Pure Economic Damages, Pollution, and Tort Law

The late days of summer have arrived and now that my wedding and the honeymoon are over, I have spent the last week preparing for my second year of law school. I have to make some apologies for not keeping some twitter promises that I made in terms of dropping articles about Pokemon Go and Star Trek, but things kind of crept up on me, and school prep became a little more important.

Ultimately, I have decided to turn this website into a bit of a legal blog, where I will talk about issues of liberty and libertarianism that I come across in my studies. That way, I will be able to re-hash my classes, practice some light legal writing, and be an advocate for liberty all at the same time. I would just like to stress however, that nothing that I write here should remotely be taken as legal advice.

Today in my advanced torts class we started the semester by talking about pure economic damages in tort actions. In more basic terms, this refers to plaintiffs who seek profits that were lost as a result of tortuous actions taken by the defendant.

As a general rule (with some exceptions), courts do not allow recovery of pure economic damages, because they are speculative in nature and open the floodgates to frivolous claims (which I will elaborate on later).

A classic example of this type of case is Rardin v. T & D Machine Handling, Inc., 890 F.2d 24 (1989).

In this case, the plaintiff, a printing business, bought a new press from Whitacre-Sunbelt, Inc, who contracted with T & D to ship the new press to Rardin. During the shipping process, T & D acted negligently and damaged the press and as a result, Rardin lost business. Because T & D acted negligently, Rardin sued for lost profits and lost.

The court stated that there was no way for T & D to know what scope of losses that Rardin would face if they were to damage the printing press, and therefore T & D did not owe a duty to Rardin (even though they may have owed a contractual duty to Whitacre).

From a libertarian point of view, this makes sense. It is not the role of the courts to protect businesses from the inherent risks they take in conducting commerce with other businesses. If Whitacre were to ship their own printing presses and failed in that respect, it would be a different story, because the court would simply be enforcing the voluntary contract they made with Rardin. Additionally, Rardin could have mitigated the risk to their business by having a spare printer around or created a contractual provision with Whitacre to account for third party negligence.

This kind of reasoning was drawn over to another case: State of Louisiana, Ex Rel. Guste v. M/V Testbank, 752 F.2d 1019 (1985). In this case, two barges on the Mississippi River collided while transporting hazardous materials. As a result, twelve tons of pentachlorophenol (PCP) were spilled into the river. The collision resulted in the filing of 41 lawsuits, of which the immediate case was only one.

In this case, the fishermen who operated within the affected area brought suit against the barge company, seeking profits they lost on account of the wildlife population being destroyed.

In reading this case, my knee-jerk reaction was to impose unlimited liability upon the defendants for their negligent action in allowing the barges to collide. This reasoning came about from my general libertarian knowledge that the government allows corporations to pollute, specifically by passing legislation that leads to increasingly risky business operation and shielding private actors from liability. Also that government itself is, in fact, the largest polluter out there. These opinions are discussed in this transcript of Ron Paul’s Liberty Report.

However, after having class, I agree that unlimited liability is completely unrealistic in terms of pure economic damages. From a legal point of view, the specific consequences to the fishermen of the chemical spill were not foreseeable to the defendant at the time of the spill. Additionally, if we allowed the fishermen recovery of lost profits for the spill, where would the liability end? Would we allow restaurants in Saint Paul, MN to recover because their shipment of shrimp was late?

In reality, the only prudent solution to fighting pollution of this nature is to–surprise, surprise–allow private ownership of waterways and to remove the government’s 134 million dollar cap on liability for environmental disasters. That way, any kind of liability can be justified through good old-fashioned private nuisance and breach of contract claims (to name a few). These ideas are elaborated a bit in this excerpt from Rothbard’s For a New Liberty. Go check it out.

All in all, it is good to be back in the swing of things and to return to normal life. I hope that I haven’t completely lost my readership in the past month that I’ve been out!

As always, thanks for reading. I hope to be posting at least once a week, but seeing as law school is a constant assault of statist propaganda, I will have a lot of things to write about.

Once again, do not somehow take any of this as legal advice. It’s not.

 

2 thoughts on “Pure Economic Damages, Pollution, and Tort Law”

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