attorney generals

Bankruptcy Courts Are Good At Adjudicating Tort Claims

Economists tend to view tort law differently than lawyers—or state attorney generals—and this difference explains both the advent of bankruptcy trusts in adjudicating class action liability claims and the complaints by the latter group concerning this development.

Tort law covers someone who was injured because of an action or omission that harms another. Its purpose is to change the essential cost-benefit calculus for a firm so that it does all that is feasible to prevent this from happening.

A classic example of the application of tort law is the manufacture of the Ford Pinto. Engineers placed the gas tank in the very rear of the car as a cost expedient measure even though they knew it would leave the car more vulnerable to a fire or explosion in an accident. They concluded that the liability costs would be less than re-engineering the car to place the tank elsewhere.

The courts found this calculus appalling and contrary to the public interest, and Ford’s liability ended up being many times greater than if it had addressed this vulnerability to begin with.

However, these days tort liability is invariably driven less by a desire to incentivize proper decisions and more by the

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