THIS WEEK IN TORTS

Today we’re going to take another stop on our abridged tour of theories of tort law with a look at Social Utility Theory. To this point we’ve talked a lot about why people sue or don’t sue, but you can’t really understand tort law without understanding why people win or don’t win. In theory, people should win based on the merit of their claim, fairness, justice, equity, righting wrongs, etc. But we’ve all seen or heard about cases that seemingly defied equity and did not go in the way of justice. When that happens, often it is because the court is focused on more than just the parties before them. It is debatable whether they should be in the business of looking outside the courtroom, but judges do sometimes focus on what is best for society at large. And when they do, it is an expression of what we’re calling Social Utility Theory.

On July 13, 1977, the lights went out in New York. The city that never sleeps was rendered a convoluted mess. People got stuck in elevators, people got stuck in trains. Traffic snarled as all the signals went blank. Looters emerged and violence erupted. The health care system plunged into chaos, as patients lay on the operating table with only emergency backup lights to guide their surgeons’ hands. There were around 7 million people living in New York City in 1977, and you can imagine far more than 7 million instances of damage and loss due to that blackout.

But when injured parties tried to sue Consolidated Edison, the city’s electric company, they were largely shut out from recovery. In Straus v. Belle Realty Company and Consolidated Edison Company, a man fell down the stairs in his apartment building’s darkened stairwell as he attempted to recover his emergency water supply in the basement. The man sued both his landlord and also ConEd on the theory that both of their negligence led to his injury.

The court determined that while ConEd may have owed a duty to the plaintiff, it should not be held liable due to policy concerns about overextending liability:

“... while the absence of privity does not foreclose recognition of a duty, it is still the responsibility of courts, in fixing the orbit of duty, ‘to limit the legal consequences of wrongs to a controllable degree’... and to protect against crushing exposure to liability. ‘In fixing the bounds of that duty, not only logic and science, but policy play an important role’... The courts' definition of an orbit of duty based on public policy may at times result in the exclusion of some who might otherwise have recovered for losses or injuries if traditional tort principles had been applied.”

The court in Strauss basically said that while the plaintiff has a reasonable case in theory, in practice it would establish a precedent that might create boundless liability that would ultimately be injurious to society at large. For the torts system to work, the scope of liability must be limited to certain bounds. This line of reasoning has a long history, exercised by some of the most distinguished judges ever to don the robe. The classic example is the opinion by Benjamin Cardozo, a Lion of the Law™ if there ever was one, in Moch vs. Rensselaer. In this case, the defendant, the Rensselaer Water Company, had a contract to supply water to the city of Rensselaer. While the contract was in force, a building set on fire and the fire spread to the plaintiff’s warehouse and destroyed it. The plaintiff sued the water company for failing to supply them with enough water to put out the fire and prevent the destruction of their property. However, the court disagreed, explaining that allowing the plaintiff to recover in this case would overextend liability:

“We are satisfied that liability would be unduly and indeed indefinitely extended by this enlargement of the zone of duty. The dealer in coal who is to supply fuel for a shop must then answer to the customers if fuel is lacking. The manufacturer of goods, who enters upon the performance of his contract, must answer, in that view, not only to the buyer, but to those who to his knowledge are looking to the buyer for their own sources of supply. Every one making a promise having the quality of a contract will be under a duty to the promisee by virtue of the promise, but under another duty, apart from contract, to an indefinite number of potential beneficiaries when performance has begun. The assumption of one relation will mean the involuntary assumption of a series of new relations, inescapably hooked together. Again we may say in the words of the Supreme Court of the United States, ‘The law does not spread its protection so far.’”

Both Moch and Strauss involve liability stemming from the failure of public utilities (water and electricity), but we might argue that the entire field of law and economics adopts similar legal reasoning. Law and economics is a gigantic field full of people who think very deeply about these things, and we cannot possibly do justice to describing the bounds of the field. But put most simply, law and economic theory states “that law is best viewed as a social tool that promotes economic efficiency, that economic analysis and efficiency as an ideal can guide legal practice.”

It would be reasonable to say that the law and econ movement saw its genesis when Lion of the Law™ Learned Hand created the “B<PL” formula in United States et. al. v. Carroll Towing Company. When assessing duty, hand stated that:

“[T]he owner's duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that [a harm will happen]; (2) the gravity of the resulting injury...; (3) the burden of adequate precautions.”

That is, multiply the gravity of an injury and the burden of adequate precautions the defendant could have taken, and compare that to the probability of an injury. By including the burden of taking precautions into account, Hand seems to have formally introduced social utility into the courtroom.

We might see a modern example in McCarty v. Pheasant Run. In Pheasant Run, a woman was assaulted in her room at the Pheasant Run Resort, by an intruder who entered the room through a sliding glass door behind a drawn curtain. Judge Richard Posner, yet another Lion of the Law™, explicitly pursued a BPL analysis even though it was not the law in Illinois, which he was supposed to apply. Posner looked at the cost of better locks and the burden of the hotel installing the locks relative to the harm suffered by the plaintiff. Even though hotels owe a heightened duty of care to their customers in Illinois, the judge still found that the hotel had not violated its duty by neglecting to lock or check the lock on the door. Basically, the plaintiff was out of luck because Poser determined it would have cost the hotel too much to install adequate locks. It is an outcome that many might dispute, but is at least theoretically based on some kind of analysis that promotes the best outcome for society.

Cases like Strauss, Moch, and Pheasant Run show that in our torts system social utility and justice can sometimes seem opposed to one another. It is always important to remember that our torts system is a creation of humans and of our society. People in another place could choose a completely different system that might create a better, or at least different, balance between justice and social utility. In our upcoming fifth and final installment of Theories of Torts, we leave these shores altogether and travel to middle Earth (aka New Zealand) which has a novel approach to torts.