The Neglected Defense of Undue Hardship (and the Doctrinal Train Wreck in Boomer v. Atlantic Cement)

Abstract

Economically minded legal scholars have devoted much attention to the comparative costs of property rules and liability rules, but little attention to the legal rule that most squarely addresses that choice — the defense of undue hardship. In general, a court will refuse an injunction, and leave plaintiff to his damage remedy, if defendant’s cost of complying with the injunction would be greatly disproportionate to the benefits to plaintiff.

This defense may have been rendered obscure to law-and-economics scholars by the highly visible opinion of the New York Court of Appeals in Boomer v. Atlantic Cement, which seemed to say that the cost of compliance had been irrelevant in New York prior to the court’s decision in Boomer itself. Boomer was in fact no innovation, and the defense of undue hardship had long been established in New York as elsewhere.

The undue-hardship defense implements the core economic concern with cost, but it differs from traditional economic analysis in important ways, and those differences are analyzed here. The defense could have provided a ready-made solution to the problem of “patent trolls,” had the Supreme Court attended to it in eBay v. MercExchange. And subsequent developments in Boomer, on remand from the Court of Appeals, illustrate that supracompensatory remedies, such as disgorgement of unjust enrichment and even punitive damages, can function as liability rules rather than property rules.

Keywords: undue hardship, balancing the equities, injunctions, nuisance, encroachment, patent trolls, Boomer, eBay