Immunity Rules

Abstract

Liability rules, as defined by Calabresi and Melamed, are a false category. The concept combines two kinds of legal rules, each important in itself, but not alike in any important way. Accident law, in which the injurer pays compensation for the victim’s harm and is subject to no stronger remedy, is the leading example of one kind of liability rule. Eminent domain, in which the government acquires interests in property without the owner’s consent and pays compensation, is the other leading example. The two are analytically distinct. Compensatory liability is a particular combination of a primary legal position and a remedial rule: it is the combination in which a claim-right is enforced only with compensation. Eminent domain operates in a different analytical category. It is a power in the government to which private property owners are subject, and is an exception to the general principle that owners are immune from changes in their rights of ownership by the unilateral act of another person. Rules about duty and remedy are distinct from rules about power not only analytically but also for practical purposes. An individual who is subject only to a compensatory remedy for violating another’s property right does not have the practical equivalent of the power to expropriate that right that the government has. Nor are the two kinds of liability rule united by the function of facilitating mutually beneficial exchanges by substituting objectively determined compensation for market prices. The compensation requirement for negligence operates as a sanction and not a price, and so cannot be explained as setting a price when parties are not in a position to bargain. Neither can the compensation requirement for eminent domain be so explained, because it is not necessary to cause the government to act in the public interest. Although those two kinds of liability rule are each significant, combining them in one concept produces confusion. One such confusion is to obscure the point that as between private people, the basic rule governing private rights is not liability in the analytical sense, but immunity.