Damages

About: Damages is a research topic. Over the lifetime, 9365 publications have been published within this topic receiving 89750 citations. The topic is also known as: compensation award.

An Economic Analysis of Corporate Directors' Fiduciary Duties

Abstract: This paper studies how the legal liability rules for directors can be optimally designed to provide them with the incentives to fulfill their fiduciary duties and to maximize ex-ante firm value. I present a principal-agent model where the shareholders can obtain a verifiable but costly and imperfect signal on the director's fulfillment of his fiduciary duties by taking legal action against him. This allows the firm to make the director's remuneration contingent not only on performance but also upon the court's decision. The paper shows that, when damages awards are high, the widespread use of liability insurance and limited liability provisions that is observed in the US is optimal because it allows shareholders to credible commit to an optimal suing strategy. The results on the use of liability insurance are maintained when the parties can settle out of court.

Remedies and the Psychology of Ownership

Abstract: I. INTRODUCTION It is surprising that there are cases like Boomer u. Atlantic Cement Co.1 The plaintiffs in Boomer were eight homeowners seeking injunctive relief against the dust and noise produced by a neighboring cement plant, the Atlantic Cement Company. The trial court declared Atlantic Cement a nuisance, but refused to enjoin the plant's operations.2 Instead, the court awarded monetary damages to the plaintiffs for the loss in value to their property attributable to the defendant's activities. The dissatisfied plaintiffs appealed, but ultimately New York's highest court declared that they were not entitled to injunctive relief.3 That the plaintiffs sued the plant is not surprising; Atlantic Cement's operations produced a tremendous amount of noise and dust.4 The striking aspect of the case is that the plaintiffs spent the time and money to appeal the type of remedy, even though they had won the right to substantial damages. Clearly an injunction had special value for the Boomer plaintiffs-but why? This Article presents evidence that people do not regard rights protected by damages remedies as being owned in the same way as rights protected by injunctive relief. The former can be taken by another without the right holder's permission, whereas the latter cannot be taken without the right holder's permission. The power to refuse to sell a right is a critical psychological component of ownership, and damages remedies do not include this power. When the trial court refused to grant the Boomer plaintiffs an injunction, it took away their power to refuse to sell their rights to Atlantic Cement, thereby undermining their status as owners. Law and economics has an alternative account of the Boomer plaintiffs' motives. Application of the Coase Theorem suggests that the plaintiffs were hoping to use an injunction to extract a large settlement from the defendant.5 According to Coase, parties regularly trade their legal rights, and so the homeowners might have been hoping to improve their bargaining position before ultimately selling their rights to Atlantic Cement. The right to shut down Atlantic Cement's plant would have been a valuable right, indeed, as the plant had cost $45 million to build and supported a payroll of 300 employees.6 The eight homeowners could conceivably have demanded a sizeable portion of Atlantic Cement's future revenue stream in exchange for allowing the company to continue operating. Furthermore, the homeowners had reason to be dissatisfied with the size of the damages remedy that the lower court provided. The Boomer plaintiffs, like most homeowners, probably valued their property at an amount greater than the market-price damages that the courts used as a measure of compensation. The present owner of a right is likely to be the party who most values it (or else they would likely have sold it). This suggests that the market-price damages would have undercompensated the plaintiffs. In this view, the plaintiffs were using the leverage that an injunction would provide either to extort Atlantic Cement or to recover the subjective value they had for their homes. Understanding the Boomer plaintiffs' motives is not a mere academic inquiry. Boomer is a paradigmatic nuisance dispute. As such, it plays a prominent role in debate concerning the appropriate allocation of and protection for property rights.7 Courts and legislatures must constantly decide how to allocate and protect rights, and Boomer squarely presents both of these issues. The court in the Boomer case could have given a right to pollute to Atlantic Cement or given the right to clean air to the plaintiffs. If the court had given rights to the plaintiffs, it could have protected them with monetary damages (a liability rule) or injunctive relief (a property rule).8 The Boomer plaintiffs' motives should matter a great deal to courts and legislatures as they make these choices. Their motives reveal what it is that property owners value, try to protect, and expect the law to protect. …

Natural Resource Damages: Law and Economics

Abstract: LAW. Public Trust and Parens Patriae Doctrines. Common Law Claims. Federal Water Pollution Control Act. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Oil Pollution Act of 1990. ECONOMICS. The Context for Valuation. CERCLA Regulatory Framework. Markets and Concepts of Value. Externalities and Public Goods. Revealed Preference Valuation Methods. The Contingent Valuation Method. Contingent Valuation: Issues and Applications. CASE STUDIES. Overview of Case Studies. Eagle Mine and Idarado. Idaho v. Southern Refrigerated. Russian River Basin Formaldehyde Release. Validating a Type A Assessment Model. Economics of Ecological Restoration. Nestucca Oil Spill. Natural Resource Damages for Oil Spills in California. Exxon Valdez--Lost Recreation Use. Kakadu Conservation Zone. Table of Cases. Index.

Liability Externalities and Mandatory Choices: Should Doctors Pay Less?

Abstract: According to legal principles, a driver who negligently breaks a pedestrian’s leg should pay the same damages as a doctor who negligently breaks a patient’s leg. According to economic principles, however, the driver should pay more than the doctor. Non-negligent drivers impose risk on others without being liable for it. When liability externalities are mainly negative as with driving, liability should increase beyond full compensation to discourage the activity. Unlike pedestrians, patients contract with doctors for treatment and willingly submit to the risk of harm. Imperfections in medical markets cause some kinds of doctors to convey more positive than negative externalities on their patients. Increasing liability for these doctors would discourage an activity that needs encouragement. The argument for decreasing doctors’ liability is especially strong when doctors must choose among risky procedures, such as cesarean or vaginal delivery of a baby, which we call a “mandatory choice”. Given equal benefits, the doctor ought to choose the least risky alternative. If the doctor negligently chooses a more risky alternative and harm materializes, courts award damages equal to the harm suffered by the patient. Even without the doctor’s faulty choice, however, the patient would have been exposed to the least risky alternative. Economic efficiency requires reducing the doctor’s liability below the victim’s actual harm, which current legal rules usually prohibit. We propose that legislatures give courts the choice of lowering tort damages for doctors in well defined circumstances, and for their mandatory choices in particular, and we suggest some principles for doing so. ∗Robert Cooter is Herman Selvin Professor of Law, University of California at Berkeley. Ariel Porat is Alain Poher Professor of Law, Tel Aviv University Faculty of Law and Visiting Professor, University of Chicago Law School (Fall 2006). For helpful comments we wish to thank Jennifer Arlen, Ronen Avraham, Richard Craswell, Mark Geistfeld, Keith Hylton, Barak Medina, Ronen Perry, Mitch Polinsky, Steve Sugarman, Omri Yadlin, the participants in the law and economics workshops at Berkeley and Stanford, and the participants in the conference, “Tort Law and the Modern State”, Columbia University School of Law, 15-16 September 2006. We thank Arik Rosen and Jennifer Shakbatur for excellent research assistance.

Global Warming: The Economic Stakes

Abstract: Examines the economic costs/benefits of an international programme to limit global warming from the greenhouse effect. The book reviews the science implications of global warming, and assesses expected economic damages from reduced agricultural production, sea-level rise and other effects.