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Geoff Trachtenberg
Geoff Trachtenberg
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Application of Comparative Fault to Business Torts

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Most states have adopted a form of comparative fault. The idea behind newer comparative fault laws is to ameliorate some of the harsh results of the common law, but it can have the opposite effect in the business context.

In a “pure” comparative fault state, such as Arizona, a defendant is only responsible for the percentage of fault assigned to it by the jury. So, while your damages maybe $1 million dollars, if a defendant is only found responsible for 1% of the damage, they are only liable for $10,000. Seems fair, right?

While it is frequently fair, application of comparative fault to business torts can lead to some surprising results.

Take, for example, a commercial broker that represents two parties in a real estate transaction (a bad idea, but it happens every day) — let’s call them Party A and Party B. Suppose the broker helps Party A improperly misrepresent an important aspect of a transaction that results in a substantial loss to Party B. Suppose further that the broker does this for no other reason than to “get the deal done” to get his commission (again, a bad idea, but it happens all the time).

Party A sues the broker and Party B, but Party B is long gone and/or, as is often the case, is uncollectible. The broker shrugs and says he really did nothing terribly wrong, and certainly did not profit from any misrepresentation beyond receiving his regular commission. The broker says he should not receive much blame, if any, since it was Party B really made out like a bandit.

The jury is asked to compare the fault of the broker and Party B. Even though the entire mess would not have occurred but for the involvement of the duplicitous broker, it is easy to see where a jury would assign the bulk of the fault to the “primary” scoundrel (Party B) and less fault to the “secondary” scoundrel (the broker). As you can imagine, a result assigning the bulk of the fault to uncollectible Party B is not exactly fair to Party A, but that is what Party A will have to accept since that is the law in most comparative fault states.