency in international customary law towards limiting the jurisdictional immunity of the states.
The reasoning of the Supreme Court is examined by scrutinising the authorities the Court adduced in support of its ruling, as well as by putting the ruling in the broader context of the jurisprudence of the International Court of Justice (ICJ) and European Court of Human Rights (ECtHR).
It is concluded that what the Supreme Court utilised is not the territorial tort exception but rather the ‘human rights/jus cogens’ exception. Further, the case before the Ukrainian Supreme Court is distinguishable from the ICJ and the ECtHR cases, where it was held that notwithstanding gross violations of human rights, the respondent state should nevertheless enjoy immunity. Unlike those cases, the Ukrainian case was tried amid the ongoing war, when no reparation agreements had been concluded, the legitimate aim of ‘promoting comity and good relations between states’ had been frustrated, and it was no longer possible to justify the restriction of the plaintiff’s right of access to a fair trial.
Friday, July 8, 2022
Bernard Black, Jeffrey Traczynski, & Victoria Udalova have posted to SSRN How Do Insurers Price Medical Malpractice Insurance?. The abstract provides:
We study the factors that predict medical malpractice ("med mal") insurance premia, using national data from Medical Liability Monitor over 1990 to 2017. A number of core findings are not easily explained by standard economic theory. First, we estimate long run elasticities of premia to insurers' direct cost (payouts plus defense costs), allowing for lags of up to four years, of only around +0.40, when one might expect elasticities near one. Second, state caps on malpractice damages predict a roughly 50% higher ratio of premia to direct costs even though, in competitive markets, a damages cap should affect premia primarily through effect on cost. A difference-in-differences analysis of the "new cap" states that adopted caps during the early 2000's provides evidence supporting a causal link between cap adoption and the ratio of premium to direct cost. Third, the premium-to-cost ratio, which one might expect to be fairly constant over time, instead varies widely both across states at a given time and within states across time. Our results suggest that insurance companies do not fully adjust revenues to changes in direct costs even over long time periods. Insurers in new-cap states have been able to charge apparently supra-competitive prices for a sustained period.
Wednesday, June 29, 2022
Bradley Wendel has posted to SSRN Malice or Snafu? Punitive Damages and Organizational Culture Defects. The abstract provides:
This paper was written for the annual Clifford Symposium on Tort Law and Policy at DePaul Law School. The theme for this year is tort law as a response to corporate wrongdoing. The paper was part of a panel on the Boeing 737-MAX disasters.
In engineering or risk-management (not tort) terms, the root cause of the Lion Air and Ethiopian Airlines crashes involving 737-MAX aircraft can be understood as a failure of Boeing’s organizational culture. A certain narrative has become accepted as conventional wisdom, described in journalistic accounts, reports of House and Senate investigative committees, and the Netflix documentary Downfall. For the purposes of this paper, let’s stipulate to the story: Boeing enjoyed a well-deserved decades-long reputation as a solid, engineering-driven company in which safety concerns were always paramount. Then came the merger with McDonnell-Douglas in 1996 which led to the adoption of an organizational culture that prioritized maximizing stock prices and shareholder value, subordinated engineering values to cost-cutting concerns, and reoriented internal reporting relationships to place bean-counting MBAs in charge of teams of engineers. Then the company was confronted by a market shock when Airbus introduced a fuel-efficient variant on its popular A320 narrowbody jetliner, risking a further loss of market share to Boeing’s European rival. Rather than develop a clean-sheet design to compete with the A320neo, Boeing hastily updated its venerable 737 airframe by adding new fuel-efficient engines. In order to attract customers who had an existing fleet of 737NG aircraft, Boeing committed itself to a goal of a redesign that would not require extensive additional training for flight crews. Thus, when a relatively minor aerodynamic issue – one that would not arise during normal airline operations – was discovered during flight testing, Boeing adopted a software fix known as MCAS for the purpose of certifying the design. However, it decided not to disclose the operation of the system in the Flight Operation Manual for the aircraft, for fear that the FAA would require simulator training for pilots transitioning from the 737NG to the MAX. The MCAS system proved to have significant design defects (in products liability terms), and these defects were the proximate cause of the Lion Air and Ethiopian Airlines accidents.
The dynamics of organizational cultural failures are by now fairly well understood. In some cases the failure is the result of top-down directives from senior leadership, sometimes driven by market pressures. Other situations, however, are more subtle, and sometimes are the result of the unintended consequences of either neutral or well-intentioned organizational decisions. There is a folklore version of the Challenger launch story, in which an engineer for Thiokol, one of the contracting firms, heroically tried to prevent the launch, but was shot down by managers at NASA and Thiokol, one of whom notoriously told the engineers to take off their engineering hat and put on their management hat. In fact the story is quite a bit more complicated, involving subtle psychological factors at work at the level of both individual and collective decisionmaking. As detailed in a report by Jenner and Block commissioned by company’s board of directors, the GM ignition switch response is almost entirely a story of dysfunctions in the company’s organizational culture that were the result of well-intended procedures and reporting structures that had the unintended effect of diffusing responsibility so thoroughly within the organization that no one really had any ability to respond effectively.
In my judgment Boeing is an intermediate case between GM, which I would characterize as a true SNAFU (emphasis on “situation normal” in a gigantic, decentralized organization), and the conscious imposition by upper management of unrealistic goals that foreseeably would reorient lower-level managers and employees away from goals like safety and social responsibility. Even granting the truth of some of the most damning allegations, such as reports by flight-test crews that MCAS behaved in surprisingly aggressive ways and calls by some engineers to include information about MCAS in the FAA-approved Flight Operation Manual for the plane, the ultimately fatal decisions did not arise from a state of mind that traded lives for dollars or ignored safety concerns. Rather, there were mistakes, miscommunications, perhaps excessive optimism (e.g. that flight crews would handle an inadvertent MCAS firing as an ordinary trim runaway), failures to be more proactive in managing risks, and above all a kind of blinkered obsession with not having to retrain flight crews which may have led to unconscious framing of some of the judgments regarding MCAS. In order words, the explanation is more in line with the findings of behavioral psychology, beginning with Kahneman and Tversky, than with an assumption that Boeing was a rogue actor that was consciously indifferent to safety. The damage is real – both the lives lost and the financial and reputational losses to the company. However, the underlying explanation bears more similarities to the Challenger launch decision or the GM ignition switch recall than to cases like Enron or Wells Fargo.
In doctrinal terms, the argument of this paper is that Boeing’s conduct, in the conventional wisdom story recounted above, does not rise to the level of malice, as required by the common law of punitive damages, or the reprehensibility required by the constitutional test from Gore and Campbell. The theoretical argument is that most defects in organizational cultures, although capable of producing serious harms, are not private wrongs that can justify the imposition of punitive damages in tort. They are governance failures or occasions for regulation, but not private wrongs. Obviously the second argument takes a position on a much-debated issue, so I will address briefly the New Private Law approach, with which I have some sympathy.
The company definitely screwed up and squandered a reputation earned, at least since World War II, for being a pilot’s and engineer’s kind of company. The conclusions of the paper should have implications beyond the case study of Boeing, however. To me at least, the most interesting question is how to understand the common law malice standard as applied to corporate actors where the explanation for wrongdoing rests largely on subtle effects known to social psychologists but very difficult to counteract. Good organizational cultures are extremely difficult to maintain, given the often-unconscious tendencies that underlie cultural declines. NASA and Thiokol weren’t bad actors in the Challenger case; they were pretty good organizations full of conscientious engineers and managers who just happened to get caught by some very sneaky psychological effects. Most failures of organizational cultures do not count as reprehensible private wrongs, however devastating the consequences of these failures.