Torts - Cases, Principles, and Institutions Fifth Edition, 2016a

Witt & Tani, TCPI 9. Liability without Fault?
Why would one select a liability rule rather than a property rule as the better remedy?
Calabresi and Melamed focus on transaction costs. In those settings in which we think that
transaction costs are low enough that the market will allocate resources to their highest value
users, property rules will be perfectly adequate. But when transaction costs lead us to think that
the market will not allocate resources to their highest value users, liability rules allow actors to
decide to go ahead with conduct so long as that conduct can pay its way.
At this stage, Calabresi and Melamed make a breathtaking claim. They contend that the
ongoing character of the injury in nuisance cases, and the availability of the injunction remedy for
such ongoing cases, reveal for us a logic underlying tort cases more generally. In those cases, too,
the tort remedy is simply a substitute for the marketplace. Cases of completed injuries between
strangers, they suggest, are essentially cases in which the transaction costs were sufficiently high
that we allowed the defendant to impose the risk and indeed injury on the plaintiff without her
consent, at the cost of having to pay damages after the fact. We could of course protect plaintiffs’
interests in their bodily integrity or property as against negligent conduct by a property rule; such
a regime might lead to punitive damages or perhaps even criminal punishment in order to force
actors to negotiate up front with possible victims. But we don’t adopt this approach. In tort law,
we allow people to impose risk and injury on others—so long as they are willing to pay for it.
Calabresi and Melamed’s “View of the Cathedral” (to echo the title of their classic article)
posits a logic for private law generally—for the law of contract, property, and tort. In this logic,
tort law’s liability rules substitute for the entitlements of property law when market failures
prevent the law of contract from achieving the right social outcomes. Tort law, in other words,
allows actors like the cement plant in Boomer or a driver in an ordinary automobile accident case
to compel others to bear some of the risks generated by their activity in return for a price set by
the courts. And it typically does so in areas in which the transaction cost obstacles to getting
consent up front are simply too great, either because the consent would have to come from
unreachable strangers (the highway case) or because collective action problems and strategic
behavior are likely to prevent an actor from gaining consent.
3. Tort and contract in “the Cathedral.” Some say that the Calabresi / Melamed view of tort
reduces tort law to a sort of contract law substitute: one designed to recreate contract’s virtues in
those areas that contracts and the market are otherwise unable to reach. How plausible a reading
of the law of torts is this? Consider the cases and materials we have reviewed in the past nine
chapters. What, for example, would the Calabresi / Melamed theory hold for relational cases, i.e.,
cases where there is a contract or relationship between the parties such that transaction costs have
not been insuperable? Are these cases in which the terms of the contract itself ought to govern the
torts resolution? Would tort be swallowed up into contract in such cases? Or does tort law supply
something independent in such cases such that it is not simply reduceable to contract?
4. Markets and inequality. One critique of the Cathedral is that market-mimicking liability
rules may reflect and reproduce economic inequality. In the context of pollution, if liability rules
are imposed, polluting defendants are incentivized to relocate to poorer neighborhoods where the
damages to the neighbors will be less. Even more troublingly, it may sometimes be the case that
the residents of poorer neighborhoods will accept lower monetary compensation for putting up
with pollution. Imagining for the moment that this is so, should we respect such deals?
513