Treating medical malpractice claims under a variant of the business judgment rule

Notre Dame Law Review

Volumn 77, Issue 2, 2002, Pages 373-427

  O'Connell, Jeffrey ^a,b,c   Boutros, Andrew S ^a,d  

^a UNIVERSITY OF VIRGINIA   (United States)

^b DARTMOUTH COLLEGE   (United States)

^c HARVARD UNIVERSITY   (United States)

^d VIRGINIA POLYTECHNIC INSTITUTE AND STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 34248213953     PISSN: 07453515     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (296)

1. ANICIUS MANLIUS SEVERINUS BOETHIUS, THE CONSOLATION OF PHILOSOPHY 21 (Richard Green trans., Bobbs-Merrill Co. 1962) (524 A.D.).
2. Id. at 22.
3. Id.
4. Euripus is a narrow strait that separates the island of Euboea from the coast of Boeotia. It is well known for its irregular tides. Id. at 23 n.1.
5. Id. at 23.
6. Id. at 24.
7. For discussions, pro and con, on jury reliability in medical malpractice cases, see Jeffrey O'Connell & Christopher Pohl, How Reliable Is Medical Malpractice Law? A Review "Medical Malpractice and the American Jury: Confronting the Myths about Jury Incompetence, Deep Pockets and Outrageous Damage Awards" by Neil Vidmar, 12 J.L. & HEALTH 359, 367-69 (1997-1998).
8. Howard Hiatt & Paul Weiler, No-Fault Medical Coverage Would Cure Many Ills, BOSTON GLOBE, Nov. 5, 1999, at A27 (referring to HARVARD MED. PRAC. STUDY, PATIENTS, DOCTORS, AND LAWYERS: MEDICAL INJURY, MALPRACTICE LITIGATION, AND PATIENT COMPENSATION IN NEW YORK (1990)).
9. Howard Hiatt & Paul Weiler, No-Fault Medical Coverage Would Cure Many Ills, BOSTON GLOBE, Nov. 5, 1999, at A27 (referring to HARVARD MED. PRAC. STUDY, PATIENTS, DOCTORS, AND LAWYERS: MEDICAL INJURY, MALPRACTICE LITIGATION, AND PATIENT COMPENSATION IN NEW YORK (1990)).
10. See generally PAUL C. WEILER, MEDICAL MALPRACTICE ON TRIAL (1991).
11. E.g., JEFFREY O'CONNELL, THE BLAME GAME (1987); see also G. EDWARD WHITE, TORT LAW IN AMERICA 164 (1980).
12. E.g., JEFFREY O'CONNELL, THE BLAME GAME (1987); see also G. EDWARD WHITE, TORT LAW IN AMERICA 164 (1980).
13. See Henson Moore & Jeffrey O'Connell, Foreclosing Medical Malpractice Claims by Prompt Tender of Economic Loss, 44 LA. L. REV. 1267, 1268 (1984). See generally COMM. ON QUALITY OF HEALTH CARE IN AM., INST. OF MED., TO ERR IS HUMAN: BUILDING A SAFER HEALTH SYSTEM (Linda T. Kohn et al. eds., 1999) [hereinafter IOM] (suggesting that medical errors are typically the result of a confluence of. factors, and proposing a system of error reduction).
14. See Henson Moore & Jeffrey O'Connell, Foreclosing Medical Malpractice Claims by Prompt Tender of Economic Loss, 44 LA. L. REV. 1267, 1268 (1984). See generally COMM. ON QUALITY OF HEALTH CARE IN AM., INST. OF MED., TO ERR IS HUMAN: BUILDING A SAFER HEALTH SYSTEM (Linda T. Kohn et al. eds., 1999) [hereinafter IOM] (suggesting that medical errors are typically the result of a confluence of. factors, and proposing a system of error reduction).
15. NEIL FEIGENSON, LEGAL BLAME 151-69 (2000).
16. Cf. COMM. FOR ECON. DEV., BREAKING THE LITIGATION HABIT: ECONOMIC INCENTIVES FOR LEGAL REFORM 10-11 (2000) ("The substantive law declared by the courts is often complex and . . . defies common sense. The imposition of liability is unpredictable, leading to doubt as to whether justice is served . . . .").
17. Paul C. Weiler, Fixing the Tail: The Place of Malpractice in Health Care Reform, 47 RUTGERS L. REV. 1157, 1163 (1995) (footnote omitted).
18. Jurors sitting on civil cases report that assessing damages is more difficult than resolving the issue of liability. See Mark Geistfeld, Placing a Price on Pain and Suffering: A Method for Helping Juries Determine Tort Damages for Nonmonetary Injuries, 83 CAL. L. REV. 773, 783 (1995).
19. See id. at 832-35 (discussing a market approach to the determination of personal injuries).
20. Id. at 782 (quoting GRAHAM DOUTHWAITE, JURY INSTRUCTIONS ON DAMAGES IN TORT ACTIONS § 6-17, at 274 (2d ed. 1988)).
21. Notice that there is no objective measurement for determining the severity of a plaintiffs pain and suffering. See Jeffrey O'Connell & Geoffrey Paul Eaton, Binding Early Offers as a Simple, if 'Second-Best, Alternative to Tort Law, 78 NEB. L. REV. 858, 862-63 (1999).
22. Louis L. Jaffe, Damages for Personal Injury: The Impact of Insurance, LAW & CONTEMP. PROBS., Spring 1953, at 219, 224-25.
23. See Geistfeld, supra note 15, at 786-87.
24. See Weiler, supra note 14, at 1179.
25. See Geistfeld, supra note 15, at 788.
26. Id. (quoting Kenneth S. Abraham et al., Enterprise Responsibility for Personal Injury: Further Reflections, 30 SAN DIEGO L. REV. 333, 339 (1993)).
27. See Jeffrey O'Connell, Two-Tier Tort Law: Neo No-Fault & Quasi-Criminal Liability, 27 WAKE FOREST L. REV. 871, 871 (1992). It is estimated that 25,000 to 30,000 medical tort suits filed each year are invalid. Weiler, supra note 14, at 1165.
28. See O'Connell, supra note 24, at 871. It is estimated that each year perhaps 75,000 potentially valid claims are not filed or do not lead to awards. Weiler, supra note 14, at 1165.
29. HARRY KALVEN, JR. & HANS ZEISEL, THE AMERICAN JURY 8 (1966).
30. See generally Robert P. Charrow & Vedar R. Charrow, Making Legal Language Understandable: A Psycholinguistic Study of Jury Instructions, 79 COLUM. L. REV. 1306 (1979) (proposing a methodology for measuring comprehensibility of legal language, in particular, jury instructions); Charles T. McCormick, Jury Verdicts Upon Special Questions in Civil Cases, 2 F.R.D. 176, 177 (1941) (calling for reform of juries and jury instnictions).
31. See generally Robert P. Charrow & Vedar R. Charrow, Making Legal Language Understandable: A Psycholinguistic Study of Jury Instructions, 79 COLUM. L. REV. 1306 (1979) (proposing a methodology for measuring comprehensibility of legal language, in particular, jury instructions); Charles T. McCormick, Jury Verdicts Upon Special Questions in Civil Cases, 2 F.R.D. 176, 177 (1941) (calling for reform of juries and jury instnictions).
32. Maurice Rosenberg, Contemporary Litigation in the United States, in LEGAL INSTITUTIONS TODAY 152, 177-78 (Harry Jones ed., 1977). But see infra notes 293-300 and accompanying text.
33. Hal R. Arkes & Cindy A. Schipani, Medical Malpractice v. the Business Judgment Rule: Differences in Hindsight Bias, 73 OR. L. REV. 587 (1994). Hal R. Arkes is a Professor of Psychology at Ohio University, and Cindy A. Schipani is a Professor (an Associate Professor at the time of the publication of the above mentioned article) at the School of Business Administration at the University of Michigan.
34. Id. at 594-95.
35. Id.
36. Id.
37. STEVEN E. PEGALIS & HARVEY F. WACHSMAN, AMERICAN LAW OF MEDICAL MALPRACTICE § 3.2, at 97 (2d ed. 1992).
38. Arkes & Schipani, supra note 29, at 596 (quoting Pike v. Honsinger, 49 N.E. 760, 762 (N.Y. 1898)).
39. See id. at 595.
40. See id. at 603.
41. See id. at 603-04.
42. Other reasons for the abandonment of the strict locality rule include the fear that rural patients would receive a substandard level of medical treatment, the standardization and nationalization of medical education, the nationalization of medical journals, the availability of modern transportation and communication, and the availability of physician referrals. See id. at 604.
43. See id.
44. See id. at 605.
45. See id.
46. Id. at 597.
47. Id. at 598.
48. See id.
49. See id.
50. See id.
51. See id. at 600.
52. Id. at 599.
53. Id. (citations omitted). The so-called "best judgment" rule (of which more below) is also a criterion in some jurisdictions for a physician's compliance with due care standards. Id. at 601. The best judgment rule is seen as creating tension in determining malpractice and leaves room for confusion in the formulation of jury instructions. Id. For instance, it is argued that it is possible for physicians to exercise their best judgment yet still decide on a course of treatment that would not have been chosen by competent members of the physician's medical community (whether based on a "similar community" or "national community" standard). Id. Under such a situation, it is argued physicians' use of their best judgment is not - nor should it be misunderstood by a trier of fact to be - a sufficient defense against evidence of incompetence. Id. at 603. Because of the concern of jury confusion, courts have shifted toward eliminating the best judgment (or "error of judgment") standard. Id. at 602 & n.62 (citing Shumaker v. Johnson, 571 So. 2d 991, 994 (Ala. 1990); Ouellette v. Subak, 391 N.W.2d 810, 815 (Minn. 1986); Shamburger v. Behrens, 380 N.W.2d 659, 663 (S.D. 1986); Wall v. Stout, 311 S.E.2d 571, 577 (N.C. 1984); Teh Len Chu v. Fairfax Emergency Med. Ass'n, 290 S.E.2d 820, 822 (Va. 1982)). But see infra notes 240-44 and accompanying text.
54. Twenty-four states. have adopted all or substantially all of the Model Business Corporation Act (the Model Act) as their general corporation statute. REV. MODEL BUS. CORP. ACT, Introduction, at xix (1999). These states are: Alabama, Arizona, Arkansas, Connecticut, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Mississippi, Montana, Nebraska, New Hampshire, North Carolina, Oregon, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming. Id. at xix n.1. Seven other jurisdictions have corporation statutes based on the 1969 version of the Model Act. Id. at xix. These seven jurisdictions are: Alaska, the District of Columbia, Hawaii, Maine, New Mexico, Rhode Island, and South Dakota. Id. at xix n.2.
55. Id. § 8.30(a), (b). The Model Act's 1984 formulation of the duty of care provided that a director is required to discharge his/her duties with "the care an ordinarily prudent person in a like position would exercise under similar circumstances." Id. § 8.30.
56. Specifically, duty of care is defined as "the care that an ordinarily pnident person would reasonably be expected to exercise in a like position and under similar circumstances." AM. LAW INST., PRINCIPLES OF CORPORATE GOVERNANCE AND STRUCTURE: ANALYSIS AND RECOMMENDATIONS § 4.01 (a) (1994) [hereinafter PRINCIPLES OF CORPORATE GOVERNANCE].
57. See Arkes & Schipani, supra note 29, at 611.
58. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
59. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
60. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
61. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
62. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
63. See Charles Hansen, The ALI Corporate Governance Project: Of the Duty of Due Care and the Business Judgment Rule, a Commentary, 41 BUS. LAW. 1237, 1240 (1986) [hereinafter Hansen, ALI Corporate Governance Project]. In the non-decisionmaking context, the test of liability is "some form of results oriented due care standard that measures the merits of the directors' supervisory performance." Charles Hansen, The Duty of Care, the Business Judgment Rule, and the American Law Institute Corporate Governance Project, 48 BUS. LAW. 1355, 1356 (1993) [hereinafter Hansen, The Duty of Care]. As we shall see, in the non-decisionmaking context, the required due care standard is much less demanding than the traditional language often expressed in case law, or in the Model Act or in the Principles of Corporate Governance. See Hansen, The Duty of Care, supra, at 1359. (By way of illustration, the REV. MODEL BUS. CORP. ACT § 8.30 (1984) speaks of due care in terms of "the care an ordinarily prudent person in a like position would exercise under similar circumstances."). As one commentator has noted, despite the traditional language used, a careful examination of the facts and holdings of cases indicate that officers and directors are found liable in the non-decisionmaking context "only upon an express abdication of responsibility or upon obvious and prolonged failure to exercise oversight or supervision." Hansen, The Duty of Care, supra, at 1359. In other words, only when there is an abdication of responsibility by officers and directors do courts impose liability. An often-cited case demonstrating this observation is Francis v. United Jersey Bank, 432 A.2d 814 (N.J. 1981). In Francis, a director of a reinsurance brokerage was held personally liable for unlawful payments made by her sons as officers of the corporation because of her neglect of corporate affairs. The New Jersey Supreme Court found that the director never read or obtained the firm's financial statements, which would have plainly revealed the fraud, nor did she know virtually anything of the corporation's affairs. 432 A.2d at 819. According to Charles Hansen, "[a]n extensive study of the cases in the non-decision making context indicates that express abandonment of duty, or patterns of exacerbated neglect amounting to an abandonment of duty, constitute, with rare exception, the only circumstances in which directors were found liable" despite talk of traditional tort-derived formulations of the duty of care. Hansen, The Duty of Care, supra, at 1360. Thus, the similarity of language defining due care standards for physicians and corporate officers and directors is highly deceptive.
64. HARRY G. HENN & JOHN R. ALEXANDER, LAWS OF CORPORATIONS 661 (3d ed. 1983) (citations omitted) (emphasis added).
65. See Hansen, The Duty of Care, supra note 54, at 1357.
66. Id. at 1358.
67. Id. (citing Cramer v. Gen. Tel. & Elecs. Corp., 582 F.2d 259, 275 (2d Cir. 1979)).
68. Id. (citing Aronson v. Lewis, 473 A.2d 805, 812 n.6, 815 (Del. 1984)).
69. Id. (citing Citron v. Fairchild Camera & Instrument Corp., No. 6085, slip op. at 45 (Del. Ch. May 19, 1988), aff'd, 569 A.2d 53 (Del. 1989)).
70. Id. at 1366 (citing Allaun v. Consol. Oil Co., 147 A. 257, 261 (Del. Ch. 1929)).
71. Id. at 1358.
72. Id. at 1365-69.
73. One of the most famous formulations of the business judgment rule, typical of the broad interpretation that courts have attached to this doctrine, is found in Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (stating that "[i]t is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company").
74. There are a few jurisdictions that do hold officers and directors to the standard of simple negligence. E.g., Theriot v. Bourg, 691 So. 2d 213 (La. Ct., App. 1997) (stating that in Louisiana the standard of care is simple rather than gross negligence). These jurisdictions remain a small minority, and they have received wide criticism for their interpretation of the business judgment rule. See, e.g., Thomas M. McEachin, Note, Theriot v. Bourg: The Demise of the Business Judgment Rule in Louisiana?, 59 LA. L. REV. 375 (1998).
75. PRINCIPLES OF CORPORATE GOVERNANCE, supra note 52, § 4.01 (a) cmt. h.
76. Joseph W. Bishop, Jr., Sitting Ducks and Decoy Ducks: New Trends in the Indemnification of Corporate Directors and Officers, 77 YALE L.J. 1078, 1099 (1968).
77. Hansen, ALI Corporate Governance Project, supra note 54, at 1245.
78. See Arkes & Schipani, supra note 29, at 617; see also, e.g., DEL CODE ANN. tit. 8, § 102(b)(7) (Supp. 2000).
79. See Arkes & Schipani, supra note 29, at 617-18.
80. Notice that with the existence of exculpation and/or indemnification it is unnecessary for officers and directors to allocate a portion of their salaries to the purchasing of costly malpractice insurance.
81. See Daniel R. Fischel, The Corporate Governance Movement, 35 VAND. L. REV. 1259, 1288 (1982) ("Courts . . . do not possess the experience, expertise, or information necessary to make complicated business decisions."); see also E. Norman Veasey, Seeking a Safe Harbor from Judicial Scrutiny of Directors' Business Decisions - An Analytical Framwork for Litigation Strategy and Counselling Directors, 37 BUS. LAW. 1247, 1265-66 (1982).
82. See Daniel R. Fischel, The Corporate Governance Movement, 35 VAND. L. REV. 1259, 1288 (1982) ("Courts . . . do not possess the experience, expertise, or information necessary to make complicated business decisions."); see also E. Norman Veasey, Seeking a Safe Harbor from Judicial Scrutiny of Directors' Business Decisions - An Analytical Framwork for Litigation Strategy and Counselling Directors, 37 BUS. LAW. 1247, 1265-66 (1982).
83. R. Franklin Balotti & James J. Hanks, Jr., Rejudging the Business Judgment Rule, 48 BUS. LAW. 1337, 1341-42 (1993) (citation omitted).
84. Id. at 1342.
85. Franklin A. Gevurtz, The Business Judgment Rule: Meaningless Verbiage or Misguided Notion?, 67 S. CAL. L. REV. 287, 304-21 (1994) (stating that the four general categories are: difficulties with after-the-fact review of business decisions, nature of the damages, nature of the plaintiff, and utility of compensation or deterrence).
86. Kenneth B. Davis, Jr., Once More, the Business Judgment Rule, 2000 WIS. L. REV. 573, 574-75, 580-89 (explaining the business judgment rule in terms of risk allocation (weak and strong form), expertise, imperfect litigation, non-standardization and sovereignty). The weak form of the risk allocation rationale provides that business decisions and risks arc inseparable, and that sound decisions when made, although later resulting in loss, should not, with the prescriptive of hindsight, result in personal liability for corporate officers and directors. According to this view, the business judgment rule is needed in order to ensure healthy risk taking in the business context. Id. at 574. The strong form of the risk allocation rationale provides that the business judgment rule is necessary for purposes of risk distribution. This justification sees the business judgment rule as a necessary tool to shift loss from a small group (such as a board) across a larger, more diversified group (such as shareholders). See id. at 575. The expertise rationale provides that business judgments should be for business experts, such as directors and management, and that judges and juries are ill-equipped to review such decisions. See id. at 580. The imperfect litigation rationale provides that litigation, several years after the action in question, cannot fairly evaluate all the circumstances and factors confronting corporate officers and directors when their decision was made. See id. The standardization rationale provides that corporate officers and directors, as a profession, lack institutional arrangements to "develop, debate, and disseminate professional standards." Id. at 583. Finally, the sovereignty rationale justifies the business judgment rule on the grounds that there exists a statutory directive (at least in states like Delaware) that "the corporation's business and affairs be managed by or under the direction of its board of directors" not courts. Id. at 587; see also infra notes 215-21 and accompanying text.
87. Gevurtz, supra note 75, at 305-12 (arguing that the business judgment rule should be abolished and that corporate officers and directors should be held to the same rules of simple negligence as is the case with other professionals). In his article, Professor Gevurtz advanced several of the arguments generated in this Article. Unlike Professor Gevurtz, however, we do not believe that such arguments should be used to abolish the business judgment rule. Instead, the arguments extended by Professor Gevurtz should be utilized to expand at least a variant of the business judgment rule to other professions such as medicine and engineering and even beyond. See infra notes 250-55 and accompanying text.
88. 644 F. Supp. 1074, 1083 (M.D.N.C. 1986), aff'd, 836 F.2d 209 (4th Cir. 1987).
89. Id. (citations omitted) (emphasis added).
90. Id.
91. Id.
92. Id.
93. 529 N.E.2d 449, 459 (Ohio 1988).
94. Id. at 459-60.
95. Arkes & Schipani, supra note 29, at 622 (emphasis added).
96. See id. at 621-30.
97. Id. at 630.
98. See id. at 633-35.
99. Id. at 623.
100. Id. (citation omitted).
101. Barnett v. Bachrach, 34 A.2d 626, 629 (D.C. 1943).
102. Arkes & Schipani, supra note 29, at 623 (citation omitted).
103. See W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS 185-93 (5th ed. 1984).
104. Robert H. Brook et al., The Relationship Between Medical Malpractice and Quality of Care, 1975 DUKE L.J. 1197, 1209.
105. Arkes & Schipani, supra note 29, at 623 (citation omitted) (emphasis added).
106. See Gevurtz, supra note 75, at 311 & n.107 (citing Grain v. Allison, 443 A.2d 558, 561 (D.C. 1982)).
107. Id. at 311.
108. Id.
109. Id. at 311 n.110.
110. See Eckert v. Long Island R.R., 43 N.Y. 502 (1871) (upholding a jury verdict finding that a deceased killed while attempting to rescue a child from the path of an oncoming train was not negligent). The Eckert court explained, "If, from the appearances, he [the deceased] believed that he could [save the child], it was not negligence to make an attempt so to do, although believing that possibly lie might fail and receive an injury himself." Id. at 505-06. The court continued, "The law has so high a regard for human life that it will not impute negligence to an effort to preserve it, unless made under such circumstances as to constitute rashness in the judgment of prudent persons." Id. at 506. In other words, if the potential benefits of the action outweigh both the risk involved and the consequences of not acting, then a defendant is not negligent (nor a plaintiff contribitorily negligent) for so acting.
111. Arkes & Schipani, supra note 29, at 623.
112. Note the caveat that this observation is most true if a corporation has not adopted any exculpatory or indemnifying provisions that shield its officers and directors from liability.
113. See Randall R. Bovbjerg, Medical Malpractice on Trial: Quality of Care Is the Important Standard, LAW & CONTEMP. PROBS., Spring 1986, at 321, 324; Brook et al., supra note 94, at 1213, 1217; James W. Brooke, Medical Malpractice: A Socio-Economic Problem from a Doctors [sic] View, 6 WILIAMETTE L.J. 225, 231 (1970); Gevurtz, supra note 75, at 312 & n.113 (citing STAFF OF SENATE SUBCOMM. ON EXECUTIVE REORGANIZATIONS OF THE SENATE COMM. ON GOV'T OPERATIONS, 91ST CONG., MEDICAL MALPRACTICE: THE PATIENT VERSUS THE PHYSICIAN 453 (Comm. Print 1969)).
114. See Randall R. Bovbjerg, Medical Malpractice on Trial: Quality of Care Is the Important Standard, LAW & CONTEMP. PROBS., Spring 1986, at 321, 324; Brook et al., supra note 94, at 1213, 1217; James W. Brooke, Medical Malpractice: A Socio-Economic Problem from a Doctors [sic] View, 6 WILIAMETTE L.J. 225, 231 (1970); Gevurtz, supra note 75, at 312 & n.113 (citing STAFF OF SENATE SUBCOMM. ON EXECUTIVE REORGANIZATIONS OF THE SENATE COMM. ON GOV'T OPERATIONS, 91ST CONG., MEDICAL MALPRACTICE: THE PATIENT VERSUS THE PHYSICIAN 453 (Comm. Print 1969)).
115. See Randall R. Bovbjerg, Medical Malpractice on Trial: Quality of Care Is the Important Standard, LAW & CONTEMP. PROBS., Spring 1986, at 321, 324; Brook et al., supra note 94, at 1213, 1217; James W. Brooke, Medical Malpractice: A Socio-Economic Problem from a Doctors [sic] View, 6 WILIAMETTE L.J. 225, 231 (1970); Gevurtz, supra note 75, at 312 & n.113 (citing STAFF OF SENATE SUBCOMM. ON EXECUTIVE REORGANIZATIONS OF THE SENATE COMM. ON GOV'T OPERATIONS, 91ST CONG., MEDICAL MALPRACTICE: THE PATIENT VERSUS THE PHYSICIAN 453 (Comm. Print 1969)).
116. The problem is that fear of liability can cause practitioners to resist many of the new advances made by researchers and therefore cause an unnecessary delay between discovery and implementation. Cf. Peter W. Huber, Safety and the Second Best: The Hazards of Public Risk Management in the Courts, 85 COLUM. L. REV. 277, 308-09 (1985).
117. See M. Schwarz, Liability Crisis: The Physicians' Viewpoint, in MEDICAL MALPRACTICE - TORT REFORM 18 (James E. Hamner & B.R. Jennings eds., 1987) (citing L. HARVEY & S. SHUBAT, A.M.A. SURVEYS OF PHVSICIANS AND PUBLIC OPINION (1986)).
118. See M. Schwarz, Liability Crisis: The Physicians' Viewpoint, in MEDICAL MALPRACTICE - TORT REFORM 18 (James E. Hamner & B.R. Jennings eds., 1987) (citing L. HARVEY & S. SHUBAT, A.M.A. SURVEYS OF PHVSICIANS AND PUBLIC OPINION (1986)).
119. See id. at 20.
120. See U.S. CONG., OFFICE OF TECH. ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 3 (1994); Armand Leone, Jr., As Health Care Enterprise Liability Expands . . . Is ADR the Rx for Malpractice?, DISP. RESOL. J., Sept. 1994, at 7, 10; see also Laurence R. Tancredi, Designing a No-Fault Alternative, LAW & CONTEMP. PROBS., Spring 1986, at 277, 279 (citing AMA Study Reports Sharp Increase in Malpractice Claims Against Physicians, MED. LIAB. ADVIS. SERVICE, Jan. 1980, at 16); Joel Brinkley, A.M.A. Study Finds Big Rise in Claims for Malpractice, N.Y. TIMES, Jan. 17, 1985, at Al.
121. See U.S. CONG., OFFICE OF TECH. ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 3 (1994); Armand Leone, Jr., As Health Care Enterprise Liability Expands . . . Is ADR the Rx for Malpractice?, DISP. RESOL. J., Sept. 1994, at 7, 10; see also Laurence R. Tancredi, Designing a No-Fault Alternative, LAW & CONTEMP. PROBS., Spring 1986, at 277, 279 (citing AMA Study Reports Sharp Increase in Malpractice Claims Against Physicians, MED. LIAB. ADVIS. SERVICE, Jan. 1980, at 16); Joel Brinkley, A.M.A. Study Finds Big Rise in Claims for Malpractice, N.Y. TIMES, Jan. 17, 1985, at Al.
122. See U.S. CONG., OFFICE OF TECH. ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 3 (1994); Armand Leone, Jr., As Health Care Enterprise Liability Expands . . . Is ADR the Rx for Malpractice?, DISP. RESOL. J., Sept. 1994, at 7, 10; see also Laurence R. Tancredi, Designing a No-Fault Alternative, LAW & CONTEMP. PROBS., Spring 1986, at 277, 279 (citing AMA Study Reports Sharp Increase in Malpractice Claims Against Physicians, MED. LIAB. ADVIS. SERVICE, Jan. 1980, at 16); Joel Brinkley, A.M.A. Study Finds Big Rise in Claims for Malpractice, N.Y. TIMES, Jan. 17, 1985, at Al.
123. See U.S. CONG., OFFICE OF TECH. ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 3 (1994); Armand Leone, Jr., As Health Care Enterprise Liability Expands . . . Is ADR the Rx for Malpractice?, DISP. RESOL. J., Sept. 1994, at 7, 10; see also Laurence R. Tancredi, Designing a No-Fault Alternative, LAW & CONTEMP. PROBS., Spring 1986, at 277, 279 (citing AMA Study Reports Sharp Increase in Malpractice Claims Against Physicians, MED. LIAB. ADVIS. SERVICE, Jan. 1980, at 16); Joel Brinkley, A.M.A. Study Finds Big Rise in Claims for Malpractice, N.Y. TIMES, Jan. 17, 1985, at Al.
124. See U.S. CONG., OFFICE OF TECH. ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 3 (1994); Armand Leone, Jr., As Health Care Enterprise Liability Expands . . . Is ADR the Rx for Malpractice?, DISP. RESOL. J., Sept. 1994, at 7, 10; see also Laurence R. Tancredi, Designing a No-Fault Alternative, LAW & CONTEMP. PROBS., Spring 1986, at 277, 279 (citing AMA Study Reports Sharp Increase in Malpractice Claims Against Physicians, MED. LIAB. ADVIS. SERVICE, Jan. 1980, at 16); Joel Brinkley, A.M.A. Study Finds Big Rise in Claims for Malpractice, N.Y. TIMES, Jan. 17, 1985, at Al.
125. See S. Y. Tan, Comment, The Medical Malpractice Crisis: Will No-Fault Cure the Disease?, 9 U. HAW. L. REV. 241, 242 (1987).
126. See Daniel Kessler & Mark McClellan, Do Doctors Practice Defensive Medicine?, 111 Q.J. ECON. 353, 387-88 (1996).
127. It may be argued that the nature of damages is a necessary but not sufficient factor to explain the difference in legal treatment between physicians and corporate officers and directors. If such an argument were advanced, the next step would be to determine what other factors, if any, are sufficient to justify this difference.
128. Of course, some of the work that attorneys do is not economic in nature. For instance, criminal defense work holds more at stake than just the protection of one's purse. Be that as it may, the bulk of work by most attorneys is purely economic.
129. See Gevurtz, supra note 75, at 313 (remarking that corporate directors are not unique among potential tort defendants in that their negligence is likely to lead to economic rather than physical injury - attorneys as a group are the example cited to make this point).
130. Arkes & Schipani, supra note 29, at 624.
131. See Hansen, ALI Corporate Governance Project, supra note 54, at 1239.
132. See, e.g., Smith v. Van Gorkom, 488 A.2d 858, 899 (Del. 1985) (Christie, J., dissenting).
133. See McEachin, supra note 65, at 384.
134. See supra notes 105-09 and accompanying text.
135. E.g., SCHWARZ, supra note 105, at 21; JENNIFER O'SULLIVAN, MEDICAL MALPRACTICE 5 (CRS Report for Congress 1997) (citing an American College of Obstetrician and Gynecologists (ACOG) survey which reported that one-quarter of members reduced high-risk obstetrical care due to fear of tort liability).
136. Medical Malpractice: Hearings on H.R. 5110 Before the Subcomm. on Health and the Env't of the House Comm. on Energy and Commerce, 99th Cong. 80-81 (1986) (citing a 33% drop in number of practicing obstetricians in Florida alone).
137. O'SULLIVAN, supra note 118, at 5 (citing ACOG study indicating that 12.3% of members gave up obstetrics in 1992 because of fear of tort liability).
138. Moore & O'Connell, supra note 11, at 1270; Roger Rosenblatt, Why Do Physicians Stop Practicing Obstetrics?: The Impact of Malpractice Claims, 76 OBSTETRICS AND GYNECOLOGY 245, 245 (1990).
139. In fact, we argue below that the path to becoming a physician is the most laborious of the many graduate and professional programs available.
140. Arkes & Schipani, supra note 29, at 624.
141. See supra note 54 and accompanying text.
142. See supra notes 55-65 and accompanying text.
143. See supra notes 66-68 and accompanying text.
144. See supra notes 69-71 and accompanying text.
145. See, e.g., Bell v. N.Y. Health & Hosps. Corp., 90 A.D.2d 270 (N.Y. App. Div. 1982).
146. See Arkes & Schipani, supra note 29, at 606.
147. One can argue that corporate officers and directors ultimately pay to receive exculpation by being offered smaller salaries for their services.
148. See 1 AM. LAW INST., REPORTERS' STUDY: ENTERPRISE RESPONSIBILITY FOR PERSONAL INJURY 285-89 (1991).
149. Although it can be argued that physicians will pass on the expenses of higher premiums to patients and their health insurance companies, it seems unlikely that such a response - especially in today's age of cost-containment policies, medical utilization review, and purchasing agreements - will necessarily enable physicians to capture the increased costs of delivering medicine.
150. See Kenneth S. Abraham & Paul C. Weiler, Enterprise Medical Liability and the Evolution of the American Health Care System, 108 HARV. L. REV. 381, 399 (1994). The standardization of premium rates for liability insurance is justified on the grounds that "from the insurer's as well as from the physician's point of view, having been sued is a sufficiently rare and random event that it gives very little evidence about the general quality of a physician's work." See Weiler, supra note 14, at 1191 n.60.
151. See Abraham & Weiler, supra note 133, at 401-02.
152. See AM. LAW INST., supra note 131, at 287-89.
153. Arkes & Schipani, supra note 29, at 624.
154. Id. at 625.
155. Id.
156. Critics may argue that because the corporate field lacks threshold requirements, some officers and directors may not have the knowledge or training of those who have received a formal business education. But these individuals, under the law corporate governance standards, are still held to the same objective standard of due care. See Francis v. United Jersey Bank, 432 A.2d 814, 822 (N.J. 1981).
157. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
158. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
159. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
160. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
161. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
162. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
163. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
164. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal
165. See Gevurtz, supra note 75, at 308 & n.92 (citing Gordon Christy, Corporate Mismanagement as Malpractice: A Critical Reanalysis of Corporate Managers' Duties of Care and Loyalty, 21 HOUS. L. REV. 105 (1984)). For example, one of the common areas involving board approval, and a frequent source of legal challenges to the board's decision, is the buying and selling of businesses or major business assets. E.g., Stuart R. Cohn, Demise of the Directors' Duty of Care: Judicial Avoidance of Standards and Sanctions Through the Business Judgment Rule, 62 TEX. L. REV. 591, 596-97 (1983). Here one of the primary issues is price. FRANKLIN A. GEVURTZ, BUSINESS PLANNING 796-804 (1991). While business valuation is certainly more of an art than a science, to say it is an art without any established guidelines or methodologies is to ignore huge quantities of available literature. E.g., HAROLD BIERMAN, JR. ET AL., QUANTITATIVE ANALYSIS FOR BUSINESS DECISIONS (8th ed. 1991); ARTHUR S. DEWING, FINANCIAL POLICY OF CORPORATIONS (5th ed. 1953); EUGENE F. FAMA & MERTON H. MILLER, THE THEORY OF FINANCE (1972); DENNIS E. LOGUE, HANDBOOK OF MODERN FINANCE (2d ed. 1990); JAMES C. VAN HORNE, FINANCIAL MANAGEMENT AND POLICY (5th ed. 1980); J. FRED WESTON & EUGENE F. BRIGHAM, MANAGERIAL FINANCE (4th ed. 1972). Id. at 308 n.92; cf. Davis, supra note 76, at 582-84 (discussing the possibility of standards for business professionals, such as directors, in the context of the business judgment rule).
166. See Gevurtz, supra note 75, at 308.
167. See id. at 308 & n.93 (citing see, e.g., William H. Rodgers, Jr., Negligence Reconsidered: The Role of Rationality in Tort Theory, 54 S. CAL. L. REV. 1, 6-7 (1980) ("This is not to say that group deliberations yield better results; merely that there is more likely to be an articulated rationale or rationales for the group's action.")). But for the distinction between "deciding" and "doing," see infra notes 220-22 and accompanying text.
168. As the reader will sense, we do not in any way advocate the elimination of the business judgment rule; instead, we argue that many of the rationales given to justify its exclusive existence seem misplaced.
169. See Gevurtz, supra note 75, at 309-10. For an analysis examining why trial lawyers are not more often found negligent for their trial work due to the largely judgmental nature of their of decisions see id.
170. See id. at 310.
171. For an insightful article echoing many of the points made herein concerning practice guidelines, see Karen A. Butler, Comment, Health Care Quality Revolution: Legal Landmines for Hospitals and the Rise of the Critical Pathway, 58 ALB. L. REV. 843, 856 (1995).
172. The Institute of Medicine is a private, nonprofit society of the National Academy of Sciences. See IOM, supra note 11, at iii.
173. Other terms such as "standards," "parameters," and "practice options" are also sometimes included in a discussion of medical guidelines. Each bears different definitive levels of recommendation and meaning. A report to Congress on "Practice Guidelines" by the United States General Accounting Office defined a standard as "practice policies [in] which the consequence of an intervention on health and economics is sufficiently well-known and there is virtual unanimity (by the promulgators) about the desirability or undesirability of the intervention and about the proper use, or non-use of that intervention." Lori Rinella, Comment, The Use of Medical Practice Guidelines in Medical Malpractice Litigation - Should Practice Guidelines Define the Standard of Care?, 64 UMKC L. REV. 337, 337 n.5 (1995) (citing U.S. GEN. ACCOUNTING OFFICE, PRACTICE GUIDELINES: THE EXPERIENCE OF MEDICAL SPECIALTY SOCIETIES, REPORT TO CONGRESSIONAL REQUESTERS 12 (1991)). Practice guidelines "are recommendations that are understood well-enough to permit meaningful decisions about proper uses of a health care intervention, and an appreciable, but nonunanimous, majority of physicians and informed patients share the preferences regarding the intervention." Id. Practice options refer to when an "intervention is a reasonable choice of course but the outcomes are not known, or a significant portion of physicians or patients feel the intervention is not worth the benefit, not known or are evenly divided." Id.
174. Other terms such as "standards," "parameters," and "practice options" are also sometimes included in a discussion of medical guidelines. Each bears different definitive levels of recommendation and meaning. A report to Congress on "Practice Guidelines" by the United States General Accounting Office defined a standard as "practice policies [in] which the consequence of an intervention on health and economics is sufficiently well-known and there is virtual unanimity (by the promulgators) about the desirability or undesirability of the intervention and about the proper use, or non-use of that intervention." Lori Rinella, Comment, The Use of Medical Practice Guidelines in Medical Malpractice Litigation - Should Practice Guidelines Define the Standard of Care?, 64 UMKC L. REV. 337, 337 n.5 (1995) (citing U.S. GEN. ACCOUNTING OFFICE, PRACTICE GUIDELINES: THE EXPERIENCE OF MEDICAL SPECIALTY SOCIETIES, REPORT TO CONGRESSIONAL REQUESTERS 12 (1991)). Practice guidelines "are recommendations that are understood well-enough to permit meaningful decisions about proper uses of a health care intervention, and an appreciable, but nonunanimous, majority of physicians and informed patients share the preferences regarding the intervention." Id. Practice options refer to when an "intervention is a reasonable choice of course but the outcomes are not known, or a significant portion of physicians or patients feel the intervention is not worth the benefit, not known or are evenly divided." Id.
175. Id. at 337 (citing Kathleen N. Lohr, Guidelines for Clinical Practice: What They Are and Why They Count, 23 J.L. MED. & ETHICS 49, 49 (1995) (citation omitted)).
176. See Gilbert B. Bluhm, President's Page: Practice Parameters - Physician Input Is Key, 93 MICH. MED. 68, 68 (1994).
177. See Omnibus Budget Reconciliation Act of 1989 § 1901, 42 U.S.C. § 299 (Supp. V 1999).
178. See Rinella, supra note 148, at 339.
179. Id. at 338 (citing Adam Wolff, Practice Parameters in Health Reform: New State Approaches Precede Clinton Plan, 21 J.L. MED. & ETHICS 394 (1995)).
180. See Butler, supra note 146, at 854-55 (citing Steven H. Woolf, Practice Guidelines: A New Reality in Medicine (pt. 3), 153 ARCHIVES INTERNAL MED. 2646, 2650 (1993)).
181. See id.
182. Id. at 855. As to the widespread failure to follow practice guidelines in the U.S. see Michael D. Cabana et al., Why Don't Physicians Follow Clinical Practice Guidelines? A Framework for Improvement, 282 JAMA 1458, 1458 (1999).
183. See Ed Hirshfeld, Use of Practice Parameters as Standards of Care and in Health Care Reform: A View from the American Medical Association, 19 JOINT COMM'N J. ON QUALITY IMPROVEMENT 322, 323 (1993).
184. See Gevurtz, supra note 75, at 309.
185. Id. at 309 (citing DONALD A. SCHON, THE REFLECTIVE PRACTIONER: HOW PROFESSIONALS THINK IN ACTION 16 (1983)); see also Bovbjerg, supra note 103, at 329 (measuring the quality of medical care is especially difficult given that medicine is as much an art as a science and given the complexities of the human organism); David Mechanic, Some Social Aspects of the Medical Malpractice Dilemma, 1975 DUKE L.J. 1179, 1182 (stating that standards of medical practice are ambiguous).
186. Id. at 309 (citing DONALD A. SCHON, THE REFLECTIVE PRACTIONER: HOW PROFESSIONALS THINK IN ACTION 16 (1983)); see also Bovbjerg, supra note 103, at 329 (measuring the quality of medical care is especially difficult given that medicine is as much an art as a science and given the complexities of the human organism); David Mechanic, Some Social Aspects of the Medical Malpractice Dilemma, 1975 DUKE L.J. 1179, 1182 (stating that standards of medical practice are ambiguous).
187. Davis, supra note 76, at 581-82.
188. See supra notes 10-14, 29-49 and accompanying text.
189. See supra note 73 and accompanying text.
190. See Kenneth Abraham, The Trouble with Negligence, 54 VAND. L. REV. 1187, 1193-94 (2001).
191. See id.
192. KARL N. LLEWELLYN, THE COMMON LAW TRADITION: DECIDING APPEALS 364-65 (1960) (discussing vagueness in the enforceability of unconscionable contracts).
193. See Abraham, supra note 163, at 1199.
194. Abraham, supra note 163, at 1195.
195. Arkes & Schipani, supra note 29, at 626.
196. Id.; see also Wilkinson v. Vesey, 295 A.2d 676, 682 (R.I. 1972) (holding that physicians do not guarantee either a correct diagnosis or successful treatment).
197. Arkes & Schipani, supra note 29, at 627.
198. Id.
199. Id.
200. Id.
201. Intentional misconduct, egregious, irrational, wanton, criminal, or fraudulent conduct could all be treated as negating good faith. That is, they can be seen as the equivalent of bad faith. See infra note 245 and accompanying text.
202. For instance there are no pre-law and generally no pre-business requirements that must be satisfied before entering American law or business schools.
203. Duke University School of Medicine is one such school that encourages its medical students to complete a biochemistry course before the first day of medical school classes. BULLETIN OF DUKE UNIVERSITY 2000-2001, DOCTOR OF MEDICINE PROGRAM 35 (2001), http://registrar.duke.edu/bulletins/Medicine/2000/doc_mecl.PDF.
204. The year 2000 medical school acceptance rate compiled by U.S. News & World Report speaks to the briskness of competition for medical school seats. Of the top fifty-one research medical schools in the report, forty schools had a single digit acceptance rate. Of these top fifty-one schools, Boston University had the most stringent acceptance rate (2.1%) and the University of Massachusetts - Worcester had the least stringent (22.2%). Best Graduate Schools, U.S. NEWS & WORLD REP., Apr. 9, 2001, at 88, available at http://www.usnews.com/usnews/edu/beyond/bcrank.htm.
205. Medical school and dental school are four years in duration, law school is three years, a Masters of Business Administration (MBA) program is two years, a masters degree typically requires two to three years of study, and a Ph.D. program usually takes at least three to four years to complete. Certified public accountants (CPAs) are not required to have a graduate degree to sit for the CPA exam; 120 credit hours was formerly required but this has recently been changed to 150 credit hours. Most engineers work with a bachelors of science degree that takes four to five years to earn.
206. No other profession, to our knowledge, requires its members to complete a residency program.
207. See supra note 73 and accompanying text.
208. See, e.g., Daniel R. Fischel & Michael Bradley, The Role of Liability Rules and the Derivative Suit in Corporate Law: A Theoretical and Empirical Analysis, 71 CORNELL L. REV. 261, 275-76 (1986); David M. Phillips, Principles of Corporate Governance: A Critique of Part IV, 52 GEO. WASH. L. REV. 653, 672-82 (1984).
209. See, e.g., Daniel R. Fischel & Michael Bradley, The Role of Liability Rules and the Derivative Suit in Corporate Law: A Theoretical and Empirical Analysis, 71 CORNELL L. REV. 261, 275-76 (1986); David M. Phillips, Principles of Corporate Governance: A Critique of Part IV, 52 GEO. WASH. L. REV. 653, 672-82 (1984).
210. Arkes & Schipani, supra note 29, at 628.
211. See id.
212. See id.
213. See id.
214. Id.
215. Id. at 629.
216. Health Care Quality Improvement Act of 1986, Pub. L. No. 99-660, 100 Stat. 3784 (codified as amended at 42 U.S.C. §§ 11101-11152 (1994)).
217. 42 U.S.C. § 11131(a), (c) (1994); see also IOM, supra note 11, at 121.
218. See id. § 11133(a) (1) (A).
219. See id. § 11133(a) (1) (B) (i)-(ii).
220. See id. § 11135(a) (1).
221. See id. § 11131(a) (2).
222. Note, however, whenever possible, hospitals may often settle claims on their own without including any physician's name in the settlement in order to avoid the reporting requirement as to physicians.
223. See 42 U.S.C. § 11135(b).
224. For more information on the NPDB and its operation, see generally Susan L. Horner, The Health Care Quality Improvement Act of 1986: Its History, Provisions, Applications and Implications, 16 AM. J.L. & MED. 455 (1990); Ila S. Rothschild, Operation of the National Practitioner Data Bank, 25 J. HEALTH & HOSP. L. 225 (1992).
225. For more information on the NPDB and its operation, see generally Susan L. Horner, The Health Care Quality Improvement Act of 1986: Its History, Provisions, Applications and Implications, 16 AM. J.L. & MED. 455 (1990); Ila S. Rothschild, Operation of the National Practitioner Data Bank, 25 J. HEALTH & HOSP. L. 225 (1992).
226. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
227. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
228. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
229. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
230. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
231. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
232. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
233. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
234. Marshall B: Kapp, Medical Error Versus Malpractice, 1 DEPAUL J. HEALTH CARE L. 751, 770 (1997) (citing BARRY R. FURROW ET AL., HEALTH LAW 265-88, chs. 7-8 (1995)); see also Robert L. Wilson, Jr., Corporate Negligence of Hospital, in 2 MEDICAL & HOSP. NEGLIGENCE §§ 20:01-:12 (Miles J. Zaremski & Louis S. Goldstein eds., 1988); Robert L. Wilson, Jr., Respondent Superior, in 2 MEDICAL & HOSP. NEGLIGENCE, supra, §§ 19:0-:10; Jennifer Steinhauer, Legislators Approve Web List Disclosing Missteps by Doctors, N.Y. TIMES, June 24, 2000, at Al. But as to the inadequacy of the NPDB and other reporting systems, see, for example, Sandra G. Boodman, Still Trying To Open Database on Doctors, WASH. POST, Mar. 7, 2000, at 13 (Health Magazine); Must Mistakes Happen?, WASH. POST, Dec. 2, 1999, at A38; Jennifer Steinhauer, Hospitals in City Faulted by State for Failing To Report Many Errors, N.Y. TIMES, Feb. 13, 2001, at B1; James B. Stewart, Doctors Who Kill, WASH. POST, Sept. 10, 2000, at B7. 198 211 N.E.2d 253 (Ill. 1965), cert, denied, 383 U.S. 946 (1966).
235. See Thompson v. Nason Hosp., 591 A.2d 703, 707 (Pa. 1991).
236. Id.
237. Id. at 703.
238. See id. at 707.
239. The doctrine of corporate liability has been recognized by at least seventeen jurisdictions. See Bryant v. McCord, No. 01A01-9801-CV-00046, 1999 Tenn. App. LEXIS 26, at *27 (Ct. App. Jan. 12, 1999) (citing the following jurisdictions as having recognized the corporate liability doctrine, although declining to adopt the doctrine in Tennessee: Tucson Med. Ctr., Inc. v. Misevch, 545 P.2d 958, 960 (Ariz. 1976); Elam v. Coll. Park Hosp., 183 Cal. Rptr. 156, 157 (Ct. App. 1982); Kitto v. Gilbert, 570 P.2d 544, 550 (Colo. Ct. App. 1977); Insinga v. LaBella, 543 So. 2d 209, 214 (Fla. 1989); Mitchell County Hosp. Auth. v. Joiner, 189 S.E.2d 412, 414 (Ga. 1972); Darling v. Charleston Cmty. Mem'l Hosp., 211 N.E.2d 253, 258 (Ill. 1965); Ferguson v. Gonyaw, 236 N.W.2d 543, 550 (Mich. Ct. App. 1975); Gridley v. Johnson, 476 S.W.2d 475, 484-85 (Mo. 1972); Foley v. Bishop Clarkson Mem'l Hosp., 173 N.W.2d 881, 884 (Neb. 1970); Corleto v. Shore Mem'l Hosp., 350 A.2d 534, 537-38 (N.J. Super. Ct. Law. Div. 1975); Raschel v. Rish, 488 N.Y.S.2d 923, 925 (App. Div. 1985); Blanton v. Moses H. Cone Mem'l Hosp., Inc., 354 S.E.2d 455, 457-58 (N.C. 1987); Benedict v. St. Luke's Hosps., 365 N.W.2d 499, 504 (N.D. 1985); Park N. Gen. Hosp. v. Hickman, 703 S.W.2d 262, 266 (Tex. Ct. App. 1985); Pedroza v. Bryant, 677 P.2d 166, 170 (Wash. 1984); Utter v. United Hosp. Ctr., Inc., 236 S.E.2d 213, 215 (W. Va. 1977); Johnson v. Misericordia Cmty. Hosp., 301 N.W.2d 156, 164 (Wis. 1981)).
240. The loss of clinical privileges would have a crippling effect on those physicians whose practice depended on the use of hospital facilities.
241. It has been argued that the existence of the NPDB discourages physicians from settling disputes since one of the consequences of settlement is the reporting of a physician's name to the data bank. See Weiler, supra note 14, at 1168-69. A sensible solution may be to waive mandatory reporting requirements for physicians who settle cases below a certain monetary threshold (Weiler, himself, suggests a $50,000 threshold as an example to illustrate his point). Id. at 1169. Such a compromise seeks to preserve the virtues of deterrence and market mechanisms while also remedying one of the major disincentives that exist to settlement. See Robert Pear, Group Asking U.S. for New Vigilance in Patient Safety, N.Y. TIMES, Nov. 30, 1999, at Al. But see supra note 194.
242. Kapp, supra note 197, at 770; see also Robert Pear, Inept Physicians Are Rarely Listed as Law Requires, N.Y. TIMES, May 29, 2001, at A1.
243. Kapp supra note 197, at 755 & n.17 (citing Louis SNYDER, Disclosure of Errors and the Threat of Malpractice, in ETHICAL CHOICES: CASE STUDIES FOR MEDICAL PRACTICE 47, 51 (Louis Snyder ed., 1996)). One study found that in a profession that prizes perfection, error is essentially forbidden. See Marc Newman, The Emotional Impact of Mistakes on Family Physicians, 5 ARCHIVES FAM. MED. 71, 72 (1996); see also Daniel H. Novack et al., Calibrating the Physician: Personal Awareness and Effective Patient Care, 278 JAMA 502, 505 (1997).
244. Kapp supra note 197, at 755 & n.17 (citing Louis SNYDER, Disclosure of Errors and the Threat of Malpractice, in ETHICAL CHOICES: CASE STUDIES FOR MEDICAL PRACTICE 47, 51 (Louis Snyder ed., 1996)). One study found that in a profession that prizes perfection, error is essentially forbidden. See Marc Newman, The Emotional Impact of Mistakes on Family Physicians, 5 ARCHIVES FAM. MED. 71, 72 (1996); see also Daniel H. Novack et al., Calibrating the Physician: Personal Awareness and Effective Patient Care, 278 JAMA 502, 505 (1997).
245. Kapp supra note 197, at 755 & n.17 (citing Louis SNYDER, Disclosure of Errors and the Threat of Malpractice, in ETHICAL CHOICES: CASE STUDIES FOR MEDICAL PRACTICE 47, 51 (Louis Snyder ed., 1996)). One study found that in a profession that prizes perfection, error is essentially forbidden. See Marc Newman, The Emotional Impact of Mistakes on Family Physicians, 5 ARCHIVES FAM. MED. 71, 72 (1996); see also Daniel H. Novack et al., Calibrating the Physician: Personal Awareness and Effective Patient Care, 278 JAMA 502, 505 (1997).
246. Kapp, supra note 197, at 755 (quoting Levy, Code Blue, 7 HARV. PUB. HEALTH REV. 36, 39 (1995)).
247. Id.
248. Id. (citing Lucian L. Leape, Error in Medicine, 272 JAMA 1851 (1994)).
249. Arkes & Schipani, supra note 29, at 629.
250. See id.
251. Although we add the caveat that this statement should be limited to publicly traded corporations. The ability of shareholders to withdraw their investments is severely restricted in non-publicly traded corporations (such as closely held corporations). Despite the absence of a market in which non-publicly traded shares can be bought and sold, the business judgment rule still applies with equal vigor. For a discussion of the applicability of the business judgment rule in the setting of a closely held corporation and certain circumstances where courts have deviated from the business judgment rule in favor of the "strict fiduciary duty" rule and the "involuntary dissolution" rule, see Davis, supra note 76, at 593-94.
252. See Arkes & Schipani, supra note 29, at 629.
253. Although this would seem to be the better view, it can be argued that patients do voluntarily expose themselves to the treatment of a particular physician just as shareholders voluntarily expose themselves to the decisionmaking of a particular group of officers and directors. Just as shareholders dissatisfied with the former decisions of officers and directors are free to withdraw from a corporation, patients who learn of a physician's unfavorable legal and disciplinary history or second-rate delivery of care (for instance, through word of mouth) are also free to leave such a physician in exchange for what they consider to be a more suitable health care provider. According to this argument, with state medical boards facilitating public access to data banks containing physicians' past legal and disciplinary predicaments, patients, like shareholders, are able to decide whether they are willing to expose themselves to certain risks at the hands of particular physicians or corporate officers and directors. In other words,just as shareholders can research a particular corporation prior to entering into a voluntary relationship with it, this argument contends that patients seeking non-emergency medical attention, particularly one involving high-risk or invasive procedures, likewise can supposedly research the adverse professional history of a physician prior to coming under his/her care. Of course, under an HMO or PPO system, patients may not have as much full freedom to select their health care providers as may be the case in a fee for service regime. But HMOs and PPOs do not completely eliminate patient choice; instead, they allow patients to select health care providers from among a group of physicians contracted with and, often for an additional premium or deductible, even to go outside the approved panel. Therefore, patient choice is restricted, but not eliminated.
254. Joy v. North, 692 F.2d 880, 885 (2d Cir. 1982).
255. Id. at 886.
256. See supra notes 102-09, 117-35 and accompanying text.
257. Joy, 692 F.2d at 886.
258. James J. Hanks, Jr., Evaluating Recent State Legislation on Director and Officer Liability Limitation and Indemnification, 43 BUS. LAW. 1207, 1232 (1988).
259. Balotti & Hanks, supra note 73, at 1343.
260. See supra note 49.
261. Arkes & Schipani, supra note 29, at 630.
262. See id.
263. See id.
264. See supra notes 147-60 and accompanying text. The existence of practice guidelines may actually breed litigation against hospitals. This may occur in four situ-ations. First, hospitals may be held liable for negligently implementing substandard guidelines. John D. Blum, Hospitals, New Medical Practice Guidelines, CQI and Potential Liability Outcomes, 36 ST. LOUIS U. L.J. 913, 943 (1992). Second, hospitals may be found liable for a physician's deviation from a guideline if the hospital neglected to utilize the guideline to monitor the physician's course of treatment. Id. Third, hospitals that create incentives and penalties that affect a physician's medical judgment and decisionmaking autonomy may be held jointly or solely responsible for a patient's injuries. Id. Lastly, a hospital may be held liable if its implementation of practice guidelines leads to the reasonable belief that a physician is an agent of a hospital. See, e.g., Kashishian v. Port, 481 N.W.2d 277, 286 (Wis. 1992) (dealing with a hospital held liable under apparent authority for the negligence of a physician, who was an independent contractor, because paper with hospital letter head was presented to the patient).
265. See Arkes & Schipani, supra note 29, at 632-33.
266. See, e.g., CAL. Civ. CODE § 3295(d) (West 1997); MINN. STAT. ANN. § 549.20(4) (West 1993); Miss. CODE ANN. § 11-1-65(1) (1998); MONT. CODE ANN. § 27-1-221(7) (1991); NEV. REV. STAT. 42.005(3) (1991); N.J. STAT. ANN. § 2A:15-5.13 (West 1997); N.C. GEN. STAT. § ID-30 (1997); N.D. CENT. CODE § 32-03.2-11(2) (1997); OKLA. STAT. ANN. tit. 23, § 9.1 (West 1998); TEX. CIV. PRAC. & REM. CODE ANN. § 41.008(A) (Vernon 1997); UTAH CODE ANN. § 78-18-1(2) (1996).
267. See Fed. R. Civ. P. 42 (b) and amendments (allowing courts to order a separate trial of any claim or any separate issue in furtherance of convenience or to avoid prejudice or when separate trials will lead to expedition and economy). 230 Arkes and Schipani, supra note 29, at 633.
268. See id.
269. Id.
270. ABRAHAM LINCOLN, Fragment: Notes for a Law Lecture (1850), in THE COLLECTED WORKS OF ABRAHAM LINCOLN: SUPPLEMENT 1832-1865, at 18, 19 (Roy P. Basler ed., 1974).
271. GERALD GUNTHER, LEARNED HAND: THE MAN AND THE JUDGE 26, 146 (1994) (quoting Learned Hand, The Deficiencies of Trials to Reach the Heart of the Matter, Address Before the New York City Bar Association (Nov. 17, 1921), in 3 LECTURES ON LEGAL TOPICS: 1921-1922, at 87, 105 (1926)).
272. GERALD GUNTHER, LEARNED HAND: THE MAN AND THE JUDGE 26, 146 (1994) (quoting Learned Hand, The Deficiencies of Trials to Reach the Heart of the Matter, Address Before the New York City Bar Association (Nov. 17, 1921), in 3 LECTURES ON LEGAL TOPICS: 1921-1922, at 87, 105 (1926)).
273. See JEFFREY O'CONNELL, THE LAWSUIT LOTTERY: ONLY THE LAWYERS WIN 181-82 (1979).
274. See O'Connell, supra note 24, at 884.
275. Almost three-fifths (57%, as opposed to 47% for motor vehicle claims) of the dollars spent by the health care system on malpractice litigation is expended on attorneys' fees and other transaction costs. Weiler, supra note 14, at 1163.
276. In deciding whether to tender an early offer, a defendant will consider the following factors: the amount of net losses versus transaction costs plus monetary high verdict exposure under traditional litigation.
277. Three years is the median period from the occurrence of the medical incident to the malpractice payment. Weiler, supra note 14, at 1163.
278. See David S. Starr, The No-Fault Alternative to Medical Malpractice Litigation: Compensation, Deterrence, and Viability Aspects of a Patient Compensation Scheme, 20 TEX. TECH L. REV. 803, 806-07 n.23 (1989) (observing that delay tactics, contingent fees, and psychological stress all contribute to significant transaction costs, even for successful litigants); see also Murray L. Schwartz & Daniel J.B. Mitchell, An Economic Analysis of the Contingent Fee in Personal-Injury Litigation, 22 STAN. L. REV. 1125, 1125 (1970) (stating that the greatest single cost for a claimant is the contingent fee).
279. See David S. Starr, The No-Fault Alternative to Medical Malpractice Litigation: Compensation, Deterrence, and Viability Aspects of a Patient Compensation Scheme, 20 TEX. TECH L. REV. 803, 806-07 n.23 (1989) (observing that delay tactics, contingent fees, and psychological stress all contribute to significant transaction costs, even for successful litigants); see also Murray L. Schwartz & Daniel J.B. Mitchell, An Economic Analysis of the Contingent Fee in Personal-Injury Litigation, 22 STAN. L. REV. 1125, 1125 (1970) (stating that the greatest single cost for a claimant is the contingent fee).
280. See supra notes 10-13 and accompanying text.
281. See Jeffrey O'Connell, A "Neo No-Fault" Contract in Lieu of Tort: Preaccident Guarantees of Postaccident Seulement Offers, 73 CAL. L. REV. 898, 900 (1985); see also Troyen A. Brennan et al., Relation Between Negligent Adverse Events and the Outcomes of Medical-Malpractice Litigation, 335 NEW ENG. J. MED. 1963, 1966 (1996) (indicating that a plaintiff's degree of disability, not a defendant's negligence, is most statistically correlated with tort recovery).
282. See Jeffrey O'Connell, A "Neo No-Fault" Contract in Lieu of Tort: Preaccident Guarantees of Postaccident Seulement Offers, 73 CAL. L. REV. 898, 900 (1985); see also Troyen A. Brennan et al., Relation Between Negligent Adverse Events and the Outcomes of Medical-Malpractice Litigation, 335 NEW ENG. J. MED. 1963, 1966 (1996) (indicating that a plaintiff's degree of disability, not a defendant's negligence, is most statistically correlated with tort recovery).
283. Under the business judgment rule, quality of care is typically measured by concepts of bad faitb or a lower standard of care.
284. See supra notes 102-09, 117-23 and accompanying text.
285. See supra notes 57-62, 66-68 and accompanying text.
286. See O'Connell, supra note 24, at 879-80.
287. Damages awarded after the imposition of liability has been determined (for a breach of a lower standard of care) would be expected to be great - even higher than damages that are currently awarded for tortious duty of care violations. The ability of claimants to overcome the hurdles imposed by the early offers regime would likely be viewed as a sign of greater culpability on the part of defendants. Triers of fact may then deem it appropriate, and rightfully so, to award punitive damages for the plaintiff. The possibility of such exorbitant damages, albeit slim, serves as a powerful deterrent against suboptimal physician conduct. As it already stands, the average medical malpractice award, adjusted for the severity of a victim's injury, is twice as high as product liability cases and three times as high as motor vehicle cases. See Weiler, supra note 14, at 1174 (citing Randall R. Bovbjerg et al., Juries and Justice: Are Malpractice and Other Personal Injuries Created Equal?, LAW & CONTEMP. PROBS., Winter 1991, at 5, 16-21).
288. For a more detailed explanation concerning the functioning of pain and suffering at the punitive level, see O'Connell, supra note 24, at 886-89.
289. See 131 CONG. REC. 17,775 (1985) (utilizing the definitions of 42 U.S.C. § 1395 (1984)).
290. See supra notes 163-67 and accompanying text.
291. See Dawson v. Chrysler Corp., 630 F.2d 950, 953 (3d Cir. 1980).
292. S. 1861, 104th Cong. (1996).
293. H.R. 3084, 99th Cong. (1985).
294. Mass. House Bill no. 5700 (May 1986).
295. For a proposal that early offers be used for claims against HMOs as a compromise to their full scale liability versus complete immunity, see Jeffrey O'Connell & James F. Neale, HMO's, Cost Containment and Early Offers: Naw Malpractice Threats and a Proposed Reform, 14 J. CONTEMP. HEALTH L. & POL'Y 287, 310-13 (1998).
296. See supra notes 251-52 and accompanying text.