JIB in the News

[Admiral Yi]

Joan, I don't see the relevance of Coase to JiB.  JiB and the beatdown victim are not transacting freely.

[crazy canuck]

Joan, I don't see the relevance of Coase to JiB.  JiB and the beatdown victim are not transacting freely.

Agreed.  Hence the issues of the proper application of the principles of forseeability and remoteness.

[Malthus]

So, if they were 1% at fault, they should pay 0% damages? What's the threshold, moving upwards? If they were 10% at fault, should they pay anything? 25%? 50%?

I can see dismissing claims that are clearly de minimis, but 1% of a $20 million claim is still $200K an a several basis.

I see I am going to have to explain my meaning better.  Before a party can be found liable in negligence there has to be a number of hurdles to cross.  Duty of Care,  Foreseeability, Remoteness and Causation being the big ones.  In my view the problem is that the law has developed in such a way that these important barrier to liability have been steadily eroded so that parties who have almost nothing to do with the injury (and so there had no causal connection, or the injury was too remote, or was unforseeable) are being found liable.

The problem is not with the law regarding joint and several liability.  The problem is that parties are being found to be tortfeasors who should not have any liability at all.

Okay, but that strikes me as simply restating the problem as 'I don't buy that someone held 1% liable could ever have met the causation, foreseeablility and remoteness requirements, properly applied'. Which raises the question of whether someone held 10% or 25% could. 

[crazy canuck]

Okay, but that strikes me as simply restating the problem as 'I don't buy that someone held 1% liable could ever have met the causation, foreseeablility and remoteness requirements, properly applied'. Which raises the question of whether someone held 10% or 25% could.

No, its not mathmatical. 

[The Minsky Moment]

Joan, I don't see the relevance of Coase to JiB.  JiB and the beatdown victim are not transacting freely.

A direct transaction over the risk is not feasible.  Thus, placing the responsibility on the patron will result in suboptimal level of care by retail owners because the patrons cannot either transact to raise it, nor accurately monitor the level of care.  That follows from Coase.

But if responsibility is placed on the retail owner they can and will transact with an insurer to spread that risk.  And that transaction should result approximately in the optimal level of care.  I.e. let's say a 10% risk of $1 million injury can be avoided by spending $40,000.  The insurer will charge $100,000 in additional premium if the expenditure is not made, and so it will be made.  But what if it costs $150,000 to avoid?  Then it won't be made.

If the insurance market is sufficiently deep and competitive, bargaining in that market should approximate the optimal result. In effect, the public will be buying the "right" amount of insurance for the "right" price, albeit indirectly through the incorporation of insurance premia in the cost of goods.  And while it is very unlikely that any given person will be injured in a 5 AM fight in a St. Louis fast food joint, it is quite likely, that over an entire lifetime, a person or their dependents will be exposed to some potential hazard as a result of interacting with some purveyor of goods or services.

[Admiral Yi]

I don't see the relevance of insurance either.  The issue is whether $20 million is an efficiently derived price for JiB's negligence to ensure safety.  The whole point of your pollution example is that once rights are assigned neither party has an incentive to be dishonest about quantity and price.  The beatdown victim had every incentive in the world to be dishonest about risk aversion pricing.

[The Minsky Moment]

I don't see the relevance of insurance either.  The issue is whether $20 million is an efficiently derived price for JiB's negligence to ensure safety.  The whole point of your pollution example is that once rights are assigned neither party has an incentive to be dishonest about quantity and price.  The beatdown victim had every incentive in the world to be dishonest about risk aversion pricing.

I didn't mention JiB or this case.  That may be why you don't see the relevance because we are talking about different things.

I am talking about the design of a regime to allocate rights and responsibilities.
You are talking about something different - given a particular regime, how are the costs of a violation of right or obligation to be accurately determined?

Of course, under an adversarial system such as the US, the victim has an incentive to exaggerate the cost of injury; OTOH the defendant has a similar incentives to minimize it and typically at least as much means to present evidence in favor of its view. 

Perhaps you view that system as faulty or structurally biased given the jury system.  There any many possible solutions to THAT problem assuming it truly exists - e.g. have judges decide damages award, have expert special masters decide damages, remove damages from adversarial case presentation altogether, etc.  But that doesn't effect the basic legal regime of allocating the underlying rights and responsibilities for the injury, however its value is determined.

[Admiral Yi]

OK.

Forgive me if this question sounds rude, but what question were you trying to answer Joan?

[The Minsky Moment]

OK.

Forgive me if this question sounds rude, but what question were you trying to answer Joan?

The question of why it might make sense to have a tort regime that puts more responsibility on enterprises for injuries that occur on their premises than on the members of the public who enter them.

[Malthus]

OK.

Forgive me if this question sounds rude, but what question were you trying to answer Joan?

The question of why it might make sense to have a tort regime that puts more responsibility on enterprises for injuries that occur on their premises than on the members of the public who enter them.

The law as described appears, in effect, to impose strict liability on premises-owners regardless of fault. Why them and not (say) the state government of the state that they happen to live in? If fault is effectively removed from the equation, it isn't obvious why this particular person should have to pay.

[The Minsky Moment]

The law as described appears, in effect, to impose strict liability on premises-owners regardless of fault.

It doesn't really - in most cases, in most states it is still a negligence standard and the plaintiff has to prove breach of the standard of care.
In reality, the plaintiff can usually get to a jury and a jury presented with a victim and a deep pocket may not agonize much over the standard of care.  But that is sociology, not the law.

Why them and not (say) the state government of the state that they happen to live in?

You could do that and then have a regulatory regime but in theory decentralized bargaining between private insurers and facility owners should be more efficient.

[stjaba]

Most countries in Europe have universal health care insurance and stronger social welfare systems. Because of that, if a climber is hurt at a climbing gym in Europe through the negligence of the gym, he doesn't need to sue the gym to be compensated for his injuries, he will be compensated by the government. Either way, the climber is ultimately paying for his own insurance, though higher taxes as in Europe, or through a higher gym membership price as in the US.

So we have three potential systems:
-insurance provided by the government
-insurance provided by private markets
-insurance provided through the tort system

One of these is dramatically less efficient than the others.

I am not so sure about that. I don't think government insurance (i.e Social Security) is a paradigm of efficiency.

And modified liability schemes do not necessarily eliminate litigation and/or create their own problems.

For instance, in Florida, auto accidents are "no fault" when damages do not exceed $10,000. Drivers are required to purchase no fault insurance. If drivers are injured, but only modestly, they don't need to file a lawsuit and they can have their medical bills taken care of by their own insurer. In addition, they can get some lost wages paid. In theory, this what you want: plaintiffs must insure themselves, whether they are injured due to their own fault or others. I believe that the theory was that no fault insurance would drive down litigation costs.

In practice, no fault insurance has led to an explosion of fraud in Florida. People stage accidents, go to shady doctors who run up bills in exchange for a medical opinion that allows people to make lost wage claims, etc. In response, insurance companies basically have to now go through the time and expense of closely scrutinizing claims, hiring lawyers to put claimants under oath (similar to a deposition in a lawsuit), etc. In other words, while the no fault system was supposed to reduce expenses and costs, associated with low level claims, it hasn't done a good job of that. Additionally, because so many doctors and clinics were engaging in shady practices, insurance companies began short-changing them on reimbursements. In response, the clinics started filing lawsuits against insurance companies. It's a big mess. And ultimately the no fault system probably introduced as many problems as it solved.

[The Minsky Moment]

The trick with the system like that is have a panel of independent doctors to review the cases.  If you want recovery, you have to go through someone on the panel and assignment is random.
Or something like that.

[dps]

  You still have an inefficient allocation of resources based on a legal absurdity.

that the risk of wrongdoing should be borne by the wrongdoers and not the victim.  What an interesting view of absurdity you have 

A part of the problem is that it's unclear, I think, in a case like this, that JiB was in any real sense a "wrongdoer".  What exactly did they do wrong, and what should they have done differently?  And if they had done what they "should" have done, would the beating still have occured anyway?  As you yourself put in a later post, "The problem is that parties are being found to be tortfeasors who should not have any liability at all."  (Yes, we're told that they did not follow their own internal policies, but exactly what those policies were and how they were not followed in this particular instance, we don't know.)

In this particular instance, I'd agree that Jib couldn't do much to prevent the beatdown, probably.  However, as a general rule, I think you would agree defendants are best placed to prevent accidents. I am speculating, but I imagine 90%+ of tort cases involve car accidents, slip and fall accidents and the like, where the defendant is best placed to prevent the accident. While there may be exceptions to the general rule, in formulating the general rule it makes sense to account for what happens in the vast majority of cases.

How, exactly, is a business best placed to prevent car accidents in its parking lot?  Slips and falls I can see, because you have a responsibility to keep your walkways and such clean and clear, but auto accidents?

[Razgovory]

  You still have an inefficient allocation of resources based on a legal absurdity.

that the risk of wrongdoing should be borne by the wrongdoers and not the victim.  What an interesting view of absurdity you have 

A part of the problem is that it's unclear, I think, in a case like this, that JiB was in any real sense a "wrongdoer".  What exactly did they do wrong, and what should they have done differently?  And if they had done what they "should" have done, would the beating still have occured anyway?  As you yourself put in a later post, "The problem is that parties are being found to be tortfeasors who should not have any liability at all."  (Yes, we're told that they did not follow their own internal policies, but exactly what those policies were and how they were not followed in this particular instance, we don't know.)

In this particular instance, I'd agree that Jib couldn't do much to prevent the beatdown, probably.  However, as a general rule, I think you would agree defendants are best placed to prevent accidents. I am speculating, but I imagine 90%+ of tort cases involve car accidents, slip and fall accidents and the like, where the defendant is best placed to prevent the accident. While there may be exceptions to the general rule, in formulating the general rule it makes sense to account for what happens in the vast majority of cases.

How, exactly, is a business best placed to prevent car accidents in its parking lot?  Slips and falls I can see, because you have a responsibility to keep your walkways and such clean and clear, but auto accidents?

I imagine the wrong doing on the part of JIB would be failure to call the police for an incident occurring on their property.