Tort...

Russell Turpin deafbox at hotmail.com
Mon Nov 10 09:01:51 PST 2003


Turpin:
>>Until some victim has launched a suit and put themselves
>>at risk under your legal system, they lack the legal
>>power of discovery, without which it's not easy to know
>>which company owns which truck.

Bone:
>While I agree this is a problem, it seems more like a tactical issue than a 
>problem with the overall idea.

That wasn't my chief criticism. If you make every suit
a bet on the amount in dispute, companies will find
business models that rely on shifting costs to others.
Assuming they are sued *every* time, and that punitive
damages are triple actual damages, they only have to win
three-eighths of their cases to break even, taking into
account the original taking that caused the suit. If
they win more than half, getting sued becomes a revenue
center. If they win less than 37% of the time, the
business strategy is a loss. But hey, sometimes you lose
in business. How many companies will try?

>And it has a positive effect: it means that plaintiff's lawyers have to 
>sink more costs into due diligence before deciding to take the risk of 
>representing the plaintiff --- thus even further reducing frivolous torts.

I agree that frivolous lawsuits are a problem and we should
seek to lessen them. But you don't want to go so far the
other way that there's a good business in screwing others,
and lawsuits from it are merely a gamble to manage. Keep
in mind that incorporation encourages gambling. Investors
are shielded from losses beyond their investment. In
businesses that worked as I describe, I can imagine that
large judgments by plaintiffs would be uncollectible,
since the corporation would simply go bankrupt. The
corporations that gamble and win pay the investors enough
to make up for this.

This also gets into the issue of tort law vs. criminal
law. A major reason to make some behavior criminal is
precisely to raise the moral stakes. I think it is a
good thing that someone who purposely commits fraud
doesn't risk just their investment, or even their own
wealth beyond that, but personal punishment. Someone
like Winnick or Lay can return hundreds of millions of
dollars, and still walk out richer than you or I. But a
day in jail is a day of sorrow for rich and poor alike.

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