Expansion of Liability under Public Nuisance

Abstract

Next article FreeArticleExpansion of Liability under Public NuisanceHenry N. Butler and Todd J. ZywickiHenry N. Butler Search for more articles by this author and Todd J. Zywicki Search for more articles by this author Full TextPDF Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinked InRedditEmailQR Code SectionsMoreIntroductionFrom guns to lead paint to sub-prime mortgages to global climate change, use of the common law doctrine of public nuisance to recover damages allegedly caused by the actions of multiple parties over many years is rising. These efforts have met with mixed results, and there are serious doubts about the legitimacy of public nuisance as a means to extract compensation for such widespread harms. Surprisingly, recent public nuisance litigation had been neglected by leading scholars. In order to bring more scholarly insights to the appropriateness of recent public nuisance actions, the Searle Center on Law, Regulation, and Economic Growth commissioned four papers for presentation and discussion at a Research Roundtable at Northwestern University School of Law in April 2008. Roundtable participants included professors, practicing attorneys, and government regulators. Following eight hours of lively discussion, the authors revised their papers to incorporate the comments received. Those papers are presented in this volume of the Supreme Court Economic Review.I. Keith N. Hylton, the Economics of Public Nuisance Law and the New Enforcement ActionsHylton formulates an economic justification for public and private nuisance theories and offers insights into the common ground between the two doctrines. Under his framework, strict liability for nuisance is shown to be an optimal means of regulating activity levels under certain conditions. Using his model, Hylton also discovers the common core between public nuisance and private nuisance—two doctrines traditionally considered incompatible and largely inconsistent.Hylton explains that the nuisance doctrine properly applies to actors who, despite absence of negligence on their part, do not internalize the full social costs of their activities. Although this proposition is widely recognized, the novelty of Hylton’s argument lies in his explanation of the conditions under which strict liability for nuisance leads to optimal activity levels. Hylton’s model “suggests that an unreasonable invasion is one that is associated with an activity for which: (a) the external costs substantially exceed the external benefits, or (b) the external costs thrown off by the defendant’s activity are not reciprocal to the external costs thrown off by other local activities.”1 His framework further consolidates some of the outlying threads of nuisance doctrine and offers rationales for common law treatment of the overly-sensitive plaintiff, proximate causation, and coming to the nuisance.The robustness of Hylton’s theory is demonstrated by its ability to unify public and private nuisance doctrine. Hylton explains that the “public rights” protected by the former “are the same rights protected by private nuisance doctrine.”2 That is, under his model, “the law aims to discourage nuisance activities, not to protect specific types of victim.”3 By establishing a particular harm threshold for private actions against public nuisances, Hylton explains that this common law rule serves administrative efficiency, distinguishing false from valid claims and further serving an operational deterrence function.In addition to his theoretical and normative discussion, Hylton addresses the recent public nuisance actions seeking lead paint abatement and gun control. His criticisms of these litigation efforts are echoed by Priest,4 as well as in other scholarship.5 Regarding lead paint specifically, Hylton and Priest concur that nuisance liability is ineffective at regulating activity levels, primarily because interior lead paint has already been banned for many years. Hylton also notes problems in identification of defendants and proof of causation, which Priest focuses upon in his paper. Regarding gun control litigation, Hylton applies his model and suggests that these suits are misguided, because, among other deficiencies, the cost-benefit assessment for unreasonableness does not support strict liability under nuisance doctrine.II. George L. Priest, Market Share Liability in Personal Injury and Public Nuisance Litigation: An Economic AnalysisPriest takes aim at recent lead paint actions that have employed market share liability, both under public nuisance and personal injury causes of action. Priest points to the use of market share liability to satisfy both a causation function and apportionment of liability. Through economic analysis of the doctrine of market share liability, Priest demonstrates that the theory can function effectively under very limited circumstances, none of which is present in the mass tort litigations at issue.Priest analyzes the doctrinal roots of market share liability in Sin-dell v. Abbott Laboratories,6 regarding the DES drug, and its theoretical foundations in Summers v. Tice7 and Escola v. Coca Cola Bottling Co.8 Priest identifies the purpose of the doctrine, which intends to “improve societal welfare by internalizing injury costs to the firms that generate those costs in contexts in which identification of the specific injurer is impossible.”9 Despite these lofty goals, Priest’s economic analysis of the doctrine finds that its ability to achieve these ends is highly suspect. Specifically, Priest determines: [F]irst, that there are very few—if any—contexts in which market share liability will appropriately allocate the costs of injury… . Second, those … will most typically be contexts in which liability, even if perfectly allocated, is unlikely to affect incentives for the manufacture of safer products… . Third, contexts appropriate for market share liability are typically ones in which the notion of providing some form of insurance for consumer injury is entirely implausible and unworkable.10Priest’s economic analysis centers on the cost-internalization function of tort liability, which, providing manufacturers can pass the costs down to consumers of the defective products, will establish a price differential that will direct consumer demand to safer products and afford compensation to those injured. In turn, market competition will drive manufacturers’ incentives to reduce their liability by supplying safer products. However, Priest explains that this dynamic is disabled in cases where a substantial time has passed between the product’s manufacture and sale and the manifestation of injury—precisely the conditions that necessitate the use of market share liability to identify defendants and allocate responsibility. Consequently, market share liability often results in no meaningful information or incentives, as the costs are passed down to a different population of consumers than those purchasing the offending products. For example, in both the DES and lead paint cases, these products had long been banned by the time injuries manifested and lawsuits were brought.Priest also demonstrates that manufacturers held liable under market share theories will be unable to insure against damages verdicts ex ante. Rather, Priest concludes that the predominant effect of market share liability is the “taxation of one set of consumers or shareholders to pay benefits to a different set of consumers.”11 On a number of fronts, Priest demonstrates that the redistributive effects of market share liability are inconsistent with sensible tax policy and are unjustifiable on this basis.III. David A. Dana, the Mismatch Between Public Nuisance Law and Global WarmingThe arguments by Hylton and Priest against public nuisance in the specific area of mass tort litigation are largely consistent with scholarship that supports public nuisance as a generally efficient form of effecting regulation of pollution-generating activities.12 In environmental regulation, for example, federal oversight is criticized for the unchecked political externalities it often imposes,13 whereas federalism through common law environmentalism is seen as a more efficient and effective way to achieve optimal activity levels.14 Yet, proponents of common law environmentalism also recognize the impropriety of recent lead paint and other toxic torts cases, and proposals have put forth to curtail these abuses of common law doctrines.15Dana takes a different track in the area of global warming, and argues that this particular issue is an exceptional case of environmental pollution. Departing from common law approaches in this context, Dana argues that public nuisance suits against alleged contributors to global warming should be categorically reigned in, and litigation should be permitted only under select circumstances.16 Dana explains that global warming is a commons problem, and one that operates on a much larger scale than localized pollution.Dana argues that global warming “is not best conceived as a binary pollution dispute between producers and recipients of ‘pollution;’ rather, global warming is an issue of how to manage a common natural resource (the atmosphere) so that the human ‘load’ on the resource is or will not push the resource beyond a ‘tipping point.’ ”17 Accordingly, global warming is a special case to which the tenets of free market environmentalism are inapplicable. Dana argues that courts are ill-suited to craft sensible and effective remedies in global warming cases. At the same time, he argues that dismissal of such suits under the federal question doctrine is inappropriate. Rather, Dana supports different rationales for dismissal. He cites procedural avenues such as lack of standing, because the injury caused by global warming is not redressable by the court, and further explicates normative bases that counsel against case-by-case treatment of this issue.In the main, Dana supports dismissal of these lawsuits because “climate change is best conceptualized as an overexploitation-of-a-commons problem, as a commons resource management problem in the face of the well-known dynamics of the tragedy of the commons,” which public nuisance law is ill-suited to address effectively.18 Instead, Dana argues that the assignment of rights in the climatic commons is a political and legislative task. Although frameworks have been proposed to allow courts to address the global warming issue and fashion appropriate relief, namely cost-benefit analysis19 and the Golden-Rule approach,20 Dana argues that neither is sufficient to tackle the problem.Rather, Dana articulates a role for localized litigation as a means of upholding state legislation concerning global warming against challenges based on federal preemption and the dormant Commerce Clause. Specifically, Dana argues that courts considering preemption arguments should apply a heightened ripeness standard and a robust presumption against preemption.21 In this manner, Dana’s approach seeks to foster the development of more effective federal intervention into the global warming issue, by using state legislative initiatives to spur and direct Congress to legislate optimally in this field. Dana’s approach, however, appears to use such litigation to trigger federal action, thereby allowing state courts to impose political externalities on other states and the nation as a whole. For instance, federalism defends the power of a state (such as California) to adopt policies to address concerns about climate change, even if those policies result in lower economic growth to that state’s residents. This principle does not, however, justify permitting California to export its choice about policy tradeoffs to other states, thereby allowing California to pursue economically-damaging policies while imposing many of the costs on those elsewhere.IV. Martin H. Redish, Private Contingent Fee Lawyers and Public Power: Constitutional and Political ImplicationsRedish addresses a different aspect of public nuisance actions by state Attorneys General—namely, their current practice of outsourcing litigation efforts to private sector lawyers on a contingency fee basis. On political, ethical, and Due Process grounds, Redish argues against this practice. Analogizing to the hypothetical practice of paying a criminal prosecutor by her conviction success rate, Redish advocates for prophylactic proscriptions against private contingency fee litigation of public causes of action. Redish argues that our constitutional and political traditions “demand that those exercising [public] power base their decisions and conduct on a good faith assessment of the public interest, rather than on considerations of narrow focus of personal self-interest.”22Arguing in the tradition of liberal democratic theory, Redish upholds the public-private distinction as a central tenet to maintaining individual autonomy in society. A substantive dichotomy must exist between the public and private spheres, and “some constitutional restrictions must be imposed on government to assure that individuals are treated fairly.”23 Regarding litigation, this dichotomy means that though private attorneys representing private clients are encouraged to pursue their client’s interests vigorously, attorneys representing public interests must pursue the litigation to advance the public interest. In turn, the propriety of litigation on a contingency fee basis diverges between these two spheres, and what is a useful mechanism in the private arena becomes abhorrent in the public.On ethical grounds, Redish analogizes to the fact that “[c]reation of a distinctly personal incentive on the part of a prosecutor to pursue conviction would threaten prosecutorial pursuit of the public interest.”24 Redish demonstrates that this same threat is present in civil litigation where the advocate is contracted for a specific lawsuit. Noting that public attorneys inevitably face a host of motivations to use litigation to advance their personal interests, Redish explains that contingency fee arrangements nonetheless skew their incentives by tying personal financial gain to obtaining large damages verdicts. Specifically, the threat applies to situations where “[t]he public interest [would] be furthered not by continued litigation, not by gaining damage awards, but either by cessation of litigation or acceptance of a form of non-monetary relief.”25On constitutional grounds, Redish notes that central to the guarantees of procedural Due Process is the presence of a neutral adjudicator, from which he derives the requirement of “adversarial neutrality,” applicable to government lawyers.26 Again citing the prosecutor analogy, Redish explains that Due Process requires not only that the judge remains neutral, but also that the prosecutor remains constrained to good faith pursuit of the public interest. Redish connects the dots to private contingency fee litigation of public causes of action, and concludes that “procedural due process requires that those acting on behalf of the state in the course of litigation pursue the public interest as they reasonably understand it, rather than their own personal financial interests.”27In sum, Redish finds that private contingency fee litigation of public rights yields “the worst of all possible worlds,”28 and creates a situation in which society stands to lose even though the state may win its lawsuit. Therefore, Redish concludes that in addition to likely constitutional violations, this practice is both ethically unsound and politically improper. Notes 1 Keith N. Hylton, The Economics of Public Nuisance Law and the New Enforcement Actions, 18 S Ct Econ Rev 43, 55 (2010).2 Id at 62.3 Id.4 See George L. Priest, Market Share Liability in Personal Injury and Public Nuisance Litigation: An Economic Analysis, 18 S Ct Econ Rev 109 (2010).5 See Henry N. Butler, A Defense of Common Law Environmentalism: The Discovery of Better Environmental Policy, 58 Case W Res L Rev 705, 748 (2008) (“[T]he expanded use of public nuisance doctrine in products liability and toxic torts cases … unjustifiably taints the primary legal doctrine of common law environmentalism.”).6 Sindell v Abbott Laboratories, 607 P2d 924 (Cal 1980).7 Summers v Tice, 33 Cal2d 80, 199 P2d 1 (1948).8 Escola v Coca Cola Bottling Co., 24 Cal2d 453, 150 P2d 436 (1944).9 Priest, 18 S Ct Econ Rev at 113 (cited in note 4).10 Id.11 Id at 132.12 See Butler, 58 Case W Res L Rev at 747–48 (cited in note 5) (advocating for common law environmentalism but cautioning against “expansive and redistributive application of public nuisance law”).13 See generally Todd J. Zywicki, Environmental Externalities and Political Externalities: The Political Economy of Environmental Regulation and Reform, 73 Tul L Rev 845 (1999).14 See generally Butler, 58 Case W Res L Rev 705 (cited in note 5); Todd J. Zywicki, A Unanimity-Reinforcing Model of Efficiency in the Common Law: An Institutional Comparison of Common Law and Legislative Solutions to Large-Number Externality Problems, 46 Case W Res L Rev 961 (1996).15 Butler, 58 Case W Res L Rev at 748 (cited in note 5).16 Dana’s argument is consistent with an important principle of common law environmentalism. David A. Dana, The Mismatch Between Public Nuisance Law and Global Warming, 18 S Ct Econ Rev 9 (2010). Butler explains that, to serve efficient ends, common law suits against polluters must “adhere to the matching principle that all of the consequences of a jurisdiction’s laws must be felt within that jurisdiction.” Butler, 58 Case W Res L Rev at 747 (cited in note 5).17 Dana, 18 S Ct Econ Rev at 12 (cited in note 16).18 Id at 22.19 Id at 29 (quoting Keith N. Hylton, The Economic Theory of Nuisance Law and Implications for Environmental Regulation Case W Res L Rev 673, 688–89 (2008)).20 Dana, 18 S Ct Econ Rev at 33 (cited in note 16) (citing Thomas W. Merrill, Golden Rules for Transboundary Pollution, 46 Duke L J 931, 999 (1997)).21 Dana, 18 S Ct Econ Rev at 40–41 (cited in note 16).22 Martin H. Redish, Private Contingency Fee Lawyers and Public Power: Constitutional and Political Implications, 18 Sup Ct Econ Rev 77, 78 (2010).23 Id at 85.24 Id at 90.25 Id at 103.26 Redish, 18 S Ct Econ Rev at 103 (cited in note 22).27 Id at 105.28 Id at 80. Next article DetailsFiguresReferencesCited by Supreme Court Economic Review Volume 182010 Sponsored by the Antonin Scalia Law School, George Mason University Article DOIhttps://doi.org/10.1086/659979 Views: 56 © 2011 by The University of Chicago. All rights reserved.Crossref reports no articles citing this article.