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The Institute in the Courts: State Courts Look to Recent ALI Work

Courts continue to be guided by the work, new and old, of The American Law Institute. Some examples of citations to recent publications follow:

In Dhital v. Nissan North America, Inc., 2022 WL 14772909 (Cal. Ct. App. Oct. 26, 2022), the California Court of Appeal held that claims for fraudulent inducement were not barred by the economic-loss rule as defined by Restatement of the Law Third, Torts: Liability for Economic Harm § 3. The case was brought by consumers who alleged that they purchased a vehicle with a defective transmission system from the defendant manufacturer, and that the defendant, “by fraudulently concealing the defects, induced them to purchase the car.” The court explained that the plaintiffs’ claim for fraudulent inducement fell within an exception to the economic-loss rule because the defendant’s fraudulent inducement violated a duty that was “independent of [its] alleged warranty breaches.” Citing § 9 of the Restatement, it observed that the expectation of honesty during negotiation of the purchase contract called for remedies not customarily available from the law of contract or restitution, because “parties to a contract generally [did] not treat the possibility that they [lied] to each other as a risk for the contract to allocate.”

In Woodson v. Commonwealth, 871 S.E.2d 653 (Va. Ct. App. 2022), the Court of Appeals of Virginia cited Restatement of the Law, Children and the Law § 3.24 (Tentative Draft No. 1, 2018) in upholding the parental privilege to use reasonable corporal punishment on the ground that it would protect low-income and Black families from excessive state intervention. The court reversed and dismissed a mother’s conviction for assault and battery, holding that the government failed to set forth sufficient evidence that the mother striking her children’s buttocks, leaving no serious injuries, was excessive or immoderate such that she lost her parental privilege to use corporal punishment. The court looked to § 3.24 to explain the purpose of that privilege, pointing out that a substantial number of low-income and Black families continued to use physical punishments such as spanking. “Limiting the significant costs on the family that accompany state interference” was an important goal in light of the fact that such families, without the privilege to use moderate corporal punishment to discipline their children, would be disproportionately impacted by “incarceration or invasive community supervision.”

In Stream TV Networks, Inc. v. SeeCubic, Inc., 279 A.3d 323 (Del. 2022), the Supreme Court of Delaware acknowledged the difficulty of The American Law Institute’s task of clarifying the law. The court—in its discussion of whether Delaware had a common-law insolvency exception to the general rule that a board of directors of a corporation was required to obtain shareholder approval before selling all corporate assets—opined that “[a]scertaining the initial question of what the common law is often is not an easy task.” This, the court noted, “is evidenced by the painstaking work done by [T]he American Law Institute in formulating the various Restatements of the Law.” The court quoted from the Institute’s Style Manual, as excerpted in the front matter of Restatement of the Law, Corporate Governance (Tentative Draft No. 1, 2022), which acknowledges:

Like a Restatement, the common law is not static. But for both a Restatement and the common law the change is accretional. Wild swings are inconsistent with the work of both a common-law judge and a Restatement. And while views of which competing rules lead to more desirable outcomes should play a role in both inquiries, the choices generally are constrained by the need to find support in sources of law.

In this case, the court noted, “given the complete absence of any Delaware case support, it is not entirely clear that the exception was ever adopted in Delaware in the first place. It follows, that before addressing whether a statute supersedes the common law, it must be established that the exception was indeed part of the common law in that jurisdiction.”