The Market Tort in Private International Law

Whincop, Michael J., Keyes, Mary | January 1, 1999

Perhaps the most troublesome of all choice of law questions arises when a plaintiff asserts a cause of action for injuries arising from a contractual exchange entered in a market situation. This description embraces some of the most important case types in modern litigation: products liability, securities litigation, industrial accidents, medical negligence, and so on. Outside of private international law cases, these have represented the battlefields of recent tort “crises” and subsequent reforms. We shall refer to these cases as “market torts” . They represent the principal subject of analysis in this work. The rules that should apply where a choice of law does not exist is a question about the optimal form of default rules. This question can be answered with reference not only to the scholarship of contract default rules, but to the second analogous literature: the economics of adjudication by rules and standards. A choice of law rule is the product of what Cass Sunstein and Edna Ullmann-Margalit describe as a second-order decision. A strategy used in order to avoid the need to confront a decision-making situation is a second-order strategy; the choice of such a strategy is a second-order decision. Thus, choice of law rules avoid the need for a judge to choose a rule on the basis of a direct comparison, according to some cost-benefit calculus and the facts of the particular case. Instead, a choice of law rule provides a means to avoid the need for such comparison, by permitting the matter to be resolved according to the approach embodied in the second-order choice of law rule. Thus, choice of law rules can be differentiated according to whether or not the second-order choice of law rule takes a simple, low-cost formulation, and whether or not that rule permits the eventual first-order adjudication (wherein the law of the cause is selected) to be simple and low-cost. We show how choice of law methods can usefully be described by this taxonomy, and how, with the benefit of the economic literature on rules and standards, we might choose between and give content to these approaches.