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REGARDING                Book Review:  Liability

If you have read Peter Huber's recent _Galileo's Revenge_, or Walter Olson's
_The Litigation Explosion_, or if you've been following some of the recent
pushes for legal reform (spearheaded by Quayle???), or if you're like me and
you like watching "L.A. Law" just because you know you're going to disagree
with most of the cases they keep on winning all the time, or if you've heard
the joke where the lawyer is talking to someone on the street and an ambulance
speeds by and he suddenly says, "Sorry, gotta run!", then you may be interested
in Peter Huber's first book on legal reform, _Liability_.

Peter Huber; _Liability: The Legal Revolution and its Consequences_; 1988;
Basic Books; 260 pages. 

Peter Huber's _Liability_ is an intellectual history of the long, slippery
slope that is recent tort law.  The strength of Huber's book lies in quickly
identifying a central fallacious judicial policy and then tracing its history
of unforeseen consequences and inverted logic from the late 50's up to the
present time. It's extremely well written, so it lends itself to a quick
summary. 

The problem started when a group of "progressive" judges and legal scholars
determined that consumers don't take risk into account adequately and fail to
demand sufficient safety from products. The courts adopted a progressively
hostile attitude towards producers, applying arbitrary standards of risk to all
products, regardless of individual preferences expressed in the form of a
contract. The courts did this in order to force producers to be more careful,
to provide consumers with a kind of secondary insurance, and to create a hidden
tax on unsafe products. According to this philosophy, it didn't really matter
if the product caused the injury, what mattered was that producers take
responsibility for the percentage of accidents that inevitably result from its
use. Don't blame whoever was at fault, blame whoever could have avoided the
accident at the lowest cost, the one with the deepest pockets. 

For these goals to be achieved, many legal standards had to erode. The very
sanctity of contracts came into question, and contract law rapidly yielded to
more contentious torts. If you didn't specifically warn against the risk of
heart palpitations when selling "happy fun ball," a broad disclaimer was
nullified. If you counter by putting in specific warnings, courts would counter
by saying the warning wasn't conspicuously placed even if it was in the
contract, that the contract was not negotiated properly, that the producer
violated an unrelated minor point of the contract, that one of the parties
wasn't competent to enter into the contract with the big bad corporation--what
we tend to call "loopholes" when the results are not so auspicious.  

The standards for ordinary prudence and negligence also shifted. Courts that
previously had only ruled on manufacturing defects (a single item from the
assembly line) now ruled mainly on design defects (the entire production run).
A "design defect" is a vague concept, and juries got into the business of
rearranging priorities and second-guessing engineers. If you received an injury
from operating a Yugo that may have been prevented if it were designed more
like a Volvo, that can construed as a design defect. The fact that you
expressed a preference for the cheaper, riskier car does not matter, since
consumers are assumed to be innocent and ignorant of safety information when
entering into the bargain. Some products, such as effective drugs, are
inherently risky, and juries started drawing comparisons between existing
products and hypothetical, ideal products. Although regulatory agencies and
trade associations are no doubt more knowledgeable in developing standards,
judges and juries regularly subvert those standards in order to make them
arbitrarily more strict.  [To be fair, at least the courts were efficient in
making their decisions and left a fairly clean wound, unlike regulatory
agencies, which require large bureaucracies to arrive at their arbitrary
decisions. :>) ]  Still, manufacturers have little way to determine what the
"law" really is, or is going to be tomorrow, so they adopt a policy of extreme
defensiveness, often withholding potentially valuable products and services
from the market.  

Under the new liberal rules, the statute of limitations was loosened and then
dispensed with.  Discovery rules were changed so that it didn't matter when the
injury took place; when you discovered it many years later you were still
entitled to sue, when the defendant's ability to gather evidence or even
remember who you are is sharply reduced.  Plaintiffs sued in anticipation of
injuries that may not actually have occurred, but for which a plausible case
could be made that they would at some point.  Once plausibility broke down,
cases rested on unsupported fears of future harm, fear being considered itself
an injury.  The link between cause and effect was severely eroded when any
"scientist" willing to be an "expert witness" could promulgate quack theories. 
[This aspect of the problem is dealt with comprehensively in Huber's follow-up
book, _Galileo's Revenge_.]  

At the end of all this activism, life is made no less risky.  Huber uses the
example of a cole slaw machine in which you put pieces of cabbage in an opening
at one end and cole slaw comes out the other end.  Suppose a child's hand is
caught in the machine one day.  The court determines that the opening was too
wide to be safe, and insists that it be made narrow.  Fine.  Now, for the
cabbage to fit through the opening, the chunks have to be smaller, and for that
you have to use a knife, which is at least as likely to cause injury.  But what
are you going to do, sue the manufacturer of the knife for your clumsiness?  So
the net result is not that risk is reduced, but that the specific behavior that
gets people sued is reduced or diverted.  New technologies suffer
disproportionately.  

The tragic consequences of flexible liability can be seen in its effects upon
health care.  Medical services become so expensive as a result of the
exorbitant malpractice insurance rates and entry barriers to decent health care
are so high that calls are made for drastic measures, such as universal health
care and no-fault insurance, that hide costs and diffuse individual
responsibility.  On the one hand you can say that flexible liability is more
effective in preventing dangerous products from ever coming to market.  The
reality, though, is that the first products that are selected against are those
high-risk products that people need most, such as vaccines and birth control
devices.  

This condensation cannot convey how reasonable the logic sounds at each point
as it goes by, even if you haven't consciously accepted the initial assumption
that producers implicitly accept responsibility for all damages. Many of the
plaintiffs described in the book were no doubt wronged on some level, and
indeed deserving, but the book steps back and examines the legal seduction that
was necessary to entertain these cases in the first place.  Often Huber's tone
makes it seem as if the judges and lawyers destroyed legal standards
consciously, for the hell of it.  Of course, the truth is far worse-- they
genuinely wanted to do good.  

Huber is very good at digging a hole and leading us down into legal hell, but
not as good leading us out of it.  I found his "What's Wrong" section far more
convincing than his "What We Can Do About It" section, and you'll sympathize
with such pessimism by the time you reach the end of the book.  Huber calls for
a resurgence of contract law, not the primitive sort of catch-all disclaimers
that existed before tort law took over, but flexible agreements that take
consumers' advanced expectations into account.  Interestingly, Huber implicitly
bases his argument on the idea that the "market" for contracts initially failed
to take new consumer expectations into account, resulting in a takeover by the Judiciary.
 If there was an inherent weakness in the market that led to such government
zealousness, then what caused it, and how might the mistaken policy have been
avoided in the first place?  

Unlike Walter Olson's _The Litigation Explosion_, Huber does not spend much
time describing the symptoms-- a society permeated with ambulance-chasers.  I
suspect that Olson's book is more likely to be useful if you are interested in
specific reforms.  Huber's book is a short history of ideas that will help you
understand how we got to this point.  

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