Download A Life Lesson From Palsgraf (PDF)

by Joseph Fontak '91
Leader & Berkon, LLP

Every first year law student is introduced to the tribulations of poor Mrs. Palsgraf, who was injured through no fault of her own, yet was ultimately denied recovery in her lawsuit against the Long Island Railroad. Benjamin Cardozo wrote the much-discussed, intricately worded opinion for a Court of Appeals that had divided four to three over how the case should resolve. As a result, Mrs. Palsgraf lost her jury award even after it was affirmed at the appellate level. Interestingly, seven of the thirteen judges who had a say in Mrs. Palsgraf’s case went her way. Unfortunately for her, four of the six judges who decided against her sat together on New York’s highest Court. In the end, Mrs. Palsgraf received nothing from the LIRR for all her troubles. Not only did Justice Cardozo reverse Mrs. Palsgraf’s award, but in the final line of his opinion, he provided an additional punishment to Mrs. Palsgraf by awarding “costs in all courts” to the LIRR.

I recall enjoying the thought provoking language of Justice Cardozo’s opinion as a first year law student at Cardozo Law School, but also appreciating the logic of Justice Andrew’s compelling dissent. The real life implications to Mrs. Palsgraf and the LIRR were not the concern of the intellectual debate of law school students. As one thinks about it, the result in Palsgraf was akin to endings in sports when everything changes in the final seconds - - a basketball player makes the winning shot as time runs out and the buzzer sounds or the receiver catches the quarterback’s Hail Mary pass to win the game. One team is forever made the champion and the other team remains forever the loser, no matter how the prior game, series of games or entire season may have played out. Had that final play gone differently, the opposite result would remain in perpetuity. A great example is the 2006-‘07 NFL season, when the New England Patriots went undefeated for the season and were universally thought to be the strongest team in football that year. It took a miraculous final drive in the closing minutes of the Super Bowl for the Giants to pull out the victory. The Patriots went from having a chance to be only the second team to have an undefeated NFL season, to another season’s Super Bowl losers. Such is the nature of sports.

But litigation is not a sporting event. Each case does not necessarily demand that there be simply one winner and one loser, it is often a misguided lawyer or litigant who pursues that result. Given the risks, and the tremendous opportunity for a “last second” reversal of fortune in each case, litigants are almost always wiser to settle their dispute, especially when they seem to be ahead. The trick is determining the right time and amount at which to settle. Often the parties cannot agree on the total value of the dispute, admissibility and relevance of evidence, interpretation of facts, application of law or apportionment of liability among the parties, but that does not mean the case cannot be resolved. The sides often can agree on a settlement amount even though they arrive at the amount using very different factors. The parties will simply agree that the benefit of resolving at the agreed upon terms exceeds the costs of proceeding with litigation. For plaintiffs, the benefits of resolving include receiving money sooner, terminating litigation costs and returning to life without the litigation. For defendants, the benefits of resolving include saving money, avoiding bad precedent, avoiding bad publicity and removing risk.

Perhaps the life lesson of Palsgraf would best be understood by learning of the settlement offers rejected by Mrs. Palsgraf prior to Justice Cardozo’s decision. Obtaining a favorable verdict at trial should not have so emboldened Mrs. Palsgraf and her counsel as to completely ignore the risk of a reversal on appeal. The fact that two of the five appellate judges would not affirm her verdict should have been a red flag. The arguments against her recovery should have convinced Mrs. Palsgraf to settle for an amount below the jury verdict. On the other hand, the LIRR’s victory on appeal was far from certain. While the LIRR’s win permitted Justice Cardozo to write his renowned opinion, it is unlikely the win prevented future cases against the LIRR from being brought. Hindsight is 20-20, but an experienced litigator will tell you there was an amount that the LIRR and Mrs. Palsgraf would have agreed upon that would have served them both well. Mrs. Palsgraf did not have to end with nothing.

A recent example of litigation where outcome uncertainty and high stakes promotes resolution is found in the asbestos realm. Asbestos litigation as a mass tort has been around since the 1970’s. As a result of early high verdicts against the “traditional” asbestos defendants, many of those defendants filed for bankruptcy protection. Over time, the litigation has shifted from claims brought against entities that manufactured and supplied asbestos to claims brought against entities that manufactured and supplied products which utilized asbestos-containing components, such as packing and gaskets.

An issue being wrestled with by the courts is whether the manufacturer of a product may be held liable for injuries caused by a separate product used in connection with its product that the manufacturer did not manufacture, sell or supply? Courts around the country are divided on whether the case against the defendant manufacturer may be presented to the jury. The defense has had some significant victories on the issue as set forth by the Supreme Court of California (O’Neill v. Crane Co., 53 Cal. 4th 335, 135 Cal. Rptr. 3d 288, 266 P.3d 987 (Cal. 2012)), a federal district court in Florida (Faddish v. Buffalo Pumps, 881 F. Supp.2d 1361 (S.D. Fla. 2012), the federal court handling the multi-district asbestos litigation (MDL-875) (Conner v. Alfa Laval, 842 F. Supp.2d 791 (E.D. Pa. 2012)), the Supreme Court of Washington (Bratten v. Saberhagen Holdings, 165 Wn.2d 373, 198 P.3d 493 (Wash. 2008)) and the Sixth Ciruit Court of Appeals (Lindstrom v. A-C Product Liability Trust, 424 F.3d 488 (6th Cir. 2005), to name a few.

In New York, while there have been encouraging decisions for the defense (see, e.g., Surre v. Foster Wheeler LLC, 831 F. Supp.2d 797 (S.D.N.Y. 2011)), there continue to be large verdicts awarded to plaintiffs that do get to trial. One plaintiff was recently awarded $32 million. On appeal to the trial Judge, the award was reduced to $8 million and a further appeal is pending before the First Appellate Department. Even more recently, five plaintiffs’ cases were tried together resulting in a combined jury award of $190 million. Those five verdicts will no doubt be appealed. Even given verdicts such as these, the parties may find good reason to resolve. Plaintiffs will not receive money, but will incur continuing costs, during the pendency of the appeals. Moreover, given the growing number of decisions on this issue around the country siding with the defense, New York’s appellate courts, upon further consideration of the issue, may also decide for the defense.

Unquestionably, the outcome of personal injury cases is often uncertain and, like Palsgraf, involves complex questions of duty, foreseeability, reasonableness and proximate cause, to name a few. As Mrs. Palsgraf learned on her long road from injury to dismissal of her case, reasonable minds can differ widely on the issues and the outcome of a case. When thirteen judges can divide seven to six as in the case of Mrs. Palsgraf, proceeding with the appeal to determine the outcome was essentially not much better than flipping a coin. Litigants on both sides of the case would be wise to assess whether there is an outcome short of a complete all or nothing result that would better serve both their purposes. I submit there always is. As a plaintiff attorney said to me after we tried a case and he obtained a verdict significantly below my client’s final settlement offer, “when two parties fail to settle, one party is always making a mistake.” I have no doubt Mrs. Palsgraf and Justice Cardozo would agree.

Joseph Fontak was in the SBA, serving as Vice President in his 3rd year. He has participated in a number of panel presentations to students as a practioner over the years and joined the Executive Committee of the Alumni Association in 2008. He chaired the Annual Alumni Association Meeting from 2008 until 2013. He also chaired the New Jersey Cardozo Alumni Group from 2007 to 2010, and began a term as co-Chair for the Cardozo Mid-Atlantic Alumni Group at the end of 2013. Joseph has been on the ITAP faculty continuously since 2006. Professionaly, he works in Leader & Berkon's office in New York and Philadelphia, handling civil litigation matters in New Jersey, New York and Pennsylvania.