CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Liability is a pillar of the law. It is “the means for enforcing contracts, civil
rights, labor and employment law, environmental regulations, federal tax law, in-
tellectual property law, most kinds of property rights, and just about every other
kind of law on the books.”
Some view limited liability as “the corporation’s
most precious characteristic”
and an invention more important than “steam and
The desire to avoid liability determined the shape of the modern
Moreover, understanding a ﬁrm’s liability boundaries has
become more pressing because businesses increasingly rely on call centers,
online third-party sellers, sales agents, brokers, ride-sharing contract drivers, debt
collectors, delivery services, and many other external providers that may harm
Despite liability’s centrality to the legal system and industrial organization, an
existential question for decades received limited attention: When is one company
liable for the acts of a separate entity?
The legal issue of when a business can be
held liable for the acts of another business traces back to the common law doc-
trine of respondeat superior. The law as long recounted in scholarship, cases, and
textbooks is that except in unusual circumstances, businesses are not liable for
the acts of independent contractors.
Additionally, as the Supreme Court has
observed, “It is a general principle of corporate law deeply ‘ingrained in our
1. Lynn M. LoPucki, The Death of Liability, 106 YALE L.J. 1, 4 (1996).
2. William W. Cook, “Watered Stock”—Commissions—“Blue Sky Laws”—Stock Without Par
Value, 19 MICH. L. REV. 583, 583 (1921) (quoting President Charles Eliot of Harvard University).
3. William P. Hackney & Tracey G. Benson, Shareholder Liability for Inadequate Capital, 43 U.
PITT. L. REV. 837, 841 (1982) (quoting President Nicholas Murray Butler of Columbia University).
4. See, e.g., LoPucki, supra note 1, at 21 (“Limiting liability—that is, defeating part of it—is the
principal reason for creating [multiple corporate] entities.”).
5. See, e.g., Margaret M. Blair, Erin O’Hara O’Connor & Gregg Kirchhoefer, Outsourcing,
Modularity, and the Theory of the Firm, 2011 BYU L. REV. 263, 272–90 (describing the hierarchy and
production interdependence of corporations).
6. Sustained attention on the topic has mostly focused on legal subareas without providing a big-
picture perspective, or on economic issues of whether vicarious liability provides an optimal level of
incentive to take precautions. For economic treatments, see, for example, Jennifer H. Arlen & W.
Bentley MacLeod, Beyond Master–Servant: A Critique of Vicarious Liability, in EXPLORING TORT LAW
111, 122–24 (M. Stuart Madden ed., 2005); Richard R. W. Brooks, Liability and Organizational Choice,
45 J.L. & ECON. 91, 93–94 (2002); Alan O. Sykes, The Economics of Vicarious Liability, 93 YALE L.J.
1231, 1233 (1984). For an example of third-party liability in a narrower organizational context, see
Michael R. Flynn, The Law of Franchisor Vicarious Liability: A Critique, 1993 COLUM. BUS. L. REV.
89, 102 (arguing that it is inappropriate to apply vicarious liability to franchisor–franchisee
7. See, e.g., Lewis A. Kornhauser, An Economic Analysis of the Choice Between Enterprise and
Personal Liability for Accidents, 70 CALIF. L. REV. 1345, 1375 (1982) (“An enterprise is not liable for
the torts of its independent contractors . . . .”); Gary T. Schwartz, The Hidden and Fundamental Issue of
Employer Vicarious Liability, 69 S. CAL. L. REV. 1739, 1753 (1996) (“[T]he negligence of the
contractor is (absent special circumstances) not attributed to that party.”).
2020] THE REVIVAL OF RESPONDEAT SUPERIOR 143