The Disaggregated Hand Formula

Abstract

Commercial activities, like selling a car or serving hot coffee, can generate a risk of loss to which multiple individuals are exposed. Likewise, the burdens of avoiding such risks are rarely borne by a single person. When burdens and losses distribute across multiple stakeholders, when should negligence law tolerate or condemn the risky choice? A famous answer at the center of the One-L curriculum invokes the Hand formula: the failure to avoid a risk is negligent when the sum of the burdens of risk-avoidance is less than the sum of the expected losses. However, it is rarely explained why the sum of burdens and losses ought to be compared when there are other ways of comparing interests. This modest observation can serve as the starting point for reconstructing and reclaiming a fundamental concept of American tort law.

This Article argues that the Hand formula should be applied to multi-party cases by, first, disaggregating burdens and losses and comparing them on a pairwise basis, starting with the individual who bears the highest burden and the one who bears the highest risk of loss. Three reasons favor this reconstruction. First, the traditional interpretation of the Hand formula rests on a controversial ethics of aggregation. The “disaggregated” formula is more ethically defensible, informed by values like impartiality and equality, not just utility maximization or cost minimization.  Second, famous jury verdicts as well as Learned Hand’s reasoning in United States v. Carroll Towing support the alternative interpretation. Students of tort law are usually taught that jurors repudiate the Hand formula, perhaps most famously in the “Ford Pinto” (Grimshaw v. Ford Motor Co.) and “McDonald’s coffee” cases (Liebeck v. McDonald’s Restaurant). But such cases are only inconsistent with the traditional purely aggregative interpretation, while lesser-known cases where the formula was successfully applied involved disaggregated reasoning. Third, the Hand formula, on the proposed construal, can be translated into simple jury instructions as well as formalized to reveal new economic models of risk-related decision-making. In short, moral, legal, and practical reasons favor disaggregating the Hand formula, with implications for the economic theory of accidents and for high-stakes lawsuits currently in the public spotlight, such as the Abbott/Reckitt class actions over the sale of contaminated infant formula.

Keywords: Negligence, Ethics of aggregation, Economic theory of accidents, Impartiality, Mass torts, No-fault accident compensation, Ford Pinto, BPL analysis, Decision making under uncertainty, Products liability