The Essential Structure of Judgment Proofing

Abstract:     
This article argues that substantially all judgment proofing can be described through a single model: a symbiotic relationship between two or more entities, in which one of the entities generates disproportionately high risks of liability while the other owns a disproportionately high level of assets. The two entities typically are joined by a contract that allocates the profits gained from externalization of the tort liability. Proof that the model is workable even in large businesses is made by demonstrating that a single business can be divided into two such entities without altering its components or its function. The courts cannot collapse the two entities into one because no principle exists for distinguishing them from each other or from their environment.

JEL Classifications: K13, K22

Accepted Paper Series