Thursday, March 31, 2011

Joint and Several Liability, Law school versus B-school perspective

Today's chapter in the torts E&E was on Joint and Several Liability.  This is one of the things covered in business law classes and I've had it on more than one occassion.  I figured this chapter would be an easy one.  It was easy, but it is striking how differently business schools and law schools teach the subject.

Joint and Several Liability comes about when two people (or companies or whatever, the legal term would be "tortfeasors") do something that causes injury.

So, for instance, let's say that I dig a big hole in my front yard, but fail to erect any sort of barrier around it to prevent people from falling in.

A neighbor is standing on the corner of the hole.  A jogger comes running through, is distracted, and bumps into the neighbor, knocking them into the hole.

A jury finds that I am 70% negligent.  The jogger is 30% negligent.  Total damages come to $10,000.

Now, business school basically teaches it like this:  "Joint and several liability means that even though you are only 70% negligent, you're on the hook for the entire $10,000 amount.  So is the person who is 30% negligent.  So, if the 70% negligent person is bankrupt, then the jogger would have to pay $10,000 even though they were only 30% negligent."

The basic inferrence, here, is that lawyers and people who sue are scumbags who don't care about fairness.  They only want to take money that they're not entitled to and they use the law to do it.

To the business person's perspective, the jogger should be on the hook for only $3,000, and the idea that they could, through this legal trick, be responsible for the entire $10,000 is an abomination and miscarriage of justice.

Now, first, business students tend to be somewhat analytical, especially in matters regarding money.  It's hard to study any field of business without being able to figure out that 30% of $10,000 is $3,000.  So, unlike other majors, the business major is even more disposed to think that 30% negligence should only result in a payment for $3,000.

Also, businesspeople hate attorneys.  I think one of the reasons I waited too long to seriously consider law school is that business automatically conditions you to hate attorneys.  Businesspeople and doctors are probably some of the most anti-attorney populations in the country.  It's bred into our professional DNA that attorneys punish us for doing what we are trying to do.

Now, having read the legal perspective, again, this makes more sense.

In the case of the jogger and hole, the person would not have been injured except for the hole.  And the person would not have been injured except for the jogger.  Who is really to blame?  In reality, both parties are 100% to blame because the accident would not have happened if either one had not done what they did.

So, the person who suffers injury should be compensated fully for their injury.

To give them less than $10,000 is not a fair settlement to them.  Now, is it fair to make the jogger pay $10,000 if the hole-digger is insolvent?  In one way of thinking, yes, it is.  The jogger is really 100% at fault for the accident.  It would not have happened if not for the jogger.  Yes, the hole-digger is also 100% at fault, but that doesn't mean that the jogger is not also 100% at fault.

The law doesn't allow the victim to collect twice for the same accident (by collecting, say, $10,000 from both the jogger and the hole digger.)  However, it does demand that somebody who was to blame for the accident should compensate the victim.

If the alternative solution held sway and the hole-digger were insolvent, the jogger would pay, say, $3,000 and the victim would only get $3,000.

That's considerably less fair (to give the victim only 30% of what they should get) than making the jogger pay 100% of the cost of the accident that would not have happened had the jogger not been negligent.

In any event, law school and b-school are totally different in this regard because the basic premise of both is different.  Business school treats injuries and litigation as expenses to be avoided.  So, the idea that you'd have to pay them is anathema to a business student. 

So, the biz student looks at this and thinks, "The courts do X, and that's total bullshit."

Law students, on the other hand, are trying to determine what the courts will see as a reasonable solution to a problem.  They're not trying to formulate the reasonable solution.  That's a job for legislators.  They're just trying to figure out how the court will likely rule based on the current state of the law. 

The law student looks at this and thinks, "The courts do X.  So, I need to present or defend a case knowing that the law says X."

2 comments:

  1. And the other perspective is that what B school folks think is completely irrelevant. Ha!

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  2. Well, what they think is irrelevant, but the way it's taught in b-school is probably appropriate for business purposes, which is basically to tell us that if we're named a defendant and we're ruled against under joint and several liability, we might be on the hook for the whole enchilada.

    No way to like that. It's the way it is, but there's not a lot of good ways to spin it from a business perspective.

    However, they soft-peddle the whole, "you did something that made you negligent to begin with" part.

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