'Marketplace' features book, film, Wisconsin law class on wild risks at shuttered N.J. water park

Action Park fun in 1994
(Joe Shlabotnik CC BY 2.0 via Wikimedia Commons)

Marketplace today features a torts course about accident risk and liability at a water park.

The 2020 HBO documentary Class Action Park (2020) (trailer) told the story of Action Park, a New Jersey theme park in the 1980s and 1990s.  Here is a compelling excerpt of the film's pitch:

It was known as a lawless land, ruled by drunk teenage employees and frequented by even drunker teenage guests. The rides were experimental and illogical, and seemed to ignore even the most basic notions of physics or common sense—not to mention safety.

Let’s put it this way: There was an enclosed tube waterslide that went in a complete loop—and that wasn’t even close to the most dangerous ride at the park.

Lying somewhere between Lord of the Flies and a Saw movie, Action Park is remembered as a place so insane and treacherous that, decades later, anybody who ever stepped foot in it is left wondering whether their memories could possibly be true. It became a nearly perfect breeding ground for urban legends and myths.

And then there was the park’s founder: A genius madman who was willing to break any rule to bring his vision to life, including the creation of a fake insurance company in the Cayman Islands to circumvent insurance regulations. As cunning as he was criminal, Action Park became the pure expression of his particular worldview, which valued self-responsibility above all else—including basic safety measures and physically practical rides.

There is a book, too: Action Park (2020) by Andy Mulvihill and Jake Rossen.  Andy Mulvilhill is the son of the "genius madman," Gene, who died in 2012. Andy wrote a narrative about his father in Esquire in 2020.

Attorney Bill Childs, adjunct professor at Mitchell Hamline Law School and assistant general counsel at 3M, has taught a course about Action Park, Recreation and Risk: no doubt an informative exploration of how the tort system is supposed to regulate social and economic activity and how its dysfunctions often cause it to fail. For the Marketplace story, David Brancaccio interviewed Professor Childs.

I start Torts I each fall with consideration of the relationship between the thriving market in extreme supports in New Zealand and the suspension of tort litigation in favor of the nation's administrative accident compensation system. N.Z. bungee-jump entrepreneur A.J. Hackett told Australian Broadcasting in 2012 that he closed his Las Vegas franchise because of frivolous litigation. I have doubts about the frivolity of the claims, but there's no doubt that the threat of tort litigation in the United States calls on business models to moderate risk, for better and for worse, more than they might have to in other countries. In the same vein, I am keen myself to learn more about what went wrong or right in claims arising at Action Park.

Theme parks, because they aim to entertain the public at large, not especial risk takers, do not trigger the rare preservation of implied-assumption-of-risk doctrine (IAOR) that pertains in sport, sometimes to deprive even amateur athletes of a cause of action. In U.S. jurisdictions today, IAOR is largely superseded by the adoption of comparative fault, a partial defense. But athletes knowingly engage in a suspension of the social contract, voluntarily undertaking a degree of risk that the general public ordinarily does not.  So some jurisdictions preserve IAOR for that occasion.

The inapplicability of IAOR to Action Park risk is on my mind because of a recent article in which Toronto attorney Will Keele and Windsor law student Keanin Parish revisited a 1993 case, Hall v. Hebert, in which the Supreme Court of Canada preserved IAOR in a non-sporting context. After "equally drunk" Hall and Hebert's Pontiac "muscle car" dropped 30 feet into a ditch in 1986, Hall sued Hebert for having let him drive. On those facts, the court favored volenti, a functional equivalent of IAOR, as a complete defense over comparative fault as only partial defense. In other words, Hall had it coming. Keele and Parish opined that that conclusion squares with later cases in the 21st century that preserved IAOR as a defense against injury claims arising in golf and hockey.

The extremity of risk at Action Park shows that the line is not so bright between IAOR preservation for the plaintiff who consents to risk and the abolition of IAOR for the plaintiff who engages with risk unreasonably—or, I might say, between informal sport and general-public thrill-seeking. Were Action Park's "drunker teenage guests" so clearly different from Hall? The salient distinction arises less in the plaintiff's subjective consent and more in the nature of the risk known to arise from the activity the plaintiff undertakes. A car crash is a known hazard of drunk driving, but even a drunk theme park rider does not expect the ride to be operated unsafely—usually. At some point—"memories could possibly be true"?—the distinction runs out. 

I have not had an HBO subscription for a while, but if we sign up later this month for House of the Dragon, I'll check out Class Action Park, too.

Police negligence suit against BLM organizer goes ahead after La. Supreme Court greenlights duty

BLM protest in Baton Rouge in 2015
(Alisdare Hickson CC BY-NC 2.0 via Flickr)

A lawsuit against Black Lives Matter organizer DeRay Mckesson lives on since the Louisiana Supreme Court opined in March that state law allows imposition of a duty in tort law and does not preclude liability to police under the firefighter rule.

I wrote about the Mckesson case in April and November 2020. In the case's winding appellate disposition, the U.S. Supreme Court faulted the Fifth Circuit for jumping the gun on Mckesson's First Amendment defense and entreated the court to certify questions of state tort law to Louisiana.

It is not alleged that Mckesson himself threw any projectile at police, so the defense asserted that the intentional criminal action of a third party supervened in the chain of causation between Mckesson's organizing and police officer injury. But the Louisiana Supreme Court was unsympathetic, characterizing the pleadings as alleging related criminal conduct by Mckesson. The court reasoned:

Under the allegations of fact set forth in the plaintiff’s federal district court petition, it could be found that Mr. Mckesson’s actions, in provoking a confrontation with Baton Rouge police officers through the commission of a crime (the blocking of a heavily traveled highway, thereby posing a hazard to public safety), directly in front of police headquarters, with full knowledge that the result of similar actions taken by BLM in other parts of the country resulted in violence and injury not only to citizens but to police, would render Mr. Mckesson liable for damages for injuries, resulting from these activities, to a police officer compelled to attempt to clear the highway of the obstruction.

The court also rejected Mckesson's the firefighter-rule defense. The common law rule (in Louisiana, "the professional rescuer's doctrine"), not universally recognized, ordinarily disallows recovery by emergency responders for injury incurred in the course of the job, upon the theory that the job is what the responder is compensated for, and responsible parties should not be deterred from summoning emergency response.

The court took the occasion of the Mckesson case to ponder whether the firefighter rule survived the statutory adoption of comparative fault in Louisiana. The rule embodies a form of implied assumption of risk, the court reasoned. Louisiana is not a pure civil law jurisdiction, but the courts rely heavily on statute in accordance with the civil law tradition. Though the legislature left the details of comparative-fault adoption to the courts to work out, the high court acknowledged, the lack of any explicit recognition of the firefighter rule left it displaced.

The case in Louisiana is Doe v. Mckesson, No. 2021-CQ-00929 (La. Mar. 25, 2022). The case in the Fifth Circuit is No. 17-30864.

The Mystery of the Student Loan Fraud, or Of In Pari Delicto, Respondeat Superior, et Cetera

A still mysterious financial fraud perpetrated on students of Merrimack College resulted in a high court ruling last week on agency law with important implications for tort liability and the equitable doctrine of in pari delicto.

Students at Merrimack College Orientation in 2015.
By Merrimack College (CC BY-NC-ND 2.0)

Merrimack is located in North Andover, Massachusetts (where the recent gas explosions occurred).  Merrimack is a small liberal arts college founded in the Roman Catholic tradition after World War II especially to serve returning vets.  Despite the depressed market in higher education, Merrimack this fall reported a record-size freshman class and plans to join Division I athletics.

In 2014, Merrimack financial aid director Christine Mordach pleaded guilty to federal criminal fraud charges, and in 2015, she was sentenced to a year’s imprisonment and ordered to pay $1.5 million in restitution.  She had been accused of perpetrating a scheme that replaced college scholarship awards with federal loan money on the college books.  The scheme came to light when a new accounting system started to inform students of federal Perkins debts they did not know they had.

Why Mordach did what she did is the mystery.  The scheme shored up the college’s bottom line through lean times, because money paid out of college coffers in grants was replaced with borrowed dollars that students would be on the hook to pay back.  But there was no evidence that Mordach was ordered to execute the scheme.  To the contrary, she seems to have taken steps to conceal it, which she did so well that Merrimack auditor KPMG gave the college a clean bill of health while the fraud was ongoing.

That brings us to the instant civil case.  Merrimack seeks to recover against KPMG on a range of theories, including breach of contract, professional malpractice, and negligent misrepresentation, for KPMG’s failure to detect the fraud.  KPMG won dismissal in the superior court upon the doctrine of in pari delicto.  Literally Latin for “in equal fault,” in pari delicto translates as the clean hands doctrine of equity.  In tort, the doctrine prevents a tortfeasor from recovering against a co-tortfeasor or innocent party—such as a bank robber who blames a co-conspirator for his bullet wound, or the burned arsonist who would blame firefighters for too slow a rescue.  Merrimack appealed the dismissal to the Massachusetts Supreme Judicial Court (SJC).

Being a doctrine in equity, rather than a rule, in pari delicto calls for a fact-sensitive application, operating as a function of the parties’ relative moral blameworthiness.  Thus in a 1985 case discussed in the instant opinion, the U.S. Supreme Court allowed would-be beneficiaries of insider trading to sue their tipsters for losses resulting from misinformation, even if both plaintiffs and defendants were wrongdoers.  The plaintiffs’ trading upon a failure to disclose was not “substantially equal” in moral culpability to the tipsters’ illegal insider disclosures, the Court decided, and public policy favored holding the tipsters to civil account.

KPMG Boston (Google Maps Aug. 2017)

KPMG argues more than just Merrimack’s benefit derived from a favorable financial picture.  KPMG argued successfully in the superior court that Mordach’s actions must be imputed strictly to Merrimack upon the tort-and-agency doctrine of respondeat superior, because Mordach was an employee of Merrimack and acted within the scope of her employment.  So if intentional fraud is imputed to Merrimack, then in pari delicto precludes recovery against KPMG for the diminished culpability state of mere negligence.

On the one hand, the SJC reasoned, look at the problem from the perspective of Merrimack students:  Were they to have sued Merrimack—not actually necessary, as the college spent $6 million to square its affairs with students—there is little doubt that Mordach’s intentional tort would have imputed strictly, even to an otherwise innocent Merrimack, through respondeat superior.  From where the student sits, the fraud was perpetrated by Merrimack’s financial aid office: Mordach and college, one and the same.  Merrimack might have sought indemnity from employee Mordach, but that’s always true in respondeat superior cases (notwithstanding employment contract).

On the other hand, the SJC reasoned, look at the problem from the perspective of Merrimack College:  Strict liability through the action of respondeat superior imputes liability irrespective of fault and certainly says nothing about moral blameworthiness.  Merrimack as liable to students is never adjudicated as bearing fault.  From a moral standpoint, Merrimack is at worst guilty of neglect, or failure to act, such as by negligent supervision of its financial-aid director.  So notwithstanding strict legal liability, Merrimack’s negligence would implicate moral blameworthiness of a magnitude less than what the college alleges of KPMG.

When co-tortfeasors both commit an intentional tort, in pari delicto precludes liability of one to the other.  But that’s not necessarily so when merely negligent co-tortfeasors A and B unwittingly combine efforts to cause loss to C, incidentally causing loss also to B.  In the subsequent action B v. A, the old contributory negligence rule, as a complete defense, would have effectuated the clean-hands doctrine.  But contemporary tort law commits negligent co-tortfeasors to comparative-fault analysis.  In a modified-comparative-fault jurisdiction such as Massachusetts, B may recover from A if A bore more fault than B, and B’s recovery is reduced in proportion to B’s own share of fault. 

The SJC decided that moral blameworthiness, not legal liability exposure, must be the guiding principle for an equitable doctrine.  Merrimack might be on the hook hypothetically for respondeat superior liability, and even negligent supervision.  But neither of those rules suggests moral blameworthiness greater than KPMG’s.  The case might be different if Mordach has been a senior executive of Merrimack; she was not.  And there is no evidence that Merrimack knew what Mordach was up to, much less directed her actions.

So in the absence of an intentional tortfeasor between Merrimack and KPMG, in pari delicto does not apply.  If Merrimack’s negligence contributed to its own losses, that will come out in the comparative-fault wash.  That conclusion is bolstered by a comparative-fault-like mechanism in Massachusetts statute that applies specifically to client-versus-auditor malpractice claims.  Accordingly, the SJC reversed and remanded.

Chief Justice Gants at UMass Law (2016)

The SJC received amicus briefs from the American Institute of Certified Public Accountants, the Massachusetts Academy of Trial Attorneys (MATA), and the Chelsea Housing Authority.  For the MATA, attorney Jeffrey Nolan argued, like in the U.S. Supreme Court insider trading case, that liability exposure is needed to hold KPMG accountable, especially in a market dominated by the Big Four accounting firms.  The housing authority also backed Merrimack, attorney Susan Whalen recounting her client’s victimization by internal misconduct that went undetected by accountants.  She asserted that in pari delicto has “the perverse result of de facto immunity for gross levels of negligence” by auditors (Law360, subscription required).

All of that is not to say that KPMG will be held liable.  Besides fault yet to be proved, the SJC affirmed the superior court’s leave for KPMG to amend its answer, adding a defense of release.  Ut victoriam tyranne?

The case is Merrimack College v. KPMG LLP, No. SJC-12434 (Mass. Sept. 27, 2018).  The opinion was authored by Chief Justice Ralph D. Gants, a graduate of Harvard undergrad and law, one-time AUSA, and 2016 recipient of an honorary law degree from UMass Law School.