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Understanding Enterprise Liability

Understanding Enterprise Liability: Rethinking Tort Reform for the Twenty-First Century

Copyright Date: 1995
Published by: Temple University Press
Pages: 272
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  • Book Info
    Understanding Enterprise Liability
    Book Description:

    In recent years critics have assailed the cost, inefficiency, and unfairness of American tort law, including products liability and medical malpractice. Yet victims of accidental injury who look to the tort system for deserved compensation often find it a formidable obstacle. Those who seek to reform tort law find legislatures, particularly the United States Congress, paralyzed by the clash of powerful special interest groups.

    Understanding Enterprise Liabilitysheds new light on the raging tort reform debate by challenging its fundamental assumptions. Offering historical insights and fresh perspectives on the politics and possibilities for sensible reform, Virginia Nolan and Edmund Ursin pragmatically assess alternative routes to a workable, balanced, and equitable system of compensation for personal injury. They offer a specific proposal, based on the precedent of strict products liability that incorporates the insights of no-fault compensation plan scholarship to create an enterprise liability doctrine that should appeal to courts and to tort reformers.

    eISBN: 978-1-4399-0764-1
    Subjects: Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-x)

    • CHAPTER 1 Contemporary Tort Reform and Enterprise Liability
      (pp. 3-12)

      Tort reform is in the air. Accompanied by proclamations of a tort and insurance crisis, a wide variety of tort reform proposals have been considered in recent years by legislatures, the electorate, and academics.¹ The stakes and level of public awareness of this debate are high. In the fall 1988 battle of tort, auto no-fault, and insurance reform ballot initiatives in California, for example, total spending by the insurance industry, plaintiffs’ lawyers, and consumer groups came to more than $83 million—an “orgy of spending” that exceeded the cost of the entire 1984 presidential election.² Searching examinations and criticisms of...

    • CHAPTER 2 Traditional Tort Theory and Enterprise Liability: An Overview
      (pp. 13-18)

      From the late nineteenth century to the 1950s, tort scholarship was dominated by traditional tort theory, a view that stood in opposition to the legislative and common law agenda of the enterprise liability scholars. A classic statement of that view is found in Oliver Wendell Holmes's 1881 book,The Common Law, in which he summarily rejected the idea that the “state might . . . make itself a mutual insurance company against accidents, and distribute the burden of its citizens’ mishaps among all its members.”¹ Holmes similarly rejected the possibility that tort law should “throw all loss upon the actor...


    • CHAPTER 3 Workers’ Compensation Plans and Enterprise Liability
      (pp. 21-29)

      The theory of enterprise liability emerged out of the legal and political ferment at the turn of the century that produced workers’ compensation legislation. During the second half of the nineteenth century, American courts had responded to a perceived need not to burden infant industries with excessive liability by restricting the possibility of accident victims receiving compensation through the tort system. By the turn of the century, strict liability was a disfavored doctrine on the verge of extinction.¹ Moreover, doctrines that immunized negligent business enterprises from tort liability were a central feature of American tort law. Negligent manufacturers, for example,...

    • CHAPTER 4 Leon Green: Explication and Application
      (pp. 30-37)

      The theory of enterprise liability emerged in unmuted form in the scholarship of Leon Green, who burst onto the scene with a flurry of publications in the 1920s.¹ Today Green is identified as one of the leading Legal Realists;² and his 1930 book,Judge and Jury,³ is recognized as a landmark Realist work.⁴ Green’s torts scholarship is most identified with his theories of causation and duty, his emphasis on the functions of judge and jury, his focus on “relational interests” in tort law and his iconoclastic casebook, which was first published in 1931.⁵ Yet despite this notoriety, Green’s seminal contributions...

    • CHAPTER 5 The Columbia Plan and Dashed Hopes
      (pp. 38-43)

      Green’s two-part “Duty” article provided a broad blueprint for the enterprise liability theory and suggested that compensation plans might be enacted for a variety of accident situations. Enterprise liability advocates soon focused intently on one of these accident situations—the automobile accident—after a landmark report, known as theColumbia Study,appeared in 1932.¹ The Committee to Study Compensation for Automobile Accidents began its work in June 1929 under the auspices of the Columbia University Council for Research in the Social Sciences. Chaired by Arthur A. Ballantine, who had urged a compensation plan for railway accidents in 1916, the committee...

    • CHAPTER 6 Renewed Focus on Compensation Plans in the 1950s
      (pp. 44-53)

      Despite the failure of the Columbia plan to achieve enactment, and the consequent disillusionment during the 1940s with the prospects for legislative reform, the focus of enterprise liability scholars in the 1950s returned once again to the compensation plan strategy. This shift in focus occurred in part for theoretical reasons and in part for pragmatic reasons. On the theoretical level, it remained apparent that the ideal of assured, adequate compensation could best be obtained by legislative reform as opposed to the cumbersome process of judicial lawmaking. This point was forcefully made by Green. In a 1952 address (published as a...

    • CHAPTER 7 The Keeton-O’Connell Plan, Legislative Successes, and Proposed Extensions of No-Fault
      (pp. 54-60)

      Despite the note of caution sounded by James in 1959, the newfound momentum of the automobile compensation plan movement continued into the 1960s. The major achievement of that decade came with the 1965 publication of Robert Keeton and Jeffrey O’Connell’sBasic Protection for the Traffic Victim.¹ This justly praised analysis and proposed automobile compensation plan can be seen as a highly skilled, politically sensitive synthesis of the work of the enterprise liability scholars. Echoing the policy and methodology of enterprise liability, Keeton and O’Connell wrote that when

      we recognize that the law may distribute losses rather than merely shift them,...

    • CHAPTER 8 Dashed Hopes (Again) and the Need for Alternatives
      (pp. 61-68)

      Despite the optimism of O’Connell and other advocates of compensation plan alternatives to tort, the no-fault movement ground to a halt in 1975, only two years after O’Connell’s call to expand no-fault insurance. In retrospect, it is apparent that O’Connell and those who followed his lead had—like the enterprise liability scholars of the 1930s—been overly optimistic about the legislative process. They had misjudged the strength of the “army of trial attorneys,” the timidity of insurance executives, and the prospects for legislative reform of tort law.¹

      By 1977, O’Connell’s hope had given way to caution, and he reported the...


    • CHAPTER 9 Leon Green and the “Tort” Version
      (pp. 71-75)

      As we have seen, during the early decades of the century, torts scholars sought to achieve the goals of enterprise liability primarily through legislative compensation plans. Among these scholars Leon Green was distinctive because his 1928 and 1929 “Duty” articles suggested that, despite the obstacles posed by the ideology and jurisprudence of theLochnerera, courts might play a constructive role in achieving the goals of enterprise liability. In his view, the loss spreading and safety considerations that justified compensation plans should also be employed by courts deciding common law questions of duty and liability.¹

      Green likened the “judicial process...

    • CHAPTER 10 Karl Llewellyn and the “Sales Law” Version: Strict Products Liability Proposed
      (pp. 76-81)

      Although Green and Feezer recognized the potential of courts to adapt the common law to serve the policies of enterprise liability, their focus on “tort” law meant that they neglected an existing body of strict liability rules that courts were already employing in products cases. These rules were found in the law of sales, specifically the warranty doctrines that permitted courts to impose strict liability in cases of injury caused by food products.¹ It was out of these warranty decisions that the modern law of strict products liability grew and an aggressive common law strategy developed. The seminal scholar was...

    • CHAPTER 11 Perspectives on Courts and Legislatures: The 1930s
      (pp. 82-87)

      In addition to suggesting a new field of common law strict liability, the law of sales also provided torts scholars with new insights concerning the relative potential of the legislative and judicial routes to the goals of enterprise liability. Unlike tort law, the American law of sales grew from a statutory framework. A legislative origin, however, was no protection against an obsolete body of law. Indeed, Williston’s 1906 Uniform Sales Act was based on the 1893 English Sales of Goods Act, “which itself was based on nineteenth-century English sales law that reflected the organization of nineteenth-and even eighteenth-century commerce.”¹ Llewellyn...

    • CHAPTER 12 Increased Focus on the Common Law: The 1940s
      (pp. 88-93)

      Beginning in the 1940s, the strategic focus of torts scholars began to shift toward the common law implementation of their theories. By that time it had become increasingly apparent that, despite its impeccable academic credentials and enthusiastic academic reviews,¹ the Columbia plan was going nowhere. It seemed that inertia and the opposition of special interests carried more weight in the legislative process than did a good idea that had been thought out and articulated by legal scholars. James, for example, wrote in 1946 that the Depression and war years had seen “virtually no important legislative modification in this field of...

    • CHAPTER 13 The Possibility of a Judicially Created Strict Enterprise Liability
      (pp. 94-99)

      The possibility that courts might adopt strict liability rules began to receive increased attention in 1951 when Albert Ehrenzweig and Charles Gregory independently placed the label “enterprise liability” on the expansive liability that was increasingly being imposed on modern business enterprises.¹ Expressly building on the work of Green, James, and Traynor, Ehrenzweig’s 1951 bookNegligence Without Fault² sought to establish in an array of doctrinal and factual contexts that “[f]or the last fifty years . . . insurance, by protecting the injurer-entrepreneur, has removed many obstacles against the expansion of his liability for harm inflicted by lawful activities.”³ Like James,...

    • CHAPTER 14 Strict Products Liability: Recognition and Adoption
      (pp. 100-105)

      Preparation ofThe Law of Tortsalso caused James to recognize the significance of strict products liability as a form of enterprise liability. In a lengthy 1955 two-part article,¹ which became the chapter on products liability,² James wrote that product injuries were “like the injuries in industry and on the highways[,] a by-product of profitable enterprise.”³ He believed that the cost of these injuries could be widely distributed by that enterprise, which was strategically placed to make products safer.⁴ The implication for James was that courts might “develop a warranty theory in products liability cases which is tailored to meet...

    • CHAPTER 15 The Damages Agenda of the 1950s
      (pp. 106-115)

      As enterprise liability scholars increasingly focused on expanding the availability of compensation through the tort system during the 1950s, they also began to focus on the question of damages reform. Today this aspect of the enterprise liability theory has largely been forgotten, allowing tort critics to depict the enterprise liability scholars as persons who with “radical single-mindedness . . . promoted one principle—risk distribution—[and] ruthlessly devalued or ignored [every] other consideration that might be thought relevant to the resolution of a tort dispute.”¹

      This caricature of scholars indifferent to concerns of cost and efficiency is contradicted by the...

    • CHAPTER 16 Common Law Successes and Proposed Extensions
      (pp. 116-122)

      The common law version of the enterprise liability theory was by 1960 at the threshold of success. Traditional tort theory, the dominant view since the nineteenth century, still had proponents who persevered in their commitment to fault-based rules premised on the idea that tort law merely shifts losses between individuals. But the enterprise liability theory was on the offensive. In 1961, for example, Guido Calabresi, a young colleague of James’s, wrote in the first two sentences of his first tort article: “In their excellent new casebook on Torts Professors Gregory and Kalven state that ‘the central policy issue in tort...


    • CHAPTER 17 The Success and Fragmentation of the Theory of Enterprise Liability
      (pp. 125-132)

      During the 1970s and 1980s, leading torts scholars turned away from both the common law and legislative versions of the enterprise liability theory. Indeed, the focus was no longer on practical issues of tort reform but on tort theory, formulated in terms of either economic analysis or “rights.” As a consequence, when O’Connell urged that legislative stalemate required alternate means to achieve the goals of enterprise liability, few followed his lead. Moreover, by the 1980s enterprise liability as a tort theory had faded from the academic consciousness, only to be resurrected in George Priest’s misleading 1985 account, which equated enterprise...

    • CHAPTER 18 The Emergence of (Calabresi’s) Economic Analysis as an “Ally” of Enterprise Liability
      (pp. 133-137)

      The economic analysis of tort law can be traced to the 1961 publication of Guido Calabresi’s first tort article, which appeared almost simultaneously with Ronald Coase’s famous article, “The Problem of Social Cost.”¹ Calabresi began by stating his agreement with Gregory and Kalven that “the central policy issue in tort law is whether the principal criterion of liability is to be based on individual fault or on a wide distribution of risk and loss.”² Rather than take sides in this debate between traditional tort theory and enterprise liability, Calabresi offered an economic theory of tort law that was an alternative...

    • CHAPTER 19 The Antagonism Between Calabresi’s Economic Analysis and Enterprise Liability
      (pp. 138-141)

      Calabresi’s economic analysis was offered as an alternative to the enterprise liability theory, and from the outset there was a fundamental antagonism between the two approaches. Enterprise liability scholars had argued that strict liability is desirable because it would “place the loss where the most pressure will be exerted to keep down future losses.”¹ These scholars, however, had seen the effect of liability rules on safety as highly speculative and had urged that the primary goal should be the compensation of accident victims and the spreading of accident losses.² Calabresi’s economic analysis rejected that view. In his 1961 article, for...

    • CHAPTER 20 The Ascendancy of Economic Analysis and Its Opposition to the Enterprise Liability Agenda
      (pp. 142-146)

      The antagonism between economic analysis and the enterprise liability theory went largely unnoticed during the 1960s because, as presented by Calabresi, economic analysis appeared to support the no-fault and strict liability agenda of enterprise liability. During the 1970s, however, it became apparent that the substantive implications of the efficiency goal were far more ambiguous than had been widely believed. Ironically, economic analysis emerged as a major theoretical force only as it became clear that, contrary to Calabresi’s belief, the efficiency goal was at best agnostic and at worst antagonistic toward the nonfault agenda that he had supported.

      During the 1960s,...

    • CHAPTER 21 Contemporary Tort Theory and the Reinvention of Enterprise Liability
      (pp. 147-152)

      Despite its victories over traditional tort theory, the enterprise liability theory fell into obscurity during the 1970s. The common law version was either misunderstood or forgotten, and no-fault insurance was no longer linked to a broader tort theory. When the no-fault movement came to a standstill in the late 1970s, economic analysis, focused on “liability incentives for the prevention of future injuries,” was left as “the generally prevailing scholarly theory about the appropriate role of tort law.”¹ Contrary to the initial suggestion of Calabresi’s pioneering work, however, economic analysis failed to provide a safe “middle ground”² that could support nonfault...


    • CHAPTER 22 The Legislative Agenda
      (pp. 155-161)

      Contrary to the views of contemporary tort reformers, no-fault alternatives to tort law are an implementation, not a repudiation, of the enterprise liability theory. Moreover, the true success of that theory is that its premise is accepted today as the starting point for the discussion of accident compensation law. Writing in the early 1950s, Green stated that the shared goal of a generation of enterprise liability scholars had been to create “a more comprehensive and more adequate means of protection for all victims of personal injuries and death . . . without placing too heavy a burden on enterprise or...

    • CHAPTER 23 The Need for Alternatives to Legislation
      (pp. 162-167)

      Despite its medical no-fault proposal, theReporters’ Study,taken as a whole, fails to embrace the broader implications of the enterprise liability theory. Like other contemporary tort reform scholars, its authors assume that judicial lawmaking is the problem rather than a vehicle for the implementation of the “compensation principle” that is central to theReporters’ Study’s own medical no-fault proposal.¹ Moreover, contrary to the enterprise liability tradition, theReporters’ Studydoes not view its medical no-fault proposal as a model for a broader legislative agenda, as “a pattern by which to indicate other developments either mature or now underway.”²


    • CHAPTER 24 A Common Law Proposal
      (pp. 168-178)

      To achieve the goal of assured, adequate compensation, a common law enterprise liability should dispense with the defect requirement and limit recoverable damages. Justice Traynor, as we have seen, anticipated both these developments when he wrote in 1965 that strict products liability provided a “wealth of analogy yet to be developed.”¹ In recent years, however, scholars have assumed that courts are incapable of reforming damages law,² and they have forcefully asserted that the “abandonment of the traditional defect requirement . . . is one significant step in the evolution of American products liability that our courts will never take.”³ We...

  9. Notes
    (pp. 179-242)
  10. Index
    (pp. 243-255)