Remedies, Product Liability, and Property Law

Remedies and Product Liability

Remedies are crucial in addressing wrongful acts, determining how damages are allocated to the wrongdoer. In tort law, remedies serve as compensation for damages, mirroring the logic in contract law. Compensation covers both the victim's loss and any gains they were unable to realize due to the tort.

A. Restitution to the Original Position

This involves restoring the plaintiff to the state they would have been in had the tortious act not occurred. It's typically preferred when:

• Materially feasible.

• Not excessively burdensome (costly) for the debtor.

B. Monetary Damage

This entails providing pecuniary compensation equivalent to the value of the plaintiff's loss, including both sustained losses and lost profits, contingent on causation.

Types of monetary damages:

• Compensatory damages: Equal to the harm suffered by the victim, helping them recover what was lost. This aligns with the principle of tort liability based on compensation and distributive justice. The injured party must substantiate the damage suffered (e.g., Art. 1223 Italian Civil Code).

• Punitive damages: Exceeding the victim's loss, designed to punish the tortfeasor and deter others from similar conduct. They aim to compensate for non-compensable losses and cover attorneys’ fees.

Punitive Damages

• Common Law: Punitive damages are generally recognized, particularly in the U.S., for intentional torts or violations of significant interests.

• Civil Law: Traditionally focused on compensation, but punitive damages are gaining acceptance in Continental Europe, especially when tort law serves a deterrent function.

BMW of North America Inc. v. Gore, 517 U.S. 559 (1996)

Gore discovered his new BMW had been repainted before purchase, a routine practice by BMW for cars damaged below 3% of their cost. An Alabama jury awarded Gore $4,000 in compensatory damages and $4 million in punitive damages (later reduced to $2 million).

The Supreme Court addressed whether high punitive damages violate the Due Process clause, requiring damages to be reasonably necessary for punishment and deterrence.

Factors considered:

• Reprehensibility of the defendant’s conduct.

• Ratio to compensatory damages (actual or potential harm).

• Comparison to civil or criminal penalties for similar misconduct.

Non-Pecuniary Losses

Compensation is warranted for personal injury or violations of human dignity, liberty, or personality rights. It can also extend to those closely related to victims of fatal or severe injuries.

• Non-pecuniary damage does not reduce the victim’s patrimony.

• European tort systems generally compensate for this type of loss, with variations in scope.

Assessment considerations:

• No rigid tariff exists.

• Comparable treatment of similar cases is essential.

• Gravity, duration, and consequences are central in determining the sum.

• Some systems consider the tortfeasor’s conduct.

• Assessment methods vary, with judges using schedules to quantify impairments.

UK Supreme Court, Cox v. Ergo Versicherung AG [2014]

Major Cox died in Germany after being hit by a car while cycling. His widow, Katerina, later returned to England, entered a new relationship, and had two children. The question was what kind of damages Katerina could recover, considering both German and English laws.

1. German Law, § 844(2) BGB:

   • Pecuniary loss: Covers the loss of maintenance the deceased would have provided.

   • Non-pecuniary loss: Not granted for the death of a relative unless pain and suffering is medically proven.

2. English Law, Fatal Accident Act 1976:

   • Pecuniary loss: Disregards the widow's remarriage prospects.

   • Non-pecuniary loss: Quantified at £12,980 for each death (solatium for injured feelings).

Key differences:

1. German law considers subsequent relationships affecting maintenance rights, while English law does not.

2. German law doesn't provide solatium unless exceptional psychological distress is proven.

German law was deemed applicable.

Non-Pecuniary Damage Example

In Milan, a student's father missed his son's graduation due to a 12-hour Ryanair flight delay. The court granted damages:

• €250 for economic loss.

• €73 for flight reimbursement.

• €500 for non-pecuniary loss, recognizing the unique importance of the event.

Special Case: Product Liability

Arising in the late 20th century with mass industrial production, traditional tort law principles have been inadequate for consumers damaged by defective products.

• EU law emphasizes consumer protection, intervening in both contract and tort law.

• Proving manufacturer wrongfulness has been challenging for consumers.

Example: Mr. White receives a defective microwave oven, causing injury and property damage upon explosion.

Issues:

• No direct contractual relationship with the producer.

• Difficulty proving fault and causation.

To address this, EU law has established stricter liability for producers, holding them liable for damages caused by defective products.

Directive 85/374/EEC

The consumer needs only to demonstrate a defect and resulting damage, shifting the burden to the producer to disprove liability.

Strict Liability: A producer is liable even without negligence when:

• There is a defect.

• The consumer was exposed to the defect.

• The defect caused damage.

The producer can avoid responsibility by proving specific circumstances.

European Tort Law & Product Liability: EU Intervention

• Rationale: To harmonize consumer protection within the EU market.

• Directive 85/374/EEC of 25 July 1985 addresses defective product liability.

• Strict liability regime: liability without fault.

A product is defective when it doesn't meet expected safety standards, considering factors like presentation, reasonable use, and time of circulation.

Categories of defects:

• Defective manufacturing.

• Defective design.

• Failure to warn.

The producer is not liable if they prove:

• They didn't put the product into circulation.

• The defect appeared after circulation.

• The product wasn't manufactured for sale or profit.

• The defect resulted from compliance with mandatory regulations.

Member States may allow derogations regarding development risks.

Product Development Risk: Mineral Bottle of Water Explosion

A girl was injured when a mineral water bottle exploded due to a chip, damaged during refilling. The manufacturer claimed it was an unavoidable defect and sought exemption under the Directive.

The question was whether the ‘product development clause’ applies to ‘manufacturing defects’ or only to ‘design defects’.

Development risks only include dangers from product design, not those unavoidable during manufacturing. The EC-Directive on Product Liability intended Art. 7(e) to cover design defects only.

The Directive applies to damage:

• Caused by death or personal injuries.

• Caused to property for private use or consumption.

The consumer's burden of proof is limited to:

• Actual damage.

• Defect in the product.

• Causal relationship between damage and defect.

Property Law

Property law concerns the transfer of subjective rights and forms a cornerstone of Western liberal legal orders. It is deeply intertwined with liberalism and capitalism, especially regarding private property. Civil codes often have private property at their core.

Private property underpins the capitalistic economy because sales, the most common subject of contracts, involve the transfer of property. Ownership grants full power over a good, enforceable against everyone. It incentivizes investment, leading to the maximum valorization of assets and innovation, profit maximization, and market economy.

Historically, feudalism scattered land entitlements, making sales difficult. Abolition of feudalism post-French Revolution gave way to the concept of absolute dominium over land in the Code Napoleon, which facilitated the capitalist process.

Hardin View (Criticized)

Hardin's “tragedy of the commons” argued private property is essential to preserve resources. However, critics suggest private property can also incentivize over-exploitation in the short run, and communal use can be managed sustainably.

Property Interests

Property law deals with absolute rights, valid erga omnes. Basic features include:

• Exclusive rights assigned to the right-holder.

• Ability to exclude interference.

• Specific recovery for goods.

• Voluntary transactions for entitlement removal.

Three main components of property rights:

1. Possibility to enjoy the good (use it, or not use it).

2. Right to dispose of the title and exchange prerogatives.

3. Excluding everyone else from using the resource.

Civil codes impose limitations, balanced by constitutional guarantees, especially for market economies. Parliament typically sets these limitations concerning public interest, like land law. Property is considered an absolute right, enforceable against everyone.

Objects of Property

Legal subjectivity distinguishes between subjects and objects; subjects cannot be owned. Property Law can be seen as the Law of Things, with classifications based on:

• Movable vs. Immovable Goods.

  • Movable Good: Property that can be moved without alteration.

  • Immovable Good: Property that cannot be moved without destruction or alteration.

• Tangible vs. Intangible Goods.

  • Tangible Good: Corporeal objects/ assets.

  • Intangible Good: Incorporeal objects/ideas, regulated by intellectual property law.

Movable/Immovable Things

Civil Law: A unitary field applies to all types of property, based on the absolute right of ownership, with rules varying by category.

Common Law: Distinguishes between land law and personal property. Ownership is the primary property right, granting full-fledged power unless otherwise directed by law.

Full-Fledged Power on Goods

Provided the law does not direct otherwise, an owner is free to do what he pleases. The law does not tell an owner what he can do with the “thing” but provides expressly for the acts that they may not or must do.

Exclusive Power on Goods

The owner of the “thing” has an absolute right (ex: a claim against any other individual to refrain from interfering with the enjoyment deriving from the “thing” granted to him/her)

Examples from Civil Codes:

• French Code Civil, Art. 544: Ownership is the right to enjoy and dispose of things most absolutely, provided statutes and regulations are respected.

• BGB, Section 903: The owner may deal with the thing at their discretion and exclude others, unless statutes or third-party rights conflict.

• Italian civil code art. 832 c.c: The owner has the right to enjoy and dispose of things fully and exclusively, within the limits of and observing the obligations established by law.

DCFR - VIII. – 1:202: “Ownership” is the most comprehensive right a person, the “owner” , can have over property, including the exclusive right, so far as consistent with applicable laws or rights granted by the owner, to use, enjoy, modify, destroy, dispose of, and recover the property.

Civil law jurisdictions include the right to enjoy the good freely, dispose of the title (related to possession), and exclude others.

Common Law (English Common Law)

Feudal traditions influenced its development more gradually. The Crown technically owns all lands. Real estates are property rights/interests over immovable goods. The English system modernized in 1925, standardizing property rights, with only two feudal rights remaining:

• Fee simple: Exclusive possession for an unlimited time (like civil law ownership).

• Terms of Years: Exclusive possession for a limited time.

Personal Properties

Ownership is called a title, with similar rights to civil law owners. Personal property law applies to movable goods and choses in action.
The primary right is called “title” → it is the right of exclusive possession to a chattel. It is the most extensive entitlement to a chattel a person can have.

Distinction: Material and Immaterial Goods

While property often relates to tangible goods, it extends to intangible rights like copyrights and recipes. Fencing ideas is more challenging, resulting in legal protection mechanisms. Civil codes traditionally intended property for tangible goods, but separate branches like intellectual property law (IPL) adapt property characteristics to intangible goods.

• Copyright: Exclusive right to use and distribute original art.

• Patent: Exclusive right to use and distribute a novel invention.

• Trademark law: Exclusive rights to signs identifying products.

Rationales for Intellectual Property:

• Incentivizes investment and development.

• Concerns exist over limiting knowledge distribution.

• Regulations aim to balance public interest with private incentives.

Myriad Genetics Case

Myriad patented BRCA genes related to cancer risk but was challenged in 2010. The Supreme Court invalidated Myriad’s claim to isolated genes, stating that merely isolating genes found in nature doesn’t make them patentable.

Patentability Requirements: Novelty, usefulness and non-obviousness. Genes are “products of nature” that may not be patented, since they are not artificial inventions.

Property Protection and Property Interests Remedies

Exclusivity of ownership is created by the legal remedies through which the owner may be protected. There are many remedies, and they are complex, but we will see the main 2:

• Recovery action (revindicatio).

• Injunctive action (actio negatoria).

Revindicatio

This is the right of the owner to assert their right and to claim the return of the object from any third party.

Connected to the idea that the owner has the right of possession of the good.
The owner has the right to use the good, in order to have the good with them.

Unless an agreement occurs, the owner can sue the person who has material control over a good through revindicatio.
A judge will assess ownership and order to restitute the good.

Actio Negatoria

This is the right of the owner to prevent or to remove any interference with his proprietary interests.

Not only implies possession, but someone violates it while I have it.

Difference: recovery is usable if someone tries to live there; actio negatoria occurs if someone creates a lot of smoke around there and you cannot be there.

REAL CASES - Revindicatio

Cour de cassation, 22 April 1823 - Hellot V. Leclecr

Hellot and Leclerc owned two adjacent buildings separated by a wall

In 1819 Leclerc demolished the wall and erected a new building

Hellot sued Lecrlerc, indicating that the new building encroached on his property by 14 inches, destabilising it

Leclere did not challenge the allegations, but replied that:

• Hellot's building had fallen into ruin and could not be repaired because of legal restrictions;

• Hellot has suffered only minimal losses while the obligation to remove his building would cause him considerable damage

Hellot is entitled to request the removal of the encroaching building and the return of his property irrespective of the state of properties and the actual harm suffered.

Cour de cassation,20 March 2002 - Houssin v. Legrasse

Judges cannot force contracts on people. No person may be deprived of his property.

Houssin is entitled to request the removal of the encroaching fence and the return of his property. The degree of encroachment is of no relevance.

REAL CASES -Injunctive action

German Supreme Court, 1.12.1995

Claimants purchased a parcel of land situated next to the factory premises of the defendant, in order to build an underground car-park there.

Construction company detected considerable pollution by chemical substances. The disposal of the excavation waste led to high costs.The claimant requested the payment of additional disposal costs.In the meantime the defendant company had gone bankrupt and was run by a liquidator.

The operator of a facility that caused soil contamination on a neighbouring piece of land remains responsible even after the shutdown, and can be ordered to remove the contaminants interfering with the owner's peaceful enjoyment of his property

German Supreme Court

The claimant owned a parcel of land with a house. The defendant, his neighbor, let his property to a couple of spouses, allowing them to run it as a brothel.

The claimant believed that his underage daughter was morally endangered and that the value of his property was debased. The claimant demanded the defendant to terminate the commercial sex-working in his house.

The claim was denied: injunctive action does not cover property interference of a genuine moral nature.

We need to assess that the interference overcomes a certain threshold which must be intolerable, and it must not have a moral base. It is based on the risk, financial markets are the same.

PROPERTY INTERESTS

Limited property rights

Primary Property Rights: Includes the full bundle of powers that the holder may have on goods (ownership of intellectual property) .

Secondary Property Rights: Encompasses only some of the powers that the owner may have on goods (secondary right of use and secondary security rights) .

Fragmentation of property: there are different types of property rights:

• Protection erga omnes: absolute right; they can be enforced towards every other person in the world.

• Run with the asset: if ownership is fragmented, limited property rights will bind subsequent owners of the (remaining rights in) the asset.

• Numerus clausus: (numbered by the law); limited property rights are provided only by the law: individuals cannot create new kinds of property rights.

Limited property rights are property rights with erga omnes effect derived from a right of ownership on a movable or immovable thing.

A limited property right is basically the idea that certain prerogatives, that normally are w/the owner, can be distributed to someone else. It is the right over a good that runs with the assets.

Usufruct: real right to use and enjoy the property with the agreement that when it will cease, it would go back to the owner. - FRAGMENTATION OF PROPERTY

Types of Limited Rights

1. Limited property rights of enjoyment. They grant to their holders specific, though limited (compared to ownership) rights to make use of the object.

   • Servitudes (easements in common law).

   • Usufruct.

   • Use-habitation.

2. Limited property rights of security. They were created to secure the payment of a claim. They are usually created by the debtor/owner on an object in favor of his creditors:

   • Hypothec/ mortgage.

   • Pledge

Servitudes

A predial servitude consists of a burden imposed on a land (servient) for the utility of other land (dominant) belonging to a different owner. Servitudes have: 1. Dominant land: the piece of land which benefits from the establishment of a servitude. 2. Servient land: the land subject to the servitudes on which the “burden” is imposed. Servitudes is a right in rem. They insist on land/ they do not bind the owner personally.

Security Rights and Possession

Security property rights are created to secure the payment of a claim. We have already seen them -limited property rights: enforce the right against anyone. Those are a second type of limited property rights. In this way a credit is secured. The mechanism of functioning is pretty much the same, A mortgage is about immovable goods, a pledge is on movable goods.
Par condicio creditorum → each creditor have the same rights.

Security property rights run with the asset → if I sell the house it would have a mortgage on it; attached to the house.

Possession

Possession is not itself a right, it is a factual situation of someone having a control over a good and considering themselves as the owner.

Consequences of Possession

1. Protection- right to be protected as a possessor, just based on the fact that they possess the fact - even against the owner.

2. Possibility to acquire ownership through possession.

What is the type of protection that the possessor has: it is called restoration action.
Possibility to acquire ownership: for movable good: Any act in which you are transferring the rights assume that you are a rightholder, in principle. In a contract of sale we transfer the right of property.
For immovable good, acquisitive prescription.

Acquisitive Prescription:

If a person in a continued and ininterruped way possesses a good for a predetermined period of time then you acquire ownership of the good.
Law is not about legality or illegality but about legal consequences.

European Courts of Human Rights

Rights need to be balanced when there is a conflict. The court said that there are other values such as efficiency and certainty → needs to be balanced with the right to property. You really need to show that you do not care (20 years) → acquisitive prescription is a good balance.