Market share liability

See Sindell v. Abbott Laboratories (1980) market share liability introduced by the California court specifically in response to the difficulties in proving causation faced by DES plaintiffs. 

Applying a market share liability theory would solve this dilemma. Advocates argue that since you cannot distinguish which of several manufacturers is liable, the burden should be shared by all of them according to the share of the market they had at the time the paint was sold. This argument has been rejected in some states, but is being presented in other states. 

Beyond these indirect costs, there are future costs associated with new or more stringent variations of existing environmental legislation. We also need to recognize that all operations, especially those within complex industry sectors like petrochemicals, carry liabilities and exposures to potential catastrophic releases. Systems do fail for a variety of reasons, leading to unplarmed and sometimes innocent mistakes, that may result in third-party exposures for environmental damages or health risk exposures. These costs are related to legal fees, loss in consumer confidence, and subsequent losses in market shares for the products a company sells, as well as the clean-up associated with the spill or release. 

In Hardy v. Johns-Manville Sales Corp., 509 F.Supp 353(1981), the Eastern District of the District Court for the Eastern District of Texas, ruling on motions related to discovery and collateral estoppel, announces an intention to adopt some sort of Sindell liability. The court granted discovery motions targeting market share. 

Severity is the potential loss when an event occurs. Some express potential losses in human terms, such as loss of life, serious injury, serious illness, number of cancer cases or similar terms. Some express a loss in financial terms. Examples are dollar value of production interruption, cost to replace lost equipment, cost to replace facilities, or cost of medical treatment, pay compensation for those injured or increased insurance premiums. Some express loss in legal terms, such as number of claims or lawsuits and the liability incurred. For a company, a loss can be a reduction in public image or product image or lost market share. 

Legislation can be advocated that would put the burden of abating lead paint on the industries who originally marketed it. Also, legislation can help lawsuits against corporations succeed, by supporting the market share theory of liability, so that industries could be held liable for injuries done by products even though it was not possible to identify the manufacturer of the specific product involved in the particular case. 

When it is time to develop a written budget, it is important to identify operating cost, potential benefits such as direct benefits (e.g., reduced labor cost, lower accidents, reduced insurance cost, or productivity gains). Indirect benefits should also be considered in light of quality improvanents— reduced scrap less rework reduced product liability, exposure, or produa recall expenses improved corporate image or inaeased market share. At times, indirect benefits are improved anployee morale, which reduces absenteeism and turnover or increases teamwork and ownership. The potential reduction in the numbers of compliance penalties can be a benefit. 

Regardless of what institutions govern human exposure to chemicals, residual exposure will exist. Risk-averse individuals will want to share that risk through insurance. Chapter 5 explains the operation of insurance markets, particularly environmental insurance markets. The federal "Superfund" program and certain court decisions have made insurers reluctant to write environmental insurance contracts. Until Congress and the courts stop confiscating wealth through arbitrary statutes and common-law decisions, the environmental liability insurance market will not work well. 

The second part of the balance sheet in Table 16.3 lists the liabilities and stockholders equity. Current liabilities include all payments that must be made by the company within one year. The total for U.S. Chemicals is 4,153,(XX),0(X). Long-term debts, often in the form of bonds, are due after more than one year from the date of the balance sheet. They total 3,943,(XX),000. Other noncurrent liabilities total 1,754,(XX),(XX) and include pension and other postretirement benefits as well as reserves for any company operations that are discontinued. Total liabilities are 9,850,000,000. We note that liabilities are less than assets by 4,361,(XX),0(X). Thus, by Eq. (16.1), this difference must be the stockholders equity. This equity includes the par value of issued common stock, which totals 1,(XK),000,(X)0. The par value of a share of stock is an arbitrary amount that has no relationship to the market value of the stock, but is used to determine the amount credited to the stock account. If the stock is issued for more than its par value, the excess is credited to the account shown as capital in excess of par value. In Table 16.3, the par value is 1.00 per share but the stock was issued at 4.23 per share. Companies frequently repurchase shares of their common stock, resulting in a reduction of stockholders equity. Because the shares are placed in a treasury, the transaction appears as treasury stock at cost. In Table 16.3, that amount is 3,428,000,000. The other account under stockholders equity is retained earnings, which is the accumulated retained earnings that is increased each year by net income. Tte amount of this entry must be such that Eq. (16.1) is satisfied. This is seen to be tte case in Table 16.3, where the net stockholders equity is 4,361,000,000, giving total liabilities plus stockholders equity as 14,211,000,000, which is equal to total assets. 

What is value Value can be defined in different ways. There are those who might classify value in the short term in two main categories book value and market value. A company s financial statements determine its book value. The book value of assets and stockholder s equity can be ascertained from the balance sheet. Recall from earlier chapters that stockholder s equity is the difference between assets and liabilities. Market value, commonly referred to as market capitalization, is calculated by taking the number of shares outstanding times the share price. Market value changes multiple times per day, every day. When concentrating on the number of shares and share price, this refers to a company s market value of equity. 

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