Foundations of Law and Economics
1928
Palsgraf v. Long Island Railroad Co.
248 N.Y. 339, 162 N.E. 99 (1928)
New York Court of Appeals
Issue
Duty, foreseeability, and the legal boundary placed on liability for an extended chain of accidental harm.
Facts
Railroad employees helped a passenger board a moving train. A small newspaper-wrapped package he carried fell to the tracks; the package unexpectedly contained fireworks, whose explosion allegedly caused scales at the other end of the platform to strike Helen Palsgraf.
Holding
The court reversed the judgment for Palsgraf, concluding that the railroad employees' conduct did not breach a duty owed to her because the package gave no notice of a risk to a person in her position.
Reasoning
Chief Judge Cardozo framed negligence relationally: conduct is wrongful toward a plaintiff only when the apparent range of danger includes that plaintiff. Judge Andrews's dissent instead treated duty more broadly and would have addressed remoteness through proximate cause.
Why It Matters
Palsgraf provides a canonical setting for comparing foreseeability, scope-of-risk limits, causal remoteness, and the administrative cost of extending accident liability.
Institutional Analysis
Institutional problem
Accident law needs a limiting principle when careless conduct initiates an extended causal chain whose ultimate victim and mechanism of injury were difficult to foresee.
Economic analysis
A scope-of-risk limit can reduce open-ended liability, insurance costs, and adjudication over remote harms, but an overly narrow limit may leave actors with too little incentive to account for low-probability spillovers. The rule also affects which party must investigate unusual risks and who bears residual loss.
Alternatives and limits
Foreseeability, directness, statutory safety rules, enterprise liability, insurance, and no-fault compensation allocate remoteness and error costs differently. Economic analysis does not determine the doctrinal choice between Cardozo's duty framework and Andrews's broader duty plus proximate-cause approach.
This analytical supplement distinguishes institutional interpretation from the court’s holding and reasoning.
Research Questions
- Which risks could the defendant process at reasonable cost before acting?
- How should liability account for very low-probability but potentially large harms?
Case Text and Citation
Cite the reported decision as 248 N.Y. 339, 162 N.E. 99 (1928). The linked copy is provided for reading access and may be hosted by a court, institutional repository, or secondary case archive.
Open case text: New York State Law Reporting Bureau