Showing papers on "Damages published in 1995"

Customer switching behavior in service industries: An exploratory study

Abstract: Customer switching behavior damages market share and profitability of service firms yet has remained virtually unexplored in the marketing literature. The author reports results of a critical incid...

Environmental Policy under Oligopoly with Endogenous Market Structure

Abstract: Emission taxes under both fixed-number oligopoly and endogenous market structure, which are the most relevant market structures for policy issues, are examined. In the latter case, and contrary to what is expected under imperfect competition, the optimal tax could exceed marginal external damages, which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages. Under endogenous market structure, a scheme consisting of a license fee and a second-best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages. Copyright 1995 by The editors of the Scandinavian Journal of Economics.

On the Efficiency of Privately Stipulated Damages for Breach of Contract: Entry Barriers, Reliance, and Renegotiation

Abstract: Two roles for stipulated damage provisions have been debated in the literature: protecting relationship-specific investments and inefficiently excluding competitors. Aghion and Bolton (1987) formally demonstrate the latter effect in a model without investment or renegotiation. Although introducing renegotiation alone destroys their result, introducing both renegotiation and investment restores it. In particular, if an entrant has market power and the seller's cost of production is observable but not verifiable, then privately stipulated damages are set at a socially excessive level to facilitate the extraction of the entrant's surplus. In contrast, if the entrant prices competitively (as typically is assumed in the law and economics literature on breach), then private stipulation is efficient. Whereas a simple legal restriction on the contract corrects for any inefficiency, standard court-imposed remedies do not.

Hydrologic and economic impacts of drought under alternative policy responses

Abstract: A severe sustained drought in the Colorado River Basin would cause economic damages throughout the Basin. An integrated hydrologic-economic-institutional model introduced here shows that consumptive water users in headwaters states are particularly vulnerable to very large shortfalls and hence large damages because their rights are effectively junior to downstream users. Chronic shortfalls to consumptive users relying on diversions in excess of rights under the Colorado River Compact are also possible. Nonconsumptive water uses (for hydropower and recreation) are severely affected during the worst drought years as instream flows are reduced and reservoirs are depleted. Damages to these uses exceeds those to consumptive uses, with the value of lost hydropower production the single largest economic impact of a severe sustained drought. Modeling of alternative policy responses to drought suggests three general policy approaches with particular promise for reducing damages. Consumptive use damages can be reduced by over 90 percent through reallocation from low to high valued uses and through reservoir storage strategies which minimize evaporation losses. Reservoir management to preserve minimum power pool levels for hydropower production (and to maintain reservoir recreation) may reduce damages to these nonconsumptive uses by over 30 percent, but it may increase consumptive use shortfalls.

Property Rules and Liability Rules: The Cathedral in Another Light

Abstract: Ronald Coase's essay on "The Problem of Social Cost" introduced the world to transaction costs, and the introduction laid the foundation for an ongoing cottage industry in law and economics. And of all the law-and-economics scholarship built on Coase's insights, perhaps the most widely known and influential contribution has been Calabresi and Melamed's discussion of what they called "property rules" and "liability rules." Those rules and the methodology behind them are our subjects here. We have a number of objectives, the most basic of which is to provide a much needed primer for those students, scholars, and lawyers who are interested but not particularly fluent in the economic analysis of law. Like Coase before them, Calabresi and Melamed figure regularly in the work of the legal academy, but-again like Coase before them-their ideas are not understood as well as they should be, notwithstanding an excellent explanation by Professor Polinsky published some fifteen years ago. Since Polinsky's contributions have been all too routinely ignored, we shall restate several of his central points emphatically. But we also take issue with parts of Polinsky's analysis, and we aim, in any event, to extend his account, and the literature on property rules and liability rules generally, into previously undiscovered territory. In Parts I and II we set out first the background and next the conventional understanding of the "four rules" that figure in the work of Calabresi and Melamed. Then, in Part II, the centerpiece of our discussion, we shift from description to critique and from the familiar to the novel. We question some of the typical thinking about transaction costs, and about "objective" versus "subjective" accounts of reality (as in objective versus subjective damages). We consider the irony in the standard analysis of "extortion" and the paradox of Calabresi and Melamed's so-called rule four of reverse damages. We present a way out of the paradox-namely reverse-reverse damages, or what we prefer to call "the double reverse twist" - and in the course of doing so introduce a "best-chooser" principle that adds a new element to the conventional methodology. We then use the best-chooser principle to show that much that seems strange in our account is in fact familiar, provided one thinks about legal institutions in a sufficiently systematic way. Throughout, we mean to be both constructive and critical, trying to enhance a useful method of legal analysis but at the same time questioning whether the method, rightly understood, entices its practitioners into a game not worth the candle. So there is a tension in our account. It is addressed in the Conclusion.

Sustainable International Agreements on Greenhouse Warming — A Game Theory Study

Abstract: Atmospheric concentrations of the greenhouse gases (e.g., CO2) are increasing rapidly due to human economic and industrial activity. The thermal balance of the earth is changed resulting in overall climate warming referred to as the “greenhouse effect”. The greenhouse effect is a global issue. Reducing damages caused by climatic changes requires major international efforts. Many countries bear the view that the joint efforts should be undertaken under international agreements. We present a dynamic game theory model for an international environmental negotiation problem that may arise in the context of global climate change. Our game theory setting is based on the fact that the countries differ in their vulnerability to the global warming and that two coalitions will possibly be formed. One coalition may include countries that do not suffer from global warming, or where the damages are minor, and in the other coalition we may have countries that suffer from the global warming. The greenhouse problem is modelled as an economic infinite-horizon differential game. The players negotiate an agreement among Pareto efficient programs. Since the costs of one player will be reduced in cooperation while the costs of the other will increase, transfer payments may be used in negotiating an agreement. Transfer payment programs are designed such that it is possible at any stage of the agreement to punish violations against cooperation and to discourage the other player from selfishly polluting the atmosphere. The use of memory strategies in designing self-enforcing agreements is discussed. The main conclusion is that the incentives for international cooperative control of global warming will become stronger with an accelerating speed.

Placing a Price on Pain and Suffering: A Method for Helping Juries Determine Tort Damages for Nonmonetary Injuries

Abstract: At present, no well-defined legal standards exist for assessing tort damages for nonmonetary injuries such as pain and suffering. As a result, jury awards for pain and suffering vary widely for similar injuries. In response, many states have enacted legislative reforms that limit pain-and-suffering awards. Meanwhile, many tort-reform advocates call for eliminating pain-and-suffering damages altogether. This Article argues that pain-and-suffering awards are desirable and proposes a method for calculating nonmonetary injuries that could be implemented without resort to radical reform measures. After a thorough survey of the approaches used to compute pain-and-suffering damages and current reform proposals, the author demonstrates that full compensation is desirable since eliminating or reducing nonmonetary damage awards would create significant inefficiencies and inequities. Applying well-accepted economic principles, this Article recommends that juries assess damages from an ex ante perspective that asks how much a reasonable person would have paid to eliminate the risk that caused the pain-and-suffering injury. The author shows that this methodology is appropriate for all tort cases; that it would yield reasonably accurate results despite data limitations; and that it can and should be implemented within the current system. For these reasons, the ex ante full-compensation award is a dramatic improvement over the current approaches to calculating pain-and-suffering damages.

Tort, Insurance and Ideology

Abstract: When misfortune befalls an individual, our social and legal arrangements may provide a variety of responses other than to let the losses associated with it lie where they fell. For example, the misfortune may have been the subject of private insurance taken out by the victim and at a level the victim chose. The risk of the misfortune may have been socialised by being covered by, say, a scheme of social insurance or social welfare. A third response is restoration of the victim, that is provision to the victim of a financial measure which attempts as far as money is able to return the victim to the position he was in before the misfortune occurred. Clearly, tort qualifies as a form of the third response because the measure of damages in tort is restorative of the victim; but is it also a form of the first two responses and, if so, what are the ramifications of this? Each of these three responses has its own rationale and, though any combination of responses may be triggered in the event of a misfortune, they often compete as alternatives in public policy debates about misfortune. Over time, the outcome of this competition displays certain trends. In this century, until about the late 1970s, there was a rise in the incidence of the insurance response but an even more dramatic rise in public policy reliance on the socialisation of risk across an increasing range of misfortunes. Parallel to this has come a general broadening of the catchment of situations recognised by the courts as giving rise to tort entitlements. In the past 20 years, however, concern has mounted in some quarters that both the latter trends (socialisation of risk and tort expansion) have gone too far and that such support for misfortune is now so over-developed that it stifles initiative by fostering a dependency culture and infringes the autonomy of those who are forced to finance these structures. The degree to which one shares this concern, if at all, will depend on one's politics. It is not a legal question. My aim in this article is to emphasise that whether one thinks the existing catchment of tort (or existing forms of social insurance and social welfare) should be reduced, leaving individuals merely with the support they can afford from Elrst party insurance or hope to receive from charity, is profoundly a matter of ideology. The reason this requires emphasis is that confusing tort with the other forms of support for misfortune can lead, and has recently led in the United States, to the presentation of these choices as apolitical and their resolution in favour of retrenchment of tort as merely the working through of inexorable logic. In this article I will deal with tort's relationship with insurance.l Concentrating first on the common but vague claim that tort is somehow 'about insurance,' I will argue that neither actual insurance nor insurability are or should be relevant to the reach and shape of tort liability. I then hope to explain why continued confusion on this point can lead to the conflation of tort with the insurance model of response to misfortune. Once this 'tort as insurance' construction of liability is embraced, the normative agenda for the future of tort inexorably points to retrenchment: an agenda, it can then be claimed, which arises from the mere logic of what tort is

Malpractice Reform in the 1990s: Past Disappointments, Future Success?

Abstract: State governments, the federal government, interest groups, and researchers have proposed various approaches to reform the malpractice system. Malpractice reforms fall into two generations. First-generation reforms are those adopted by states beginning in the 1970s chiefly to reduce claim frequency and severity and thereby improve the malpractice system primarily from the perspective of providers and insurers. Scholars and interested constituencies developed second-generation reforms, such as use of medical practice guidelines to set the standard of care, various no-fault approaches, enterprise liability, mandated alternative dispute resolution, and scheduling damages, to streamline the adjudication and compensation system from the perspective of claimants and providers. Research indicates that first-generation reforms have not been very effective in achieving the compensation and deterrence goals of tort, whereas second-generation reforms hold greater promise of doing so. This analysis of state and federal legislation indicates that states, and more recently Congress, have been reluctant to adopt second-generation reforms but continue to promote and/or adopt first-generation reforms. The strength of the provider lobby, concerns of health care reformers about the relationship between defensive medicine and health system costs, and lack of an organized consumer force for second-generation malpractice reform are important explanations of why the states and Congress have not embraced second-generation reforms. Furthermore, federal and state legislative interest in second-generation reforms, although never high, is waning in the current health care reform debate.

Keeping Society in the Dark: On the Admissibility of Pretrial Negotiations as Evidence in Court

Abstract: We model the settlement and litigation process, allowing for incomplete information about the level of damages on the part of both the defendant and the court, and use the model to examine the effect of making (currently inadmissible) settlement demands admissible as evidence in court should a case proceed to trial. Two conclusion emerge. First, admissibility rules have efficiency consequences: making a pretrial demand admissible would increase the expected number of cases that go to trial. Second, such rules have distributional consequences and need not benefit all parties to a controversy.

Removing the shadow of the law from the debate about genetic testing of children.

Abstract: When physicians view efforts to obtain genetic testing for children as unwise or contrary to the children's interests, they face difficult problems both of ethics and of communicating with the parents. Contrary to the suggestions of some, the law has little to say about how physicians resolve these dilemmas. Parents do not have a constitutionally protected right to demand that unwilling physicians perform these tests. In addition, there is little risk of liability for damages unless the child suffers physical harm as a result of the physician's refusal to do the test. The debate about genetic testing of children needs to take place with a clear understanding of the law's limited impact.

Contract remedies and options pricing

Abstract: This article examines the choice between money damages and specific performance as the remedy for contract breach by drawing on the theory of options valuation. The ability to breach and pay money damages is analogous to granting the breaching party an option to buy back his performance for a strike price equal to the damages award. The option affects the parties' returns from the contract and the variance of those returns. The parties' ex ante preference for money damages or specific performance should therefore depend, among other things, on their ability to value the option and their attitudes toward risk. The article examines the parties' ability to determine the option value and the effects of that value on their preferences under various assumptions. It concludes that the options analogy helps to explain the common law's choice of money damages as the normal remedy and the most common exceptions.

International legal issues arising under the United Nations decade of international law

Abstract: Preface Doha Declaration Editor's Note Opening Statements His Highness Sheikh Hamad bin Khalifa Al-Thani, Najeeb Al-Nauimi, Boutros Boutros-Ghali, F Mayor I: The United Nations and the Decade II: Environment Law Section 1: Protection of the Environment in Times of Armed Conflict Section 2: Legal Aspects of the Protection of the Environment in Areas Not Subject to National Jurisdiction (Global Commons) Section 3: Draft Principles Relating to Liability and Compensation for Damages Arising from the Transboundary Movement of Hazardous Wastes III: The Law of the Sea Section 1: The Problems Arising at the Time of the Entry into Force of the 1982 Law of the Sea Convention Section 2: Problems Arising with Respect to Highly Migratory Fish Stocks and Straddling Stocks IV: The Settlement of Disputes V: Humanitarian Law Section 1: The Role of Criminal Law in Relation to the Peace and Security of Mankind and the Nature and Structure of an International Criminal Court Section 2: The Establishment of Safety Zones for Displaced Persons in their Country of Origin Section 3: The Right of/to Humanitarian Intervention VI: Rio Aftermath Section 1: The Rio Conference and Post-Rio Section 2: The New International Economic Order

The Comparative Law and Economics of Penalty Clauses in Contracts

Abstract: Imagine the following monologue by a father afflicted by a severe attack of nerves. "My daughter's wedding is scheduled for next month and I'm in deep trouble. She has expressed a strong desire to hold the party in our old country house. A long time ago, I promised her that I would organize the party there. But then I forgot to make arrangements with the builders. A lot of work needs doing to the house. There's no way she can hold the party there without the work being done. All the invitations have already been sent. If I don't get things sorted out my daughter will never speak to me again. Yesterday I rushed around looking for a building contractor. None of them could promise me that they'd finish the work on time. None of them ruled it out, of course, since they didn't want to loose a customer. But they made no promises. I can't take the risk because it would ruin my relationship with my daughter. I'd pay any money for the certainty. This situation of the absent minded father, late in organizing his daughter's wedding, is a typical one in which penalty clauses would be very helpful. He may eventually find a builder willing to rush the work, and willing to promise to have the job finished by the date of the wedding, but in return for a high extra price (say 900 dollars extra). But how can the father be sure that the contractor is not making the promise to attract a customer, charging 900 dollars more than the usual price and then finding an excuse for not meeting the deadline? Of course, if this happens the father can sue the builder for damages. It is equally obvious, however, that he will regard damages

Regulatory objectives and enforcement behavior

Abstract: Economic models of enforcing environmental law have incorporated varying assumptions about regulatory objectives. This paper examines the consequences of different attitudes toward the benefits and costs of pollution control on the part of regulators who have limited powers and resources. We find that greater weight given to compliance costs relative to the social damages of the polluting activity will bring outcomes closer to the optimum when the regulator is strong, but may move outcome further from the social optimum when regulatory powers are weak. When negotiated noncompliance is an option, greater consideration of compliance costs will tend to produce better results.

Existence Value, Contingent Valuation, and Natural Resources Damages Assessment

Abstract: The purpose of this paper is to review recent developments in economics and public policy with regard to environmental resources. We describe the traditional concepts of externalities, public goods, efficient property rights, and the more recent concept of existence values for wilderness areas and other natural resources. A feature is the inclusiveness of modem economic theory. We trace the development of economic approaches to estimating values. We briefly review approaches based on observable market behavior and contingent market responses. Contingent valuation plays a vital role in estimation because it is the sole technique available for estimating the potentially important existence values. Benefit-cost analysis for regulatory decisions and natural resource damages assessment for implementation of Superfund legislation are discussed. We conclude that estimates of existence values based on contingent valuation can be useful especially when the alternative is greater reliance upon an imperfect political process.

Fault, Settlement, and Negligence Law

Abstract: State tort laws that govern the apportionment of damages from accidents often bar potential plaintiffs who played even a minor causal role in the accident from recovering damages from other culpable parties. However, anecdotal evidence suggests that judges and juries fail to enforce the letter of the law, which leads to a weaker relationship between fault in an accident and recovery for injuries than the laws would predict. Data from insurance settlements arising out of auto accidents are consistent with the anecdotal evidence. This indicates that the letter of the law may be less important in shaping individuals' behavior than scholars have supposed.

The Limits of Liability, Keeping the Floodgates Shut

Abstract: Preliminary Observations W.V.H. Rogers, et al. Limitation and Mitigation in German Tort Law C. v. Bar. Direct and General Limits on Tort Damages in the United States D.B. Dobbs. European Tort Law: Hellenic National Report K.D. Kerameus, Kl. Roussos. Mitigation of Damages under Austrian Law and Ideas for Future Regulations H. Koziol. La moderation de la reparation du dommage dans le droit belge de la responsabilite civile extra-contractuelle A. van Oevelen. Keeping the Floodgates Shut: "Mitigation" and "Limitation" of Tort Liability in the English Common Law W.V.H. Rogers. How to Keep Liability Within Reasonable Limits? A Brief Outline of Dutch Law J. Spier. Moderation et limitation des responsabilites et des indemnisations: Rapport sur le droit francais G. Viney. Determination et reduction de la reparation en droit suisse P. Widmer.

Is there a bias in arbitration of nonunion employment disputes? an analysis of actual cases and outcomes

Abstract: This paper uses 1992 nonunion employment arbitration awards to examine how parties currently use arbitration outside collective bargaining. It presents descriptive data on the costs of arbitration. It compares employer and employee claims, and finds that employees win higher damage awards. Employees recover a higher proportion of the damages they claim or have a better outcome than employers, notwith‐standing the theory that an arbitrator will rule in favor of employers because they have more resources to pay the arbitrator. While both employers and employees have lower outcomes when the arbitrator is paid a fee, this appears to be because the fee‐paying cases are higher stakes claims, and higher stakes claims result in proportionally lower damage awards. The findings tend to contradict the theory that employment arbitrators will be biased in favor of employers in a nonunion setting.

Lawyers in distress

Abstract: A significant number of lawyers experience such a high level of distress at work that it damages their physical and mental health, as well as their ability to represent clients This article introd

Estimating Environmental Liability: Quantifying the Unknown:

Abstract: In 1990, a Missouri jury awarded $16.2 million in damages to a family that sued Georgia-Pacific and Temple Industries for health effects suffered from particleboard in their home.In 1992, Boeing ag...

"Speculative" Antitrust Damages

Abstract: This article, published in 1995, describes antitrust law’s framework for proving individual harm as the basis for an award of treble damages. Antitrust damages are based on a standard of net individual harm, adapted (by the antitrust injury and Illinois Brick doctrines) to conform to a larger principle of net social harm. Net individual harm, so qualified, is measured by the difference between the plaintiff’s actual condition and its “but-for condition,” that is, the condition the plaintiff would have been in but for the defendants’ anticompetitive conduct. The plaintiff must project its but-for condition from a reasonably comparable base experience. In doing so, it must offer a theoretical model and an evidentiary foundation sufficient to isolate the defendant’s illegal conduct as the cause of the difference between the actual and but-for conditions.

New directions in floodplain management

Abstract: Over the last 30 years, average annual riverine flood damages have exceed $2 billion. Damages associated with the Mississippi River Flood of 1993 exceeded $12 billion and these costs do not include the non-quantifiable, human impacts of this disaster. In a report submitted to the White House in June 1994, a federal interagency floodplain management review committee proposed better ways to manage the nation's floodplains. The committee indicated that the 1993 Mississippi River flood was the result of a significant hydrometeorological event, that federal flood control efforts in the Mississippi basin had prevented nearly $20 billion in potential damages, and that, in spite of federal flood damage reduction efforts, throughout the nation people and property remain at risk to inevitable future flooding. It recommended that the division of decision and cost-sharing responsibilities among federal, state and local governments be more clearly defined, and that the nation adopt a strategy of, sequentially, avoiding inappropriate use of the flood-plain, minimizing vulnerability to damage through both nonstruc-tural and structural means, and mitigating damages as they occur. The report did not call for abandonment of human use of the flood-plain but argued for full consideration of the economic, social and environmental costs and benefits of all future floodplain activity.

Racial harassment: Case characteristics and employer responsibilities

Abstract: This article examines the socio-business issue of racial harassment in the workplace. For two decades, the federal judiciary has been defining and refining the elements of the offense within the parameters of Title VII of the Civil Rights Act of 1964 and Section 1981 of the Civil Rights Act of 1866. The Supreme Court’s decision to hear arguments for the first and only time on one of the important aspects of the developing doctrine focused considerable attention on this workplace problem in 1989. The Civil Rights Act of 1991 provides limited money damages to victims of discrimination under Title VII of the Civil Rights Act of 1964, whereas Section 1981 of the Civil Rights Act of 1866 provides unlimited damages to the victims of discrimination and race harassment. The authors discuss the legislative and judicial foundations of race harassment with respect toPatterson v. McLean, provide a profile and analysis of racial harassment cases (1971–1987), and conclude with a discussion of employer liability and recommendations for management.

A Tortfeasor's Lot is not a Happy One?

Abstract: In recent years there has been considerable emphasis on preventing a plaintiff receiving compensation for the same injury from two different sources when awarding damages in personal injury cases at the expense of the tortfeasor.1 This problem of double recovery is raised in deciding whether a plaintiff should receive damages for the value of caring services rendered to her gratuitously by a third party. It can be argued that if the plaintiff is allowed to recover she receives both the care and the cost of the care, the latter being a benefit to the plaintiff at the expense of the tortfeasor. However, in Donnelly v Joyce2 and Cunningham v Harrison,3 the Court of Appeal accepted that such damages could be recovered. In Hunt v Severs,4 the House of Lords considered whether recovery should be allowed where the voluntary services were provided by the tortfeasor rather than a third party. In rejecting the plaintiff's claim, the House of Lords recategorised the legal basis on which any plaintiff can recover for the value of gratuitously provided services and used this new 'trust' basis to deny recovery on the facts. However, the extent to which the plaintiff would have been overcompensated if recovery had been allowed, whether if such overcompensated existed it was justified and whether the imposition of a trust as a means for compensating voluntary providers of care is workable, receive inadequate treatment.

The therapeutic partnership: legal and ethical aspects of consumer health information.

Abstract: Patients' rights to information in the UK are based on a mixture of statute (including legislation on access to medical records) and case law (principally revolving around the issue of informed consent). These rights are set out in the Patient's Charter, which is itself a mixture of rights based on legislation and those enforced by management practice. Failure to provide adequate information to a patient could expose a medical practitioner to action for negligence or battery. Negligent information-giving could also expose consumer health information services to damages, for which the best defence is a high standard of professional competence and adequate professional indemnity insurance. Sharing information about the risks and benefits of treatment to enable truly informed decision making and consent by the patient is a key element of an ethical relationship between care giver and consumer--the therapeutic partnership.

Medical decisionmaking for older adults in institutional settings: is beneficence dead in an age of risk management?

Abstract: The regulation of institutional long-term care (referred to as nursing facilities, or NFs, in this article) in the United States today is extensive and complicated. Constant provider concern about legal survival and financial viability within this complex, omnipresent regulatory environment has led to what might be characterized as an "ethical lobotomizing"(1) of NF management, care staff, and governance personnel. That is, parties responsible for caring for NF residents, who generally are the oldest and most frail members of society, often are influenced in their daily decisions and actions far less by a thoughtful consideration of ethical principles and consequences than by calculations for avoiding regulatory and judicial sanctions. This article explores the tension within the NF context between ethical care, particularly care built on the precept of beneficence, or doing good, on one hand, and provider concentration on legal and financial risk management, on the other. Special attention is paid to the unintended consequences of regulation in this sphere, leading to formalism masking ethical neglect, as well as to the potential and actual roles of institutional ethics committees. A few modest possibilities for addressing the described tension effectively are suggested. The Regulatory Octopus The approximately fifteen thousand NFs in the United States currently are regulated from a variety of directions. This regulatory octopus is an understandable public reaction--albeit arguably an overreaction--to an industry that has been tarnished with scandals for much of its history.(2) The vast majority of NFs now participate in Medicare(3) and Medicaid(4) and therefore must comply with federal requirements contained in the Nursing Home Quality Reform Act, passed as part of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87),(5) and in OBRA's implementing regulations(6) in order to be compensated for the care of residents financed by these two programs. Nationally, Medicaid alone paid more than $28 billion to NFs in 1991, making it by far the major third-party payment source for institutional long-term care services.(7) These requirements cover every aspect of administration, care, and quality of life within the institution, including (as will be discussed below) the rights of residents. In addition to federal requirements tied to funding, NFs are concurrently subject to licensure requirements imposed by each individual state. These mandates, especially regarding resident rights, often exceed those imposed on the federal level.(8) NFs are also heavily regulated under state and local fire(9) and building codes and similar business-related safety provisions. In their role as employer, NFs fall within state, federal, and local labor law and occupational health (e.g., precautions against exposure to blood-borne pathogens)(10) provisions. Private organizations, most notably the Joint Commission on Accreditation of Healthcare Organizations (JCAHO),(11) establish standards that NFs may voluntarily meet in order to obtain certification. The incentive to pursue such accreditation may intensify in the future if the federal government grants "deemed status" to private organizations for purposes of Medicare and Medicaid approval.(12) Long-term care providers must also be concerned about potential malpractice liability to residents or their representatives predicated on tort and breach of contract theories.(13) Personal injury lawsuits for civil damages brought against NFs have been relatively uncommon in the past, but providers are aware that this legal environment is changing as the plaintiffs' bar discovers this ripe area and courts show more willingness to award large noneconomic and punitive damages for patterns of abusive or neglectful treatment.(14) Provider anxiety about this regulatory atmosphere is exacerbated by the resident advocacy network that overlies the NF industry today. …