Liability Standards Research Articles

Filtering Tort Accidents

Abstract Conventional wisdom in the economic analysis of tort law holds that legal errors distort incentives, causing behavior to depart from the optimum. If potential injurers know that courts err, they may engage in less or more than optimal precaution. This article revisits the effect of judicial error on the incentives of potential injurers by identifying a heretofore-neglected filtering effect of uncertainty in settings of imperfect judicial decision-making. We show that when courts make errors in the application of the liability standards, uncertainty about erroneous decision-making filters out the most harmful torts but leaves unaffected less harmful accidents. Our insight applies to various procedural and institutional aspects of legal adjudication, including the randomization of case assignment, the strength of precedent, and the use of standards versus rules.

Retroactive Liability in China's Soil Pollution Law: Lessons from Theoretical and Comparative Analysis

AbstractWhether companies and shareholders should be held liable for land contamination that occurred prior to the passage of the law imposing liability for such contamination is a complex issue. After a theoretical analysis of the legitimacy of retroactivity in land contamination law, our comparative study shows that most countries have adopted, or tacitly approve of, retroactive liability for land contamination. However, the liability schemes implemented in the countries investigated vary as to the types of obligation, the timing of conduct for which liability is imposed, and the standard of liability, among other factors. The retroactive imposition of liability in China's recently enacted Law on the Prevention and Control of Soil Pollution is examined, as well as the roadblocks that still remain, and further improvement based on the theoretical and comparative analysis are considered.

The Changing Landscape of Auditors’ Liability

We provide a comprehensive overview of shareholder litigation against auditors since the passage of the Private Securities Litigation Reform Act. The number of lawsuits per year has declined, dismissals have increased, and settlements in recent years have declined. Our study asks why. Tests indicate that the decline cannot be attributed solely to increases in audit quality, leading us to consider whether Supreme Court cases limiting the scope of Rule 10b-5 against private actors may have led to the decline. To study this possibility, we focus on the Supreme Court’s 2007 and 2011 rulings in Tellabs v. Makor and Janus v. First Derivative, respectively. Our analysis provides strong evidence that the higher liability standards imposed by Janus significantly reduced auditors’ liability exposure, but we find only limited evidence that the pleading standards imposed by Tellabs had a significant effect.

Prioritizing Environmental Protection: Regulating Sulfide-Ore Mining in the Boundary Waters Canoe Area Wilderness of Northeastern Minnesota

This paper examines the environmental policy implications and environmental risks of engaging in copper-ore sulfide mining in the Boundary Waters Canoe Area Wilderness of Minnesota. The re-instatement of mining leases in the area within the past year has generated significant controversy within the state. Concern over limiting environmental risk through effective regulation sits at the forefront of the prominent debate taking place at the federal, local, and state levels. Currently, Minnesota is not equipped to properly and effectively regulate these mines for environmental protection. With that goal in mind, this analysis argues that regulations must return to—and continue beyond—the status quo ante, established in 2016, by implementing stricter command and control design & performance standards; mandating severance taxation; establishing research and development programs; improving transparency; addressing information asymmetries; and ensuring liability standards for adequate compensation of incurred costs caused by environmental degradation and displaced industries. Implementation of these policy mechanisms will ensure prioritization of environmental preservation of the Arrowhead region of northeastern Minnesota.

Investment Syndication Networks and International Differences in Legal Enforcement and Culture

Being part of an investment syndicate offers various network benefits, but also exposes risks that someone in the network acts in a manner that violates securities laws. These risks differ depending on the ways in which securities laws are enforced. Public enforcement, with strong investigative powers and strong group sanctions, discourages the formation of syndication networks. Private enforcement, with strong disclosure and liability standards, encourages the formation of syndication networks. We present evidence strongly consistent with the negative impact of public enforcement on network density, and partial support for the positive impact of private enforcement depending on cultural conditions.

The Rising Costs of Dissent: Public Protest and Civil Liabilities

This Article critically examines the civil liabilities and costs that apply to public protest organizers and participants. It focuses on various novel claims recently filed against protest organizers and petitioners. These include “negligent protest,” “conspiracy to protest,” “malicious petitioning,” and “riot boosting.” Further, a wide variety of more traditional costs, ranging from permit fees to punitive damages, also significantly affect public protest. These costs and liabilities add to an already challenging and burdensome public protest environment, which imposes legal, regulatory and other restrictions on protest activities. Owing to their chilling effect on speech, assembly and petition rights, courts have a special obligation to review both new theories and traditional costs skeptically, to demand clarity and precision in terms of liability standards, and to allow civil liability only in very narrow circumstances. Applying these guidelines, the Article urges courts to reject new theories of liability and all officials to consider more carefully the First Amendment implications of the cumulative – and rising – costs of dissent.

The Fédération Equestre Internationale Speaks for the Horse Who Has No Voice and the Court of Arbitration for Sport Listened: Equine Welfare and Anti-Doping in Equestrianism

The strict liability standard employed by the Fédération Equestre Internationale (FEI) in equine doping cases has been a source of contention among academics, riders and trainers. The FEI Disciplinary Tribunal and the Court of Arbitration for Sport (CAS) have consistently upheld the standard and no alternative has been considered. At the core of the application of the strict liability standard has been the protection of the equine athlete. With the dual aims of the protection of equine athletes and equality between competitors, the FEI imposes a provisional equine suspension when a horse’s sample records an adverse analytical finding. The standard of strict liability and the imposition of provisional suspensions together put the welfare of the horse to the fore. While the intentions of the FEI have been based on this noble premise, ambiguities and inconsistencies have undermined the effectiveness of the Equine Anti-Doping and Controlled Medication Regulations (EADCMRs).

Professional Liability and Forensic Science in the Context of the Lex Aquilia

ABSTRACTThis article examines the emergence of professional liability and forensic science in the context of the Lex Aquilia. The interpretations of jurists, found in the sections of the Digest discussing the Lex Aquilia, subjected professionals to a higher standard of responsibility and liability, both in the context of locatio-conductio contracts and outside of it. At the same time, the Roman legal system increased its reliance on professionals for determining factual issues in legal disputes. The examples of public physicians, who were dispatched to examine suspicious acts of violence; midwives, who were appointed by the court to determine contested paternity or maternity; and land-surveyors, who presided over boundary disputes, are amongst the most common. This article examines the inter-relation between legislation originating in the Lex Aquilia and the emergence of professional liability on the one hand, and the evolution of forensic science on the other hand.

Director Independence and Corporate Investment Efficiency: Evidence from Board Reforms Worldwide

This paper investigates the effect of major board independence reforms on corporate investment efficiency using a large sample of firms from 30 countries. We find evidence of a significant reduction in over-investment subsequent to initiation of board reforms. This reduction is most effective (1) in countries with rule-based reforms and higher liability standards and (2) in firms with lower insider ownership and higher analyst coverage. We also find stronger reductions in over-investment among firms most affected by board reforms – firms that did not have majority board independence at the time of reform. Furthermore, we provide evidence that firms have lower deviations from the level of expected investments following board reforms. Our evidence is consistent with major country-level board reforms that increase the percentage of independent directors enhancing investment efficiency through the mitigation of the moral hazard problem for over-investing firms.

Evolucija sudske prakse u pogledu tumačenja standarda posredne odgovornosti u žigovnom pravu SAD

Secondary liability, according to the general rules on liability, is based on the issue of conscientiousness, in other words whether the intermediary knew or should have known that the right was infringed through his service. In U.S. law, the secondary liability standard is a result of case law. This paper presents the evolution of case law regarding the interpretation of secondary liability standard in U.S. trademark law. This standard was announced by the U.S. Supreme Court in Inwood Laboratories Inc. v. Ives Laboratories Inc. regarding the liability of manufacturers and distributors. In the decades that followed, the U.S. Courts, with their creative interpretations, extended the scope of application of this standard, first to intermediary market operators, and later to online service providers (internet intermediaries). Also, the development of digital technology has influenced the case law to adapt the secondary liability standard for trademark infringement to the new circumstances in the digital environment. The most significant cases in this context are Hard Rock Café Licensing v. Concession Services, Inc., Tiffany Inc. v. eBay Inc. and Rosetta Stone Ltd. v. Google Inc. Finally, 1-800 Contacts, Inc. v. Lens.com, Inc. demonstrates a slight turn of the U.S. Courts' practices towards a more flexible interpretation of secondary liability standard to online service providers.

Filtering Tort Accidents

Conventional wisdom in the economic analysis of tort law holds that legal errors distort incentives, causing behavior to depart from the optimum. If potential injurers know that courts err, they may engage in less or more than optimal precaution. By contrast, when courts always set the care standard at the socially efficient levels, injurers are incentivized to take due care. This article revisits the effect of judicial error on the incentives of potential injurers by identifying a heretofore-neglected filtering effect of uncertainty in settings of imperfect judicial decision-making. We show that when courts make errors in the application of the liability standards, legal uncertainty filters out the most harmful torts but leaves unaffected less harmful accidents. Our insight applies to various procedural and institutional aspects of legal adjudication, including the randomization of case assignment, the strength of precedent, and the use of standards versus rules.

Технодетерминизм в частном праве: влияние биопринтинга на развитие концепции защиты права на цифровой образ

Introduction: the new technological revolution became a trigger in the development of the non-pecuniary benefits concept. In the context of digital transformation, personal privacy protection appears to be a serious problem. A person is found to be in a vulnerable position facing challenges of the new digital reality. This could be illustrated by the example of bioprinting since this technology is connected with digitalization of the human body and creation of its digital three-dimensional model. As a result, a person is becoming dependent on their three-dimensional digital embodiment in implementing their rights to life and health. Evolution in the concept of the right to personal image through recognition of the right to digital image appears as the private law response to the technological challenges. Purpose: to identify and analyze the major problems related to protection of the human right to digital image in bioprinting, as well as to determine an effective model of tort liability for encroachment on the personal digital image associated with the use of bioprinting technologies. Methods: dialectical, formal logical, functional, and other general scientific research methods, as well as special legal methods, including comparative legal and formal legal techniques. Results: the author has studied legal and philosophical problems associated with the bioprinting technology influence on the concept of protecting non-pecuniary benefits and its development; identified a trend associated with the evolution of the human right to digital image; considered the models of tort liability for encroachment on the personal digital image in European law in the comparative legal aspect; formulated prognostic conclusions concerning the model of liability for damage caused by violation of the right to digital image in Russian law. Conclusions: information about a person objectified in a digital three-dimensional model (CAD-file) deserves special protection. The possibility of access and use of such information about a person creates serious risks of causing damage to them. A person’s vulnerable position in bioprinting technologies indicates the need to recognize an absolute non-pecuniary right with a person to their digital image registered in the corresponding digital model (CAD-file). The philosophical and legal concept of human vulnerability serves as a theoretical foundation for the elaboration of solutions aimed at creating an efficient set of tools for protecting the human right to digital image. This concept was manifested in the European law in expanding the possibility of compensation for non-pecuniary damage, its presumption in case of encroachment on non-pecuniary benefits, as well as establishment of the no-fault liability standard. It is necessary to introduce in Russian legislation a special tort establishing the no-fault liability standard for damage caused by encroachment on a personal digital image. Presumption of moral damage in such encroachments, as well as the possibility of recovering exemplary damages from a delinquent, would correspond to the goals of general and special prevention.

Evaluating wildland fire liability standards – does regulation incentivise good management?

Fire spread on forested landscapes depends on vegetation conditions across the landscape that affect the fire arrival probability and forest stand value. Landowners can control some forest characteristics that facilitate fire spread, and when a single landowner controls the entire landscape, a rational landowner accounts for spatial interactions when making management decisions. With multiple landowners, management activity by one may impact outcomes for the others. Various liability regulations have been proposed, and some enacted, to make landowners account for these impacts by changing the incentives they face. In this paper, the effects of two different types of liability regulations are examined – strict liability and negligence standards. We incorporate spatial information into a model of land manager decision-making about the timing and spatial location of timber harvest and fuel treatment. The problem is formulated as a dynamic game and solved via multi-agent approximate dynamic programming. We found that, in some cases, liability regulation can increase expected land values for individual land ownerships and for the landscape as a whole. But in other cases, it may create perverse incentives that reduce expected land value. We also showed that regulations may increase risk for individual landowners by increasing the variability of potential outcomes.

An Unreasonable Solution: Rethinking the FTC's Current Approach to Data Security

For over two decades, the FTC creatively employed its capacious statute to police against shoddy data practices. Although the FTC’s actions arguably were needed at the time to fill a gap in enforcement, there are reasons to believe that its current approach has outlived its usefulness and is in serious need of updating. In particular, our analysis shows that the FTC’s current approach to data security is unlikely to instill anything close to optimal incentives for data holders. These shortcomings cannot be fixed through changes to the FTC enforcement approach, as they are largely generated by a mismatch between the tools that Congress gave it over a century ago and what it needs to foster firms’ incentives to mimic socially optimal levels of care for the data they hold. Not only does the current framework likely suffer from informational deficiencies attendant to its focus on “reasonable” security that render liability standards uncertain, it also lacks the ability obtain the type of relief that will force firms to internalize the costs of their data security decisions. We examine the problem of data security enforcement through the lens of the economics of optimal precautions and identify several reasons why a strict liability regime administered by the FTC, under which firms pay for the expected harm from breaches they cause, is likely to be superior to the current framework that revolves around the concept of reasonableness. The benefits from strict liability flow from the likelihood that firms do not fully internalize the costs and benefits of their data security decisions and the relatively large informational burdens associated with measuring actual and optimal care under a negligence regime. We also show why in this informational environment strict liability is better than negligence for developing a vibrant market for cyber insurance, which will allow data security regulation to be de facto outsourced to insurers who will contract with firms for optimal levels of care. Because these private contracts will harness private information on costs and benefits from precautions, they are likely to incentivize more efficient behavior.

The effect of malpractice law on physician supply: Evidence from negligence-standard reforms

We explore whether the composition of the physician workforce is impacted by the clinical standards imposed on physicians under medical liability rules. Specifically, we explore whether the proportion of non-surgeons practicing in a region decreases—and thus whether the proportion of surgeons increases—when liability standards are modified so as to expect that physicians practice more intensively. For these purposes, we draw on a quasi-experiment made possible by states shifting from local to national customs as the basis for setting liability standards. Using data from the Area Health Resource File from 1977 to 2005, we find that the rate of non-surgeons among practicing physicians decreases by 2–2.4 log points (or by 1.4–1.7 percentage points) following the adoption of national-standard laws in initially low surgery-rate regions—i.e., following a change in the law that effectively expects physicians to increase their use of surgical approaches.

Standard of Care and Liability of Public Procurement Officials: Blessing or Curse?

Section 217 of the Constitution provides that organs of state, when contracting for goods or services, should do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective. Therefore, public procurement officials acting on behalf of such organs of state should act in terms of these principles. When their conduct falls foul of section 217, it may be declared unlawful by a court of law. In the recent past, there have been countless reports of unexplained corruption, theft and fraud committed by public officials, especially in the public procurement sector. Consequently, the legislature, by enacting legislation (specifically the new Public Audit Amendment Act 5 of 2018), and the judiciary, by imposing cost orders, have started holding public procurement officials personally liable for unlawful conduct. This article examines the latest developments in this area of law, including case law and recent legislative amendments, and asks the question whether the standard of care and liability of public procurement officials has increased because of these developments.

Liability in Tort of Financial Supervisory Authorities – a comparative analysis

The article reviews case law and also provides a theoretical framework for claims of individuals, such as depositors, and financial institutions, who seek monetary compensation against public authorities for failure to supervise the financial market and its institutions. The author presents the core elements of a tort of Financial Supervisory Authorities and analyses the evolution of the standard of liability. Other conditions for a compensatory claim which operate as obstacles to liability (eg. the protective purpose of legal rules and compensable damage) are also discussed. Finally, policy argument pro and on the liability of Financial Supervisory Authorities are recapitulated.

Contractual Liability and the Theory of Contract Law

This article considers the character of contractual liability and its implications for theories of contract law. Contractual liability has seemed to legal theorists to stand in need of explanation because it is ‘strict’: a contracting party may be answerable for breach regardless of whether her conduct is faulty. In efforts to account for this approach, theorists have invoked a number of well-known general theories of contract, including Holmesian, economic, moral, voluntarist (or choice-based) and rights-based theories. The article contends that none of the existing theories is fully satisfactory. To develop an alternative account, the article suggests we should reconsider the nature of contractual liability in the common law, attending more closely to certain features that theorists have so far tended to overlook. Having done this we will be able to see that another very well-known general theory is capable of accounting for the standard of contractual liability: the theory of contract as promise.

The Role of the Modern General Counsel

The last three decades have seen a transformation in the role of the general counsel in major US companies. The general counsel has replaced the senior partner in the (external) law firm, as the go-to person for the CEO and the board of directors on advising on a plethora of topics ranging from regulatory compliance to risk mitigation to tackling cross-border operational issues and general (corporate) ethical standards. The broader role that general counsels play has had a positive impact on the overall quality of in-house legal departments, including lowering external legal costs and turn-around time. However, these are ancillary benefits and not its raison d'etre, and a series of events over the last several decades are responsible for shaping the role of the general counsel. Specifically, the adoption of a higher standard of director liability through judicial decisions in the US, and, an increase in regulatory oversight and scrutiny of corporate actions have compelled companies towards stricter compliance regimes, and general counsels seem best suited to oversee this task. However, the role is not without conflict as general counsels owe a duty both to the board of directors and management. Hence, changes in the corporate governance structure may be necessary to minimize the conflict if not completely remove it.

Syndication Networks and Legal Enforcement

This study investigates whether international differences in legal enforcement are associated with venture capital (VC) syndication networks, and whether culture moderates this relationship. We conjecture that public enforcement, with strong investigative powers against any syndicate member and strong group sanctions, increases the costs of VC syndication and discourages the formation of dense syndication networks. By contrast, private enforcement, with strong disclosure and liability standards, encourages the formation of denser VC syndication networks, through clarification of liability rules, standardizing securities contracts, and cost sharing amongst those belonging to the investment syndicate. Based on data from 31 countries involving 201,552 VC-investee firm relationships, the evidence is consistent with the negative impact of public enforcement on VC network density, and partially supports the positive impact of private enforcement depending on cultural conditions.