Introduction to the Law of Torts - Lecture Notes | MGMT 209, Study notes of Introduction to Business Management

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CHAPTER 5: TORTS  This chapter concerns the rights and duties of parties to the involuntary transactions, such as accidents, assaults, intentional interference with business, opportunities, and fraud. *TORT*- defined as a civic wrong other than a breach of contract for which the courts will provide a remedy in the form of damages to compensate the injured party. 1st Section: Introduction to Torts (basic doctrines and purpose of Tort Law) 2nd Section: Examines Intentional Torts in a Business Setting *INTRO TO THE LAW OF TORTS*  Crimes and torts are very similar. “Both are Wrongs”  CRIME - a wrong against society where as a TORT- is a wrong against a private party CRIME  Punished through fines or imprisonment TORTS  Not to primarily punish defendants, but to compensate injured Plaintiffs through an award of monetary damages BOTH  The results of criminal law and Tort law are the same: They are a deterrence of activities considered to be wrong.  Three Categories of Torts 1. Intentional Torts 2. Negligent Torts 3. Strict Liability 1. INTENTIONAL TORT  Involves a deliberate action, which results in an injury Example: A company knowingly makes false statements about the quality of a competitor’s products. 2. NEGLIGENT TORT  an unintentional tort that arises from the failure to use reasonable care toward one, whom a duty is owed, which results in injury Example: Slip-and-Fall accidents due to defectively designed products 3. STRICT LIABILITY  Liability without fault Example: You did the acts that resulted in the harm  Purpose of Tort Law  Tort law - provides a set of legal rules that allows parties injured as the result of the actions of others to collect damages under “certain well-defined circumstances.”  Compensation & Appeasement  The purpose of the law is to limit the negative impact of the infliction of injury to the event of the event of the injury itself.  Tort law provides a way to:  Right the wrong without the injured party retaliating through some destructive means  Victim is appeased in two ways: 1. Receipt of compensation 2. Knowledge of the fact that the transgressor is punished by being required to pay  Justice  Justice is viewed as an expression of moral principle:  One who by his fault has caused damage to another ought to make compensation as a matter of justice  Two views in support of this view: 1. Ethical Retribution- emphasis on fact that the payment of compensation is harmful to the offender and that justice requires that the offender suffer the harm 2. Ethical Compensation- (point of view of the victim) emphasizes the fact that the payment of compensation is a benefit to the victim of the wrong, and declares that justice requires that the victim should receive this compensation  Deterrence  Some view Tort law as a regime of prevention. o Rules of tort law are designed to alter the incentives of interacting parties so as to control their future conduct in a manner that reduces losses due to accidents in the most efficient manner. o Concentrated on developing legal rules that minimize the total costs associated with accidents  Two Types of Costs (associated w/ accidents) 1. Costs of preventing accidents 2. Actual costs of accidental injuries Example: Cost of avoiding accident < Cost of injuries  An efficient legal rule would be one that imposes liability on the party that could have avoided the accident at the lowest possible cost.  Deterrence View of ROLE of Tort Law: o not only concentrates on altering behavior so as to avoid accidents, but also generates public policy prescriptions based on efficiency:  The party who is the “least-cost avoider” of an accident should be held liable. (This is not always obvious) o The rule is intended to alter behavior so that the likelihood of accidents is decreased o Bearing costs of injuries = the incentive to liable parties to alter their behavior to reduce the risk of injury since the precedent set by such cases establishes liability rules for the future Example: Many courts have held that grocery storeowners are liable to customers that are mugged in UNLIT parking lots. Courts are saying it is cheaper to light parking lots to prevent muggings rather than for customers to hire bodyguards or provide some other form of personal security.  The IMPACT is to make grocery stores install lights or pay damages to someone who is mugged in the dark.  The Deterrence Perspective o does not answer all questions about the proper liability rule o Some Cases: cost of preventing accident may be greater than the cost of the accident  The liability rule WILL NOT alter the behavior of the parties because it is cheaper to pay for the cost associated with the accident rather than to try to prevent the accident.  Social Insurance o CONSIDER TORT LAW AS A MEANS OF SOCIAL INSURANCE o This View:  The party who is in the best position to spread the loss of the injury should be held liable. responsible for the action of their employees while on the job or within the scope of their employment.  Battery  If the security guard does any unlawful touching or physical contact with the female shopper without her consent, a battery has also occurred.  Battery - the intentional act of physical contact or offensive touching of someone else without his or her permission  I can be a battery: any contact with another in any manner causing physical contact or offensive touching.  Can be Battery in any of the following situations: a) A person hits another person in an offensive manner b) A person shoots another person and the bullet his the person c) A person commands their dog to attack another person d) You throw a rock and hit someone Note: To have a battery, all you have to do is unlawfully or offensively touch someone without their permission.  Defenses to Assault and Battery o A defense is a legal justification to commit what otherwise would be a tort. o 1st Defense = Consent  Consent - can be expressed, as in signed releases or waivers or implied, as in most sporting events.  Tortfeasor - the person committing the tort  If the tortfeasor goes beyond the level of consent given, the appropriate tort would still occur.  Another defense is that of self-defense.  You can defend yourself. You can also go the defense of others.  The problem: the amount of force that you can use in self-defense and whether or not you exceeded that force.  The victim- can use “reasonable amount of force to defend himself or others.  Can be the use of deadly force if deadly force is first used against you & you have no other alternative. o In defending property you can use reasonable force, but under common law you cannot use deadly force to protect your property.  Several states have statutory laws that allow one to use deadly force in certain situations to protect themselves and their property.  False Imprisonment o Defined as intentionally causing the confinement of another person without consent or legal justification.  Confinement situations involve: 1) Physically restraining an individual 2) Using threatening force against an individual or his or her family members to restrain them 3) Using force or threat of force against an individual’s property to restrain the victim 4) Refusing to release a person from confinement when there is a duty to release  Common False Imprisonment Situation  Retail merchant detaining a customer suspected of shoplifting.  Merchant may assert the defense of “shopkeeper’s privilege.”  In most states “anti-shoplifting statutes” have been passed making the shopkeeper’s privilege statutory.  These laws: require the merchant to show that he or she had a reasonable basis for suspecting the customer of shoplifting, and that the detention was reasonable.  Detaining shoplifters is a major problem for businesses involved in retail sales. Example: Store employee sees what he thinks is a person who is in the process of shoplifting. The store employee follows the alleged shoplifter. If the alleged shoplifter realizes he is being followed, could he be afraid, especially if the store employee is undercover and does not look like a store employee? Say that the store employee waits until the alleged shoplifter leaves the store, he then gives chase. Now the shopper is afraid and runs from what he thinks is a crazy person. This is a potential assault. Then, when the employee catches the shoplifter and tackles him in the parking lot there is a potential battery. Then when the store employee takes the alleged shoplifter back into the store against his will there is potential false imprisonment. If the store can prove that their employee’s actions were reasonable under the circumstances or that they acted within the states statutes covering this area, if any, then the store is privileged in its actions. But, what if the alleged shoplifter either was not a shoplifter or the store could not prove its justification? Furthermore, what if the alleged shoplifter turned out to be the son of one of the most prominent businessmen or politician in town who just happens to be from the oldest and most powerful family in town? Then, what if the business is Wal-Mart or McDonald’s? In that situation it is easy to see that a jury could have sympathy for the victim and after all, the business has lots of profits, so how much could it really hurt the business if the jury gave the poor accused shoplifter half a million dollars? Result: Therefore, the result could be very bad for the business. Because of the potential damages in this type of situation, several businesses have a policy not to detain shoplifters! Businesses need more than just the common law “shopkeeper’s privilege” protection in this area.  Intentional Infliction of Mental Distress o Defined as the intentional or reckless causing of severe mental suffering in another by means of extreme conduct of language. Conduct that goes beyond the bounds of decency. o Protects individuals from: harassing tactics by businesses to collect debts. o The elements required for a case of action for infliction of mental distress to be successful are: 1) Outrageous and extreme conduct by the defendant 2) Which causes severe emotional and mental distress in the plaintiff 3) Which is manifested by some form of physical injury to the plaintiff such as a heart attach, mental breakdown, etc o Courts are not inclined to find that obscene and abusive language, by itself, is sufficient for a cause of action for several reasons.  Freedom of speech is a highly protected interest.  Abusive and obscene language is a matter of definition and allowing suits on such a basis could give rise to trivial lawsuits.  Since extreme and outrageous conduct is required for this tort, such conduct does not reach the level required for intentional infliction of mental distress.  Courts are hesitant to act in this area because mental suffering is not only difficult to measure, it also may be feigned in a fraudulent attempt to recover damages.  Hurt feelings are not sufficient.  Various courts have awarded damages for infliction of fright, grief, shame, humiliation, embarrassment, anger, chagrin, and worry.  The distress must be severe enough to manifest itself in some form of physical injury. However, an outward injury is not generally required. Tension headaches could suffice.  Invasion of Privacy o Person has right to live life privately without being subjected to unwarranted publicity. Note: unwarranted does not mean unwanted. o The tort of invasion of privacy usually occurs in one of four forms: 1) A person’s name or likeness is used for business purposes without consent  Example is using a likeness or name for advertising purposes without consent. 2) There is an unreasonable intrusion upon an individual’s physical solitude.  Examples include: public disclosure of information obtained by illegal entry into one’s home or an illegal wiretap. 3) Public disclosure about a person which is offensive and objectionable.  Example: The publication of one’s personal credit history would probably be acceptable. 4) Publication of information which places an individual in a false light.  Example: The publication that an individual possesses certain beliefs, when in fact, he or she does not. o A necessary element for an action for the invasion of privacy is the public disclosure of a private fact. All that is required is that the fact be private and that the disclosure be objectionable even though the fact is truthful. o POINTS TO REMEMBER : 1) Unwarranted does not mean unwanted. 2) If something is taken from public records, there is no invasion of privacy. 3) Public figures give up some, but not all of their rights of privacy.  Defamation o Defined as publication of a false statement that tends to injure a person’s reputation or good name causing the public to hold that person up to hatred, contempt, or ridicule, or to cause him or her to be shunned or avoided. o Defamation includes libel & slander. (The difference between libel & slander has to do with the nature of the publication)  Libel - defamation through some permanent form, in print or permanent recording;  Slander - defamation through some transitory means such as unrecorded speech; o Examples: statements that an individual had committed a crime, has a socially unacceptable disease, or has been cheating customers; Note: Keep in mind that for the tort of defamation to occur the statement must be false.  Business Intentional Torts o Product Disparagement  Product Disparagement- a similar tort to defamation.  The elements required to prove a case of product disparagement include: 1) That the defendant published an untruth about the plaintiff’s property or products 2) That the defendant knew the statement was untrue 3) That the statement was made with malice with the intent to injure the plaintiff 4) That plaintiff suffered special damages (the loss of one customer or a general downturn in business after the statement was published) o False Advertising  The tort of false advertisement is similar to product disparagement, but different in that false statements are being made about the defendant’s own products which give a false impression that defendant’s products are superior to plaintiffs.  Section 43(a) of the Lanham Act established an action for damages for any false description or representation of one’s goods or services, which may damage a competitor. o Only applies to misrepresentations made about the defendant’s won product, not the plaintiff’s. o Intentional Interference with Contractual Relations  A party to a contract, under some circumstances, can sue a third party for interfering with the performance of the contract.  Established in an English common law case in the 1850s (Lumley v. Gye)  Damages for intentional torts often include punitive damages.  The tort allows for recovery from a party that may have more financial resources available to satisfy the damage award than does the contract breaching party.  To establish that a tort of interference with a contract occurred, a plaintiff must show that: 1. A valid contract with another party existed 2. That the defendant knew about the contract 3. That the defendant interfered with the contract causing damage to the plaintiff Example: Phyllis contracts to sell her car to Brenda for $1,000 with payment and delivery of the car to take place in ten days. Before the car is delivered, Patsy, without knowledge of the contract, offers to buy the car for $1,200 and Phyllis accepts. Brenda does not have a cause of action against Patsy for interference with the contract; her only action is against Phyllis for breach of contract. o Interfering with Employment  An employer-employee relationship is a contractual one and bears special mention. o It takes time and money to train employees properly. o If an employee is induced to quit and go to work for a competitor, the competitor gains a substantial advantage.  An employment contract is a valuable property right that will be protected from third-party interference. o QUESTION: Under what circumstances will a competitor be liable in tort for interference with an employment contract?  A necessary condition is that there must be a contract for a specified period.  If a business entices employees from a competitor in order to injure the former employer, then an action in tort is possible even if the employment contracts were terminable at will. o The Ten Billion Dollar Jury Award  The largest award for damages ever granted by a jury was in an intentional interference with a contract case.  Getty Oil Company agreed to a merger with Pennzoil. o The deal was made at a meeting of Getty’s board of directors, at the conclusion of which parties from both sides shook hands, the classic signification of agreement. However, the paperwork was not complete yet. Getty Oil announced the next morning that it had an “agreement in principle” to merge with Pennzoil and that the details of the merger would be worked out in a formal written agreement. No final writing of the terms of the agreement was ever executed, but remember; a contract does not need to be in writing to be enforceable. o Texaco requested Getty to stall with Pennzoil and merge with them.  As part of the agreement, Texaco agreed to indemnify Getty for any damages that Pennzoil might win in subsequent litigation. o During the trial, Texaco did not present any evidence on the issue of damages. Once the jury determined there was a contract, they only had evidence of damages that had been presented by Pennzoil.  Punitive damages were awarded because this was a tort, not a contract, action.  The jury awarded the full $7.53 billion in actual damages that Pennzoil had claimed with an additional $3 billion in punitive damages for an award in excess of $10 billion, all because of oral interference with a contract.  No error was found and Texaco filed for bankruptcy protection and the case was eventually settled for $3 billion. (Texaco, Inc. v. Pennzoil) o Interference with Prospective Economic Advantage  Some courts have expanded the tort of intentional interference with contracts to include interference with prospective economic advantages.  This is broader because an agreement in the form of a contract is not required.  This action could arise if a third party steals a competitor’s customers during negotiations, but before a contract is made.  However, the tortfeasor must intentionally interfere with someone else’s business in an unreasonable and improper manner. o This can include predatory behavior of unreasonably stealing a competitor’s business.  It is not predatory behavior if a large chain store comes into a town and just because it charges lower prices, drives the competition out of business. However, if a large chain store then raised its prices, it would have some explaining to do. o Interference with Property Rights  Private property is a fundamental attribute of the free market economy.  Realize that tort law protects many private property rights. o Tort law provides a set of liability rules intended to deter infringement upon private property rights by making the infringer pay. o Property law provides a set of property rules involving an outright prohibition against interference with property rights.  Basic Property Law:  Real Property- land or anything permanently attached to the land.  Personal Property- anything else (clothes, vehicle, money, etc.)  Personal Property can include: o Tangible Property- property that you can touch  Intangible Property- property that you cannot touch (stocks)  Trespass to Land o Trespass to Land- any unauthorized physical intrusion or entry upon land where someone else has a superior right to the property o Any unauthorized entry below, on, across, or above the land even in the absence of actual physical damage or physical contact is an actionable trespass to land.  An exception to this rule is that the flight of aircraft above the land is permissible so long as it is at a reasonable altitude and does not interfere with the proper use of the land. o If someone trespasses onto your property, you have a right to use “reasonable force” to remove the trespasser.  If you know a trespasser is on your property and you do nothing, this may be inferred by the trespasser and ultimately by the courts, as implied permission.  In general, you do not have any responsibility to a trespasser for damages the trespasser incurs while he is injured on your property.  In some states, they have determined that you owe the trespasser the duty of “reasonable care.”  It is almost a universal rule that if you have something on your property that you know attracts trespassers, then you must take whatever reasonable steps are necessary to protect the trespasser. This is called the attractive nuisance doctrine and applies to things like swimming pools.  Trespass to Personal Property o Trespass to Personal Property- a wrongful invasion of ownership rights in property other than land. o Element of this tort:  Interference by an individual or business with the property owner’s right to exclusive use and possession of personal property.  In general, liability for damages on the theory of trespass to personal property is imposed in situations where the trespasser takes the property of another, damages the property, or somehow deprives the owner of the use of the property. Example: When a car is vandalized. When the damage is intentional, the remedy is money damages to cover the actual damages and may also include punitive damages. In contrast to trespass to land, good faith is a defense to trespass to personal property.  Conversion o The tort of conversion is similar to trespass to personal property. However, conversion occurs when personal property is taken by the wrongdoer and kept from its true owner or prior possessor.  Conversion differs from trespass to personal property in that conversion represents the permanent disenfranchising of the owner from his or her personal property. o Conversion is the civil side of crimes related to stealing.