When Less Liability May Mean More Precaution: The Case of Nanotechnology
David A. Dana
Northwestern University - Pritzker School of Law
December 3, 2009
UCLA Journal of Environmental Law & Policy, Forthcoming
Northwestern Law & Econ Research Paper No. 09-43
Northwestern Public Law Research Paper No. 09-24
The heart of the Article is an exploration of the possible role of common law tort liability in both encouraging and deterring voluntary, precautionary study of new products generally and nanotechnology products in particular. A key variable in considering liability’s role as an incentive or deterrent to testing is the manufacturer’s subjective assessment of the probability that any injuries from its product would be detected by the injured parties and successfully attributed to the product absent research by the manufacturer itself on the adverse effects of the product. Another key variable is the legal standard for tort liability, and specifically how the applicable standard falls on a spectrum from the imposition of liability on manufacturers only for known risks on the one hand to the imposition of liability even for risks the manufacturer could not have reasonably foreseen on the other. The lower the perceived probability of detection without manufacturer research and the more the applicable liability standard veers toward requiring actual knowledge of risks on the part of the manufacturer, the more likely it is that the ex ante threat of liability will lead a manufacturer to choose not to conduct research into possible adverse effects, either before the product is marketed or once it is on the market. Consideration of these two variables in the nanotechnology context would tend to suggest that liability considerations indeed may be discouraging research into possible adverse effects of nanotechnology products under development and already on the market.
The closest precedent for the regime of limited liability relief that I propose is the regime of federal preemption of state torts that is afforded manufacturers of certain FDA-approved medical devices under federal law. FDA preemption of common law tort claims, however, is controversial, to say the least. In order to avoid the disadvantages and problems of the FDA preemption regime, any regime of liability relief for nanotechnology manufacturers who voluntarily engage in testing needs a number of components that would help ensure political accountability, scientific integrity, transparency, and a reasonable pool of compensation for injured people. The scope of preemption of state tort law claims would have to be specified by federal statute, not agency promulgation or interpretation. Any such preemption should not include claims based on allegations that a manufacturer violated a tort duty by acting or failing to act in response to actual knowledge of adverse health or environmental effects. And there must be vigorous government oversight of both voluntary pre- market and post-market testing and monitoring, and the public must have reasonable access to the key information provided regulators. Finally, in order to prevent drastic denials of compensation while encouraging voluntary study, all companies would be required to maintain liability insurance, and companies that engaged in pre- and post-market testing would receive insurance subsidies in one form or another.
In voluntary regimes generally, getting initial participation may be difficult due to uncertainties of costs and benefits of participation. There would be strong incentives for some manufacturers to join a voluntary testing regime only once a number of other manufacturers of similar products have joined. Because the recruitment of initial or early participants may be difficult and would be very helpful in ultimately achieving broad participation in a voluntary testing regime, special incentives for early joiners may be warranted.
Number of Pages in PDF File: 36
Keywords: Nanotechnology, Precautionary Principle, Liability, Emerging Technology, Environmental Risk, Regulation, Tort
JEL Classification: K32, K30
Date posted: December 9, 2009