Category Archives: torts

The Hunger Games and Other Dangerous Sports

Posted on March 16, 2012 by | 43 comments

[amazon_link id=”0545265355″ target=”_blank” container=”” container_class=”” ]The Hunger Games[/amazon_link] is a trilogy of books, the first of which is also called [amazon_link id=”0545425115″ target=”_blank” container=”” container_class=”” ]The Hunger Games[/amazon_link] and which has been adapted into a film that debuts next week.  It looks like it’s going to be both a good movie and feature more accurate archery than The Avengers, but I digress. The books are set in a future dystopian society in which teenagers, selected more or less at random, are forced to compete to the death in the titular Hunger Games.

Since the book takes place in a fundamentally different world than the real one, we can’t really examine the Games on their own terms. We can say they would certainly be illegal in the real world (no surprises there), but it may be interesting to examine why, exactly. After that we’ll ponder just how dangerous a real-world version of the Games could be without obviously running afoul of the law.

Some very minor spoilers follow (nothing you wouldn’t know from the trailer, I think).

I. The Set-Up

Most entrants to the Hunger Games are selected randomly, but it is possible to volunteer.  That’s how the protagonist enters the Games, for example.  The Games themselves take place in a large uninhabited area in which the competitors (called tributes) are given weapons and supplies and expected to kill each other.  The people running the Games (the Gamemakers) have various carrot and stick mechanisms they use to goad the tributes into competing, and the more or less inevitable result is that a single victor emerges with everyone else dead.  If a group of tributes refused to fight then the Gamemakers would likely kill all of them or all but one.

II. So Why Exactly is This Illegal?

Intuitively this seems like it should be illegal, and it would be in the real world.  For starters, the Gamemakers’ actions are pretty clearly illegal: the involuntary competitors are essentially kidnapped and falsely imprisoned, then threatened with death if they don’t compete.

The voluntary competitors are pretty much just as bad, as they’re agreeing with the Gamemakers to try to kill other people, many of whom are there involuntarily.  That’s conspiracy and either attempted or actual premeditated murder.

(Note: By “voluntary competitors” I mean both tributes like the protagonist who make a direct choice to compete as well as those tributes who enter their names into the tribute selection lottery multiple times in order to earn extra food for their families.  Arguably both are voluntarily entering the Games, whereas the tributes whose names are entered the minimum required number of times could be said to be involuntary competitors.)

The involuntary competitors are only slightly better off.  They aren’t guilty of conspiracy because they didn’t agree to compete, but they may still be guilty of attempted murder or murder because they can’t claim the defenses of duress or necessity, since neither is a defense to murder in most jurisdictions.  They could avoid liability by only fighting in self-defense, however, but that would usually mean waiting until other tributes attacked them first, which isn’t typically a winning strategy.

Now wait a minute, you might say, what about consent?  Doesn’t it matter that the voluntary competitors consented to compete in the games?  The answer is no, not really, even if the minor competitors’ parents also consented.  While a person can consent to an assault or battery (think of boxing, for example), one cannot consent to one’s own serious injury or death. See, e.g., State v. Mackrill, 345 Mont. 469, 476 (2008) (“it is against public policy to permit a person purposely or knowingly to cause serious bodily injury to another, even though that conduct and the resulting harm were consented to”).

Well, what about assumption of the risk?  Aren’t the voluntary competitors assuming the risk that they will get hurt?  The problem here is that assumption of the risk does not extend to intentional wrongdoing, only negligence and recklessness.  Restatement (Second) of Torts § 496A (“A plaintiff who voluntarily assumes a risk of harm arising from the negligent or reckless conduct of the defendant cannot recover for such harm.”) (emphasis added).

Similarly, the exception made for the harm inherent in sporting events only applies to lawful sports, whereas the Games are predicated on kidnapping, conspiracy, and threats.  See, e.g, Colo Rev Stats, § 18-1-505(2) (“When conduct is charged to constitute an offense because it causes or threatens bodily injury, consent to that conduct or to the infliction of that injury is a defense only if … the conduct and the injury are reasonably foreseeable hazards of joint participation in a lawful athletic contest or competitive sport.”).

That pretty much sums up why the Games would be both criminal and tortious, but what are the real-world limits for something like this?

III. So How Close Can We Get?

Clearly we’ll have to begin with consent, so we can toss out all of the involuntary competitors.  Ideally we’d get informed written consent from both the competitors and their parents, together with explicit waivers of liability for the Gamemakers and other competitors.  Of course, to be meaningful the consent must be ongoing, which means the competitors must be free to leave the game at any time.

An important part of the informed consent process is to ensure that the competitors and their parents are aware of the reasonably foreseeable hazards of the Games.  This helps bring the Games within the exception for lawful sports: “When conduct is charged to constitute an offense because it causes or threatens bodily injury, consent to such conduct or to the infliction of such injury is a defense if: … (b) the conduct and the injury are reasonably foreseeable hazards of joint participation in a lawful athletic contest or competitive sport ….” Model Penal Code § 2.11(2) (emphasis added).

The Games themselves would have to be watered down from a fight to the death to something more like Mixed Martial Arts.  While certainly a vigorous athletic contest, serious injuries are not inherent in MMA, and so consent and assumption of the risk will go a lot farther in eliminating both criminal and tort liability.

That doesn’t mean that everyone is necessarily off the hook.  Competitors and Gamemakers could still be liable for injuries that result from, for example, breaking the rules of the game that are concerned with safety.  See, e.g., Nabozny v. Barnhill, 31 Ill. App. 3d 212 (1st Dist. 1975).  With children involved the Games would likely need to either take advantage of sovereign immunity or have a hefty insurance contract.

IV. Conclusion

So after all that, what are we left with?  Basically a kind of free-form outdoor MMA, which the competitors can quit at any time.  Not quite as exciting as a forced fight to the death in the wilderness, we’ll admit.  What can we say?  Lawyers spoil all the fun.

43 Comments

Posted in criminal law, movies, torts

Xavier’s School for Gifted Plaintiffs

Posted on March 9, 2012 by | 12 comments

Xavier’s School for Gifted Youngsters (aka the Xavier Institute) has existed in several most versions of the X-Men as a place of safety for young mutants, a training ground for future X-Men, and a private school.  These purposes are somewhat in tension, however, and students are sometimes injured either in the course of instruction or because of attacks on the school.  That leads to today’s question from Frank, who asks: “Is Professor X responsible for minor students in a parental capacity? What happens when one of them is injured or killed while at school?”

There are a few different aspects to this question.  First there’s the question of the school’s institutional liability, and second there’s the question of Professor X’ (and the teachers’) personal liability.

I. Institutional Liability

Xavier’s School is a private school in New York.  It’s usually written as a charitable school.  In some states this would entitle it to a certain degree of immunity, but New York (unlike, e.g., New Jersey) rejected the doctrine of charitable immunity several decades ago.  Bing v. Thunig, 2 N.Y.2d 656 (1957). So if the school can be sued, what could it be sued for?

The most likely cause of action is negligence: negligently allowing students to take part in dangerous activities, negligently failing to prevent superpowered students from harming one another, negligently failing to protect the students from outside threats, etc.

Normally one isn’t liable for failing to protect someone else from harm, but certain special relationships (e.g. parent/child) can create a duty to rescue, protect, or supervise.  Schools have such a relationship with students:

Schools are under a duty to adequately supervise the students in their charge and they will be held liable for foreseeable injuries proximately related to the absence of adequate supervision.  Schools are not insurers of safety, however, for they cannot reasonably be expected to continuously supervise and control all movements and activities of students; therefore, schools are not to be held liable for every thoughtless or careless act by which one pupil may injure another.  A teacher owes it to his or her charges to exercise such care of them as a parent of ordinary prudence would observe in comparable circumstances.  The duty owed derives from the simple fact that a school, in assuming physical custody and control over its students, effectively takes the place of parents and guardians.

Mirand v. City of New York, 84 N.Y.2d 44, 49 (1994).  So while a school may not be liable for every injury caused by a student, it will be liable if the injury was the result of inadequate supervision.  What’s more, since Xavier’s is a residential school, this duty is basically continuous, because “Ordinarily, the duty of care imposed on a school district, and in this case a private school, terminates upon a student’s release from their physical custody.”  David XX v. Saint Catherine’s Center for Children, 699 N.Y.S.2d 827, 830 (App. Div. 1999).

So the school’s liability will ultimately come down to whether the teachers and staff acted reasonably and whether the injury was foreseeable.  If the teachers follow all the right protocols but a superpowered delinquent blows up the school, well, that’s tough.  Similarly, a random attack by evil mutants may be unforeseeable, so it doesn’t really matter whether the school took reasonable precautions to protect the students from such an attack or not.

II. Personal Liability

“A school district, like any other employer, may be held vicariously liable under the doctrine of respondeat superior for a tort committed by an employee in the course of the performance of the employee’s duties.”  Mary KK v. Jack LL, 611 N.Y.S.2d 347, 348 (App. Div. 1994).  Of course, the employee is also still liable (and the employer can turn around and seek compensation from the employee for any damages the employer has to pay out), but most plaintiffs prefer to sue the party with deeper pockets.

But as the quote suggests, the employer is only liable under certain circumstances.  As the Mary KK court said, “What constitutes the scope of employment is generally a jury question, but” there are some guidelines.  “An act falls within the scope of an employee’s duties when the employee is doing his master’s work, no matter how irregularly, or with what disregard of instructions. On the other hand, there is no respondeat superior liability for torts committed for personal motives unrelated to the furtherance of the employer’s business.”  Murray v. Watervliet City School Dist., 515 N.Y.S.2d 150, 152 (App. Div. 1987).  More specifically, courts and juries look at factors such as:

the connection between the time, place and occasion for the act; the history of the relationship between employer and employee as spelled out in actual practice; whether the act is one commonly done by such an employee; the extent of departure from normal methods of performance; and whether the specific act was one that the employer could reasonably have anticipated

Riviello v. Waldron, 47 N.Y.2d 297, 303 (1979).  Sometimes the school might be vicariously liable, but it won’t be liable for the actions of “rogue” (no pun intended) employees.

III. Conclusion

We certainly hope Xavier’s has a serious insurance policy (or three).  Not only could it be sued, but it’s a magnet for serious injuries.  Waivers can help for voluntary activities, but not there are limits to what can be waived.  Of course, if the school goes beyond negligence and into the realm of gross negligence or intentional misconduct then its insurer may not cover it at all.

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Posted in insurance, mailbag, torts, X-Men

Arkham Asylum and Liability for Private Prisons

Posted on March 5, 2012 by | 15 comments

In February 20th’s post regarding Knightfall, a number of commenters wondered if the fact that Arkham Asylum is presented as a private entity in some stories might affect its liability for escaping prisoners. This is actually a really good question, and one that’s becoming increasingly important as more and more states experiment with privatized prison systems. Arizona is something of a leader here, and its practices have come under pretty intense criticism on a number of fronts. But here, we’re going to look solely at whether private prisons can be sued for damages caused by escaped prisoners.

As discussed in the first post, for our purposes, it really doesn’t matter whether we’re talking about a jail, prison, or mental institution, provided the inmates are there as the result of a court order. That order could be a sentence for a crime or simply protective custody. The fact is that they’re there at the requirement of the state and not allowed to leave, so escape would be a crime. The question is whether the operator of a private prison would be more or less liable for actions an inmate takes after escaping than the state would be.
Continue reading →

15 Comments

Posted in Batman, constitutional law, torts

Person of Interest: Witness

Posted on March 2, 2012 by | 14 comments

We’ll be back with more comic book-inspired posts next week, but we’ve been clearing out the mailbag lately and we’ve had quite a few questions about television shows.  Today’s question comes from Brian, who asks about an episode of Person of Interest.  Minor spoilers ahead.

In the episode, protagonist John Reese is trying to protect a witness to a mob killing.  Unfortunately, the witness is shot in the shoulder.  With the mob still on their trail, Reese makes an attempt at first aid using topically applied cocaine and glue, without the witness’s prior consent.  Brian asks:

If/when the victim presents himself at the hospital and informs doctors of how it was treated, would the victim be in violation of any laws due to the presence of cocaine in his bloodstream and/or how would he be (legally) expected to handle the consequences of being given a highly addictive and illegal street drug as an analgesic?

There are several aspects to this question.  First, did Reese violate any laws?  Second, did the witness?  And third, how does the physician/patient privilege come into play?

First, a brief factual background: cocaine has legitimate medical uses, including as  a vasoconstrictor to control bleeding (that’s why it’s a Schedule II drug instead of Schedule I in the US).  Its use in that role is mostly limited to areas like the nose rather than large-scale trauma like a gunshot, but there’s at least some theoretical efficacy there.  Similarly, certain cyanoacrylate glues (e.g. Dermabond) are FDA approved for use in closing wounds.  The medically approved kind are not all that different from over-the-counter cyanoacrylate glues, so again there’s some vaguely reasonable basis for the treatment.

I. Reese’s Liability

The most obvious problem is that Reese purchased and possessed an illegal drug.  It’s hard to tell exactly how much he bought, but it was probably about a gram, which would make it fourth degree criminal possession of a controlled substance under N.Y. Penal Law § 220.09, a Class C felony, plus liability as a buyer.  Could this be excused under a necessity theory?  And even if that could be excused, what is his potential liability if his first aid actually made things worse?

A. Necessity

In New York, the defense of necessity is called “justification,” and is described by N.Y. Penal Law § 35.05:

… conduct which would otherwise constitute an offense is justifiable and not criminal when:

…

Such conduct is necessary as an emergency measure to avoid an imminent public or private injury which is about to occur by reason of a situation occasioned or developed through no fault of the actor, and which is of such gravity that, according to ordinary standards of intelligence and morality, the desirability and urgency of avoiding such injury clearly outweigh the desirability of avoiding the injury sought to be prevented by the statute defining the offense in issue. The necessity and justifiability of such conduct may not rest upon considerations pertaining only to the morality and advisability of the statute, either in its general application or with respect to its application to a particular class of cases arising thereunder.

Basically New York follows a “choice of evils” theory: “the desirability and urgency of avoiding such injury [must] clearly outweigh the desirability of avoiding the injury sought to be prevented by the statute defining the offense in issue.”  Importantly, the choice is judged by an objective standard: the question is whether a reasonable person would agree that Reese’s conduct was necessary under the circumstances?  See People v. Craig, 78 N.Y.2d 616 (1991).

The word “necessary” must also be emphasized.  The statute “rules out conduct that is tentative or only advisable or preferable or conduct for which there is a reasonable, legal alternative course of action.”  Craig, 78 N.Y.2d at 623.

So, was there an imminent private injury?  Yes, the witness had been shot, was severely wounded, and there was no help on the way.  Was it Reese’s fault?  No, he was trying to protect the witness, who was shot by the mob.  Was Reese’s action necessary under the circumstances?  Quite possibly, but that issue would probably ultimately come down to expert testimony.  If a reasonable person would have thought that the witness was likely to die without the ad hoc medical treatment (and ordinary first aid would have been insufficient), then it was probably justified.

B. Good Samaritan Laws

So far, so good.  Reese may be off the hook for buying the cocaine.  But what if his unusual first aid actually made things worse?  Could the witness sue?

New York, like just about every state, has a “Good Samaritan law” that limits liability for people who render aid to others.  New York’s law is particularly strong, since it gives complete immunity to qualifying people who give aid:

… any person who voluntarily and without expectation of monetary compensation renders first aid or emergency treatment at the scene of an accident or other emergency outside a hospital, doctor’s office or any other place having proper and necessary medical equipment, to a person who is unconscious, ill, or injured, shall not be liable for damages for injuries alleged to have been sustained by such person or for damages for the death of such person alleged to have occurred by reason of an act or omission in the rendering of such emergency treatment unless it is established that such injuries were or such death was caused by gross negligence on the part of such person.

N.Y. Public Health Law § 3000-a.  So as long as Reese’s cocaine & Superglue first aid didn’t amount to gross negligence, he’s in the clear.  Of course, it’s easy to argue that cocaine is so often adulterated with toxic substances that it would be gross negligence to even try to use it in that situation.  It would all come back to what a reasonable person would think and whether Reese, knowing of an unreasonable risk, took it anyway.

So that’s Reese’s liability.  Now let’s turn to the witness.

II. Possession

If Reese’s use of the drug was justified, then the witness’s possession is also necessarily justified, but if Reese’s use wasn’t justified, then could the witness be in trouble?

In New York (as in most jurisdictions), possession requires knowledge of the possession of the controlled substance.  In this case, the witness was conscious as the cocaine was administered, so he certainly had knowledge.  And while he wasn’t asked for permission in advance, he seemed to consent during the procedure (“there’s a first time for everything”), so he can’t claim that he tried to divest himself of the drugs.

On the other hand, New York does not seem to recognize an “internal possession” theory of possession (e.g. using an elevated blood alcohol level as the sole evidence in proving that a minor had been in possession of alcohol).  I could not find a case specifically rejecting this theory, but the NIH agrees with this assessment.

So merely having cocaine in his bloodstream may not be enough to prove that the witness possessed cocaine.  Of course, the prosecution could impose immunity on Reese and compel him to testify, but that seems unlikely.

III. The Physician/Patient Privilege

New York, like many jurisdictions, privileges certain communication between a physician and a patient from disclosure.  N.Y. CPLR § 4504:

Unless the patient waives the privilege, a person authorized to practice medicine, registered professional nursing, licensed practical nursing, dentistry, podiatry or chiropractic shall not be allowed to disclose any information which he acquired in attending a patient in a professional capacity, and which was necessary to enable him to act in that capacity.

Knowing that the witness had potentially adulterated cocaine in his system would probably be necessary to enable a physician to attend to the witness in a professional capacity.  So given that, it’s difficult to see how the police would ever learn about what happened, assuming neither Reese nor the witness talked.

IV. Conclusion

We don’t typically follow Person of Interest, but this episode had a lot of interesting legal issues, even if some of them turned out to be moot points (if you’ve seen the episode or read the plot synopsis you’ll know what I mean).

14 Comments

Posted in criminal law, evidence, mailbag, television, torts

Knightfall

Posted on February 20, 2012 by | 25 comments

Batman: Knightfall is a major Batman story arc from the early 1990s in which the Caped Crusader faces off against Bane, the villain who will reportedly be featured in the upcoming Dark Knight Rises. The series is available in a collection of recently reprinted trades: Knightfall, Knightquest, and KnightsEnd. The story opens in Batman # 491, when Bane and his accomplices break open Arkham Asylum. The inmates go on to cause general havoc for the next dozen-odd issues. In this post, we’re going to look at just how much of that Bane is going to be liable for. Continue reading →

25 Comments

Posted in criminal law, torts

Preacher: The Trials of You-Know-Who

Posted on February 16, 2012 by | 2 comments

This will be our third post on Garth Ennis’s Preacher (one, two), the irreverent, humorous, disturbing comic from the 1990s. This one’s about a character Vertigo had to call “You-Know-Who” because DC apparently wouldn’t allow the word “arse” to appear on a cover. The character is somewhat of a tragi-comic figure. He grew up in an abusive household and attempted suicide shortly after Kurt Cobain killed himself, only to end up with severe facial deformities rather than dead. But he winds up in some rather interesting legal situations as the series goes on, and we’re going to take a look at those this time around. Continue reading →

2 Comments

Posted in torts

Chronicle

Posted on February 8, 2012 by | 19 comments

The movie Chronicle came out last week, and it’s pretty good (the Blu-ray version comes out on May 15, 2012).  The basic plot is that three teenage boys develop powerful telekinetic abilities, resulting in, well, as the AV Club put it, “This is why teenagers cannot have nice powers.”  Obviously a lot of what goes on in the film is plainly illegal, especially toward the end, but there are some more subtle and interesting legal issues to discuss.  Spoilers ahead!

Continue reading →

19 Comments

Posted in movies, torts

Getting Rich with Superpowers, Part 2: Gambling

Posted on February 3, 2012 by | 31 comments

This is the second post in our series on how common superpowers might be used to make money in the short term.  Our first post was about insider trading, and today we discuss the arguably related field of gambling.  First a little legal background, then we’ll get to the powers.

I. The Law

Throughout this post we refer only to legal gambling; obviously illegal gambling is against the law, and moreover the courts will generally not enforce an illegal gambling contract.  See, e.g., McConnell v. Com. Pictures Corp., 7 N.Y.2d 465 (1960) (“It is the settled law of this State (and probably of every other State) that a party to an illegal contract cannot ask a court of law to help him carry out his illegal object, nor can such a person plead or prove in any court a case in which he, as a basis for his claim, must show forth his illegal purpose.”)

There are several ways in which cheating can run afoul of the law.  First, winnings “earned” via cheating have been held in some jurisdictions to be unenforceable (i.e. the losing party can recover their loss from the winner). See, e.g., Berman v. Riverside Casino Corp., 323 F.2d 977 (9th Cir. 1963).  Second, states that have legalized gambling have also enacted laws criminalizing cheating.  See, e.g., Nev. Rev. Stat. §§ 465.070, 465.083.  We’ll mostly focus on Nevada law, since it has a well-developed body of law regarding gambling and cheating (no surprise there!).

II. The Powers

There are several powers that could be used to facilitate gambling, including telepathy, empathy, X-ray vision, superhuman speed or dexterity, precognition, eidetic memory, time-travel, and outright probability manipulation.  The question is, which of these, if any, could be legal to use?   We’ll start with what may be the only power that is actually legal to use.

A. Eidetic Memory

Eidetic memory would be of great use to a card counter.  Card counting has been held to be skillful play, not cheating, and a casino that allows a card counter to play must pay the player his or her winnings absent some other fraud.  Chen v. Nevada State Gaming Control Board, 116 Nev. 282 (2000) (en banc).  On the other hand, no one has a right or property interest in gambling at a particular casino, and a casino can bar a suspected card counter from playing.  Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173 (3d Cir. 2000).  Given that even a perfect card counter will require a hefty bank roll and a long stretch of play in order to realize a significant advantage, this approach, while legal, is far from a guaranteed thing.

B. Empathy

Empathy is where we begin to enter a grey area.  Arguably, reading someone’s emotions is akin to finding a gambler’s tells, and empathy is simply a more precise, direct way than, e.g., looking for facial cues or nervous tics.  Depending on how the power works, it might run into invasion of privacy problems, but some versions of the power (e.g. pheromone detection) likely wouldn’t as they make use of “broadcast” signals.  There is enough uncertainty left in reading an opponent’s emotions that it couldn’t be construed as knowing the outcome of the game, which sets empathy apart from many other powers.

C. Precognition and Time-Travel

Precognition and time-travel are, alas, probably a fraudulent act within Nev. Rev. Stat. § 465.070(5), which prohibits, “[placing] or [increasing] a bet after acquiring knowledge of the outcome of the game or other event which is the subject of the bet, including past-posting and pressing bets.”

Now, the real crux of the matter is the meaning of the word “after.”  A precog clearly places a bet “after” acquiring knowledge of the outcome, but the issue is less clear for a time-traveler.

Suppose the time traveler leaves the present (t1) and goes to the future (t2) to learn the outcome of the game, then returns to the past (t0, even earlier than t1) to place the bet.  Has the time-traveler placed the bet “after” acquiring knowledge of the outcome?  Common sense says yes: from the perspective of the time-traveler, the bet was placed after the outcome was known.  The time-traveler could make the argument that, objectively, the bet was placed before the outcome was known, but believe it or not that level of semantic hair-splitting is frowned upon by judges.

Of course, as with Biff Tannen’s scheme in Back to the Future, Part II, proving that someone is cheating by traveling through time is a tough sell unless time-travelers are well-known to exist.

D. Telepathy and X-ray Vision

Telepathy and X-ray vision are where we really cross the line into cheating  because these powers violate the rules of the game.  There’s no meaningful distinction between peeking over a player’s shoulder and using X-ray vision to look at their hand, and telepathy presents similar problems as well as invasion of privacy issues.  This may well fall under Nev. Rev. Stat. § 465.083, which simply makes it unlawful for any person to cheat at any gambling game.  Somewhat surprisingly, this law has been held not to be unconstitutionally vague, as we’ll discuss in more detail in a moment.

Failing that, these powers also likely fall under § 465.070(2), which prohibits “[placing], [increasing] or [decreasing] a bet or … [determining] the course of play after acquiring knowledge, not available to all players, of the outcome of the game or any event that affects the outcome of the game or which is the subject of the bet.” In most games, reading an opponent’s mind or viewing their hand is a great example of “acquiring knowledge, not available to all players, … that affects the outcome of the game.”

E. Superhuman Speed or Dexterity, Probability Manipulation

Superhuman speed or dexterity could be used in games like craps, either to place the dice in a particular position after rolling them or to roll them such that they are guaranteed to end up in a particular position.  There are actually cases that deal with these tactics, which hold that they are a form of illegal cheating.  Skipper v. State, 110 Nev. 1031 (1994) (holding that law criminalizing cheating was not unconstitutionally vague as applied to “dice sliding” in craps).

Those same cases would also appear to apply to probability manipulation.  “A skilled dice slider such as [the defendant], surreptitiously and contrary to the rules of the game, alters the probable outcome of a throw and drastically increases the chances of winning certain types of bets on the craps table.”  Skipper, 110 Nev. at 1035 (emphasis added).  Even though someone who manipulates probability may not even touch the dice (instead betting on someone else’s throw) or may play a game like roulette, the same logic would seem to apply.

III. Conclusion

There do not seem to be very many superpowers that could be used to legally and efficiently make money via gambling.  Many of these methods are hard to prove (e.g. precognition, time-travel), but they are nonetheless probably illegal.  Of course, many superpowers could be used to win bets of an altogether different kind, for example Wolverine betting on himself in boxing matches in X-Men, but it’s hard to make really serious money that way without arousing suspicion: eventually people catch on that betting against you is a bad idea.  It may actually be easier for a superhero to make money legally via the stock market than via gambling.

31 Comments

Posted in contracts, torts

Getting Rich with Superpowers, Part 1: Insider Trading

Posted on January 25, 2012 by | 38 comments

We’ve previously talked about how immortal beings might find it difficult to amass significant wealth simply by virtue of living a long time.  This post marks the first in a series on how other common superpowers might be used to make money in the short term.

One way to make (or lose) a lot of money is via the stock market, and several superpowers lend themselves to taking advantage of the market: telepathy, enhanced senses, invisibility, and time travel, just to name a view.  Each of these could be used to come across valuable information without necessarily breaking any other laws (e.g. without trespassing).  For example, someone with Superman-level enhanced hearing could easily overhear a boardroom conversation, and an invisible person could similarly overhear sensitive conversations in public places. The question, then, is whether using any of this information would run afoul of insider trading laws.

(Note: do not try any of this at home, at least without consulting a competent attorney in your jurisdiction.)

I. Insider Trading

There are three major theories of insider trading liability.  First, one cannot trade on material, nonpublic information if one owes a fiduciary duty  to other traders in the marketplace. Chiarella v. United States, 445 U.S. 222 (1980).  This covers the most common types of insider trading: corporate insiders who trade on confidential information or who give confidential information to an outsider in breach of a fiduciary duty.  See also Dirks v. S.E.C., 463 U.S. 646 (1983).

The second theory is “misappropriation.”  “The misappropriation theory holds that a person commits fraud “in connection with” a securities transaction, and thereby violates § 10(b) and Rule 10b–5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.”  United States v. O’Hagan, 521 U.S. 642, 652 (1997).  This, then, covers the case in which the source of the information is a patsy rather than complicit.  It still requires that the misappropriator owe the source a fiduciary duty, however.

The first two theories are based on applying common law theories of fraud to the SEC rule against fraudulent trading.  The third theory is based on Rule 14e-3, which specifically forbids a certain type of insider trading.  “Rule 14e-3 prohibits any person who is in possession of material nonpublic information relating to the commencement of a tender offer, acquired directly or indirectly from either the bidder or the target company, from trading in target company securities. It also makes unlawful passing on any such information where it is reasonably forseeable that the recipient will trade.”  Donald C. Langevoort, 18 Insider Trading Regulation, Enforcement, and Prevention § 1:10.  On the one hand 14e-3 is broad because there is no requirement of a fiduciary duty, but on the other hand it is narrow because it only applies to tender offers (e.g. mergers and acquisitions).

So, now that we have a rough idea of what constitutes insider trading, let’s see if any common superpowers can allow someone to acquire material, nonpublic information without running afoul of any of these theories.

II. Superpowered Reconnaissance

The first thing to do is to forget about using insider information to take advantage of a potential merger or acquisition.  Rule 14e-3 would almost certainly apply, so our hero (or villain) will have to stick to other kinds of valuable information (e.g. an R&D breakthrough or a pending product recall), and that’s the context we’ll assume for the rest of the post.

In general, merely overhearing something (e.g. a conversation between company employees) in a public space is not a violation under the first two theories because there is no fiduciary duty being broken: the recipient owes the company and its shareholders no duty, and the employees aren’t improperly tipping off the recipient.  So enhanced senses and invisibility would seem to be a good fit.

Telepathy is more problematic.  As we’ve discussed before, telepathy may run afoul of a person’s right to privacy.  Would discovering information about a company be highly offensive to a reasonable person?  Would it matter if the victim was a regular employee of a giant company or an emotionally-invested founder of a small business?  It’s hard to say how a jury would react.  It is not clear to me whether this kind of privacy violation would be sufficient to trigger insider trading laws, however.  The law prohibits the use of deception to acquire insider information, and telepathy could qualify, though it seems a bit strained. S.E.C. v. Dorozhko, 574 F.3d 42 (2d Cir. 2009) (holding that computer hacking to obtain insider information may be “deceptive device or contrivance” prohibited by Rule 10(b) and Rule 10(b)-5).

Time travel seems to be the cleanest of all: the superpowered schemer could simply wait until the information was public, then travel back in time and use it profitably.  This suggests the scheme in Primer might have been legal.

The previously mentioned prohibition against deception suggests that shapeshifting, psychic manipulation, and other forms of trickery wouldn’t work.

III. Conclusion

With the right superpowers and a little luck it may be possible to profit from the stock market without running afoul of insider trading laws.  Has this ever been tried in the comics?

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Posted in administrative law, criminal law, securities law, torts

Daredevil, The Man Without…Jurisdiction?

Posted on January 20, 2012 by | 15 comments

Here’s one for the serious law nerds: a post about federal jurisdiction and civil procedure.  Daredevil #8 opens with Foggy Nelson serving what appears to be a discovery request on a cemetery employee.  Accompany Nelson are a group of plaintiffs, approximately 15 people, though it isn’t clear if this is all of the plaintiffs or a subset.  The basis of the suit is that Suncourt Cemetery has been negligent in the caretaking of the cemetery, leading to graves disappearing into the ground.

Okay, what’s the big deal?  Well, several things are a little strange here, but nothing’s necessarily wrong.  We’ll start with the lawsuit itself.

I. Negligent Cemetery Caretaking?

It’s not completely clear what Nelson’s theory of the case is.  Foggy says that he thinks “there’s more to it than soft soil,” and we later learn that the graves have been intentionally disturbed or even removed.  This suggests that the theory is that someone has been intentionally messing with the graves and the cemetery corporation is liable for negligently failing to prevent the disturbance.

The law in New York on this subject is unclear.  On the one hand, “the cemetery is under a duty and has a right to prevent any trespass upon the cemetery and its parts and any damage arising from such trespass. This duty and this right come from the fact that individuals interested in graves and lots are entitled to look to those conducting the cemetery for redress for permitting trespass.”  Orlowski v. St. Stanislaus Roman Catholic Church Soc., 292 N.Y.S. 333, 482 (Sup. Ct. Erie Cty, 1936).

On the other hand, other cases have held that there is no implied duty to prevent the robbing of graves and that cemeteries are not liable for damage to graves caused by people not under its control or supervision.  Independent Potok Zloty Sisters & Brothers Benevolent Soc. v. Highland View Cemetery Corp., 264 A.D. 396 (Sup. Ct. App. Div. 1942); Coleman v. St. Michael’s Protestant Episcopal Church, 170 A.D. 658 (Sup. Ct. App. Div. 1915).

So the law in this area is somewhat confused and also very old, but on the whole I wouldn’t bet on the plaintiffs.  A modern New Jersey case agreed with Coleman and held that a cemetery isn’t liable for vandalism caused by a third party.  Bauer v. Harleigh Cemetery Co., 651 A.2d 1084 (Sup. Ct. N.J. 1994).  And even if cemetery owners had a duty to prevent trespass, it’s not clear how reasonable care would have prevented grave robbing by the Mole Man (well, okay, it could have been somebody else but it sure looks like his handiwork).

So the suit is a little creaky, but there’s a colorable argument, particularly in light of the conflicting precedents and their age.  Other, larger questions remain, however, questions of procedure and jurisdiction.  Since procedure depends on jurisdiction, we’ll go there next.

II. Making a Federal Case Out of It

One of the odd things about the opening scene is that Foggy is holding a document that appears to be from the United States District Court for the Southern District of New York, which includes New York City.  But the case is plainly based on New York state law, so why are they in federal court?

The logical answer is “if it isn’t based on a federal claim, then it must be based on diversity of citizenship.”  Diversity of citizenship is found in the Constitution, which allows federal suits “between Citizens of different States.”  U.S. Const. art. 3 § 2.  As a general rule, a plaintiff can sue in federal court on a state law claim if none of the plaintiffs are from the same state as any of the defendants (aka “complete diversity”) and the amount in controversy exceeds $75,000, per 28 U.S.C. § 1332.

Complete diversity seems like bad news for Foggy, as it’s unlikely (though admittedly not impossible) that all of these surviving relatives are living outside of New York.  Further complicating things: if any of the relatives are suing as the representative of the estate of the deceased rather than in their personal capacity, then their state citizenship is the same as the deceased, which is presumably New York.

But there’s another glimmer of hope: they’re suing a corporation, and a corporation is considered to be a citizen (for diversity purposes) wherever it has its principal place of business.  Suncourt Cemetery could be owned by a corporation that runs lots of cemeteries and has its principal place of business in, say, New Jersey.  Then it wouldn’t matter if all of the plaintiffs were from New York; in fact, that would be great.

Another possibility is that Foggy is actually representing a class action.  It’s certainly possible.  There are at least 15 plaintiffs and there could be a lot more.  In a class action the diversity rules are relaxed considerably.  Depending on the details of the case, which we don’t have, it can go as far as “minimal diversity,” which requires only a single plaintiff be from a different state than a single defendant.

Now that we’re more or less comfortably in federal court we can turn to the issue of how Nelson gets away with taking a soil sample with a backhoe.

III. You Got a Court Order for That Backhoe?

Federal Rule of Civil Procedure 34(a)(2) allows for parties to serve requests to “permit entry onto designated land or other property possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it.”  Suncourt Cemetery could oppose the request, but Foggy could then seek a court order compelling Suncourt to allow the sampling.  Since Foggy is holding up document on federal court letterhead, it seems like there has been a court order rather than a mere request.

And this makes sense because discovery happens after the complaint has been filed.  For the advanced students in the class: it probably also means the case has already survived the defendant’s motion to dismiss under 12(b)(1)  (for lack of jurisdiction) and 12(b)(6) (for failure to state a claim), which roughly correspond to sections II and I of this post, respectively.

IV. Conclusion

I have to admit, when I read the first page of this issue my gut reaction was that it was all wrong: Negligent cemetery caretaking? A state tort claim in the Southern District of New York brought by what appears to be a bunch of New Yorkers against a New York cemetery?  But surprisingly (to me, anyway) it all more or less hangs together, if a little tenuously.

In terms of writing and artwork, Daredevil continues to be great, and we recommend picking up #8 and Amazing Spider-Man #677, which contains the first half of this storyline.

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Posted in civil procedure, torts