Learned Hand, Carroll Towing, and PR in Action

In the first 11 of these, I’ve tried to lay the groundwork for what has always been the ultimate goal, which is a detailed look at how plausible reasoning manifests in the law, both wrongly and rightly, in comparison to the current “standard” for science in the law. We’ve had a look at frequentist statistics and “the Prosecutor’s fallacy,” as well as Popper’s and Imwinkelreid’s contributions to the current falsificationist view of science (with a hat-tip to David Hume’s inductive skepticism).

Special Glibs Note: If this looks at all familiar, it’s because TPTB previously published 2 pieces I wrote on Carroll Towing during the plandemic, but those pieces looked at the ruling from the POV of infectious disease spread and lockdowns.

I. Who Pays What for a Broken Contract, Part the First.

Justice Learned Hand’s opinions are a staple of law school casebooks,¹ and United States v. Carroll Towing, Co., 159 F.2d 169 (2d. Cir. 1947) is likely his most famous opinion of all. Hand achieved fame as a judge on the 2nd Circuit Court of Appeals and is considered by many to be the best judge who never made it to the Supreme Court. For example, Learned Hand is the most quoted lower court judge… by the United States Supreme Court (!). Carroll Towing mostly concerns itself with a legal concept known as “consequential damages” in the context of a barge, the Anna C., that sank and lost all of her contracted cargo while tied up at a Manhattan Pier during an unusually bad storm. Whose fault it is and who is going to foot the bill is the crux of the opinion, but before we drill down on Carroll Towing, we need a little legal history, context, and background.

The archetypical case regarding consequential damages is another staple of the law school casebook, Hadley v. Baxendale, 9 Ex. 341 (1854). Hadley and his partner owned a mill which ground grain into a meal and processed it into flour, among other products. One of the steam engines in the mill had a crankshaft break and Hadley contracted with a company to replace the crankshaft. W. Joyce & Co., the company that would replace the shaft, required the broken one to be shipped to them for manufacturing reasons, which Hadley did using a commercial shipping firm. The essence of the case is that Baxendale’s shipping firm failed to deliver the crankshaft on schedule as promised in their contract and Hadley sued for not only what he paid to ship the crankshaft, but also for his lost profits/commerce for the days that the mill was out of service well-beyond the promised delivery date. In other words, Hadley wanted both (1) his lost $$ (costs) for the failed shipment, AND (2) the lost revenue for the days he was shut down because of the shipping delay. This request for something more than the direct damages of money lost as a result of the breach of the shipping contract is why the case is considered a staple on the subject of consequential damages – damages beyond the immediate harm. I’ve bolded the words that I think are doing some relevant lifting (for our purposes) in the opinion.

Now we think the proper rule is such as the present is this: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.

This seems, all things considered, a sane rule. Damages are limited to money actually paid on a breach of contract, EXCEPT if a plaintiff communicates “special circumstances” that might thereby be considered a “part of the bargain” being struck – and could put a (future) defendant on notice that they’re going to be on the hook for something more than just giving back the money they got on the original contract.

Before we move on and discuss Carroll Towing, I want to spend a moment to point out all of the plausible (i.e. probabilistic vice deductive) reasoning that inheres in this 1854 British Court of Exchequer decision. The first parts I bolded are laden with plausible reasoning terms: fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Whatever else can be said about it, the idea that there are “fair and reasonable” considerations that occur according to the “usual course of things” or that can be “reasonably supposed… to have been in the contemplation of both parties” is all judicial-speak for what Profesor Polya, or Edwin Jaynes, or Henri Laplace would probably all have called simply “common sense.”

Now, let’s try this briefly with a more modern example and see if the principle still works: suppose that one of your children calls up in a panic because he is going on a cruise that he has pre-paid $10K for he and his girlfriend; he is planning to pop the question! Lo and behold, he has realized with only 5 days before the trip that his passport is at your house in a box of his left-behind things! You, dutiful and caring parent that you are, confirm that the passport is indeed in this box, along with some other items you’re certain he will need on this trip, and then you rush down to FedEx for GUARANTEED OVERNIGHT DELIVERY. You arrive breathing heavy, complete all of the necessary paperwork, and while speaking with the clerk you repeatedly emphasize the stakes and the necessity of the box arriving in a timely fashion lest your son get porked out of his non-refundable cruise package. Unfortunately for you and your son, that package wound up on the same FedEx plane as Chuck Noland, Tom Hanks’s character in “Cast Away.” Son’s passport disappears and he doesn’t go on the cruise, losing not only the passport and trip money, but his heartbroken fiancée, as well! Should FedEx reimburse solely the $100 for overnight shipping not completed? OR, does HvB compel the costs for the failed shipping, the costs of getting a new passport, AND the money lost on the non-refundable cruise trip?²

II. Who Pays for a Broken Contract, Part the Second.

The facts of Carroll Towing don’t appear to have been much in dispute even at the trial level. The Pennsylvania Railroad Company chartered the barge Anna C from Conners Marine Company. The Anna C was moored at Pier 52 on the North River along with several other barges; a load of flour belonging to the FedGov was in the Anna C’s hold for shipment. It was winter (Jan. 4, 1944) in NY Harbor, and the water conditions were choppy, with a fair bit of wind. The barges at Pier 52 were tied together by mooring lines, with one barge at Pier 52 tied to another set of barges at the adjacent Public Pier.

On the day of the accident the tug Carroll was sent to remove a barge from the Public Pier and in the process of removing the barge, a line between the barges at Pier 52 and the barges at the Public Pier was also removed. After the removal of the line, the barges at Pier 52 later broke free and a whole bunch of barges and their cargo went catawampus. Among the casualties was the Anna C, which wound up on the bottom of the harbor along with the United States’ flour shipment. The US sued Carroll Towing Co., owner of the Carroll tug who removed the line between the two piers, in an indemnity action to cover the cost of the lost flour.

The crux of the legal issue was (again) consequential damages, except in this case it was in the context of a tort suit for negligence, rather than an action on a contract.³ 3 In Carroll Towing, there didn’t appear to be any gross negligence on anyone’s part, but just to review, the Western legal tradition has a fairly well-developed (‘black letter’) body of law regarding negligence as a tort. The formula is (generally) that there is an existing legal duty that a person breaches, which can be shown as the proximate cause of a harm to another, and from which there is some damages. Various jurisdictions expand on these a little, but negligence as a legal claim generally involves a Duty, a Breach of the Duty that causes Harm to another, and Damages. Each of these aspects has (literally) tomes dedicated to picking at the particular thorny questions of each, and all have difficult questions around standards of measure at every step. Who decides what the legal duties are between individuals in a constitutional republic (and when did that happen)? How do we decide if my actions are the proximate cause of someone else’s harm? And what is the measure of damages – a subject with which we’ve already had a preview via Messrs. Hadley and Baxendale.

The standard to which we are all held is, as noted above, the “reasonable man,” or “reasonable and prudent” person, or some variation on the same yardstick. This “reasonable man” standard has been justifiably criticized along the same grounds as Potter Stewart’s more honest formulation regarding pornography: “I know it when I see it.” But now you, the astute reader, will likely understand that this “reasonable man” standard is nothing more than the Court’s imputation of plausible reasoning capacity to everyone. How would any of us know, for example, that a tugboat captain had been negligent – had failed – in his duties? Setting aside the procedural and evidentiary questions, we can imagine that there is some body of professional custom and knowledge, not unlike our own vocations and avocations, to which we can turn and inform ourselves, and then make judgments about whether or not someone has lived up to or missed the mark. That seems a straightforward enough proposition, but the problems of competing, alternate “reasonable” decisions can make this seem an exercise in arbitrary line-drawing (pun intended). For example, was it unreasonable for the harbormaster to order the extra line that joined the two piers cast-off? That line was not normally there. How abnormal were the sea conditions? Is the duty of a commercial carrier, like the commercial shipper M. Baxendale, higher than that of the average person? Do we impute a higher standard of care to people who handle the goods of others, especially people handling ships? It is into this maelstrom that Judge Hand waded and offered, I believe, a lantern to help illumine the murk around these issues.

III. Enter the learned Judge, or at least Judge Learned.

The meat of Judge Hand’s opinion begins with a survey of the existing case law surrounding barges, tugs, and similar maritime mishaps. He engages in the exact work mentioned above, attempting to tease out the “body of professional custom and knowledge” that governs the conduct of each of the various parties: from the harbormaster, to the deckhands, to the absent barge handlers who had gone home for the evening. Another aspect of the law that raises itself is the obligation to mitigate damages. That is to say, the law imposes affirmative duties even on plaintiffs, and one of them prohibits what I call “wallowing in ongoing harm.” For example, the landlord who loses rent because a tenant breaks their lease the day before the lease begins must attempt to fill the now-vacant apartment; she cannot simply leave it empty and claim damages month after month after month and presume that a court will now give her the entire year’s lease as the measure of the “loss.”
Likewise, Hand’s examination of various parties’ obligations includes the duty that even the plaintiffs and/or their agents had in the whole affair.

It raises interesting questions all over again about who owes what obligation to whom. For example, if the weather was bad enough that a court says the harbormaster breached his duty of due care by casting off a certain line, are the individual ship-owners and their crews also not on notice of the same exact conditions – and therefore responsible for taking mitigating actions to ensure their own ship’s and cargo’s safety? Hand covers this in the early paragraphs, but it is his discussion of the interrelation of these factors that has become a lighthouse for law students and practitioners – and even amateur philosophers and writers – to provide some firm ground by which to navigate.

It appears from the foregoing review that there is no general rule to determine when the absence of a bargee or other attendant will make the owner of the barge liable for injuries to other vessels if she breaks away from her moorings. However, in any cases where he would be so liable for injuries to others, obviously he must reduce his damages proportionately, if the injury is to his own barge. It becomes apparent why there can be no such general rule, when we consider the grounds for such a liability. Since there are occasions when every vessel will break from her moorings, and since, if she does, she becomes a menace to those about her; the owner’s duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that she will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions.

– Justice Learned Hand in Carroll Towing

This is the setup for what would become Hand’s most quoted, and likely most famous, legal pronouncement.

Possibly it serves to bring this notion into relief to state it in algebraic terms: if the probability be called P; the injury, L; and the burden, B; liability depends upon whether B is less than L multiplied by P: i. e., whether B > PL.

Let the mathematicians, and other certainty-demanding knaves, rejoice! A formula – an actual mathematical f*^ing formula! – in a legal opinion. Praise be and pass the potato salad! Hand’s formulation of this legal rule for negligence cases represents (IMO) something so profound that it may be counted among those rare opinions that eventually pass as wisdom.

Liability for negligence is an inequality in Hand’s formulation. First, we calculate/discern the probability (!) of a harm coming to fruition. Let us take a moment to notice Justice Hand explicitly acknowledging that we humans think in probabilistic terms and that we make judgments to take action, or to refrain from acting, in such terms. Deductivism, we cast ye down to the depths of hell! Second, the good Justice notes the need to make a judgment about the potential gravity of the harms that could result from our action or inaction. Then we multiply those two items (P & L he calls them) and compare that product to the burden – the costs – to the defendant of taking sufficient precautions to prevent the harm from coming to be. Zut alors! Le voilà!

I have elsewhere, and will say it here again, warned of the very real human tendency to get “locked in” on one’s own pet theory and to engage in reification, which (to my mind) not coincidentally rhymes with deification. With admonishment in mind, let’s think more broadly about Hand’s formulation, as we did about Bayes’ theorem: does this track with our own sense of how risks and responsibilities should be apportioned in a world in which humans interact, engage in trade, commerce, and bump elbows on a daily basis? This is worth investigating on both the upside and downside, as well, meaning that we can imagine circumstances where the potential harms that could result demands a much higher burden of risk-mitigating steps – if you drive a truck filled with dangerous chemicals or explosives, for example – and conversely, if the probability of harm is remote and the likely injuries minor, your obligations to others are much lower and less susceptible to cause for being liable for another’s injuries.

Should a person engaging in some action that carries a higher risk of harm to other people be required – upon pain of paying for the consequences of his actions – to mitigate or otherwise take concomitant risk-reduction or other actions to prevent those serious consequences from occurring? Practically speaking, that seems to check out. I will leave the reader to use their imagination to construct hypotheticals or examine their own life’s circumstances and put the formula to work, as a mental exercise.

Here is Hand’s application played out in Carroll Towing:

Applied to the situation at bar, the likelihood that a barge will break from her fasts and the damage she will do, vary with the place and time; for example, if a storm threatens, the danger is greater; so it is, if she is in a crowded harbor where moored barges are constantly being shifted about. On the other hand, the barge must not be the bargee’s prison, even though he lives aboard; he must go ashore at times. We need not say whether, even in such crowded waters as New York Harbor a bargee must be aboard at night at all; it may be that the custom is otherwise, as Ward, J., supposed in “The Kathryn B. Guinan,” supra; and that, if so, the situation is one where custom should control. We leave that question open; but we hold that it is not in all cases a sufficient answer to a bargee’s absence without excuse, during working hours, that he has properly made fast his barge to a pier, when he leaves her.

I do not for an instant want to suggest to anyone that there are no unanswered questions left by Hand’s opinion, be it about sinking barges specifically, or consequential damages, or negligence in the law, most broadly. What I do want to declare is that, knowingly or not, Hand is demonstrating that plausible reasoning is very much baked into the legal reasoning cake. Hand used it to construct an elegant “rule of thumb” regarding risk allocation in common negligence cases, a staple of the common law for centuries. We’ll pick up here next time and then apply plausible reasoning to some other legal contexts and see what comes out of it.

1. He also has what is inarguably greatest name for a jurist ever, practically begging a mind to conclude that he was destined from the day his parents named him to sitting on the bench. I’ve never looked, but the only improvement possible would be if his middle name were “Solomon.” …And after checking, I find out that it absolutely was pre-ordained by the Oracle at Delphi for him to be an attorney: the internet claims his original name was “Billings Learned Hand” and he dropped “Billings.” Couldn’t have made that up if I tried – an attorney named Billings Learned Hand. ↩︎
2. We’ll agree to let FedEx off the hook for providing a new fiancée when we sue FedEx. ↩︎
3. I submit for the lawyers and legally educated that the distinctions between contract and tort law are largely irrelevant legal fictions. See, e.g., Grant Gilmore, “The Death of Contract,” (1974). Tort law deals with civil wrongs for which the law recognizes a remedy; Contract law is merely a specialized subset that deals with which promises the Law will recognize as enforceable and which ones it won’t. i.e. what it will recognize as a compensable legal harm or not. Wills and Trusts and Property transfers all deal with this exact same question. ↩︎