When you have a constitutional case, you're trying to persuade the courts either to take up the question of who decides, or to let it alone.
Expertise is never the advantage. You can think of the courts as a last resort (i.e., when other institutions are even worse). Most decision-making, even in specific areas, is always going to be made outside of the courts. And in the main, courts decide not to decide-- even agressive courts leave most everything to the political process.
Bias, on the other hand, is sometimes an attractive advantage of the courts (it's a trade-off with expertise). Juries are selected because they are not experts, but they are almost impossible to target ex ante.
So when you have a question that defies easy solution by available expertise, and what you really want is an impartial decision-maker, the courts might look OK.
Take tort reform: and the question of whether or not it's constitutional... the legislature has the most access to information, but it's also the target of interest groups with high stakes. So maybe we'd like to substitute the more ignorant courts. And indeed, sometimes courts will hold tort reform efforts to be unconsitutional: you can sometimes get review of that, in other words.
See p. 82 of Imperfect Alternatives, footnote 48. Richard Pierce, "Public Utility Regulatory Takings..." 77 Georgetown. L. J. 2031, (1989). This takes the two-force model and looks at public utility rate-making. He finds a cycle between majoritarian and minoritarian bias, depending on how public the rate-making process is. So you could see over-regulation when information gets cheap, because there's the potential to convert an otherwise dormant majority into an active one.
So you can have regulation which favors or disfavors the interests of a high-stakes minority. If we have a situation of majoritarian bias, we can still see over-regulation.
Looking at this from a comparative institutional perspective, we can see that the political malfunction is very bad. But it's not enough to say merely that what they're doing is suspect. We next have to ask, "are the courts going to be better?" Some of these judges thought the courts were even worse: lack of knowledge about the consequences of a mistake makes them a poor decider. So, rightly or wrongly, they gave virtually no scrutiny.
The level of scrutiny depends not only on the level of distrust of the political process, but also on degree of difficulty for the court (see, e.g., Cleburne).
Anyway, after the fact, there's little doubt that this was a horrendous decision, and at least some of the judges regretted it. But before the fact, it didn't look so clear, and it's possible to imagine a similarly positioned issue arising in the future.
The only hitch is that the claim here is pure economic harm. What's "impure" economic harm? Something like physical injory.
Suppose there were $200K of damages, and both Π and Δ agree that Π's chance of prevailing is 10%. If both parties are risk-neutral, they'll just settle for $20K. But there's really some room for negotiation, because if we figure the cost of litigation is $10K/party, Π will accept as little as $10K (because they could get $20K, but they'd have to spend $10K to get it). And Δ might offer up to $30K (because they'd have to pay $20K, and they'd also have to pay $10K just to get to that result).
Of course, there's no reason to think that the parties agree about the probability of Π's success. Discovery is a device to get the parties to get closer to agreeing on that probability.
Precedent says there won't be any recovery for pure economic harm. Π wants the court to move the line: create an exception, or something.
Breyer is smart: he sees the downsides of moving that line. First, there would be a lot of suits (administrative costs: court costs). So the question of "how many" cases is an issue. And every case will be different, so we'll have complexity as well.
We'd prefer to handle this via market insurance than via tort-system insurance: the latter is very high-cost. Breyer is extra subtle, though: even if market insurance isn't available, they can make use of tort-system insurance, without having to expand the tort system to cover purely economic loss, through contract. Anybody who gets harmed by the oil (like the dock owners) gets recovery. So people like the owners of the Tamara can build in a portion of their recovery into their contracts (i.e., compensation for violation of service level agreements).
What about deterrence/safety? If we cover this kind of injury, we'll make insurance unaffordable, and it's doubtful that the signal would get through, since spreading risk through insurance dilutes the signal.
Consider the BP spill: we had significant regulation in place, but not significant enforcement. Why is that? Because regulations get passed during big crises-- that's when we've got motivation for it. After that point, oversight over agencies declines. Legislators might know this very well-- they may not expect enforcement. That's a little cynical.
The Chevron Doctrine: who interprets the legislation: courts or administrative agencies? The courts said the administrative agencies. The agencies have expertise. Of course this is not a hard-and-fast rule, when there's political malfunction, the courts may step in (especially if they have the ability to oversee and understand the issues at stake).
So we have two goals, and three institutions:
| Tort System | Market | Political Process | |
|---|---|---|---|
| Insurance: | Superior | ||
| Safety: | Necessary |
We want a cutoff here. We're willing to give damages for economic harm, but we want to be excused from expanding willy-nilly. We limit ourselves to instances where the benefits of allowing recovery outweigh the costs.