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Recently in Products Liability Category

Note on format; latest posting

July 20, 2004 9:23 AM

Attention readers: in contrast to the usual weblog format, new entries in this exchange are posted at the bottom rather than the top of the page. So scroll down. Thanks!

Table of contents of the discussion: Jul. 20 Olson/Krauss; Jul. 21 Olson/Krauss; Jul. 22 Olson/Krauss; Jul. 23 Olson/Krauss.

Smoking Guns and Federalism

July 20, 2004 11:15 AM

First, Wally, I'm delighted to join you in breaking the ice. This format is new for me, and I hope I master the e-intricacies involved in embedding links, etc. My apologies to readers for any technical screw-ups I make.

Let me reiterate first where I think we agree 100%:

1. The city-county-state suits against firearm manufacturers, for damages these governments suffered when they had to pay money (police overtime, cleanup of blood from streets, payments to hospitals for uninsured gunshot victims) when a bad guy used a gun to shoot someone, are totally bogus. They have nothing at all to do with the Common Law of Torts in any of the 50 states.

2. Why are they bogus? I detail the answer in my monograph, Fire and Smoke: Government Lawsuits and the Rule of Law (Independent Institute). In brief, they are bogus because they make a mockery of Proximate Causation doctrine (the manufacture and marketing of the gun was not the proximate cause of the injury; the bad guy's free choice to misuse the product was the Proximate Cause) and because Governments do not suffer direct damages, but only indirect costs which they themselves choose to bear. For each and both of these reasons, the suits must fail -- and, mostly, they have indeed failed.

3. But of course, like sharky plaintiffs lawyers, these suits were not meant to win -- they were in large part meant to bleed the product manufacturers so dry in lawyers' costs that they would "settle," as tobacco manufacturers have done. Bogus suits filed to induce settlements are the best argument in the world for a "loser pays rule" -- wanna talk about that in future installments of this conversation?

Since we agree, I think, on 1-3, why do I oppose federal intervention based on the Commerce Clause? The short answer is the same one I give to my law students when they ask me why "bad" laws are not ipso facto unconstitutional. The Constitution is not a mandate for the courts to "perfect" society. Nor is it a mandate for the federal legislative branch to repair all bad laws in the states.

Thus, a state can and should and does, in my opinion, have the right to adopt legislation (or to create state case law) that is stupid, that is inefficient, that is even immoral, so long as the state internalizes the costs of its behavior. My state, for instance, should have the right to force everyone to work a maximum of 30 hours per week, as those contemptuous folks in France do. The state would lose tax revenue, its citizens would see their real estate values drop, and presumably there would be political pressure on my state to change its labor laws. I'm not one of those (like my good friends at the Institute for Justice, for example) who believe the Constitution has set up the libertarian state, and that federal courts and the federal government have the right and the duty to impose laissez-faire on the states. Analogously, the federal government does not have the right to impose tort sanity on the states, unless those states violate the federal constitution by their insanity. Tort sanity simply doesn't justify destroying the dual sovereignty that underlies our republican system of government.

So, for instance, the states can hold gun-makers liable for the cost of crimes committed with their guns, if they are willing to destroy the foundations of their tort law, and to open a Pandora's box that will swallow most all of products liability. If, however, a state holds liable a gun-maker that does not even market in that state (the District of Columbia has adopted legislation to this effect, though it has wisely refrained from trying to enforce it so far...), then of course such legislation would be an effort to externalize costs onto others, and this legislation could be properly repressed by federal law under what is known (sorry for the legalese) as the "dormant" part of the Commerce Clause. In addition, if a state's distortions of the Common law go so far as to deprive citizens of their Constitutional right to bear arms, then federal intervention is fully merited under the Fourteenth amendment, which empowers Washington to prevent states from violating our fundamental rights.

But the state gun suits, in most part, don't go this far yet at all. State courts have taken care of business, for the most part, by throwing out these ridiculous suits. Apart from DC (and again, the District has not yet tried to enforce its law), no state has tried to hold liable a manufacturer that does not do business there. And no states' suits have, thus far, so affected the availability of firearms as to create a Second Amendment problem. State sovereignty must not be tampered with lightly, and there is as of yet no clear and present danger of constitutional breach. There is merely a little evidence of state stupidity, and states have the constitutional right to be stupid.

Finally, a note about joint publishing efforts. As I'm sure many readers know, joint writing inevitably requires compromise. My views here are unencumbered by any compromise -- I think it is clearly the case that if a state's liability rules produced shortages of firearms for sale in that state, federal intervention would be authorized under the Fourteenth Amendment. This would not be the case for tort-induced availability issues in, say, obstetrical services, for the simple reason that there is a constitutional right to keep and bear arms, but no constitutional right to hire an obstetrician.

As a teaser, let me close by saying that I think federal choice of law legislation, which WOULD be constitutional, would go far to making sure states did not externalize their havoc.

Ball back in your camp, Wally.


On Babies and Bathwater

July 21, 2004 11:52 AM

Dear Wally,

Well, this is getting interesting. Our conversation will illustrate, I think, how true allies in the global Tort war may nonetheless disagree strongly on their vision of the Constitution. As you requested, I'll try to highlight our disagreements � though I do hope that in subsequent installments areas of agreement do emerge.

You are right that I am not now predicting that the Supreme Court would overturn federal legislation nationalizing gun liability law in particular, or product liability law in general. I don't even think the current Supreme Court would overturn federal legislation nationalizing medical malpractice law (after all, to reprise the hackneyed phrase, folks do cross state lines to go see their doctors). But I very firmly believe that the law is not "whatever the Supremes say it is." Every branch of government has the duty to ensure that their activities do not cross the constitutional line, and therefore every branch of government must reflect upon where that line is.

My own reflection is that private ordering, juridical relations among citizens, is the quintessence of state rule in these United States. I have written about private ordering extensively (Krauss, Tort Law and Private Ordering, [1992] 35 St. Louis University Law Journal 623, here downloadable as a pdf file) and will be brief here. Juridical relations among citizens (embodied by contract, tort, property and family law), as distinguished from relations between citizens and the state (criminal law, administrative law, etc.) are of a particular nature and have always belonged to the states. [State and federal government properly compete in the public law sphere.] Washington could federalize contract law (after all, contract is the essence of commerce, isn't it, Wally?). It could federalize family law (those pesky inter-state divorces and separations make different legal regimes so annoying�). It could in essence cause the states to wither away on the grounds that we are now one big commercial e-market whose state lines are nothing but transaction costs. For all sorts of sound reasons it should not do this, whether or not a Supreme Court would connive to accept it. It should leave tort law to the states. Michael Greve is a great guy, and a true friend of mine, but he is not a jurist and I fear he does not have a complete sense of the constitutional structure of the country. Robert Levy and I expand on this in our 2004 essay, Can Tort Law and Federalism Coexist?, and I shall therefore now cease and desist on that subject.

Now, I agree with you wholeheartedly that current product liability law is often a beggar-thy-neighbor event. "Let's bring money into the state" is the shark plaintiff's battle cry � a cry the shark could not have uttered 100 years ago, when most products used in a state were actually made in that same state. Today the market for products is an interstate market, as you rightly note. But let me point out that the 19th Century also had its version of this beggar-thy-neighbor plaintiffs' tort behavior � tort suits against railroads. As every student of tort law knows, much of our current tort doctrine emerged from legal rulings in suits against railroads. Why? Because railroads always lost tort suits if they got their case before a jury ("let's bring money into the state, and soak those "cosmopolitan" "bankers,""etc.), so they desperately petitioned courts to find failings of law that would allow the judge to refuse to submit the plaintiff's case to a jury. Federal courts heard these cases (because of "diversity" rules), though these courts were of course obliged to apply state tort law. Congress did not create a federal tort law for railroads � similarly, they have no reason to create a federal tort law for guns or other products, unless (see my earlier posting) a federal constitutional right (such as that of the Second Amendment) is in clear and present danger.

So, hint #1: proper use of diversity jurisdiction, preserving federal courts for out-of-state products defendants, is one tool in reconciling federalism and private ordering. Currently, federal courts decline to exercise jurisdiction unless there is "complete" diversity, which means plaintiffs' lawyers can join a local defendant to an out-of-state manufacturer and thereby ensure the jurisdiction of the in-state court. There is no constitutional requirement for the complete diversity rule, as I'm sure you would agree, Wally. Congress can and should modify that rule forthwith � this would in no way diminish state sovereignty when it comes to private ordering, but would go a long way to eliminating procedural bias.

Hint #2: product liability need never be a beggar-thy-neighbor area of law. It would be quite easy to preserve state tort law while forcing states to internalize the costs of their product liability decisions. In a nutshell, this can be done by allowing companies to price-discriminate � to charge a different price for their widgets in State 1 than in State 2, to reflect different liability expectations. Currently, price discrimination is not possible, because state choice-of-law rules (which are followed by federal courts in diversity cases) allow a consumer to buy a product in State 1, then avail himself of the (hypothetically more plaintiff-biased) tort law of State 2. Imposition of federal choice-of-law rules (requiring, for example, that the state products liability law of the place of retail purchase of a widget be the applicable law to that widget) is both feasible and constitutional, and preserves entire state sovereignty over products liability while allowing price discrimination and eliminating the beggar-thy-neighbor issue. I show exactly how this could be done in a recent Brigham Young Law Journal article; here is a link to a pdf version of it.

To recap � Tort law is currently, in many cases, dirty bathwater. Our constitutional structure is a beautiful baby. We can clean up the one without sacrificing the other!


Wally, thanks for your agreement with about 90% of what I advocated in my earlier postings. In an effort to keep this dialogue interesting for readers, I won't go over those areas any more, and except for one important detail I will focus on two issues in this posting: 1) the rather narrow questions that still come between us; and 2) an introduction of that elephant in the room, the Second Amendment.

First the important detail. We agree on the constitutionality and appropriateness of federal choice of law rules for product liability (and in fact I'm pleased to note that I met with a member of the House of Representatives last week on this very subject, so the proposal may soon get some "traction", as we say inside the nefarious Beltway). But Congress is not the only route here. I believe that if the plaintiffs' bar forestalls such a development, the Supreme Court itself has the constitutional authority to impose choice of law rules unilaterally, under proper notions of judicial restraint, precisely in obeisance to the Full Faith and Credit Clause as well as other Constitutional provisions. Doug Laycock of the University of Texas has defended this proposition in an erudite piece, Equal Citizens of Equal and Territorial States: The Constitutional Foundations of Choice of Law [92 Columbia L. Rev. 249 (1992)]. As has been pointed out by Laycock, three fundamental principles demand Court action (in the absence of Congressional action) while circumscribing the exercise of legitimate federal authority over choice of law:

1. The principle of equal American citizens. Each state must, as a general matter, treat citizens of sister states on an equal basis with its own citizens. This implies that states may not adopt or exploit choice-of-law rules in order to favor local citizens over citizens of sister states. Yet in practice many states' choice of law rules have contributed to violations of this principle.

2. The principle that states are territorial. The allocation of sovereignty among states is territorial. This fundamental principle is essentially assumed by the Constitution. State constitutions and acts of admission to the Union do make the territorial basis for state sovereignty explicit. The implication of the territoriality principle is that a state�s claim to regulate behavior or to govern a dispute must be based on issues related to its territory. A state�s �interest� in extending the territorial reach of its own law to the entire country, for the purpose of subsidizing its citizens by consumers throughout the nation, is not sufficient to legitimize a state rule under this principle. Federal choice-of-law rules must take the territorial principle into account, refusing to select laws on grounds unrelated to the basis of state sovereignty.

3. The principle of republicanism. Choice-of-law rules should, ideally, encourage (or, at the very least, not discourage) civic participation in determination of policy. Confining the major effects of a state�s rules within its boundaries strongly encourages citizens to modify rules they find unsuitable and to defend those of which they approve. Republicanism also implies relatively convenient access to knowledge of laws and to lawmakers. If the costs of a New York law are borne by all Virginians (who have neither easy access to New York law nor political standing to modify it), the republican principle would not be satisfied.

I note in closing on this point that the Supremes have, this past term, prevented states from adjudging punitive damages in tort based on behavior in other states [Campbell v State Farm Insurance]. Your posting earlier today recommended Congressional action to enshrine this, and I'm not opposed � but just as the absence of legislation did not preclude Court intervention to preserve tort from excessive state punitives, so the Court can preserve tort from excessive state choice-of-law.

OK, now let me defend myself against the two remaining criticisms you have, Wally.

1. Diversity and choice-of-law changes are not panaceas, True enough. But they do go a long way. In the Loewen case (thanks for the praise for my article), for example, diversity changes would have allowed the defendant to have his case heard in federal court, sans the elected Jackson state judge and his incredible evidentiary rulings.

2. I'm taking the crust and the filling from the states, but leaving them the pie. Here I respectfully but forcefully demur. Removal for reasons of diversity is optional, not mandatory. If a state's legal process is fair, parties will agree to state proceedings � they can often be much cheaper and faster than federal cases. And state tort law is preserved under my proposal. If New Jersey citizens are more risk-averse than, say, their Virginia brethren (and there is no reason to believe that risk preferences are identical across the country), they will approve of and be willing to pay the price for their legal policies, which will be faithfully applied to New Jersey products by state and federal courts alike. No emasculation of states' rights here at all � rather, respect for the three constitutional foundations of states' rights enumerated above.

Last but not least, a few words on gun ownership and gunshot injuries. This as a way of introducing the Second Amendment discussion, which I hope will take place in our last go-round tomorrow.

As a general rule, the making and the selling of guns are neither moral nor legal causes of crime. In truth, the general use of firearms does not contribute to harm at all. If causality is sought, firearm ownership is linked to security, not to death. Guns are used defensively (merely brandished to prevent assault, rape or robbery) approximately 2.5 million times per year -- far greater than the number of firearms crimes. Robust empirical data indicate that laws permitting the carrying of concealed handguns reduce murder by about 8.5 percent and rape by about 5 percent. [Lott, John & Mustard, David (1997), Crime, Deterrence, and Right-to-Carry Concealed Handguns, Journal of Legal Studies 26:1] Those benefits are real and substantial.

Gun ownership facilitates self-defense by allowing physically weak persons to confront stronger aggressors. The �equalizer effect� has historically been associated with increased security and liberty, and was explicitly recognized as doing so by defenders of constitutionalism in both England and the United States. Ownership of a firearm, in and of itself, is best seen as insurance against lawless aggression by individuals [Wheeler, Samuel (1999) Arms as Insurance, Public Affairs Quarterly 13(2): 111], or (in the Founding Founders� eyes, and in the eyes of the 2nd Amendment to our Constitution) by government. [Malcolm, Joyce, (1994) To Keep and Bear Arms: The Origins of an Anglo-American Right, Cambridge, Harvard U. Press]

Guns are not primarily owned by criminals. Firearm ownership, for example, is most common between the ages of forty-five and sixty-five, while arrest rates for violent crime peak between the ages of fifteen and twenty and decline rapidly after age twenty-five. [On firearm ownership see National Health Interview Survey, 1994 Supplementary Series on firearm usage and on arrest rates by age see the Statistical Abstract of the United States, 1997.] This is yet another nail in the coffin of the cities� proximate causation tort argument.

Although 80 million American families own about 240 milllion guns, only about 40 children die each year from accidental discharge of guns. That�s right, 40 per year. In 1998, the last year for which we have hard data, the number was 47: of which only 17 were killed by a handgun. The others were killed with their dad�s rifle, or some other long gun. President Clinton once reported a much higher number of minors killed by guns, but it turned out that that number included an overwhelming majority of 15-19 year olds killed in gang wars � not the accidental killing of �children�. There are on average FOUR cases per year where a child shoots another child accidentally. That compares, for example, to 150 children who die each year from fires started with cigarette lighters.

The Centers for Disease Control reported in April 2002 that, for the 11th year in a row, fewer Americans are being killed or injured in gun-related accidents. The death rate declined 26 percent between 1993 and 1998, and is now at its lowest point since 1965, despite a huge increase in the number of firearms owned by Americans since then.

Notwithstanding all this data, the press gave extraordinary publicity to a 1993 article by one Arthur Kellerman in the New England Journal of Medicine. Kellerman's "study" concluded that the presence of a gun in one�s home dramatically increased one�s chances of being killed by gunfire. As has since been widely noted, though, the study had stupendous methodological flaws that would surely have precluded its publication, were the NEJM not blinded by its fear and loathing of guns.

The study consisted of going to homes where a homicide occurred, and asking whether there was a gun in the house. Such a study by design and definition excluded successful uses of the gun (i.e., where the attacker is scared off and no one is killed). Even if the homicide victim was someone who did not live in the house, and who was stabbed to death, the answer �yes� to the question, �Was there a gun in the house?�, would increase the correlation between guns and homicide.

Moreover, the fear of being killed by a stalker or a gang might well contribute to one�s decision to purchase a firearm. If the fear is well-founded, then we would expect gun purchasers to be more likely victims of murder than others. But that does not establish that the firearm ownership caused the crime. Analogously to Kellerman�s dishonest methodology, I could �prove� that visiting a hospital correlates with dying. This does not show that the hospital visit caused the fatal illness.

Gun ownership is on a steady increase. Crime is on a steady decrease. It turns out, over time, that there is no link between the extent of gun ownership and the extent of violent crime. None at all. Violent crime is much more likely to be associated with demographic factors (for example, the size of the 15-25 male age cohort) and socio-cultural factors (for example, the presence of conscription as an outlet for male aggression, the severity and certainty of punishment for violent crime) than with gun ownership patterns.


My approach to the Second Amendment differs from yours. I don�t try to keep up with the literature on how changes in gun availability may affect crime and accident rates, although I�m aware that it�s quite contentious and I gather that relatively few empirical assertions are accepted by both sides. On the other hand, I�m keenly interested in the historically held view of private gun ownership as providing, in your words, �insurance against lawless aggression. ... by government.� This topic gripped the American patriots of the Revolutionary Era, and English patriots for centuries before that, because they believed that public liberty would not remain secure indefinitely if the authorities had guns and the people did not. If they were right to hold that view, then trends in the safety of firearms as a consumer product may be beside the point. (Indeed, as I understand it, the right to bear arms was enshrined in the Bill of Rights at a time when guns often blew up in their owners� faces.)

The other thing about the Second Amendment that fascinates me is the way our courts have decided that they are not under the slightest obligation to enforce it, and have instead declined to intervene as various localities in the U.S. have more or less completely suppressed their citizens� right to gun ownership. It�s hard to read the first two entries in the Bill of Rights without wondering what life would be like if some mysterious potion in the courthouse water fountain compelled courts to give roughly the same force to the word �infringed� in the Second Amendment as they do to �abridged� in the First (on press freedom), as common usage would suggest. Either they�d have to gut the protections they now accord to press liberty (and it would become impossible to obtain a printing-press permit in many cities without having a friend at City Hall, just as it�s now impossible to get a gun permit), or else they�d have to start taking the Second Amendment seriously.

As we know, state court actions carried out in the name of common law can come into conflict with vital Constitutional liberties. Here�s a high-profile example -- you�ll probably have no trouble guessing which case I�m describing. A big company is in the business of manufacturing and distributing a product to a nationwide market, though it sells more of the product to consumers near its headquarters. Although this enterprise is respected and admired in many quarters of American society, and although the manufacture, sale and distribution of its product is specifically protected by the Bill of Rights, it is bitterly disliked in some other sectors of society. It gets sued on common-law tort theories in a distant and ideologically hostile jurisdiction, where public opinion is soon whipped up against it. The incensed jury slaps it with a painful judgment, and after failing to prevail on appeal the big company asks the federal government to step in to overturn the result and (as its critics would say) save it from having to pay its victim. The feds agree and proceed to bail the company out, imposing a new decision rule on the state courts to replace the earlier common-law rule which (they explain) had too chilling an effect on the availability of the company�s Constitutionally protected product. The ruling meets with tolerably widespread approval, but a few vehement naysayers -- the editorial board of the New York Times, for instance -- complain that federal pre-emption chips away the legitimate sovereignty of the state courts and insulates corporate malfeasance from accountability.

Just kidding about that last bit. Because of course the case I�m describing is New York Times v. Sullivan (1964), in which the Supreme Court sharply curtailed (though it did not eliminate) publications� exposure to traditional state libel law, citing the tendency of that law to chill free speech. And naturally the New York Times editorial board, which today inveighs vehemently against every scheme to limit anyone else�s liability, offers no apologies for the success of its own sweeping version of tort reform, the one to which its own name is attached.

I bring all this up not just to tweak the Times (though that is fun) and not because I necessarily disagree with the outcome of Times v. Sullivan. Indeed, it seems to me entirely plausible that the threat of unbounded defamation liability will chill some responsible and truthful criticism of public officials, just as the threat of unbounded liability in medicine chills a lot of socially beneficial work by medical professionals, and just as the threat of unbounded product liability chills the legitimate firearms trade. Commendably sensitive to free speech values, the high court was not afraid to tread fairly hard on the toes of state sovereignty.

But here�s a thought-experiment: suppose it had been Congress that had perceived the clash between libel law and the First Amendment and acted to curtail the state courts� authority? Suppose the parties in the Sullivan case had for whatever reason not chosen to pursue their controversy to the high court, but that instead supporters of press freedom had prevailed on federal lawmakers to enact a statute exactly embodying the distinctions we now associate with the Times v. Sullivan decision (�public figure�, �actual malice�, etc.), pre-empting state courts from adopting tort theories more favorable to libel plaintiffs. Would this hypothetical law have been somehow illegitimate or constitutionally infirm? It�s hard for me to see why: Congress is sworn to uphold the Bill of Rights and it's supposed to wield the powers necessary and proper to do so. Nor would it have been obliged to wait until a First Amendment train wreck had manifested itself and Northern newspapers had started closing down under the impact of Deep South liability verdicts. By analogy, if it could pre-empt certain suits against newspapers on a First Amendment rationale, it should be able to pre-empt certain suits against gunmakers on a Second Amendment rationale.

Well, the hour grows late, so I�m not going to get a chance to develop some of the other points I�d been working up (such as: if private law has been properly left to the states from the beginning, how do we explain the old federal common law that used to apply in diversity cases, which the New Deal Court extinguished in Erie v. Tompkins?). I�ll just say that I have greatly enjoyed the cordiality of our exchange and the spur it has provided to further thinking on my part. For readers who've liked what they�ve read, I have good news: Michael is soon going to add his voice to the multiparticipant weblog on the front page of Point Of Law, and you can already find me there (as well as at Overlawyered).

Again, many thanks.

The Supreme Court just overturned the $79.5 M Oregon punitives award against Philip Morris USA, in a 5-4 decision. Justice Breyer, for the court, ruled that assigning punitives based on damages suffered by non-plaintiffs was the equivalent of a "taking of property from the defendant without due process."

More when a link to the decision is available, and when I have been able to read it.




Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.