Agenda for 14th Class

1. Agenda for 14th Class • Handouts • Slides • Readings: Levi, Escola • No class Thursday, 10/17 (Fall Break) • Midterm 10/22 • In regular classroom, 2-3:50 • Unless have accommodation • Email undergraduate@law.usc.edu if you need 1.5x time, unless you have made other arrangements with DSP for space • Common Law • Devlin v Smith • MacPherson v Buick • Strict Liability and Negligence

2. Assignment for Th 10/24 • Review any questions from today’s assignment that we don’t discuss in class • Read “Levi / Escola” packet • Questions to think about / Short papers • Everyone should be prepared to discuss all the questions on the last page of the “Levi / Escola” handout • Mandatory writing • Group 1 & 5. Qs 1 & 5 • Group 2 & 6. Qs 2 & 5 • Group 3 & 7. Qs 3 & 6 • Group 4 & 8. Qs 4 & 6 • Even Tuesday writing groups have assignment, so total number of assignments is even across groups. • Optional writing -- All questions that are not mandatory

3. Loop v Litchfield • Litchfield manufactured a flywheel • Flywheel allegedly defective • Litchfield sold the flywheel to Collister • Litchfield alleges he told Collister about the defect • Collister leased the flywheel to Loop • Loop was injured by flywheel • Loop sues Litchfield • Jury for Loop • Reversed on appeal (Hunt, J).

4. Devlin v Smith • Stevenson built on contract scaffolding for Smith, a painter • Scaffolding collapsed and killed Devlin • Devlin was working for Smith • Devlin’s representative sued Stevenson & Smith • Trial court • Stevenson not liable because not negligent • Smith not liable because not in privity of contract • Appellate Court (Rappallo, J.)

5. Questions • 1. What is the holding of Loop v Litchfield? What is the holding of Devlin v Smith? • 2. What does Judge Hunt in Loop v Litchfield say was the holding of Thomas v. Winchester? Judge Rapallo sees Devlin v Smith as an easy application of “the principle of Thomas v. Winchester.” By “principle of Thomas v. Winchester,” Judge Rapallo means its holding. What does Judge Rapallo think the holding of Thomas v. Winchester was? Does he agree with Judge Hunt’s interpretation the holding of Thomas v Winchester in Loop v Litchfield? Do either agree with your interpretation of the holding in Thomas v Winchester? Which formulation of the holding of Thomas v Winchester is best? • 3. Would the outcome of Loop v Litchfield be any different if it were proved that Litchfield did not warn Collister of the defect in the fly wheel? • 4. How does Judge Rapallo deal with the fact that Loop v Litchfield decided that the seller in that case was not liable? • 5. Is a defective scaffold more like belladonna, a defective carriage, a defective gun, or a defective fly wheel?

6. Questions • 6. If a manufacturer sold a defective handgun to a retailer, and the retailer sold the gun to a consumer, and the handgun exploded and injured the consumer, would the manufacturer be liable to the consumer? Would arguments based on Loop v Litchfield give a different answer than arguments based on Devlin v Smith? • 7. If a manufacturer sold a defective car to a dealer, and the dealer sold the car to a consumer, and the car exploded and injured the consumer, would the manufacturer be liable to the consumer? Would arguments based on Loop v Litchfield give a different answer than arguments based on Devlin v Smith? • 8. What do you think makes the most sense in the situations described in Questions 7 and 8? Should the manufacturer be liable in neither case? Both cases? One case but not the other?

7. MacPherson v Buick • Buick sold car to dealer • Dealer sold car to Macpherson • Macpherson got in accident • Wheels made of defective wood and crumbled while vehicle in motion • Buick did not know of defect, nor did it conceal the defect • Buick could have discovered the defect by reasonable inspection • But did not inspect • Majority (Cardozo) • Buick liable • Dissent (Barlett) • Buick not liable

8. Questions • 1. How does the majority opinion of Judge Cardozo, and the dissenting opinion of Judge Bartlett, deal with Winterbottom? Do they accord it the same importance? • 2. How do the majority and dissent interpret Thomas v Winchester? Do they accord it the same importance? • 3. How do the majority and dissent interpret Loop v. Litchfield? Is their interpretation the same or different from the way you interpreted the case when you first read it? • 4. How do the majority and dissent interpret Devlin v Smith? • 5. Which had the better interpretation of these four precedents, majority or dissent? • 6. What is the holding of MacPherson?

9. Negligence • A person or company is “negligent” if it does not take precautions that a “reasonable man” or ordinarily prudent person or company would take. • Failure to check that scaffolding is properly constructed • Failure to test and inspect car wheels before incorporating them into car • What precautions would an ordinarily prudent person or company take? • Sometimes just left for jury to decide without much guidance • Economic interpretation (Hand formula) • Action is negligent if there was an alternative that would have been safer AND the cost of the alternative (B) is less than the reduction in the probability of harm (P) times the average dollar amount of the loss (L) • B<PL • Negligent not to do additional inspect of scaffolding if cost of additional inspection (e.g. $100 of worker time) is less than reduction in probability of harm (e.g. from 11% to 1% =10%) times average harm ($100,000). • $100 < 10% x $100,000=$10,000

10. Strict Liability • Strict liability is liability without proof of negligence • In some situations, the law will impose liability upon proof of harm, without proof that the defendant was negligent • If defendant is using explosives for mining purposes, and the explosions harm a third party, the defendant is liable, even if it took all reasonable precautions • If defendant creates a reservoir of water which bursts and causes harm to people or property below it, defendant is liable, even if it took all reasonable precautions • Strict liability for “ultra-hazardous” activities • Strict liability for patent infringement, even if defendant was unaware of patent and had performed reasonable search • Liability based on negligence is more common • “Absolute liability” is a synonym for strict liability

11. Strict Liability v Negligence • Economists sometimes argue that strict liability and negligence will lead to the same behavior by defendants • Suppose precaution costs $900 and prevents 10% chance of $10,000 harm • If legal rule is negligence • Defendant would take precaution, because defendant would be found negligent ($900 < 10%x $10,000) • Rational defendant would pay $900 to avoid 10% chance of $10,000 damages (Expected value of damages is 10% x $10,000 = $1000) • If legal rule is strict liability, defendant will obviously take precaution • Suppose precaution costs $2000 and prevents 10% chance of $10,000 harm • If legal rule is negligence • Defendant would NOT take precaution, because would NOT be found negligent ($2000 > 10% x $10,000 = $1000) • If legal rule is strict liability, defendant would still not take the precaution • Because better to pay $1000 (expected value of damages) than $2000 for precaution • Persuaded?