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A "business judgment" rule for medical malpractice? II

Peter Nordberg's response to my proposal suggests that an analogue to the business judgment rule wouldn't apply to medical malpractice because a rationale for the former is that corporate officers and directors' fates are so tightly wound with their corporation. This isn't quite the case: after all, the business judgment rule precludes second-guessing decisions of directors and officers that have left the company as surely as it does those who remain; there's no sliding scale that applies the business judgment rule with a tighter or looser hand depending on the surrounding circumstances of an officer's diversified financial portfolio. Billionaires who sit on boards of companies as favors rather than for the pittance of options received for doing so get the benefit of the business judgment rule.

But it's worth looking other rationales for the business judgment rule. Justice Steele of the Delaware Supreme Court writes for the ABA that the business judgment rule permits directors to perform valuable work without fear of liability without second-guessing. "Fear of liability" and the business judgment rule is a common theme in many writings.

Too, several have noted that courts do not "possess the experience, expertise, or information necessary to make complicated business decisions." Daniel R. Fischel, The Corporate Governance Movement, 35 Vand. L. Rev. 1259, 1288 (1982).

On a side note, now that I've started tackling a literature review, I see that I am, to a great extent, reinventing the wheel. See Hal R. Arkes & Cindy A. Schipani, Medical Malpractice v. the Business Judgment Rule: Differences in Hindsight Bias, 73 Ore. L. Rev. 587 (1994), from whom I've taken that last quote and cite, saving me the trouble of looking it up in my Easterbrook & Fischel.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.