Academic journal article Washington and Lee Law Review

Positive Externalities and the Economics of Proximate Cause

Academic journal article Washington and Lee Law Review

Positive Externalities and the Economics of Proximate Cause

Article excerpt

Table of Contents

I. Introduction.1518

II.Why is it Efficient to Exclude Harms from the Scope of Liability?.1527

III. The Exclusion of Foreseeable Reasonable Risks.1530

A. When is a Risk "Reasonable"?.1531

B. The "Correlation Problem".1532

C. The Efficiency of Excluding Reasonable Risks from the Scope of Liability.1535

D. Illustrations.1539

1. Loaded Gun and Injured Toe.1539

2. Landowner Fails to Warn Not to Swim in a Polluted Pond.1541

3. A Cholesterol-Reducing Drug.1542

4. An Overview of the Illustrations.1545

IV. Responding to the Critique of HWTRS for Excluding Foreseeable Harms.1546

A. The "Alignment Principle" and Porat's/Cooter's Criticism of the HWTRS.1547

B. Is the HWTRS "All-Inclusive"? Hurd and Moore's Critical Conception of the HWTRS 1552

V. Applying the Externalized-Benefits Analysis to the Other Six Categories Excluded by the HWTRS..1553

A. Coincidental Harms.1553

B. Unforeseeable Harms.1556

C. Low-Probability Risk: "Unusual," "Abnormal," or "Freakish" Risks.1558

D. Foreseeable, "Usual," "Ordinary," or "Background" Risks.1559

E. Intervening Factors: Faulty or Non-Faulty Conduct of Another Person or Forces of Nature.1560

F. Negligence Per Se.1561

VI. Conclusion and Some Reflections on the Hand Formula.1563

I. Introduction

Proximate cause is a major, longstanding, and well-established doctrine of tort law. The particular form of this doctrine adopted in the Restatement (Third) of Torts: Liability for Physical and Emotional Harm provides that "[a]n actor's liability is limited to those harms that result from the risks that made the actor's conduct tortious."1 The essence of the doctrine-as nicely phrased by Warren Seavey, discussing Palsgraf v. Long Island Rail Road Company2-is that "[p]rima facie at least, the reasons for creating liability should limit it."3 In England, Lord Hoffmann wrote that "[n]ormally the law limits liability to those consequences which are attributable to that which made the act wrongful."4 For the Commonwealth, John Fleming wrote that "[l]imitations on legal responsibility inevitably reflect a policy of keeping a rough correlation between what made the defendant's conduct culpable and what consequences he should be answerable for."5 This doctrine has also been titled "harm-within-the-risk" (HWR), which holds that liability is limited to harms materializing from tortious risks for which the defendant is responsible.6 For the sake of accuracy, we refer to this doctrine as "HWTRS"- harm-within-the-tortious-risk-standard.

When applied to the tort of negligence, the doctrine fits comfortably into the two-stage structure of negligence law: the ex ante stage (before harm occurs) and the ex post stage (after harm has materialized).7 In the ex ante stage, the court (jury) determines whether the defendant's conduct-at the time and in the circumstances of its occurrence-was negligent, given its foreseeable risks.8 Where the social cost of the foreseeable and unreasonable (tortious) risks on the negative scale exceeds the foreseeable social value of the conduct on the positive scale, the conduct is characterized as negligent. This is the essence of the judicial "Hand Formula" now embodied in the Third Restatement. 9 In the second ex post stage, the HWTRS (proximate cause or scope of liability, as the Third Restatement characterizes it)10 steps in. The court must not only verify that the alleged harm was in fact caused by the negligent conduct, but also that this harm meets the HWTRS-the harm materialized from foreseeable and unreasonable (tortious) risk; that ex ante lay on the negative scale that tipped the balance toward the finding that the conduct was negligent.11

The HWTRS can be easily justified in terms of corrective justice as it connects the tortious aspect of the defendant's (D) conduct with the victim's (V) actual harm. Indeed, Ernie Weinrib argues that the HWTRS proves the correlative nature of tort law such that "proximate cause connects the defendant's negligence to the plaintiffs suffering of the kind of injury or accident the risk of which rendered the defendant's act wrongful. …

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