You own University Heights Pizza, a pizza company that provides mostly home delivery. One of your drivers, Donald, routinely drives in excess of speed limits when delivering Pizza, and you are aware of these problems. One night while delivering pizzas, Donald decides to visit a girlfriend. You are aware that he sometimes does this, and you have not objected as long as the Pizza gets delivered on time. On the way to his girlfriend’s house, but on the way to deliver a customer’s pizza, Donald runs a red light at high speeds and seriously injures Alice, a driver in another car who had the right of way. Alice sues University Heights Pizza and Donald. You assert that University Heights is not liable for Donald’s fast driving.
Write a paper of 750- to 1,050-words answering the following questions posed by this scenario:
Cite to at least three scholarly references.
Format your paper consistent with APA guidelines.
Click the Assignment Files tab to submit your assignment
Here is the reading information :
In this chapter you will learn:
10-1. To compare how tort law is related to property.
10-2. To differentiate the three divisions of torts and to generate a theory
of why torts are so divided.
10-3. To explain the elements of negligence and to relate these elements
to the development of negligence law.
10-4. To analyze why tort litigation is so controversial in society today.
Just as contract law is the way owners
exchange what they own in a propertybased
legal system, so also tort law is an
important part of the same system. The property
fence protects our use of things. It is part of
what we own. But our protected use is not infinite.
It may be absolute but because we live with
other people and what is proper to them, we
may not use things just anyway we please. We
do not have a protected use of a thing if our use
harms what others own, including their persons.
Tort law helps define where the property fence is
when it comes to our use of things. It makes our
use legally wrongful and helps anyone injured
by our wrongful use to get compensation, called
T he word tort means “wrong.” Legally, a tort
is a civil wrong other than a breach of contract.
Tort law sets limits on how people can act and
use their resources so they do not violate the right
290 PART 3 Legal Foundations for Business
others have to their resources. If you think of property as a type of legal fence
surrounding resources, then tort law defines when someone has crossed that
fence wrongfully so that compensation is due to the owner.
Legal wrongs inflicted on the resources of others may be crimes as well as
torts (see Chapter 12), but the law of tort itself is civil rather than criminal.
The usual remedy for a tort is dollar damages. Behavior that constitutes a tort
is called tortious behavior. One who commits a tort is a tortfeasor.
This chapter divides torts into three main categories: intentional torts,
negligence torts, and strict liability torts. Intentional torts involve deliberate
actions that cause injury. Negligence torts involve injury following a failure to
use reasonable care. Strict liability torts impose legal responsibility for injury
even though a liable party neither intentionally nor negligently causes the
Important to torts are the concepts of duty and causation. One is not liable
for another’s injury unless he or she has a duty toward the person injured.
And, of course, there is usually no liability for injury unless one has caused the
injury. We explain these concepts under the discussion of negligence, where
they are most relevant.
This chapter also covers the topic of damages. The topic concerns the
business community because huge damage awards, frequently against businesses,
have become common in recent years.
>> Intentional Torts
An important element in the following torts is intent, as we are dealing with
intentional torts. Intent is usually defined as the desire to bring about certain
results. But in some circumstances the meaning is even broader, including not
only desired results but also results that are “substantially likely” to result
from an action. Recently, employers who knowingly exposed employees to
toxic substances without warning them of the dangers have been sued for
committing the intentional tort of battery. The employers did not desire their
employees’ injuries, but these injuries were “substantially likely” to result
from the failure to warn.
The following sections explain the basic types of intentional torts. Sidebar
10.1 lists these torts.
* Torts are divided
into intentional torts,
negligence, and strict
Intent is the desire
to bring about certain
• Assault and battery
• Intentional infliction of mental distress
• Invasion of privacy
• False imprisonment and malicious prosecution
• Common law business torts
>> sidebar 10.1
Types of Intentional Torts
CHAPTER 10 Torts Affecting Business 291
1. ASSAULT AND BATTERY
An assault is the placing of another in immediate apprehension for his or
her physical safety. “Apprehension” has a broader meaning than “fear.” It
includes the expectation that one is about to be physically injured. The person
who intentionally creates such apprehension in another is guilty of the tort of
assault. Many times a battery follows an assault. A battery is an illegal touching
of another. As used here, “illegal” means that the touching is done without
justification and without the consent of the person touched.
Hitting someone with a wrench causes physical injury, but as the following
case illustrates, the “touching” that constitutes part of a battery need not
cause physical injury.
case 10.1 >>
HARPER v. WINSTON COUNTY
892 So.2d 346 (Ala. Sup. Ct. 2004)
Sandra Wright, the revenue commissioner of Winston
County, Alabama, fired her employee, Sherry Harper.
Harper sued, claiming among other things that Wright
had committed an assault and battery in grabbing her
and jerking her arm in trying to force her to go to Wright’s
office. Before trial, the court granted summary judgment
in favor of Wright. The plaintiff, Harper, appealed, and
the case reached the Alabama Supreme Court.
SEE, J: . . . Harper argues that the trial court erred in
entering a summary judgment in favor of Wright, on
Harper’s assault and battery claim, because, she claims,
she presented substantial evidence in support of her
claim. Harper argues that Wright admits that she intentionally
grabbed Harper’s arm and, she asserts, Wright’s
grabbing of her arm was offensive. Harper states:
“[Wright] jerked my arm and tried to pull me back.”
She argues that Alabama law does not require that
Wright strike or hit her in order for a battery to occur.
In response, Wright argues that she merely “took a
hold of [Harper’s] hand.” Wright states that she did not
touch Harper in an offensive manner and that she was
only trying to coax Harper into stepping into her office
so that they could continue their conversation away
from the view of the customers and the employees of
the Department. The trial court stated in its summaryjudgment
order that “the undisputed evidence from
Sandra Wright clearly points out that the touching was
not in any way harmful or offensive, but was instead
done in an attempt to bring [Harper] under control.”
The plaintiff in an action alleging assault and battery
must prove “(1) that the defendant touched the
plaintiff; (2) that the defendant intended to touch the
plaintiff; and (3) that the touching was conducted in a
harmful or offensive manner.” In Atmore Community
Hospital, the plaintiff presented evidence indicating
that the defendant “touched her waist, rubbed against
her when passing her in the hall, poked her in the armpits
near the breast area, and touched her leg.” The
plaintiff also presented evidence indicating that “each
of these touchings was intentional, was conducted
with sexual overtones, and was unwelcome.” We held
that these factual assertions constituted substantial
evidence that the defendant had committed a battery.
In Surrency, we stated that an actual injury to the
body is not a necessary element for an assault-and-battery
claim. We also stated that when the evidence as to
whether a battery in fact occurred is conflicting, the
question whether a battery did occur is for the jury.
Quoting Singer Sewing Machine Co., this Court stated:
“To what acts will constitute a battery in a case like
this, the rule is well stated by Mr. Cooley in his work
on Torts. He says: ‘A successful assault becomes a
battery. A battery consists in an injury actually done
to the person of another in an angry or revengeful or
rude or insolent manner, as by spitting in the face, or
in any way touching him in anger, or violently jostling
him out of the way, or in doing any intentional
violence to the person of another.’ The wrong here
consists, not in the touching, so much as in the manner
or spirit in which it is done, and the question of
bodily pain is important only as affecting damages.
Thus, to lay hands on another in a hostile manner is
a battery, although no damage follows; but to touch
another, merely to attract his attention, is no battery
A store manager who threatens an unpleasant customer with a wrench,
for example, is guilty of assault. Actually hitting the customer with the wrench
would constitute battery.
2. INTENTIONAL INFLICTION OF MENTAL DISTRESS
Intentional infliction of mental distress is a battery to the emotions. It arises
from outrageous, intentional conduct that carries a strong probability of
causing mental distress to the person at whom it is directed. Usually, one who
sues on the basis of an intentional infliction of mental distress must prove
that the defendant’s outrageous behavior caused not only mental distress but
also physical symptoms, such as headaches or sleeplessness.
The most common cases of intentional infliction of mental distress (also
called emotional distress ) have concerned employees who have been discriminated
against or fired. Many such cases, however, do not involve the type of
outrageous conduct necessary for the mental distress tort.
This tort usually
requires the plaintiff to
prove not only mental
distress but also
and not unlawful. And to push gently against one, in
the endeavor to make way through a crowd, is no
battery; but to do so rudely and insolently is and may
justify damages proportioned to the rudeness. . . .”
Alabama courts have recognized that privilege can
be a defense to a plaintiff’s claim that the defendant
battered her. This Court has held that when a merchant
suspects a customer of shoplifting, it is reasonable for
the merchant’s employee to use reasonable force to
ensure that the suspected shoplifter is detained.
In this case, there is no question that Wright intended
to touch Harper’s arm; it is the “manner or spirit”
in which Wright touched Harper’s arm that is in dispute.
Harper testified at the June 13, 2000, hearing
that Wright forcefully grabbed her arm. Wright testified
that she reached for Harper’s arm in an attempt to lead
her into her office so they could continue their discussion
away from the public area. In Surrency, we noted
that “to touch another, merely to attract his attention,
is no battery and not unlawful. While it is certainly
>> CASE QUESTIONS
1. The defendant in this case did not hurt the plaintiff, Harper. Explain why the
defendant might still be liable for the tort of battery.
2. Do all touchings constitute a battery? Discuss and give examples to support your
3. In litigation what is the difference between a question of law and a question of
fact? What does the Alabama Supreme Court decide in this case about whether this
alleged battery is a question of law or a question of fact? Discuss.
conceivable that this type of touching is all that occurred
in this case, Harper presents substantial evidence to the
contrary. Harper testified at her hearing that Wright
“jerked” her arm. In her response to Wright’s motion
for a summary judgment, Harper states that Wright’s
touch greatly offended her and that this fact is evidenced
by the fact that she filed her complaint with the
Winston County Commission on May 9, 2000. In her
complaint, Harper states that “[Wright] grabbed my
arm and tried to force me to go with her.” Reviewing
the facts in the light most favorable to Harper, as this
Court is required to do on an appeal from a summary
judgment, we conclude that the question whether a battery
occurred in this case—specifically, whether Wright
touched Harper in a harmful or offensive manner—is a
question of fact for the jury to decide.
We reverse the summary judgment in favor of
Wright on Harper’s assault-and-battery claim; and we
remand this case to the trial court for proceedings consistent
with this opinion.
CHAPTER 10 Torts Affecting Business 293
In the business world, other examples of infliction of mental distress come
about from the efforts of creditors to extract payment from their debtors. Frequent,
abusive, threatening phone calls by creditors might provide the basis
for a claim of intentional infliction of mental distress. As torts go, this one is
of fairly recent origin. It is a judge-made tort, which furnishes a good example
of how the courts are becoming increasingly sensitive to the range of injuries
for which compensation is appropriate. In some states, courts have gone so far
as to establish liability for carelessly inflicted mental distress, such as the distress
of a mother who sees her child negligently run down by a delivery truck.
3. INVASION OF PRIVACY
The tort of invasion of privacy is one that is still in the early stages of legal
development. As the statutes and court cases recognize it, the tort at present
comprises three principal invasions of personal interest. An invasion of any
one of these areas of interest is sufficient to trigger liability.
Most commonly, liability will be imposed on a defendant who appropriates
the plaintiff’s name or likeness for his or her own use. Many advertisers
and marketers have been required to pay damages to individuals when pictures
of them have been used without authorization to promote products, or when
their names and identities have been used without permission for promotional
purposes. Before using anyone’s picture or name, an advertiser must obtain a
proper release from that person to avoid possible liability. See Sidebar 10.2 .
That you can
recover damages for
likeness illustrates that
you own your name
and likeness in certain
A second invasion of privacy is the defendant’s intrusion upon the plaintiff’s
physical solitude. Illegal searches or invasions of home or possessions,
illegal wiretapping, and persistent and unwanted telephoning can provide the
basis for this invasion-of-privacy tort. In one case, a woman even recovered
Michael Jordan’s name is one of the most recognizable
in all of sports. Jordan has filed several lawsuits
against advertisers who have used his name without
permission in connection with the promotion of their
products. For instance, he sued Avon for $100 million
in connection with a Father’s Day promotion that
used his identity. Avon and Jordan settled that case.
More recently, Jordan sued two Chicago-area grocery
stores for using his name in order to attract customers
to their stores. Sports and entertainment stars
especially often sue businesses that use their identities
In general, the law considers a right to privacy
as “a right to be left alone.” But notice how similar a
right to privacy is to the property right. Privacy, like
property, is a right to exclude others from interfering
with something that is privately proper to someone.
Would it have been simpler if the law had developed
by saying that people have property in their identities?
Why do you think the law didn’t develop this way?
Privacy concerns arose as new technologies like
cameras and recorders made it easy to peer into the
lives of others. The same concerns continue today
with the Internet and computers. Legislatures have
passed a variety of laws concerning privacy. As with
the common law causes of action mentioned in this
section of the text, some of the new privacy acts
and statutes don’t even mention the word “privacy.”
Chapter 18 on consumer protection covers some
of the new privacy laws. In general, concern about
various privacy issues illustrate how law develops to
meet changing needs in society.
>> sidebar 10.2
Privacy, Michael Jordan, and Society
294 PART 3 Legal Foundations for Business
damages against a photographer who entered her sickroom and snapped a
picture of her. Employers who enter their employees’ homes without permission
have also been sued successfully for invasions of privacy. If the invasion
of privacy continues, it may be enjoined by the court. Jacqueline Kennedy
Onassis sought and obtained an injunction that forbade a certain photographer
from getting too close to her and her children. Under this tort, the invasion
of physical solitude must be highly objectionable to a reasonable person.
The third invasion of personal interest that gives rise to the invasionof-
privacy tort is the defendant’s public disclosure of highly objectionable,
private information about the plaintiff. A showing of such facts can be the
basis for a cause of action, even if the information is true. Thus, publishing in
a newspaper that the plaintiff does not pay his or her debts has been ruled to
create liability for the defendant creditor. Communicating the same facts to
a credit-reporting agency or the plaintiff’s employer usually does not impose
liability, however. In these cases, there has been no disclosure to the public in
general. Also, the news media are protected under the First Amendment when
they publish information about public officials and other public figures.
4. FALSE IMPRISONMENT AND MALICIOUS
Shoplifting accounts for some $18 billion a year in business losses, almost
1% of retail sales. Claims of false imprisonment stem most frequently in
business from instances of shoplifting. This tort is the intentional unjustified
confinement of a nonconsenting person. Although most states have statutes
that permit merchants or their employees to detain customers suspected of
shoplifting, this detention must be a reasonable one. The unnecessary use of
force, lack of reasonable suspicion of shoplifting, or an unreasonable length
of confinement can cause the merchant to lose the statutory privilege. The
improperly detained customer is then able to sue for false imprisonment. Allegations
of battery are also usually made if the customer has been touched. Not
all false imprisonment lawsuits arise because of shoplifting. In one instance
a KPMG employee sued for false imprisonment alleging that his manager
blocked a door with a chair during a performance review and caused the
employee to have to remain in the room against his will.
The tort of malicious prosecution is often called false arrest. Malicious
prosecution arises from causing someone to be arrested criminally without
proper grounds. It occurs, for instance, when the arrest is accomplished simply
to harass someone. In Albany, New York, a jury awarded a man $200,000
for malicious prosecution. His zipper had broken, leaving his fly open, and
a store security guard had him arrested for indecent exposure even after he
explained that he had not noticed the problem.
To enter another’s land without consent or to remain there after being asked
to leave constitutes the tort of trespass. A variation on the trespass tort
arises when something (such as particles of pollution) is placed on another’s
land without consent. Although the usual civil action for trespass asks for an
injunction to restrain the trespasser, the action may also ask for damages.
Union pickets walking on company property (in most instances), customers
refusing to leave a store after being asked to do so, and unauthorized persons
Don’t forget that
the First Amendment
protects you when you
publish even highly
public officials and
One false imprisonment
when a tow-truck
operator towed a car
with the driver still in it.
CHAPTER 10 Torts Affecting Business 295
entering restricted areas are all examples of trespass. Note that trespass is often
a crime as well as a tort. Intentional wrongdoing is frequently criminal.
Trespass concerns the crossing of an owner’s boundaries. Today, trespass
usually refers to violating the physical boundaries of an owner’s land, but
in legal history trespass was the legal remedy for direct injuries caused by
another to one’s person as well. The famous British constitutional historian
Frederick Maitland wrote, “Trespass is the fertile mother of actions.” By this
he meant that many of our modern day causes of action in tort—like battery—
come from trespass. Now do you appreciate better the connection of tort
law to property in our legal system? In an important sense, we own ourselves
and various things we have acquired, and those who violate our boundaries
become liable to compensate us.
Conversion is the wrongful exercise of dominion (power) and control over
the personal (nonland) resources that belong to another. Conversion deprives
owners of their lawful right to exclude others from such resources. The deprivation
may be either temporary or permanent, but it must constitute a serious
invasion of the owner’s legal right. Abraham Lincoln once convinced
an Illinois court that a defendant’s action in riding the plaintiff’s horse for
15 miles was not sufficiently serious to be a conversion since the defendant
had returned the horse in good condition. The plaintiff had left the horse with
the defendant to be stabled and fed.
Conversion often arises in business situations. Stealing something from
an employer is conversion, as is purchasing—even innocently—something
that has been stolen. Failing to return something properly acquired at the
designated time, delivering something to the wrong party, and destruction or
alteration of what belongs to another are all conversions when a deprivation
of ownership is serious or long-lived. Even if you intend to return something,
if you have converted it you are absolutely liable for any damage done to it.
A warehouse operator who improperly transfers stored goods from a designated
to a nondesignated warehouse is absolutely liable when a tornado
destroys the goods or when a thief steals them.
Defamation is the publication of untrue statements about another that hold
up that individual’s character or reputation to contempt and ridicule. “Publication”
means that the untruth must be made known to third parties. If
defamation is oral, it is called slander. Written defamation, or defamation
published over radio or television, is termed libel.
False accusations of dishonesty or inability to pay debts frequently bring
on defamation suits in business relationships. Sometimes, such accusations
arise during the course of a takeover attempt by one company of another
through an offering to buy stock. In a recent instance, the chairman of one
company called the chairman of a rival business “lying, deceitful, and treacherous”
and charged that he “violated the standards by which decent men do
business.” If untrue, these remarks provide a good example of defamation of
character. At one major university, a former business professor received a
multimillion-dollar settlement following allegations made by university administrators
that he had vandalized the new business school. The allegations cost
The reason for
emphasizing how tort
relates to property
is to show you how
our legal system has
on the concept of
exclusive right, which
applies to your person
as well as to land
and other physical
In one case a student
drove a rental car
into Mexico although
the lease specifically
When an earthquake
destroyed the car
while it was parked in
Mexico City, the rental
sued the student for
Is it defamation of
character to say that
someone is gay or
lesbian? How about
that someone is
of a different race
than is correct? Is
296 PART 3 Legal Foundations for Business
him a deanship at another university. Punitive or punishment damages, as
well as actual damages, may be assessed in defamation cases.
Individuals are not the only ones who can sue for defamation. A corporation
can also sue for defamation if untrue remarks discredit the way the corporation
conducts its business. Untruthfully implying that a company’s entire
management is dishonest or incompetent defames the corporation.
Nearly one-third of all defamation suits are currently brought by employees
against present and former employers. Often these suits arise when
employers give job references on former employees who have been discharged
for dishonesty. As a result, many employers will now not give job references
or will do no more than verify that former employees did work for them.
There are two basic defenses to a claim of defamation. One defense is
that the statements made were true. Truth is an absolute defense. The second
defense is that the statement arose from privileged communications. For
example, statements made by legislators, judges, attorneys, and those involved
in lawsuits are privileged under many circumstances.
Defamation and the First Amendment Because of the First
Amendment, special rules regarding defamation apply to the news media.
These media are not liable for the defamatory untruths they print about public
officials and public figures unless plaintiffs can prove that the untruths
were published with “malice” (evil intent, that is, the deliberate intent to
injure) or with “reckless disregard for the truth.” Public figures are those who
have consciously brought themselves to public attention. See Sidebar 10.3 .
In 2008, publisher
Judith Reagan and
her employer News
her $100 million
for defaming her by
saying it had fired
her because she had
The U.S. Supreme Court issued the “public official”
standard requiring defamation plaintiffs to prove
“malice” or “reckless disregard for the truth” in New
York Times v. Sullivan, 376 U.S. 254 (1964), a case
involving criticism of an Alabama police commissioner.
The Court extended essentially the same standard
to defamation cases against “public figures” in
Curtis Publishing Co. v. Butts, 388 U.S. 130 (1967).
The facts of this case are interesting.
The Saturday Evening Post, one of the nation’s
leading feature story magazines for many years,
published a story about the University of Georgia’s
athletic director and former football coach Wallace
(“Wally”) Butts and the University of Alabama’s football
coach Paul (“Bear”) Bryant. The Post alleged that
in a telephone conversation overheard accidentally
by an Atlanta insurance salesman, Butts told Bryant
how to beat Georgia in an upcoming game. “Before
the University of Georgia played the University of
Alabama. . . , Wally Butts . . . gave to Bear Bryant
Georgia’s plays, defensive patterns, all the significant
secrets Georgia’s football team possessed.” The article
continued, “The Georgia players, their moves analyzed
and forecast like those of rats in a maze, took a
frightful physical beating.” Georgia lost the game, and
Alabama went on to win the national championship.
Although the conversation between the two
coaches may really have involved only a routine request
to exchange game films, Butts ended up being forced
to resign as athletic director. Both he and Bryant sued
the Post for defamation. The coaches won their lawsuit,
which was appealed to the Supreme Court.
The Court determined that the two coaches were
“public figures” and that the First Amendment protected
comment about them in much the same way
it protected comment about public officials. However,
the Court also concluded that the coaches had met
their heavy burden of proof. It affirmed the judgment
against the Post. Within a short time, the Saturday
Evening Post went out of business.
>> sidebar 10.3
Football Coaches as Public Figures
CHAPTER 10 Torts Affecting Business 297
Plaintiffs’ verdicts in media defamation cases are often overturned by trial
or appellate judges. In one instance a Houston investment firm, now defunct,
sued The Wall Street Journal, claiming that a story published by the newspaper
caused the firm to go out of business. Following a huge jury verdict, the
trial judge threw out $200 million in damages, ruling that the firm had not
proved the newspaper published certain statements with knowledge of their
falsity or with reckless disregard for the truth.
Plaintiffs’ verdicts in defamation cases are often overturned by appellate
courts. Because of the constitutional protection given to speech and the
media, appellate judges reexamine trial evidence very closely to determine
whether the necessary elements of defamation had been proven.
Business managers must be alert to the intentional tort of fraud. A fraud is an
intentional misrepresentation of a material fact that is justifiably relied upon
by someone to his or her injury. An intentional misrepresentation means a lie.
The lie must be of a material fact—an important one. The victim of the fraud
must justifiably rely on the misrepresentation and must suffer some injury,
usually a loss of money or other resource one owns.
Fraud applies in many different situations. Business frauds often involve
the intentional misrepresentation of property or financial status. Lying about
assets or liabilities in order to get credit or a loan is a fraud. Likewise, intentionally
misrepresenting that land is free from hazardous waste when the
seller knows that toxic chemicals are buried on the land constitutes fraud.
You can also prove fraud by giving evidence that another has harmed you
by failing to disclose a material (important) hidden fact. The fraud of failure
to disclose arises when the defendant is under a legal duty to disclose a fact,
such as when a defendant seller knows that the foundations of a house are
weakened by termites and must disclose this to the buyer.
Likewise, a defendant who has intentionally concealed an important fact
and has induced reliance on it to the plaintiff’s injury is liable for fraud. Following
the financial collapse that began in 2007, hundreds of plaintiffs filed
fraud lawsuits against banks, other financial institutions, and various of their
executives based on concealment. In one such case, the former chief executive
of Countrywide Financial agreed to pay $67.5 million to settle a fraud case
brought by the Securities and Exchange Commission. The alleged fraud was
the intentional concealment of the risks of subprime mortgages from investors
in the then-largest national mortgage lender. Note that not only the common
law but also many statutes regulating the financial industry provide for
causes of action based on fraud.
In another concealment case, New York State filed a lawsuit based on
fraud against Guidant Corporation. The complaint alleged that heart defibrillators
manufactured by the company were defective and that the implanted
devices had already failed in 28 patients. Further, the complaint asserted that
Guidant had known of the defect for several years and concealed this information
while continuing to sell the defibrillators. Said New York’s former
attorney general, “Concealment of negative facts that might influence a consumer
to purchase another manufacturer’s product is the essence of fraud.”
Fraud is not only a tort but a crime as well. Do you understand the difference
between torts and crimes? (See Sidebar 10.4 .)
According to a survey
by the Association
of Certified Fraud
companies lose an
average of 6% of their
profit to fraud.
298 PART 3 Legal Foundations for Business
Some torts are crimes and some are not. How do
we make sense out of this? Crimes, which you will
study in Chapter 13, generally require intent (also
called willfulness ). The prosecutor has to prove that
the defendant intended to cross the proper boundaries
(property) established by law. If the primary purpose
of the state (government) is to protect people
and their resources with the legal fence of property,
as was thought by many framers of the Constitution,
it becomes clear that most crimes, which are
offenses against the proper order (property order)
enforced by the government, involve the most serious
and intentional crossings of the legal fences that
protect people. These crossings injure or harm what
belongs to people and the state punishes such harm.
But people also deserve compensation because of
the injury. That is where tort law comes in.
The most serious torts like assault, battery, conversion,
and fraud, which are also frequently crimes,
are all intentional. Accidental boundary crossings are
usually not criminal unless they are extremely reckless,
but when they injure what belongs to an owner,
the owner can still get compensation through tort
law, for example, through proof of unreasonable and
careless boundary crossing called negligence (see
Sections 11–13). Likewise, certain other accidental
boundary crossings that cause injury, like the sale
of a defective product, result in the person crossing
the legal fence being held strictly liable, that is, liable
even in the absence of unreasonable behavior in the
crossing (see Sections 15–17). However, because
these torts are unintentional, they are usually not
crimes as well.
Since torts are civil and crimes are, well, criminal
in nature, they have different burdens of proof,
as explained in Chapter 4. The judge instructs the
jury that the plaintiff must prove the tort by a preponderance
of the evidence but instructs the jury in
a criminal case that the prosecutor must prove the
victim’s intentional injury by the defendant beyond a
reasonable doubt. The burdens of proof are different
because to deprive criminal defendants of their freedom
is considered much more serious than merely
to deprive them civilly of their money. And burdens
of proof exist in both civil and criminal cases because
to punish a criminal defendant to protect the proper
order of the state or to compensate a civil plaintiff for
a wrongful boundary crossing involves the taking of
something that was previously proper to defendants,
whether it is their freedom, their money, or some
other resource belonging to them.
Do you understand better now why the same
trespass across a legal fence can be both a tort and
>> sidebar 10.4
Tort or Crime? Or Both?
Additional Fraud Examples Fraud also can be committed in the
hiring process. For instance, courts have found employers liable for misrepresenting
to employees about conditions at a business that later affect
employment adversely. In one case, former professional football player Phil
McConkey received a $10 million award because his employer misrepresented
the status of merger talks with another company. McConkey lost his
job the year after he was hired when the two companies merged.
Other instances of business fraud can include:
• Misrepresentation in employment. Screenwriter Benedict Fitzgerald sued
actor–director Mel Gibson and his production company for defrauding
him into taking a much smaller salary based on their representation that
the movie budget was only $4 million–$7 million instead of the estimated
$25 million–$50 million that had been actually budgeted.
• Misrepresentation about products. The tobacco industry is beginning to
lose lawsuits when plaintiffs allege fraud based on the industry’s claiming
CHAPTER 10 Torts Affecting Business 299
for years that no tobacco consumption harm had been scientifically
proved when it knew that such harm had been established. In 2008, for
instance, the Oregon Supreme Court affirmed a $79.5 million punitive
damage award in the fraud case of deceased smoker Jesse Williams.
• Concealment about products. Farmers and growers have received over
$1 billion from DuPont in settlements based on the damage the fungicide
Benlate caused various plants. DuPont allegedly committed fraud by concealing
that Benlate could cause crop damage even when the company
was asked about the possibility.
• Nondisclosure to third parties about home sale prices. Fannie Mae, the
nation’s largest investor in home loans, told lenders in 2008 that it considered
certain “practices that may distort or artificially inflate” house prices
to be potentially fraudulent. Fannie Mae referenced situations where
home developers or builders represented that they sold homes in an area
for reported high prices but in reality gave back part of the purchase price
to buyers. The concern is that such practices can defraud future home buyers
in that development into paying higher prices than they actually should
and also mislead banks that loan money for home mortgages in the area.
The previous chapter on contracts discussed fraud as voiding a contract.
But fraud is also an intentional tort, and one who is a victim of fraud can sue
for damages, including punitive or punishment damages. Today many frauds,
as well as other intentional torts, occur on the Internet. See Sidebar 10.5 .
A variety of intentional torts take place on the
Internet. Defamation occurs when e-mailers place
messages on Listservs or public chatrooms that
hold others up to “public contempt or ridicule.”
Intentional infliction of mental distress arises, for
example, when threats are made via e-mail or websites.
A jury in Oregon awarded plaintiffs over $100
million when it found that a website threatened
abortion providers. When computer hackers break
into company databases, trade secrets are easily
Perhaps the most common intentional cyberrelated
tort is fraud. The Federal Trade Commission
has released a list of such frauds or scams that include
a variety of pyramid schemes, fraudulent auctions,
deceptive travel offers, sale of unmiraculous “miracle”
products, health care rip-offs, phony credit card
charges, and work-at-home frauds. There was even a
“rebate” check sent to consumers that if cashed gave
them new Internet service that could not be canceled.
The FTC reports that its enforcement actions against
Internet scams have risen steadily in recent years.
>> sidebar 10.5
Fraud and Corporate Governance Antifraud laws are a major
weapon in the enforcement of good corporate governance. Much corporate
misgovernance, especially by managers, arises because of misrepresentations
of fact about corporate assets or liabilities. These misrepresentations
usually induce investors to buy corporate stock shares at higher prices and
benefit corporate managers or others inside the corporation who sell their
300 PART 3 Legal Foundations for Business
stock. Sometimes a misrepresentation that raises the stock price obtains a
bonus or other perk for managers or a loan for the corporation. Usually, a
misrepresentation amounts to fraud because investors (who become owners)
or lenders rely on it to their injury, that is, they lose some or all of their
Many specific laws create civil and criminal liability for the fraud of
corporate managers and other corporate agents. As you think about fraud,
remember that it violates the principle of property. One does not acquire
proper ownership by defrauding others of their resources. Fraud does not
respect the equal property right of others.
9. COMMON LAW BUSINESS TORTS
The label business torts embraces different kinds of torts that involve intentional
interference with business relations.
Injurious Falsehood Injurious falsehood, sometimes called trade
disparagement, is a common business tort. It consists of the publication of
untrue statements that disparage the business owner’s product or its quality.
General disparagement of the plaintiff’s business may also provide basis for
liability. As a cause of action, injurious falsehood is similar to defamation of
character. It differs, however, in that it usually applies to a product or business
rather than character or reputation. The requirements of proof are also somewhat
different. Defamatory remarks are presumed false unless the defendant
can prove their truth. But in disparagement cases the plaintiff must establish
the falsity of the defendant’s statements. The plaintiff must also show actual
damages arising from the untrue statements.
As an example of injurious falsehood, consider the potential harm to
Procter & Gamble of the assertions that associated its former logo of moon
and stars with satanism. The company threatened to sue a number of individuals.
In another instance Warnaco sued Calvin Klein, alleging that Klein
had made publicly disparaging remarks about how Warnaco made Calvin
Klein clothing under license. The lawsuit alleged that Klein “falsely accused
[Warnaco] of effectively ‘counterfeiting’ Calvin Klein apparel.”
Intentional Interference with Contractual Relations A second
type of business tort is intentional interference with contractual relations.
Probably the most common example of this tort involves one company raiding
another for employees. If employees are under contract to an employer for a
period of time, another employer cannot induce them to break their contracts.
In a variation on this tort, the brokerage firm PaineWebber Group sued Morgan
Stanley Dean Witter & Company over PaineWebber’s merger agreement
with J. C. Bradford & Company. PaineWebber claimed that Morgan Stanley
pursued “a carefully planned, broadbased campaign to raid Bradford personnel
and interfere with the merger agreement between PaineWebber and Bradford.”
One of the most famous tort cases in history involved interference with
a contract of merger. In that case a jury awarded Pennzoil over $10 billion
against Texaco for persuading Getty Oil to breach an agreement of merger
with Pennzoil. After Texaco filed for bankruptcy, Pennzoil accepted a settlement
of around $3 billion.
Do remember that
you can be sued for
about a competitor’s
product that the
Don’t induce the
employees of another
company to come
to work for you
when they are under
contract to work for a
period of time.
CHAPTER 10 Torts Affecting Business 301
The second major area of tort liability involves unreasonable behavior that
causes injury. This area of tort is called negligence. In the United States more
lawsuits allege negligence than any other single cause of action.
Negligence takes place when one who has a duty to act reasonably acts
carelessly and causes injury to another. Actually, five separate elements make
up negligence, and the following sections discuss these elements. Sidebar 10.6
also summarizes them. In business, negligence can occur when employees
cause injury to customers or others; when those invited to a business are
injured because the business fails to protect them; when products are not
carefully manufactured; when services, such as accounting services, are not
carefully provided; and in many other situations.
10. DUTY OF CARE
A critical element of the negligence tort is duty. Without a duty to another
person, one does not owe that person reasonable care. Accidental injuries
occur daily for which people other than the victim have no responsibility,
legally or otherwise.
Duty usually arises out of a person’s conduct or activity. A person doing
something has a duty to use reasonable care and skill around others to avoid
injuring them. Whether one is driving a car or manufacturing a product, she
or he has a duty not to injure others by unreasonable conduct.
Usually, a person has no duty to avoid injuring others through nonconduct.
There is no general duty requiring a sunbather at the beach to warn
a would-be surfer that a great white shark is lurking offshore, even if the
sunbather has seen the fin. There is moral responsibility but no legal duty
When there is a special relationship between persons, the situation
changes. A person in a special relationship to another may have a duty to
avoid unreasonable nonconduct. A business renting surfboards at the beach
would probably be liable for renting a board to a customer who was attacked
by a shark if it knew the shark was nearby and failed to warn the customer.
The special business relationship between the two parties creates a duty to
take action and makes the business liable for its unreasonable nonconduct.
* A person doing
something has a legal
duty to act reasonably
to avoid injuring
Existence of a duty of care owed by the defendant
to the plaintiff.
Unreasonable behavior by the defendant that
breaches the duty.
Causation in fact.
An actual injury.
>> sidebar 10.6
Elements of Negligence
302 PART 3 Legal Foundations for Business
In recent years, negligence cases against businesses for nonconduct have
grown dramatically. Most of these cases have involved failure to protect customers
from crimes. The National Crime Prevention Institute estimates that
such cases have increased tenfold since the mid-1970s.
One famous case involved the Tailhook scandal. A group of male naval
aviators was sexually groping female guests as they walked down the hallway
at a Hilton hotel. (Remember that an unconsented-to touching is an intentional
tort.) One of the females who was sexually touched sued the Hilton
hotel for negligence in knowing of the aviators’ behavior and failing to protect
her. A jury awarded her a total of $6.7 million against Hilton.
The extent of a business’s duty to protect customers is still evolving. Note
that in Case 10.2 the New Hampshire Supreme Court says that the defendant
restaurant has no special relationship to the plaintiff, but still rules that it
may have a duty to protect restaurant customers.
case 10.2 >>
IANNELLI v. BURGER KING CORP.
200 N. H. Lexis 42 (N. H. Sup. Ct. 2000)
MCHUGH, J.: The plaintiffs, Nicholas and Jodiann
Iannelli, individually and on behalf of their three children,
brought a negligence action against the defendant,
Burger King Corporation, for injuries sustained
as a result of an assault at the defendant’s restaurant.
During the late afternoon or early evening hours of
December 26, 1995, the Iannelli family went to the
defendant’s restaurant for the first time. Upon entering
the restaurant, the Iannellis became aware of a
group of teenagers consisting of five males and two
females, whom they alleged were rowdy, obnoxious,
loud, abusive, and using foul language. Some in the
group claimed they were “hammered.” Initially this
group was near the ordering counter talking to an
employee whom they appeared to know. The Iannellis
alleged that one of the group almost bumped into
Nicholas. When that fact was pointed out, the teenager
exclaimed, “I don’t give an F. That’s his F’ing problem.”
Nicholas asked his wife and children to sit down
in the dining area as he ordered the food. While waiting
for the food to be prepared, Nicholas joined his family
at their table. The teenagers also moved into the dining
area to another table. The obnoxious behavior and
foul language allegedly continued. One of the Iannelli
children became nervous. Nicholas then walked over
to the group intending to ask them to stop swearing.
As Nicholas stood two or three feet from the closest of
the group, he said, “Guys, hey listen, I have three kids.”
Whereupon, allegedly unprovoked, one or more of the
group assaulted Nicholas by hitting him, knocking him
to the ground and striking him in the head with a chair.
The plaintiffs argue that a commercial enterprise
such as a restaurant has a general duty to exercise reasonable
care toward its patrons, which may include a
duty to safeguard against assault when circumstances
provide warning signs that the safety of its patrons
may be at risk. The most instructive case, given the
issues presented, is Walls v. Oxford Management Co.
In Walls, a tenant of an apartment complex alleged
that the owner’s negligent maintenance of its property
allowed her to be subjected to a sexual assault in the
parking lot. We held that as a general principle landlords
have no duty to protect tenants from criminal
attacks. In as much as landlords and tenants have a
special relationship that does not exist between a commercial
establishment and its guests, it follows that the
same general principle of law extends to restaurants
and their patrons. We recognized in Walls, however,
that particular circumstances can give rise to such a
duty. These circumstances include when the opportunity
for criminal misconduct is brought about by the
actions or inactions of the owner or where overriding
foreseeability of such criminal activity exists.
Viewing the evidence in the light most favorable to
the plaintiffs, we must decide whether the behavior of
the rowdy youths could have created an unreasonable
risk of injury to restaurant patrons that was foreseeable
to the defendant. If the risk of injury was reasonably
Note that the duty to act reasonably also applies to professional providers,
like doctors, lawyers, CPAs, architects, engineers, and others. In most negligence
cases, however, the standard of reasonableness is that of a reasonable
person. In negligence cases involving professionals, the negligence standard
applied is that of the reasonable professional. The negligence of professionals
is called malpractice.
As Sidebar 10.7 suggests, professional negligence is a controversial area
of tort law.
11. UNREASONABLE BEHAVIOR—BREACH OF DUTY
At the core of negligence is the unreasonable behavior that breaches the
duty of care that the defendant owes to the plaintiff. The problem is how do
we separate reasonable behavior that causes accidental injury from unreasonable
behavior that causes injury? Usually a jury determines this issue,
but negligence is a mixed question of law and fact. Despite the trend for
judges to let juries decide what the standard of reasonable care is, judges
also continue to be involved in the definition of negligence. A well-known
definition by Judge Learned Hand states that negligence is determined by
“the likelihood that the defendant’s conduct will injure others, taken with
A train rounds a bend
but cannot stop in
time to avoid running
over an intoxicated
person who has fallen
asleep on the track. A
jury is not likely to find
the railroad’s behavior
foreseeable, then a duty existed. We hold that the teenagers’
unruly behavior could reasonably have been anticipated
to escalate into acts that would expose patrons to
an unreasonable risk of injury. The exact occurrence or
precise injuries need not have been foreseen.
Viewed in a light most favorable to the plaintiffs,
the evidence could support a finding that the teenagers’
obnoxious behavior in the restaurant was open and
notorious. Because the group was engaging in a conversation
at times with a restaurant employee, it could
be found that the defendant was aware of the teenagers’
conduct. The near physical contact between one
teenager and Nicholas Iannelli at the counter and the
indifference expressed by the group member thereafter
could be deemed sufficient warning to the restaurant
manager of misconduct such that it was incumbent
upon him to take affirmative action to reduce the risk
of injury. The plaintiffs allege that at least one other
restaurant patron expressed disgust with the group’s
actions prior to the assault. The manager could have
warned the group about their behavior or summoned
the police if his warnings were not heeded.
In summary, the trial court’s ruling that as a matter
of law the defendant owed no duty to the plaintiffs
to protect them from the assault was error. While as
a general principle no such duty exists, here it could
be found that the teenagers’ behavior in the restaurant
created a foreseeable risk of harm that the defendant
unreasonably failed to alleviate. Accordingly, we
reverse and remand.
>> CASE QUESTIONS
1. Under the decision in this case, when does a duty arise for the defendant restaurant
to protect its customers?
2. What does the court suggest that the restaurant manager should have done in this
case that would have satisfied the duty?
3. What do you think is the difference in this case between a “special relationship”
duty and the duty of the restaurant?
304 PART 3 Legal Foundations for Business
the seriousness of the injury if it happens, and balanced against the interest
which he must sacrifice to avoid the risk.”
Examples of Negligence Failure to exercise reasonable care can cost
a company substantial sums. In one instance the licensed owner of a National
Car Rental agency in Indianapolis was ordered to pay $5.5 million to a man
who slipped on the floor and broke his hip. To save overtime pay the rental
agency had had its floors mopped during, instead of after, normal working
hours. Unaware that someone was mopping the floors behind him, the plaintiff
had stepped backwards, slipped, and fallen on the wet floor.
In another case arising from unreasonable behavior, Wal-Mart Stores
agreed to pay two young girls a settlement of up to $16 million. A store
employee had sold the girls’ father a shotgun used to kill their mother in spite
of the fact that a federal form filled out by the buyer indicated that he was
under a restraining order. Federal law bars those under restraining orders
from purchasing guns.
Even before the terrorist attacks of 9/11, New York’s World Trade Center
(WTC) had been bombed. In 2005 a Manhattan jury determined that
the Port Authority of New York was negligent in the earlier attack, which
involved a blast from a truck filled with explosives that terrorists had driven
into the public parking lot under the WTC. Six people died and over a
thousand were injured. Is it an example of litigation gone wild to hold the
Port Authority liable for a terrorist act? Consider that before the bombing
a report commissioned by the Port Authority, which controlled the WTC
Few people would disagree that physicians are extremely
unhappy about the rapidly growing insurance
premiums they have to pay. Some physicians have
gone on strike; others have left the practice of medicine.
The exact causes of the situation, however, are
difficult to determine. Consider the following and
make your own evaluation.
• Studies suggest between 44,000 and 98,000
people die annually from medical errors.
• A study in the New England Journal of Medicine
found that 9 out of 10 patients who suffer disability
from medical errors go uncompensated.
• In 2004 total payments for medical malpractice
claims fell 8.9% nationally.
• As of 2005, 27 states have capped malpractice
• In 2004 malpractice insurance costs for various
medical specialties rose between 6.9% and 24.9%.
Question: what would be the impact on the cost
of malpractice insurance if physicians had patients
sign arbitration clauses before providing service
in all but emergency cases? These clauses might
provide that disputes with a physician be resolved
before an arbitration board appointed by the state
medical association. These clauses are currently not
widely used and are specifically prohibited by several
states. But under the Federal Arbitration Act,
the state prohibitions are likely preempted by the
federal law because medical practice has a substantial
impact on interstate commerce. The Supreme
Court has already ruled that law practice has such
an impact, so it is likely that medical practice does
Sources: BusinessWeek, The New York Times, Department of Health and
>> sidebar 10.7
Medical Malpractice Crisis
CHAPTER 10 Torts Affecting Business 305
parking, had specifically warned against such a bombing and recommended:
“Eliminate all public parking at the World Trade Center.” Citing potential
loss of revenue, the Port Authority had declined to follow the report’s
Willful and Wanton Negligence A special type of aggravated
negligence is willful and wanton negligence. Although this does not reveal
intent, it does show an extreme lack of due care. Negligent injuries inflicted
by drunk drivers show willful and wanton negligence. The significance of this
type of negligence is that the injured plaintiff can recover punitive damages
as well as actual damages. For example, following the Exxon Valdez oil spill
in Alaska, commercial fishers sued Exxon for damage to their livelihoods.
A jury awarded substantial actual and punitive damages when it found that
Exxon was willful and wanton in allowing the ship captain to be in charge of
the ship when they knew he was an alcoholic.
In 2005 a New Jersey state court awarded a 2-year-old boy $105 million
for an accident that left him permanently paralyzed from the neck down. A
drunken Giants football fan had caused the accident. Before driving, the fan
consumed at least 12 beers sold to him by a Giants Stadium concessionaire.
The award for willful and wanton negligence against the concessionaire is the
largest ever for the careless sale of alcohol. The award included $30 million in
compensatory and $75 million in punitive damages.
Because employers are also liable for the intentional torts of employees
in advancing the interests of their employers (see Chapter 14), employers face
punitive damage awards in those instances even when they are also liable for
simple negligence, or have not acted negligently at all. (See Sidebar 10.8 .)
* Willful and wanton
an injured plaintiff
to recover punitive
as well as actual
The caller identified himself as a police officer and
told the McDonald’s assistant manager that Louise
Ogburn had stolen the purse of a customer who had
recently left the restaurant and should be searched.
For more than an hour the assistant manager and
other McDonald employees detained, searched, and
even committed sexual battery against Ogburn at the
instruction of the caller. However, the caller was not a
police officer and the call was a hoax.
Ogburn sued McDonald’s and the jury awarded
her a million dollars in actual damages for pain and
suffering and $5 million in punitive damages against
the company. To understand why McDonald’s is liable,
you have to understand that numerous instances
of such hoaxes were known to the company involving
various fast-food restaurants, yet the jury found that
the company had not reasonably trained its employees
such calls might be hoaxes.
If McDonald’s negligence were extreme, that
is, willful and wanton, that would justify the $5 million
punitive damage award, but McDonald’s is also
liable for the intentional torts of its employees that
justify awarding punitive damages. In this case the
employees committed such intentional torts as false
imprisonment and battery in the course of Ogburn’s
detention. Such detention advanced the interests of
McDonald’s in dealing with dishonest employees and
made the intentional acts accompanying Ogburn’s
treatment the company’s responsibility when they
turned out to be wrongful.
>> sidebar 10.8
Strip Search Hoax Costs McDonald’s $6.1 Million
306 PART 3 Legal Foundations for Business
12. CAUSATION IN FACT
Before a person is liable to another for negligent injury, the person’s failure
to use reasonable care must actually have “caused” the injury. This observation
is not so obvious as it first appears. A motorist stops by the roadside
to change a tire. Another motorist drives past carelessly and sideswipes the
first as he changes the tire. What caused the accident? Was it the inattention
of the second motorist or the fact that the first motorist had a flat tire? Did
the argument the second motorist had with her boss before getting in the car
cause the accident, or was it the decision of the first motorist to visit one more
client that afternoon? In a real sense, all these things caused the accident.
Chains of causation stretch out infinitely.
Still, in a negligence suit the plaintiff must prove that the defendant actually
caused the injury. The courts term this cause in fact. In light of the many
possible ways to attribute accident causation, how do courts determine if a
plaintiff’s lack of care, in fact, caused a certain injury? They do so very practically.
Courts leave questions of cause in fact almost entirely to juries as long
as the evidence reveals that a defendant’s alleged carelessness could have been
a substantial, material factor in bringing about an injury. Juries then make
judgments about whether a defendant’s behavior in fact caused the harm.
A particular problem of causation arises where the carelessness of two or
more tortfeasors contributes to cause the plaintiff’s injury, as when two persons
are wrestling over control of the car which strikes the plaintiff. Tort law
handles such cases by making each tortfeasor jointly and severally liable for
the entire judgment. The plaintiff can recover only the amount of the judgment,
but she or he may recover it wholly from either of the tortfeasors or get
a portion of the judgment from each.
Approximately 40 states have limited joint and several liability in certain
cases, for example, medical injury cases. In these states and types of cases,
multiple defendants are each liable usually only for that portion of the damages
juries believe they actually caused.
13. PROXIMATE CAUSATION
It is not enough that a plaintiff suing for negligence prove that the defendant
caused an injury in fact. The plaintiff also must establish proximate causation.
Proximate cause is, perhaps, more accurately termed legal cause. It represents
the proposition that those engaged in activity are legally liable only
for the foreseeable risk that they cause.
Defining proximate causation in terms of foreseeable risk creates further
problems about the meaning of the word foreseeable. In its application, foreseeability
has come to mean that the plaintiff must have been one whom
the defendant could reasonably expect to be injured by a negligent act. For
example, it is reasonable to expect, thus foreseeable, that a collapsing hotel
walkway should injure those on or under it. But many courts would rule
as unforeseeable that someone a block away, startled upon hearing the loud
crash of the walkway, should trip and stumble into the path of an oncoming
car. The court would likely dismiss that person’s complaint against the hotel
as failing to show proximate causation.
Another application of proximate cause doctrine requires the injury to be
caused directly by the defendant’s negligence. Causes of injury that intervene
Many states are
the common law of
torts regarding rules
like that of joint and
promised $20 billion
to pay for claims
arising from its oil spill
in the Gulf. To date,
only about a fifth of
that amount has been
paid out by claims
adjusters. Part of the
problem relates to
How do claimants
prove, for instance,
that a falloff in
business miles inland
is directly caused by
the oil spill instead
of poor business
practice, or for some
CHAPTER 10 Torts Affecting Business 307
between the defendant’s negligence and the plaintiff’s injury can destroy the
necessary proximate causation. Some courts, for instance, would hold that it
is not foreseeable that an owner’s negligence in leaving keys in a parked car
should result in an intoxicated thief who steals the car, crashing and injuring
another motorist. These courts would dismiss for lack of proximate cause
a case brought by the motorist against the car’s owner. For one of the most
famous tort cases in history, see Sidebar 10.9 .
Helen Palsgraf stood on the loading platform on the
Long Island Railroad. Thirty feet away, two station
guards were pushing a man onto a departing train
when one guard dislodged an unmarked package
held by the man. The package, which contained fireworks,
fell to the ground with a loud explosion.
The explosion caused a heavy scale to fall on
Helen Palsgraf, injuring her. She sued the railroad
for the negligence of its guard and won at trial and
in the appellate court. Three justices of the Court of
Appeals (New York’s supreme court) agreed with the
lower courts: “The act [of the guard] was negligent.
For its proximate consequences the defendant is
However, four justices of the Court of Appeals
decided that proximate causation was “foreign to
the case before us.” The majority ruled that what the
guard did could not be considered negligence at all
in relation to the plaintiff Palsgraf. The guard owed
no duty to someone 30 feet away not to push a passenger—
even carelessly—onto a train. The Court of
Appeals reversed the damage award to the plaintiff.
The famous Palsgraf case illustrates the complexity
of legal analysis. Question: Was it negligent for the
passenger to carry fireworks in a crowded railroad
station? Why didn’t the plaintiff just recover damages
from the passenger?
Source: Palsgraf v. Long Island R.R., 162 N.E. 99 (1928).
>> sidebar 10.9
Explosion on the Long Island Railroad
14. DEFENSES TO NEGLIGENCE
There are two principal defenses to an allegation of negligence: contributory
negligence and assumption of risk. Both these defenses are affirmative
defenses, which means that the defendant must specifically raise these defenses
to take advantage of them. When properly raised and proved, these defenses
limit or bar the plaintiff’s recovery against the defendant. The defenses are
valid even though the defendant has actually been negligent.
Contributory Negligence As originally applied, the contributory
negligence defense absolutely barred the plaintiff from recovery if the
plaintiff’s own fault contributed to the injury “in any degree, however
slight.” The trend today, however, in the great majority of states is to offset
the harsh rule of contributory negligence with the doctrine of comparative
responsibility (also called comparative negligence and comparative fault ).
Under comparative principles, the plaintiff’s contributory negligence does
not bar recovery. It merely compares the plaintiff’s fault with the defendant’s
and reduces the damage award proportionally. For example, a jury
determined damages at $3.1 million for an Atlanta plaintiff who was run
over and dragged by a bus. But the jury then reduced the damage award
308 PART 3 Legal Foundations for Business
by 20% ($620,000) on the basis that the plaintiff contributed to his own
injury by failing reasonably to look out for his own safety in an area where
buses come and go.
Adoption of the comparative negligence principle seems to lead to more
frequent and larger awards for plaintiffs. This was the conclusion of a study
by the Illinois Insurance Information Service for the year following that state’s
adoption of comparative negligence.
Assumption of Risk If contributory negligence involves failure to use
proper care for one’s own safety, the assumption-of-the-risk defense arises
from the plaintiff’s knowing and willing undertaking of an activity made
dangerous by the negligence of another. When professional hockey first
came to this country, many spectators injured by flying hockey pucks sued
and recovered for negligence. But as time went on and spectators came to
realize that attending a hockey game meant that one might occasionally be
exposed to flying hockey pucks, courts began to allow the defendant owners
of hockey teams to assert that injured spectators had assumed the risk of
injury from a speeding puck. It is important to a successful assumption-ofthe-
risk defense that the assumption was voluntary. Entering a hockey arena
while knowing the risk of flying pucks is a voluntary assumption of the risk.
However, that the injured person has really understood the risk is also significant
to the assumption-of-the-risk defense. In one 2007 case, a University
softball coach smacked his player in the face with a bat while demonstrating
a batting grip to her. She required surgery for multiple fractures of her face
and sued the coach and his employer, the university. The court denied the
assumption-of-the-risk defense, asserting that it was up to the jury to determine
whether the coach had acted negligently in hitting his player. The court
observed that the player did not appreciate the risk of being hit by her coach
with the bat.
Courts have often ruled that people who imperil themselves while attem pting
to rescue their own or others’ property from a risk created by the defendant
have not assumed the risk voluntarily. A plaintiff who is injured while
attempting to save his possessions from a fire negligently caused by the defendant
is not subject to the assumption-of-the-risk defense.
Assumption of the risk may be implied from the circumstances, or it
can arise from an express agreement. Many businesses attempt to relieve
themselves of potential liability by having employees or customers agree
contractually not to sue for negligence, that is, to assume the risk. Some
of these contractual agreements are legally enforceable, but many will be
struck down by the courts as being against public policy, especially where a
business possesses a vastly more powerful bargaining position than does its
employee or customer.
>> Strict Liability in Tort
Strict liability is a catchall phrase for the legal responsibility for injury-causing
behavior that is neither intentional nor negligent. There are various types of
strict liability torts, some of which are more “strict” than others. What ties
of the risk are more
likely to be enforced
if they prominently
bring to attention the
People injured by a
baseball at a baseball
game or a golf ball
on the golf links also
usually assume the
risk. Does someone
assume the risk of a
racing car veering off
a race track and going
over a barrier and into
CHAPTER 10 Torts Affecting Business 309
them together is that they all impose legal liability, regardless of the intent or
fault of the defendant. The next sections discuss these torts and tort doctrines.
15. STRICT PRODUCTS LIABILITY
A major type of strict tort liability is strict products liability, for the commercial
sale of defective products. In most states any retail, wholesale, or
manufacturing seller who sells an unreasonably dangerous defective product
that causes injury to a user of the product is strictly liable. For example, if a
forklift you are using at work malfunctions because of defective brakes and
you run off the edge of the loading dock and are injured, you can sue the
retailer, wholesaler, and manufacturer of the product for strict liability. The
fact that the retailer and wholesaler may have been perfectly careful in selling
the product does not matter. They are strictly liable.
Strict products liability applies only to “commercial” sellers, those who
normally sell products like the one causing injury, or who place them in the
stream of commerce. Included as commercial sellers are the retailer, wholesaler,
and manufacturer of a product, but also included are suppliers of defective
parts and companies that assemble a defective product. Not included as
a commercial seller is your next door neighbor who sells you her defective
lawnmower. The neighbor may be negligent, for instance, if she knew of the
defect that caused you injury and forgot to warn you about it, but she cannot
be held strictly liable.
An important concept in strict products liability is that of “defect.” Strict
liability only applies to the sale of unreasonably dangerous defective products.
There are two kinds of defects. Production defects arise when products
are not manufactured to a manufacturer’s own standards. Defective brakes
on a new car are a good example of a production defect. Another example
involves the clam chowder in which a diner found a condom, which led
in 2005 to a rapid settlement between the diner and a seafood restaurant
chain. Design defects occur when a product is manufactured according to
the manufacturer’s standards, but the product injures a user due to its unsafe
design. Lawsuits based on design defects are common but often very controversial.
Recent such lawsuits have included one against Ford that claimed
Ford should have designed its vans to have a heat-venting system so children
accidentally locked in the vans would be safe. Lack of adequate warnings
concerning inherently dangerous products can also be considered a design
defect. American Home Products settled a wrongful death lawsuit for an estimated
$10 million. The lawsuit alleged that the company had not adequately
warned users of its diet drug about the risks of hypertension, which had been
linked to diet-drug use.
In practice, strict products liability is useful in protecting those who suffer
personal injury or property damage. It does not protect businesses that
have economic losses due to defective products. For instance, a warehouse
that loses profits because its defective forklift will not run cannot recover
those lost profits under strict products liability. The warehouse would have
to sue for breach of contract. However, if the forklift defect causes injury to
a worker, the worker can successfully sue the forklift manufacturer for strict
Don’t forget that
strict products liability
applies only against
In one case, a jury
found the defendant
liable when its
warned users to “vent”
rooms being cleaned
but failed to say “vent
to outside.” Vapors
from the product
injured several people
when it was used in
a room with a closed
310 PART 3 Legal Foundations for Business
Under strict products liability, contributory negligence is not a defense
but assumption of the risk is. The assumption-of-the-risk defense helped
protect tobacco manufacturers from health injury liability for many years.
Misuse is another defense that defendants commonly raise in product liability
cases. Removing safety guards from equipment is a common basis for the
misuse defense. Defendants have also argued that if a product meets some
federally required standard, it cannot be considered defective. Most courts,
however, have ruled that federal standards only set a minimum requirement
for safe design and that meeting federal standards does not automatically
keep a manufacturer from being sued for strict products liability.
In recent years many states have changed or modified the rules of product
liability. See Sidebar 10.10 . These changes to the rules of products liability
(and modifications to the rules of medical malpractice) are often known generally
as “tort reform.” The federal government has also enacted tort reform
that applies to product liability. As of 2005, federal courts can decide any
class-action lawsuit involving over $5 million and involving persons from
different states. Federal plaintiffs in such class-action lawsuits need no longer
claim the usual $75,000 jurisdictional amount.
The rapid growth of products litigation during the past
two decades has brought forth many calls for “tort
reform.” Numerous states have changed their laws
to modify the tort doctrines discussed in this section
and chapter. At the federal level, comprehensive tort
reform has been strongly advocated although it has
not passed as of this writing. Some of the tort reforms
proposed or passed by the states include:
• Permitting only negligence actions against retailers
and wholesalers unless the product manufacturer
• Eliminating strict liability recovery for defective
• Barring products liability claims against sellers if
products have been altered or modified by a user.
• Providing for the presumption of reasonableness
defense in product design cases in which
the product meets the state-of-the-art; that is,
the prevailing industry standards at the time of
• Creating a statute of repose that would specify
a period (such as 25 years) following product
sale after which plaintiffs would lose their rights
to bring suits for product-related injuries.
• Reducing or eliminating punitive damage awards
in most product liability cases.
Importantly, note that not all, or even most, of these
reforms have been adopted by every state.
>> sidebar 10.10
Another important development in products liability is that in nearly
every state product liability case based on design defects, failures to warn
adequately and testing inadequacies are now decided according to “reasonableness”
standards, making these product liability cases based on the negligence.
Consider the following case involving Ford Motor Company’s failure
to test a seatbelt sleeve.
case 10.3 >>
BRANHAM v. FORD MOTOR CO.
701 S.E.2d 5 (S.C. Sup. Ct. 2010)
Hale was driving several children to her house in her
Ford Bronco. No one was wearing a seatbelt. Hale
admittedly took her eyes off the road and turned to the
backseat to ask the children to quiet down. When she
took her eyes off the road, the Bronco veered towards
the shoulder of the road, and the rear right wheel left
the roadway. She responded by overcorrecting to the
left. Her overcorrection caused the Bronco to roll over.
One of the children, Jesse Branham, was thrown from
the vehicle, was severely injured, and sued Ford Motor
Company and Hale. At trial, Branham did not seriously
pursue the claim against Hale. The case against
Ford was based on two product liability claims, one
for failing to test the seatbelt sleeve, and the other a
design defect claim related to the vehicle’s tendency to
rollover. Both of these claims were pursued in negligence
and strict liability. The jury found both Ford and
Hale responsible and awarded Branham $16 million
in actual damages. Only Ford appeals.
KITTREDGE, J.: . . . Branham alleged Ford was negligent
“in selling the Bronco II with a defective rear
occupant restraint system.” At trial, Branham claimed
Ford was negligent and also strictly liable in failing to
adequately test the seatbelt sleeve. The trial court dismissed
the strict liability claim on the ground that the
seatbelt sleeve was not as a matter of law in a defective
condition unreasonably dangerous to the user at the
time of manufacture. Based on this premise, Ford contends
the companion negligence claim must fail, for
all products liability actions, regardless of the stated
theory, have common elements. “In a products liability
action the plaintiff must establish three things, regardless
of the theory on which he seeks recovery: (1) that
he was injured by the product; (2) that the product, at
the time of the accident, was in essentially the same
condition as when it left the hands of the defendant;
and (3) that the injury occurred because the product
was in a defective condition unreasonably dangerous
to the user.” Ford, therefore, concludes that the negligence
claim (which required Branham to prove that
the seatbelt sleeve was in a defective condition unreasonably
dangerous to the user) should have been dismissed.
The trial court determined as a matter of law that
the seatbelt sleeve was not in a defective condition
unreasonably dangerous to the user. Consequently,
the absence of this common, shared element required
the dismissal of the strict liability claim and the companion
negligence claim. The trial court erred in failing
to direct a verdict as to the negligent seatbelt
We next consider the “handling and stability”
design defect claim in strict liability and negligence. We
address Ford’s two-fold argument that: (1) Branham
failed to prove a reasonable alternative design pursuant
to the risk-utility test; and (2) South Carolina
law requires a risk-utility test in design defect cases to
the exclusion of the consumer expectations test. For a
plaintiff to successfully advance a design defect claim,
he must show that the design of the product caused
it to be “unreasonably dangerous.” In South Carolina,
we have traditionally employed two tests to determine
whether a product was unreasonably dangerous as a
result of a design defect: (1) the consumer expectations
test and (2) the risk-utility test.
In Claytor v. General Motors Corp., this Court
phrased the consumer expectations test as follows:
“The test of whether a product is or is not defective
is whether the product is unreasonably dangerous to
the consumer or user given the conditions and circumstances
that foreseeably attend use of the product.”
The Claytor Court articulated the risk-utility test in
the following manner: “[N]umerous factors must be
considered when determining whether a product is
unreasonably dangerous, including the usefulness
and desirability of the product, the cost involved for
added safety, the likelihood and potential seriousness
of injury, and the obviousness of danger.” In Bragg
v. Hi-Ranger, Inc., our court of appeals phrased the
risk-utility test as follows: “[A] product is unreasonably
dangerous and defective if the danger associated
with the use of the product outweighs the utility of the
Ford contends Branham failed to present evidence
of a feasible alternative design. Implicit in Ford’s
argument is the contention that a product may only
be shown to be defective and unreasonably dangerous
by way of a risk-utility test, for by its very nature,
the risk-utility test requires a showing of a reasonable
alternative design. Branham counters, arguing that
under Claytor he may prove a design defect by resort
to the consumer expectations test or the risk-utility
test. Branham also argues that regardless of which test
is required, he has met both, including evidence of a
feasible alternative design. We agree with Branham’s
contention that he produced evidence of a feasible
alternative design. Branham additionally points out
that the jury was charged on the consumer expectations
test and the risk-utility test.
As discussed above, Branham challenged the design
of the Ford Bronco II by pointing to the MacPherson
suspension as a reasonable alternative design. A former
Ford vice president, Thomas Feaheny, testified
that the MacPherson suspension system would have
significantly increased the handling and stability of the
Bronco II, making it less prone to rollovers. Branham’s
expert, Dr. Richardson, also noted that the MacPherson
suspension system would have enhanced vehicle stability
by lowering the vehicle center of gravity. There was
further evidence that the desired sport utility features
of the Bronco II would not have been compromised by
using the MacPherson suspension. Moreover, there is
evidence that use of the MacPherson suspension would
not have increased costs. Whether this evidence satisfies
the risk-utility test is ultimately a jury question. But it
is evidence of a feasible alternative design, sufficient to
survive a directed verdict motion.
While the consumer expectations test fits well in
manufacturing defect cases, we do agree with Ford
that the test is ill-suited in design defect cases. We hold
today that the exclusive test in a products liability
design case is the risk-utility test with its requirement
of showing a feasible alternative design. Some form
of a risk-utility test is employed by an overwhelming
majority of the jurisdictions in this country. States
that exclusively employ the consumer expectations
test are a decided minority. By our count 35 of the
46 states that recognize strict products liability use
some form of risk-utility analysis in their approach
to determine whether a product is to effectively
design. Four states do not recognize strict liability at
all. Those four states are Delaware, Massachusetts,
North Carolina, and Virginia.
We believe that in design defect cases the riskutility
test provides the best means for analyzing
whether a product is designed defectively. Unlike the
consumer expectations test, the focus of a risk-utility
test centers upon the alleged defectively designed
product. The risk-utility test provides objective factors
for a trier of fact to analyze when presented with a
challenge to a manufacturer’s design. Conversely, we
find the consumer expectations test and its focus on
the consumer ill-suited to determine whether a product’s
design is unreasonably dangerous.
Most any product can be made more safe. Automobiles
would be safer with disc brakes and steelbelted
radial tires than with ordinary brakes and
ordinary tires, but this does not mean that an automobile
dealer would be held to have sold a defective
product merely because the most safe equipment is not
installed. By a like token, a bicycle is safer if equipped
with lights and a bell, but the fact that one is not so
equipped does not create the inference that the bicycle
is defective and unreasonably dangerous. There is, of
course, some danger incident to the use of any product.
In a product liability design defect action, the
plaintiff must present evidence of a reasonable alternative
design. The plaintiff will be required to point
to a design flaw in the product and show how his
alternative design would have prevented the product
from being unreasonably dangerous. This presentation
of an alternative design must include consideration of
the costs, safety and functionality associated with the
alternative design. On retrial, Branham’s design defect
claim will proceed under to the risk-utility test and not
the consumer expectations test.
[ Reversed and remanded ]
>> CASE QUESTIONS
1. Since the injured plaintiff was not wearing a seatbelt, why is Ford being sued for failing
to test the seatbelt sleeve?
2. It is often said that product liability causes of action, especially negligence and
strict liability, are coming together or merging. Discuss this idea in light of the
South Carolina Supreme Court’s decision.
3. Is the consumer expectations test or the risk utility test more favorable to manufacturers?
4. Can Branham still win this case? Explain.
CHAPTER 10 Torts Affecting Business 313
16. ULTRAHAZARDOUS ACTIVITY
In most states, the courts impose strict liability in tort for types of activities
they call ultrahazardous . Transporting and using explosives and poisons fall
under this category, as does keeping dangerous wild animals. Injuries caused
from artificial storage of large quantities of liquid can also bring strict liability
on the one who stores. For an example of the unusual dangers of ultrahazardous
activity, see Sidebar 10.11 .
Some states have
cause accidental injury
by the standard of
The Purity Distilling Co. had filled the enormous
steel tank on the Boston hillside with two million
gallons of molasses to be turned into rum. Unusually
warm weather caused the molasses to expand.
On January 15, 1919, with sounds like gunfire as
the restraining bolts sheared, the tank exploded.
A wave of hot molasses 30-feet high raced down
the street toward Boston Harbor, faster than people
could run, engulfing entire buildings. Before it
subsided, 150 people were injured and 21 drowned.
“The dead,” reported the Boston Herald, “were like
It took months to clean up the harbor. It took six
years to resolve the 125 lawsuits that followed. The
artificial storage of large quantities of liquid can be a
sticky matter indeed.
Source: Anthony V. Riccio, Portrait of an Italian-American Neighborhood
>> sidebar 10.11
The Great Molasses Flood
17. OTHER STRICT LIABILITY TORTS
The majority of states impose strict liability upon tavern owners for injuries
to third parties caused by their intoxicated patrons. The acts imposing this
liability are called dram shop acts. Because of the public attention given in
recent years to intoxicated drivers, there has been a tremendous increase in
dram shop act cases.
Common carriers, transportation companies licensed to serve the public,
are also strictly liable for damage to goods being transported by them. Common
carriers, however, can limit their liability in certain instances through
contractual agreement, and they are not liable for (1) acts of God, such as
natural catastrophes; (2) action of an alien enemy; (3) order of public authority,
such as authorities of one state barring potentially diseased fruit shipments
from another state from entering their state; (4) the inherent nature of
the goods, such as perishable vegetables; and (5) misconduct of the shipper,
such as improper packaging.
One legal scholar concludes that “the crucial controversy in personal injury
torts today” is in the area of damages. For dramatic examples of the size of
recent awards, refer to Sidebar 10.12 . Juries determine the size of damage
314 PART 3 Legal Foundations for Business
>> sidebar 10.12
Highest Jury Tort Awards of 2010
EVENT CAUSING INJURY JURY AWARD IN MILLIONS OF DOLLARS
1. Pharmaceutical products liability causing hepatitis
2. Products liability for secondhand asbestos exposure
to worker’s laundry.
3. Verdict against a cigarette company for providing
deceased woman free cigarettes when she was a child.
4. Products liability for design defect in a Ford Bronco
5. Negligence verdict against a bus company to seven
passengers injured or killed while riding in an
unlicensed commercial van.
6. Verdict against the world’s largest law firm involving
malpractice and intentional interference with business
7. Products liability against a cigarette company involving
lung cancer death.
8. Products liability for production defect of a carburetor
in an airplane crash.
9. Negligence in a natural gas explosion causing death
at a plant.
10. Cigarette products liability for lung cancer death. $ 80
Note: Although virtually ignored in news media headlines, the damages in almost all of these large jury verdicts were reduced significantly. In some
instances the judge reduced the damages as a matter of law. In other cases, appeals courts reduced damages or reversed the trial court. In many cases,
however, the parties simply negotiated a reduced settlement to avoid the risk of an appeal that upheld or reversed the damages entirely. In reading
about large jury verdicts, this final outcome is an important point for you to remember.
awards in most cases, but judges also play a role in damages, especially in
damage instructions to the jury and in deciding whether to approve substantial
18. COMPENSATORY DAMAGES
Most damages awarded in tort cases compensate the plaintiff for injuries suffered.
The purpose of damages is to make the plaintiff whole again, at least
financially. There are three major types of loss that potentially follow tort
injury and are called compensatory damages. They are:
• Past and future medical expenses.
• Past and future economic loss (including property damage and loss of
• Past and future pain and suffering.
CHAPTER 10 Torts Affecting Business 315
Compensatory damages may also be awarded for loss of limb, loss of
consortium (the marriage relationship), and mental distress.
Calculation of damage awards creates significant problems. Juries frequently
use state-adopted life expectancy tables and present-value discount
tables to help them determine the amount of damages to award. But uncertainty
about the life expectancy of injured plaintiffs and the impact of inflation
often makes these tables misleading. Also, awarding damages for pain
and suffering is an art rather than a science. These awards measure jury sympathy
as much as they calculate compensation for any financial loss. The
recent dramatic increases in the size of damage awards helps underline the
problems in their calculation. One result is that many individuals and businesses
are underinsured for major tort liability.
Currently, compensatory damage awards for pain and suffering are very
controversial. How do you compensate injured plaintiffs for something like
pain which has no market value? Many plaintiffs suffer lifelong pain or the
permanent loss of vision, hearing, or mobility. No amount of damages seems
large enough to compensate them, yet no amount of damages, however high,
will cause their pain and suffering to stop. In 2003, President Bush called for
the limitation of tort damages for pain and suffering in a case to $250,000
per person. Do you agree or disagree?
19. PUNITIVE DAMAGES
Compensatory damages are not the only kind of damages. There are also
punitive damages. By awarding punitive damages, courts or juries punish
defendants for committing intentional torts and for negligent behavior considered
“gross” or “willful and wanton.” The key to the award of punitive damages
is the defendant’s motive. Usually the motive must be “malicious,” “fraudulent,”
or “evil.” Increasingly, punitive damages are also awarded for dangerously
negligent conduct that shows a conscious disregard for the interests of others.
These damages punish those who commit aggravated torts and act to deter
future wrongdoing. Because they make an example out of the defendant, punitive
damages are sometimes called exemplary damages.
Presently, there is much controversy about how appropriate it is to award
punitive damages against corporations for their economic activities. Especially
when companies fail to warn of known danger created by their activities,
or when cost-benefit decisions are made at the risk of substantial human
injury, courts are upholding substantial punitive damage awards against companies.
Yet consider that these damages are a windfall to the injured plaintiff
who has already received compensatory damages. And instead of punishing
guilty management for wrongdoing, punitive damages may end up punishing
innocent shareholders by reducing their dividends.
Many court decisions also overlook a very important consideration
about punitive damages. Most companies carry liability insurance policies
that reimburse them for “all sums which the insured might become legally
obligated to pay.” This includes reimbursement for punitive damages. Instead
of punishing guilty companies, punitive damages may punish other companies,
which have to pay increased insurance premiums, and may punish
consumers, who ultimately pay higher prices. As a matter of public policy,
several states prohibit insurance from covering punitive damages, but the
arise from intentional
torts or extreme
“willful and wanton”
“If you were to talk
to foreign businesses
about what scares
them the most about
the U.S. judicial process,
they would say
class actions and
–Carter G. Phillips ,
Sidney Austin Brown
& Wood (law firm)
316 PART 3 Legal Foundations for Business
In 2003 the Supreme Court determined that $145
million in punitive damages in a case was unconstitutional.
In State Farm v. Campbell, the Court decided
that the large difference between punitive and compensatory
damages violated due process. The Court
suggested that a single-digit ratio of punitive to compensatory
damages (9/1 or less) would be more constitutionally
appropriate than a 145/1 ratio.
State Farm v. Campbell also reaffirmed general
punitive damage guidelines from an earlier case. The
Court stated, in evaluating the appropriateness of
punitive damages, that courts should consider:
• “the responsibility of the defendant’s conduct
(how bad it was),
• the ratio of punitive to actual damages
• how the punitive damages compare with criminal
or civil penalties for the same conduct.”
Note that juries award punitive damages in only about
2% of litigated cases.
>> sidebar 10.13
Punitive Damage Guidelines
>> Key Terms
Cause in fact 306
Compensatory damages 314
Contributory negligence 307
Design defect 309
Dram shop act 313
False imprisonment 294
Infliction of mental
Injurious falsehood 300
Intentional interference with
contractual relations 300
great majority of states permit such coverage. This fact severely undermines
arguments for awarding punitive damages against companies for their economic
Consider also that an award of punitive damages greatly resembles a
criminal fine. Yet the defendant who is subject to these criminal-type damages
lacks the right to be indicted by a grand jury and cannot assert the right
against self-incrimination. In addition, the defendant is subject to a lower
standard of proof than in a criminal case. However, defendants in tort suits
have challenged awards of punitive damages on a constitutional basis. See
Sidebar 10.13 .
Finally, note that almost no other country in the world except the United
States permits civil juries to award punitive damages. For instance, in 2007 an
Italian court refused to enforce a $1 million award against an Italian helmet
maker whose defective helmet had caused the death of a 15-year-old motorcyclist
in Alabama because the award contained punitive damages. However,
a few courts in other countries have enforced U.S. punitive damage awards
even though courts in their own countries cannot award them.
>> Review Questions and Problems
1. Assault and Battery
Under what theory can an employee sue her employer for merely touching her? Explain.
2. Intentional Infliction of Mental Distress
In business the intentional infliction of mental distress tort has most often involved what type
3. Invasion of Privacy
Explain the three principal invasions of personal interest that make up invasion of privacy.
4. False Imprisonment and Malicious Prosecution
Explain the difference between false imprisonment and malicious prosecution. In what business
situation does false imprisonment most frequently arise?
In recent months, homeowners downwind from International Cement Company have had clouds
of cement dust settle on their property. Trees, shrubbery, and flowers have all been killed. The paint
on houses has also been affected. Explain what tort cause of action these homeowners might pursue
Bartley signs a storage contract with Universal Warehouses. The contract specifies that Bartley’s
household goods will be stored at Universal’s midtown storage facility while he is out of the
country on business. Later, without contacting Bartley, Universal transfers his goods to a suburban
warehouse. Two days after the move, a freak flood wipes out the suburban warehouse and
Bartley’s goods. Is Universal liable to Bartley? Explain.
Acme Airlines attempts to get control of Free Fall Airways by making a public offer to buy its
stock from shareholders. Free Fall’s president, Joan, advises the shareholders in a letter that
Acme’s president, Richard, is “little better than a crook” and “can’t even control his own
company.” Analyze the potential liability of Free Fall’s president for these remarks.
Fraud can be used to void a contract and as a basis for intentional tort. What is the advantage
to a plaintiff of suing for the tort of fraud as opposed to using fraud merely as a contractual
9. Common Law Business Torts
You are concerned because several of your employees have recently broken their employment
contracts and left town. Investigation reveals that Sly and Company, your competitor in a
nearby city, has paid bonuses to your former employees to persuade them to break their
contracts. Discuss what legal steps you can take against Sly.
10. Duty of Care
(a) Do you have a duty of care to warn a stranger on the street of the potential danger of
broken glass ahead?
Invasion of privacy 293
Malicious prosecution 294
Production defect 309
Proximate cause 306
Punitive damages 315
Statute of repose 310
Strict liability 308
Strict products liability 309
Willful and wanton
(b) Do you have a duty to warn an employee of similar danger at a place of employment?
11. Unreasonable Behavior—Breach of Duty
In litigation who usually determines if the defendant’s behavior is unreasonable?
12. Causation in Fact
(a) What does it mean to say that “chains of causation stretch out endlessly”?
(b) What is the standard used by the judge in instructing the jury about causation?
13. Proximate Causation
Explain the difference between proximate causation and causation in fact.
14. Defenses to Negligence
A jury finds Lee, the defendant, liable in a tort case. It determines that José, the plaintiff, has
suffered $200,000 in damages. The jury also finds that José’s own fault contributed 25% to
his injuries. Under a comparative negligence instruction, what amount of damages will the jury
award the plaintiff?
Strict Liability in Tort
15. Strict Products Liability
While driving under the influence of alcohol, Joe runs off the road and wrecks his car. As the
car turns over, the protruding door latch hits the ground and the door flies open. Joe, who is
not wearing his seat belt, is thrown from the car and badly hurt. Joe sues the car manufacturer,
asserting that the door latch was defectively designed. Discuss the legal issues raised by these
16. Ultrahazardous Activity
Through no one’s fault, a sludge dam of the Phillips Phosphate Company breaks. Millions of
gallons of sludge run off into a nearby river that empties into Pico Bay. The fishing industry in
the bay area is ruined. Is Phillips Phosphate liable to the fishing industry? Explain.
17. Other Strict Liability Torts
Explain when common carriers are not strictly liable for damage to transported goods.
18. Compensatory Damages
Explain the three types of loss that give rise to compensatory damages.
19. Punitive Damages
During a business lunch, Bob eats salad dressing that contains almond extract. He is very allergic
to nuts and suffers a severe allergic reaction. There are complications and Bob becomes
almost totally paralyzed. Because Bob had instructed the restaurant waiter and the chef that he
might die if he ate any nuts, he sues the restaurant for negligence. Discuss the types of damages
Bob may recover.
1. You own University Heights Apartments, a business that rents primarily to students.
One evening, your tenant Sharon is attacked by an intruder who forces the
lock on the sliding glass door of her ground-floor apartment. Sharon’s screams
attract the attention of Darryl, your resident manager, who comes to Sharon’s aid.
Together, he and Sharon drive the intruder off, but not before they both are badly
cut by the intruder.
Is the intruder liable for what he has done?
Do you have legal responsibilities to Sharon and Darryl?
What should you consider doing at your apartments?
2. You manufacture trunk locks and your major account is a large car company.
When an important piece of your equipment unexpectedly breaks, you contact
Mayfair, Inc., the only manufacturer of such equipment, and contract to replace it.
The Mayfair sales representative assures you orally and in writing that the prepaid
equipment will arrive by October 1, in time for you to complete your production for
the car company. Instead, there is a union strike in the Mayfair trucking division,
and the equipment does not arrive until December 1.
By December 1 the car company has made an agreement with another lock
manufacturer. You threaten to sue Mayfair for their failure to deliver on time, but
Mayfair reminds you of a contract term that relieves them of contractual liability
because of “labor difficulties.” Then you learn from a former secretary to the Mayfair
sales representative that Mayfair knew that its trucking division was likely to
strike. In fact the sales representative and the sales vice president had discussed
whether or not to tell you of this fact and decided not to out of concern that you
would not place your order.
Has Mayfair done anything legally wrong?
Is your legal remedy against Mayfair limited to breach of contract?
Will you be able to get damages from Mayfair other than a refund of your prepayment?
business >> discussions
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.