Enterprise liability

United States

Suppose high-risk manufacturing activities are shunted into one corporation, while a second "marketing" corporation keeps all the profits. In the case that someone was injured by the manufacturing activity, a court might apply the enterprise liability doctrine to allow recovery from the marketing corporation, which holds all the assets.

The doctrine emerged from litigation in the wake of the 1977 Beverly Hills Supper Club fire. The doctrine is examined in Walkovsky v. Carlton, 223 N.E.2d 6 (N.Y. 1966).

Enterprise Liability has been used as alternative terminology for Industry-Wide Liability.

Sindell v. Abbott Laboratories, 607 P.2d 924 (Cal. 1980) cites Hall v. E.I Du Pont De Nemours & Co., Inc., 345 F.Supp. 353 (E.D.N.Y. 1972) to explain Industry-Wide Liability, which was equated to Enterprise Liability:

The complaint did not identify a particular manufacturer of a cap which caused a particular injury. The court reasoned as follows: there was evidence that defendants, acting independently, had adhered to an industry-wide standard with regard to the safety features of blasting caps, that they had in effect delegated some functions of safety investigation and design, such as labeling, to their trade association, and that there was industry-wide cooperation in the manufacture and design of blasting caps. In these circumstances, the evidence supported a conclusion that all the defendants jointly controlled the risk. Thus, if plaintiffs could establish by a preponderance of the evidence that the caps were manufactured by one of the defendants, the burden of proof as to causation would shift to all the defendants.

The court noted that this theory of liability applied to industries composed of a small number of units, and that what would be fair and reasonable with regard to an industry of five or ten producers might be manifestly unreasonable if applied to a decentralized industry composed of countless small producers.}}

The concept of Enterprise Liability is distinguished from Market share liability, a legal doctrine introduced in Sindell v. Abbott Laboratories.

United Kingdom

Main article: UK company law, English tort law

The idea of enterprise liability was supported by the Court of Appeal in DHN Food Distributors Ltd v Tower Hamlets London Borough Council, a case on piercing the corporate veil.

More generally in the law of tort, the principle has been argued to have been recognised, albeit indirectly, by cases such as Lister v Hesley Hall Ltd. A general principle of joint liability in tort between different contractors that work in a supply chain was also recognised in Viasystems Ltd v Thermal Transfer Ltd.

Notes

References

• AA Berle, 'The Theory of Enterprise Entity' (1947) 47(3) Columbia Law Review 343

References

1. Alexander, Roberta Sue (2005). ''A place of recourse: a history of the U.S. District Court for the Southern District of Ohio, 1803-2003.'' Ohio University Press, {{ISBN. 978-0-8214-1602-0
2. ''In Re: Beverly Hills Fire Litigation'', 695 F.2d 207 (6th Cir. 1982), cert, denied 461 US 929 (1983)
3. ''In Re: Beverly Hills Fire Litigation'', 672 S.W.2d 922 (Ky.1984)
4. Sindell v. Abbott Laboratories, 607 P.2d 924 (Cal. 1980)
5. [1976] 1 WLR 852
6. [2001] UKHL 22, critiqued by [[S Deakin]], '‘Enterprise‐Risk’: The Juridical Nature of the Firm Revisited' (2003) [https://archive.today/20140711140635/http://ilj.oxfordjournals.org/content/32/2/97.short 32(2) ILJ 97]
7. [2005] EWCA Civ 1151