Tragedy in the Judicial Commons

If you think that people who have been exposed to asbestos have the right to sue asbestos manufacturers for damages . . . or that individuals exposed to mercury or lead should be able to sue . . . or that everyone who has been X-rayed by doctors or dentists should be able to sue . . . or that anyone with a silicone breast implant, no matter how healthy and happy, should be able to sue . . . or that everyone who lives downwind from a hog farm or cigar smoker should be able to sue–sadly, you are correct.

For thousands of truly injured victims or their families, this state of affairs has not been good. Its genesis lies in the recent loosening of the legal standard plaintiffs must meet to be granted legal standing in tort cases. Although many may perceive this change to be trifling and benign, in fact it reduces the likelihood that parties with demonstrable injuries will be compensated.

Historically, judicial recognition of legal standing required a plaintiff to demonstrate: (1) that he was injured, (2) that the injury was caused by the defendant, and (3) that the court was in a position to effect a remedy. That is, a plaintiff was required to demonstrate actual injury, not perceived injury or possible future injury. However, this sensible common-law requirement was cast aside by the U.S. Supreme Court on January 12, 2000, in Friends of the Earth v. Laidlaw, in favor of a standard that permits a plaintiff to claim possible injury. In Laidlaw, the plaintiffs’ concern that water was polluted and their belief that the pollution had reduced their property values was regarded by the Court as sufficient to indicate injury in fact.

Now we are seeing the utterly predictable consequences of the new legal standard: a massive increase in tort actions brought by healthy individuals seeking “damage” awards. The wealth of a target firm is potentially available for distribution to many times more uninjured than injured parties. As the number of uninjured parties seeking judicially arranged wealth transfers for unproven damages increases, it becomes less likely that individuals with proven injuries will be able to secure the compensation they deserve–a tragedy of the judicial commons.

Garrett Hardin (Science, 1968) introduced us to the tragedy of the commons. Hardin developed a stylized example of a communal pasture, open to all comers. There are no private property rights to the pasture, or rules, customs, or norms for shared use. In this setting, shepherds seeking to maximize the value of their holdings keep adding sheep to their flocks as long as doing so adds an increment of gain for their particular flocks. Further, they graze their sheep on the commons as long as the pasture provides any sustenance. Ignorant of the effects of their individual actions on the other shepherds, the shepherds collectively (and innocently) destroy the pasture. As Hardin concludes: “Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit–in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in freedom of the commons.”

Man’s exploitation of the judicial commons is perfectly analogous to his exploitation of natural resource commons. There is a limited amount of life-enhancing greenery available. If it is not overgrazed, the greenery will grow and provide nourishment that can sustain indefinitely a stable population of consumers. Since consumption of the greenery by one individual comes at the expense of consumption by all others, each individual who is granted access has a strong private incentive to consume as much as possible before the green is consumed by others. Restricting access to those with demonstrable and justifiable claims helps prevent overgrazing. Consequently, increasing the number of citizens with access to the target green increases the likelihood that it will be wiped out by the extent of the depredation, leaving no one able to consume green from that source in the future.

Exploiting the System

As reported in a lengthy article in the April 25 Wall Street Journal, this is exactly what has happened with asbestos litigation:

• In the past two years, desperately ill plaintiffs have been eclipsed by a huge and growing number of healthy people seeking awards for possible future illnesses. Since January 2000, the wave of less-severe claims has pushed at least 20 companies that sold or used asbestos products into bankruptcy protection. . . . The upshot: There are fewer unencumbered companies to pay claims. The sickest asbestos victims are now collecting far less than comparable victims did in the 1990s. And the whole asbestos mess, which was supposed to be largely resolved by now, instead is spreading and could drag on for decades.
• The morass has increasingly pitted the interests of mortally ill plaintiffs against those who are much healthier. Dallas lawyer Peter Kraus, who files asbestos suits only for cancer victims, condemns rivals who represent those who aren’t sick. “They’re sucking the money away from the truly injured,” he says.

The problem, of course, is that not everyone who has been exposed to asbestos, mercury, lead, tobacco smoke, or other putative environmental toxin de jure will be harmed in fact. Yet by granting legal standing to sue to parties who cannot demonstrate actual harm, we have opened the legal pasture to a veritable flood of new grazers who care only about the opportunity to feed on the delicious green, not about the harm they inflict on others whose claims may not only be more pressing but also have real merit. The tragedy of the judicial commons, then, is that by granting legal standing to those with unproven harm we destroy the most fundamental justification for tort actions: the social imperative for harmed parties to be compensated fully by those who are responsible for the injury.

David Laband teaches natural resources economics at the Forest Policy Center at Auburn University.