Assuming you are a new CEO/CFO for a fortune 500 company,
describe the lessons that you have learned and how you may implement them to
effectively lead your new company, as related to your choice of two of the case studies
that we discussed in the course.
Case Study #1
• You were recently appointed commissioner of the NFL.
• How would you handle the issue of players kneeling during the National Anthem and why?
• Take into account all the audience including players, owners, fans, federal government,
etc. Please do some research to support your judgement and provide your conclusion in your
initial post.
Francis Scott Key wrote the Star Spangled Banner after personally witnessing Fort McHenry being
bombed and demolished by the British during the war of 1812. While the sky lit up from bombs and
rockets' red glare, Key was able to see a U.S. flag standing tall. Through this, Key was inspired to write a
poem that was later put to music that later became our National Anthem. President Wilson declared that
this song shall be played at all official events.
This song has represented for almost 200 years the men and women that fought and sacrificed
themselves for their country and for the freedom that we still hold today.
As the NFL Commissioner, I would personally not allow someone to kneel in protest any political or social
issues. I look at this like I am the boss and the players are my employees. When you put on the pads and
uniforms you are working on my time. When you are in the office, are you getting paid to do your task at
hand or are you getting paid to go by your own agenda. As Commissioner I would ban all protesting
game-day activity and violations will be subject for suspensions and fines.
I would also look at this from a business standpoint. Last year NFL ratings dipped almost 10%, many
believing there is a connection to the kneeling. Fans cancelling their tv packages and drops in apparel
purchases hurt the profits of the NFL and as a commissioner, I want to prevent that from happening. I
absolutely feel you have the right to protest when you have been served injustice. I just think during your
1 day of work per week is the wrong time. To show that I believe that players should stand for what they
believe, I would scheduled a media day once a moth for players to come in and speak up for what they
are fighting for.
The NFL does not need political controversy to cause fans or stakeholders to stop supporting or
sponsoring us due to outside issues. Lets keep our focus on football and the love of the game.
Case Study #2
• What is the midnight journal entry refer to in the case study?
• Was the decision made by Dooley to reverse the Asian benefits accrual ethical?
• Should Okumoto drop the matter or continue to act on his concerns (at the point where the case
ends?
The midnight journal entry refers to Sept. 12, 2002 when executives from Electro Scientific Industries
unethically doctored the accounting records to cover $977k in accrued liability. Instead of properly
reporting the liability, they removed it so the books would show a gain.
The decision made by Dooley was entirely unethical. He is obligated to follow the rules of the country in
which the company operates. By adjusting the benefits on the employees without the consultation of
anyone was illegal and unethical.
Okumoto should certainly act on his concerns because he owes it to the company to act in a manner that
he would if it were his personal affairs. If this malpractice affected him, he would do whatever it took to
resolve the issue and see that proper punishment was delivered. As a man of strong ethics, he should
continue to act.
10
CHAPTER
PRODUCT LIABILITY
INTRODUCTION
DEFINITION OF PRODUCT LIABILITY
Product liability is the legal liability manufacturers and sellers have for defective products that cause injury to purchasers, users, or bystanders, or their property. Liability extends
to anyone in the chain of distribution: manufacturers, distributors, wholesalers, and retailers.
Today, the majority of states have adopted strict product liability, whereby an injured person may recover damages without having to show the defendant was negligent or
otherwise at fault. No contractual relationship between the
defendant and the injured person is necessary. The injured
person merely needs to show that the defendant sold the
product in a defective or dangerous condition and that the
defect caused his or her injury.
CH APTER OV ERVIEW
This chapter discusses the evolution of the strict liability
doctrine, beginning with its origin in warranty and
negligence theories. It then focuses on the bases for strict
liability, including manufacturing defect, design defect, and
failure to warn. The chapter examines who may be held liable
for defective products and the allocation of liability among
multiple defendants. It discusses defenses to product
liability claims, including the courts’ increasing acceptance
of the preemption defense to preclude state-law product
liability claims and legislative reforms designed to correct
perceived abuses in the system. The chapter concludes with
a description of the law of product liability in the European
Union.
101 THEORIES OF RECOVERY
The primary theories on which a product liability claim
can be brought are breach of warranty, negligence, and
strict liability.
10-1a Breach of Warranty
In a warranty action, the reasonableness of the manufacturer’s actions is not at issue. Rather, the question is whether
the quality, characteristics, and safety of the product were
consistent with the implied or express representations
made by the seller. A buyer may bring a warranty action
whenever the product fails to meet the standards the seller
represented to the buyer at the time of purchase.
Common Law Warranties and Privity
of Contract
A common law breach of warranty action is based on
principles of contract law. To recover, an injured person
must be in a contractual relationship with the seller, a
requirement known as privity of contract. It necessarily
precludes recovery by those persons, such as bystanders,
who have no contractual relationship with the seller.
UCC Warranties
As explained in Chapter 8, a warranty under the Uniform
Commercial Code (UCC) may be either express or implied.
An express warranty is an affirmation made by the seller
relating to the quality of the goods sold. An implied warranty is created by law and guarantees the merchantability
of the goods sold and, in some circumstances, their fitness
for a particular purpose. The UCC includes alternative
provisions regarding the need for privity, from which
adopting states may choose. These range from (1) provisions limiting liability to those in privity with the seller
(as well as members of the seller’s household and guests
who may reasonably be expected to use, consume, or be
affected by the goods and are personally injured by breach
of the warranty) to (2) provisions extending liability not
only to those in privity but also to “any person who may
reasonably be expected to use, consume or be affected by
the goods and who is injured by breach of the warranty.”1
1. U.C.C. § 2-318.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
254
UNIT II
THE LEGAL ENVIRONMENT
10-1b Negligence
In the following landmark case, the New York Court of
Appeals found the defendant manufacturer liable for negligence even though there was no contractual relationship
between the manufacturer and the plaintiff. Although
liability in MacPherson was still based on the negligence
principles of reasonableness and due care, the New York
Court of Appeals abandoned the privity requirement in
this case, making it an important forerunner to the doctrine of strict product liability.
A CASE IN POINT
SUMMARY
MacPherson v. Buick
Motor Co.
Facts!MacPherson purchased a new Buick car with wooden wheels from a Buick Motor
Court of Appeals of New York
111 N.E. 1050 (N.Y. 1916).
CASE 10.1
Company dealer who had previously purchased the car from its manufacturer, Buick Motor
Company. MacPherson was injured when the car ran into a ditch after one of the car’s wheels
collapsed due to defective wood used for the spokes. The wheel had been made by a manufacturer other than Buick.
MacPherson sued Buick Motor Company directly. He proved that Buick could have discovered
the defect by reasonable inspection and that such an inspection had not been conducted. No
claim was made that the manufacturer knew of the defect and willfully concealed it. After the
trial court found in favor of MacPherson, Buick appealed.
Issue Presented!May a consumer who purchases a product from a retailer sue the
manufacturer directly for negligent manufacture of the product even though there is no contract between the consumer and the manufacturer?
Summary of Opinion!The
New York Court of
Appeals held that Buick could be held liable for negligence.
As a manufacturer, it owed a duty to any person who could
foreseeably be injured as a result of a defect in an automobile it manufactured. The court stated that a manufacturer’s
duty to inspect varies with the nature of the thing to be
inspected. The more probable the danger, the greater the
need for caution. Because the action was one in tort for
negligence, no contract between the plaintiff and the defendant was required.
To prove negligence in a products case, the injured party
must show that the defendant did not use reasonable care
in designing or manufacturing its product or in providing
adequate warnings. A manufacturer can be found negligent even if the product met all regulatory requirements
because, under some circumstances, a reasonably prudent
manufacturer would have taken additional precautions.2
As discussed later in this chapter, the only exception is
when a federally mandated standard is deemed to have
preempted state product liability law.3
It can be difficult to prove negligence. Moreover,
injured persons have often been negligent themselves in
their use or misuse of the product. This precludes recovery
in a contributory negligence state and reduces recovery in
a comparative negligence state.
Courts will not permit a plaintiff to prove negligence by
introducing evidence of subsequent remedial measures
taken by a defendant after an injury to improve a product.
2. See, e.g., Brooks v. Beech Aircraft Corp., 902 P.2d 54 (N.M. 1995).
3. See, e.g., Horn v. Thoratec Corp., 376 F.3d 163 (3d Cir. 2004).
Result!New
York’s highest court affirmed the lower
court’s finding that the manufacturer, Buick Motor Company,
was liable for the injuries sustained by the plaintiff. Buick
was found negligent for not inspecting the wheels and was
responsible for the finished product sold by its dealer.
Comments!This case established the rule, still applicable today, that a manufacturer can be liable for failure to
exercise reasonable care in the manufacture of a product
when such failure involves an unreasonable risk of bodily
harm to users of the product.
This rule is designed to encourage companies to continually strive to improve the safety of their products. If
subsequent safety measures could be used to establish negligence, companies would be deterred from improving
their products.
10-1c Strict Liability in Tort
Strict liability in tort allows a person injured by an unreasonably dangerous product to recover damages from the
manufacturer or seller of the product even in the absence
of a contract or negligent conduct on the part of the manufacturer or seller. Because the defect in the product is the
basis for liability, the injured person may recover damages
even if the seller exercised all possible care in the manufacture and sale of the product.
In 1963, in Greenman v. Yuba Power Products, Inc.,4 the
California Supreme Court became the first state supreme
4. 377 P.2d 897 (Cal. 1963).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
court in the United States to adopt strict product liability.
The case involved a consumer who was injured while using
a Shopsmith combination power tool that could be used
as a saw, drill, and wood lathe. Claiming that the tool was
defective and not suitable to perform the work for which
it was intended, Greenman sued the manufacturer and the
retailer who had sold the power tool to his wife for breach
of express and implied warranties and for negligent construction of the tool. The California Supreme Court ruled
that a manufacturer is strictly liable in tort when it places
an article on the market, knowing that the product is to be
used without inspection for defects, and it proves to have a
defect that causes injury to a human being.5
Rationale
The legal principle of strict product liability is grounded
in considerations of public policy. The rationale has four
basic parts:
1. The law should protect consumers against unsafe products.
Consumers are often unable to insure against all risks. In addition, consumers should be able to rely on the marketing of
manufacturers.
2. The cost of injury should be borne by the parties best able to
prevent, detect, eliminate, and insure against product defects:
manufacturers and others in the chain of distribution. Because
the manufacturers and sellers of products can insure against
the losses caused by their products and pass these costs on
to all consumers in the form of higher prices, they are in the
best position to bear and spread the costs of product liability.
3. Imposing strict liability encourages manufacturers to go the
extra mile to produce safer products and to improve existing
products by investing in careful product design, manufacture,
testing, and quality control. Manufacturers should not escape
liability simply because they typically do not sign a formal
contract with the end user of their product (or with nonusers
who might be injured by their product). Negligence liability
alone does not provide sufficient incentives to induce manufacturers to make safe products.
4. The law should give sellers an incentive to deal with reputable
manufacturers.
In short, the goal of strict product liability is to force
companies to internalize the costs of the injuries caused
by their products.
Elements of a Strict Liability Claim
For a defendant to be held strictly liable, the plaintiff must
prove that (1) the plaintiff, or the plaintiff’s property, was
harmed by the product; (2) the injury was caused by a
defect in the product; and (3) the defect existed at the
time the product left the defendant and did not substantially change along the way. Most states have followed the
5. Id. at 901.
PRODUCT LIABILITY
255
formulation of section 402A of the Restatement (Second)
of Torts (1965), which states:
1. One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property
is subject to liability for physical harm thereby caused to the
ultimate user or consumer, or to his property, if
a. the seller is engaged in the business of selling such a product, and
b. it is expected to and does reach the user or consumer
without substantial change in the condition in which it
is sold.
2. The rule stated in Subsection (1) applies although
a. the seller has exercised all possible care in the preparation
and sale of his product, and
b. the user or consumer has not bought the product from or
entered into any contractual relation with the seller.
In some cases, the plaintiffs may base their suit on the
anticipation of becoming ill or suffering physical injury as a
result of being exposed to a toxic product, such as asbestos.
In 2003, the U.S. Supreme Court ruled that asymptomatic plaintiffs exposed to asbestos could sue if they had a
reasonable fear of developing cancer and had at least some
physical injury.6 In Petito v. A.H. Robins Co.,7 the Florida
Court of Appeal required manufacturers and sellers of the
weight-loss drugs Fenfluramine and Phentermine to pay
for a court-supervised program of medical testing, monitoring, and study of a class of asymptomatic patients.
The American Law Institute (ALI) promulgated the
Restatement (Third) of Torts: Products Liability in 1998.
Like the Restatement (Second) of Torts, the Restatement
(Third) imposes strict liability for manufacturing defects.
In the case of design defects and defects based on inadequate instructions or warnings, however, it imposes a
standard predicated on negligence. Because a majority of
states still follow the Restatement (Second), the discussion that follows is based on that restatement, except as
otherwise noted.
102 LITIGATION STRATEGY AND
THE AVAILABILITY OF PUNITIVE
DAMAGES
Although negligence and breach of warranty are alleged
in most product liability cases, they play a secondary role
compared with strict liability. Under strict liability, the
injured person does not have the burden of proving negligence and does not have to be in privity with the seller.
Thus, strict liability is easier to prove than either negligence or breach of warranty.
6. Norfolk & Western Ry. Co. v. Ayers, 538 U.S. 135 (2003).
7. 750 So. 2d 103 (Fla. Dist. Ct. App. 1999).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
256
UNIT II
THE LEGAL ENVIRONMENT
Nonetheless, plaintiffs’ attorneys usually try to prove
negligence as well as strict liability. Proof of negligence will
often stir the jury’s emotions, leading to higher damages
awards and, in some cases, to punitive damages.8 For
example, in 2006, a jury awarded $9 million in punitive
damages on top of $4.5 million in compensatory damages
to a plaintiff who had taken Vioxx pain medication, after
the jury found that Merck had withheld information
about the drug’s health risks from the Food and Drug
Administration.9 Jury foreperson Timothy Kile explained
8. Punitive damages are discussed further in Chapters 4 and 9.
9. Alex Berenson, Merck Jury Adds $9 Million in Damages, N.Y. Times, Apr.
12, 2006, at C1.
the jury’s thought process: “[Merck is] responsible for
people taking the medication and putting it in their
bodies. To not put information out there about public
safety that I feel you have a responsibility to put out there,
that’s willful and wanton.”10
Once the plaintiff raises the issue of negligence, the defendant is permitted to introduce evidence that its products
were “state of the art” and manufactured with due care. (The
state-of-the-art defense is discussed later in this chapter.) Such
evidence would otherwise be inadmissible in strict liability
cases governed by the Restatement (Second) and manufacturing defect cases governed by the Restatement (Third).
10. Id.
IN BRIEF
Theories of Product Liability*
What needs to
be shown?
Contract—Breach of Warranty
Tort—Negligence
Tort—Strict Liability
Warranties may be express
(stated in the contract) or
implied (by law). Implied
warranties are merchantability
and sometimes fitness for a
particular purpose.
!1. #The injured party (or property)
was injured (damaged) by the
product, resulting in an actual loss.
!1.! The injured party (or property) was
harmed by a defective product (i.e.,
has a design defect, a manufacturing defect, or a failure to adequately
warn) that is unreasonably dangerous (i.e., the danger extends beyond
that contemplated by the ordinary
consumer who purchases with ordinary knowledge in the community).
2. The defendant owed a duty to the
injured party.
3. The defendant did not use reasonable care in designing the product,
manufacturing the product, or
providing adequate warnings.
4. The defect caused the injury or
damage.
5. The injury was reasonably
foreseeable.
2. The product reached the consumer
without substantial change in the
condition in which it was sold.
3. The seller is engaged in the
business of selling the product.
Is privity
of contract
required?
Yes, for common law warranties; varies by state for UCC
warranties
No
No
Who is
covered?
Only the parties in privity of
contract under common law;
under the UCC, parties in privity,
members of their household and
guests personally injured by the
breach, and, in certain states,
any reasonably foreseeable user
or bystander
Purchasers, users, and bystanders
(Note: Purchasers of used property
generally are not covered.)
Same as Tort—Negligence
Who is liable?
Only the parties in privity of
contract under common law;
seller who made the warranty
under the UCC
The person(s) who acted negligently
Anyone in the commercial chain of
distribution: component manufacturers,
manufacturers, distributors, wholesalers, and retailers (but not casual sellers;
and in some jurisdictions, there are
limits on the liability of component
manufacturers, wholesalers, and
retailers)
Is “fault”
required?
No
Yes—failure to use reasonable care in
designing, manufacturing (including
inspecting for defects in components),
or providing adequate warnings
No
CONTINUED
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
PRODUCT LIABILITY
257
Contract—Breach of Warranty
Tort—Negligence
Tort—Strict Liability
For express warranties, the
terms of the warranty generally
bar or severely limit recovery.
In contributory negligence states—
no recovery
Contributory negligence does not
apply.
In comparative negligence states—
reduced recovery
In some jurisdictions, comparative fault
can reduce awards.
Unforeseeable misuse will generally
bar recovery.
Unforeseeable misuse will generally
bar recovery.
Generally no recovery
What if the
product was
“state of
the art”?
(Note: States
differ as to the
standard used to
establish “state
of the art.”)
Generally precludes claims for negligent design
Generally irrelevant
What if the
product met
all federal
and state
regulatory
standards?
Generally irrelevant as to
express warranties but may
eliminate any claim under
implied warranties
If the standards do not preempt state
product liability law—no effect
What
damages are
recoverable?
Economic only
Economic damages, bodily injury,
property damage, and pain and
suffering
Same as Tort—Negligence
Are punitive
damages
available?
No
Yes, if the defendant’s conduct was
grossly negligent or reckless
No
What if the
injured person
negligently
used or
misused the
product?
For implied warranties, especially
fitness for a particular purpose,
the result will be fact specific.
Manufacturing defects and failure-towarn claims are still available.
Same as Tort—Negligence
If the standards do preempt state
product liability law—recovery is limited to the preemption limitations.
*Key assumptions:
1. The defendant sold a product, not a service.
2. The defendant was not engaged in an ultrahazardous activity.
3. The product was not unavoidably unsafe.
4. The court will apply standards similar to the Restatement (Second).
5. Variations among jurisdictions have not been noted in all possible circumstances.
103 WHAT IS A PRODUCT?
Strict liability in tort applies only to products, not services
and other intangibles.
10-3a Products Versus Services
or Information
In some cases, it is unclear whether an injury was caused
by a defective product or a negligently performed service.
For example, a person may be injured by a needle used by
a dentist or the hair solution used by a beautician. Some
courts apply strict liability in these situations. Other courts
will treat the product as incidental to the service and not
apply strict liability.
Courts that have addressed the definition-of-product
question have required that the item giving rise to liability be
tangible. But what happens when harm results from defective information contained in a book or other tangible item?
Is the “product” the information or the physical characteristics of the item in which the information is embedded?
In the case of books, courts have generally taken the
position that the text in a book is not a product. One court
noted the distinction between “the tangible portion of the
book, the binding and printing, which is a good, from the
thoughts and ideas contained therein, which are not.”11 For
example, mushroom enthusiasts who had relied on descriptions in a book entitled The Encyclopedia of Mushrooms to
determine which wild mushrooms were safe to eat, but who
became critically ill after eating a poisonous variety, could
not bring a strict product liability claim based on the erroneous information.12 The court reasoned that the allegedly
defective “product” was a collection of ideas and expressions, not a tangible item. The First Amendment to the U.S.
Constitution evidences the high value placed on the unfettered exchange of ideas; this could be seriously inhibited by
the threat of strict liability for the contents of books. Courts
have used similar reasoning to dismiss product claims based
11. Smith v. Linn, 563 A.2d 123, 126 (Pa. Super. Ct. 1989).
12. Winter v. G.P. Putnam’s Sons, 938 F.2d 1033 (9th Cir. 1991).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
258
UNIT II
THE LEGAL ENVIRONMENT
on a dieting guide,13 an instruction guide for a floor hockey
game,14 video games,15 and scuba diving lessons.16
In contrast, courts have allowed product liability claims
to proceed against publishers of written materials that are
akin to specialized instruments. For example, a court ruled
that aeronautical charts are sufficiently tangible to qualify
as products because they provide visual representations of
technical information, such as headings, distances, and
minimum altitudes required by pilots.17 Similarly, if the
information at issue is characterized as “an integral part of
a product in a ‘smart good,’ such as a computerized braking
system in a car,” then strict product liability will apply.18
Software
With the evolution of the digital age, courts have also
considered whether software is sufficiently tangible to be
considered a product. Certain scholars argue that “[t]he
reasons for treating software differently from all other
products no longer withstand close scrutiny, if they ever
did,” and they have called for “the extension of strict liability to defective software that causes injury at the earliest
opportunity.”19 But courts have reached varying results.
A federal court applying Louisiana law ruled that the
software State Farm Insurance used to calculate home
damage estimates might be a product under the state’s
product liability law.20 The homeowners had alleged that
State Farm had intentionally programmed the software
to underestimate the costs of repairing or replacing property damage suffered during Hurricane Katrina in 2005.
In reaching its decision, the court relied on a Louisiana
Supreme Court ruling on a tax code issue. In that case,
Louisiana’s highest court, reaching back to Roman law,
had held that software is a “corporeal movable,” or physical thing capable of being moved, not an “incorporeal
movable,” or abstract concept such as a legal right.21 (Note
that Louisiana is not a common law jurisdiction.)
In another case, which examined the issue outside of
the product liability context, the U.S. Court of Appeals
for the Fourth Circuit came to the opposite conclusion.
It characterized computer files and operating systems as
“abstract ideas, logic, instructions, and information,” not
tangible products.22 In contrast, the Eighth Circuit held
13. Gorran v. Atkins Nutritionals, Inc., 464 F. Supp. 2d 315 (S.D.N.Y. 2006),
aff ’ d, 279 F. App’x 40 (2d Cir. 2008).
14. Garcia v. Kusan, Inc., 655 N.E.2d 1290 (Mass. App. Ct. 1995).
15. Wilson v. Midway Games, Inc., 198 F. Supp. 2d 167 (D. Conn. 2002).
16. Isham v. Padi Worldwide Corp., 2007 WL 2460776 (D. Haw. Aug. 23, 2007).
17. Aetna Cas. & Sur. Co. v. Jeppesen & Co., 642 F.2d 339 (9th Cir. 1981).
18. Michael Traynor, Information Liability and the Challenges of Law Reform:
An Introductory Note, in Consumer Protection in the Age of the
Information Economy 81, 82 (Jane K. Winn ed., 2006).
19. Frances E. Zollers, Andrew McMullin, Sandra N. Hurd & Peter Shears, No
More Soft Landings for Software: Liability for Defects in an Industry That Has
Come of Age, 21 Santa Clara Computer & High Tech. L.J. 745, 782 (2005).
20. Schafer v. State Farm Fire & Cas. Co., 507 F. Supp. 2d 587 (E.D. La. 2007).
21. South Cent. Bell Tel. Co. v. Barthelemy, 643 So. 2d 1240, 1244 (La. 1994).
22. Am. Online, Inc. v. St. Paul Mercury Ins. Co., 347 F.3d 89, 96 (4th Cir.
2003), aff ’ d, 347 F.3d 89 (4th Cir. 2003).
that software that caused a subscriber to lose use of his
computer did cause damage to a tangible product within
the meaning of a general liability insurance policy.23
10-3b Fixtures and Structural
Improvements
A similar issue arises when a telephone pole or other product
installed in the ground is defective. Some courts take the
position that fixtures of this type are structural improvements
of real property and, as such, are not products for purposes
of product liability actions. For example, the Florida Court of
Appeal held that a conveyor was a structural improvement as
a matter of law and not subject to strict liability.24
Other courts, such as the Alabama Supreme Court, have
ruled that telephone poles maintain their product characteristics even after being attached to real property.25 Alabama’s
top court also treated the following structural improvements
as products: (1) a conveyor belt installed in a grain-storage
facility,26 (2) a gas water heater in a home,27 (3) a cylindrical
rotary soybean conditioner located in a soybean extraction
facility,28 and (4) a diving board that had been installed
with an in-ground, vinyl-lined swimming pool.29 Similarly,
the U.S. District Court for the District of South Carolina
treated a conveyor belt as a product under South Carolina
law.30 A New Jersey Superior Court recognized that a pool
was an improvement to real property but ruled that it was
still subject to strict liability under state law.31 In contrast,
the Alabama Supreme Court ruled that certain items, such
as fireplaces32 and multilayered exterior wall systems,33 that
become part of the structure once installed are not products
because they “will have the same useful life as the house or
building itself and will not need to be replaced over the life
of the building.”
104 WHAT MAKES A PRODUCT
DEFECTIVE?
An essential element for recovery in strict liability is proof
of a defect in the product. The injured party must show
that (1) the product was defective when it left the hands
of the manufacturer or seller, and (2) the defect made the
product unreasonably dangerous. Typically, a product is
dangerous if its characteristics do not meet consumers’
23.
24.
25.
26.
27.
28.
29.
30.
31.
Eyeblaster, Inc. v. Fed. Ins. Co., 613 F.3d 797 (8th Cir. 2010).
Plaza v. Fisher Dev., Inc., 971 So. 2d 918, 925 (Fla. Dist. Ct. App. 2007).
Bell v. T.R. Miller Mill Co., 768 So. 2d 953, 957 (Ala. 2000).
Beam v. Tramco, Inc., 655 So. 2d 979 (Ala. 1995).
Sears, Roebuck & Co. v. Harris, 630 So. 2d 1018 (Ala. 1993).
McDaniel v. French Oil Mill Mach. Co., 623 So. 2d 1146 (Ala. 1993).
King v. S.R. Smith, Inc., 578 So. 2d 1285 (Ala. 1991).
Ervin v. Cont’l Conveyor & Equip. Co., 674 F. Supp. 2d 709 (D.S.C. 2009).
Dziewiecki v. Bakula, 824 A.2d 241 (N.J. Super. Ct. App. Div. 2003),
aff ’ d, 853 A.2d 234 (N.J. 2004).
32. Wells v. Clowers Constr. Co., 476 So. 2d 105 (Ala. 1985).
33. Keck v. Dryvit Sys., Inc., 830 So. 2d 1 (Ala. 2002).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
expectations or, in a design defect case, its risks exceed its
utility. For example, a consumer expects that a stepladder
will not break when someone stands on the bottom step.
10-4a Manufacturing Defect
A manufacturing defect is a flaw in a product that occurs
during production, such as a failure to meet the design
specifications. A product with a manufacturing defect
is not like the others rolling off the production line. For
example, suppose the driver’s seat in a truck is designed to
be bolted to the frame. If a worker forgets to tighten the
bolts, the loose seat will be a manufacturing defect.
10-4b Design Defect
A design defect occurs when a product manufactured
according to specifications is, nonetheless, “unreasonably
dangerous to the user or consumer or to his property” due
to its inadequate design or a poor choice of materials.34
Under the consumer expectations test set forth in the
Restatement (Second) of Torts: “The article sold must
be dangerous to an extent beyond that which would be
contemplated by the ordinary consumer who purchases it,
with the ordinary knowledge common to the community
as to its characteristics.”35 Under the risk–utility balancing
test, which a majority of the states have adopted,36 courts
balance the risks associated with the product with its
utility to the user and the public. A notorious product satisfying both tests was the Ford Pinto, which a jury found
to be defectively designed because the car’s fuel tank was
too close to the rear axle, causing the tank to rupture when
the car was struck from behind.
John Wade, a noted American jurist whose articles are
frequently cited by courts,37 set forth the following factors
for determining whether the design of a product is defective:
1. The usefulness and desirability of the product—its utility to
the user and to the public as a whole.
2. The safety aspects of the product—the likelihood that it will
cause injury and the probable seriousness of the injury.
3. The availability of a substitute product that would meet the
same need and not be as unsafe.
4. The manufacturer’s ability to eliminate the unsafe character of
the product without impairing its usefulness or making it too
expensive to maintain its utility.
5. The user’s ability to avoid danger by the exercise of care in
the use of the product.
6. The user’s anticipated awareness of the dangers inherent
in the product and their avoidability, because of general
34.
35.
36.
37.
Restatement (Second) of Torts § 402A (1965).
Id. cmt. i.
Evans v. Lorillard Tobacco Co., 990 N.E.2d 997, 1012 (Mass. 2013).
See, e.g., Nunnally v. R.J. Reynolds Tobacco Co., 869 So. 2d 373 (Miss.
2004).
PRODUCT LIABILITY
259
E T H IC A L CO N S I D E R ATI O N
You are a manager of a major manufacturing corporation. An
interview with a low-level engineer leads you to believe the
design specifications for your model PaZazz-4 are, in fact, the
cause of numerous deaths. You are facing a wrongful death
and product liability suit for defective design. The plaintiffs
have not deposed this engineer, even though his name was
provided as one of the hundreds who worked on this project.
Thus, although you believe the design for PaZazz-4 was
defective, it will be extremely difficult—if not impossible—for
the plaintiffs to prove it. What should you do?
public knowledge of the obvious condition of the product or
because of the existence of suitable warnings or instructions.
7. The feasibility, on the part of the manufacturer, of spreading
the loss by setting the price of the product or carrying liability
insurance. 38
Criticisms of the Restatement (Second)
Consumer Expectations Test
Although strict product liability is predicated on the
assumption that manufacturers are in the best position
to insure against loss or to spread the risk of loss among
their customers, in practice, insurance policies often are
available only with a substantial deductible, if at all. This
leads to increased manufacturing costs and higher prices.
The strict product liability scheme also takes its toll on
industry efficiency and competitiveness. Companies have
become unwilling to invest in product creation or modification because this may be seen as an admission of fault.
Informed by these concerns, the American Law
Institute (ALI) approved the Restatement (Third) of
Torts: Products Liability in 1997. The new restatement
proposed bold changes in the doctrine of product liability.
As noted earlier, however, no court is bound by the restatement’s formulation of product liability law.
The Reasonable-Alternative-Design Requirement
Instead of imposing strict liability for defectively designed
products, the Restatement (Third) requires that any claim
of design defect be supported by a showing of a reasonable alternative design. According to comment (d) to
Section 2(b) of the Restatement (Third), “the plaintiff
must prove that such a reasonable alternative was, or reasonably could have been, available at time of sale or distribution.” Comment (f) further provides:
A broad range of factors may be considered in determining
whether an alternative design is reasonable and whether
its omission renders a product not reasonably safe.
The factors include, among others, the magnitude and
38. Id. at 379–80.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
260
UNIT II
THE LEGAL ENVIRONMENT
probability of the foreseeable risks of harm, the instructions and warnings accompanying the product, and the
nature and strength of consumer expectations regarding
the product, including expectations arising from product
portrayal and marketing.
In the following case, the South Carolina Supreme
Court considered whether to accept the Restatement
(Third)’s reasonable-alternative-design requirement or to
permit a plaintiff to recover for a design defect based on
the consumer expectations test.
A CASE IN POINT
IN THE LANGUAGE OF THE COURT
Branham v. Ford Motor Co.
Facts!Jesse Branham III, a passenger in a Bronco II 4×2 truck driven by Cheryl Hale, was
injured when the truck rolled over, throwing him out of the vehicle. No one was wearing a seat
belt. Hale had taken her eyes off the road to turn toward the backseat to quiet the children sitting
there. When the right rear wheel left the road, Hale overcorrected to the left, causing the truck to
roll over. Branham sued Hale for negligence and Ford Motor Company for negligence and strict
liability. He alleged that Ford’s failure to install a different suspension system constituted a design
defect. Ford engineers had criticized the Bronco’s twin I-beam design and suggested more stable
(but also more expensive) alternatives. After the jury returned a verdict against Hale and Ford for
$16 million in actual damages and $15 million in punitive damages, Ford appealed.
Supreme Court of
South Carolina
701 S.E.2d 5 (S.C. 2010).
CASE 10.2
Issue Presented!Should South Carolina adopt the Restatement (Third) approach to
design defects, which requires the plaintiff to show the existence of a reasonable alternative
design before a product will be deemed unreasonably dangerous, or permit recovery based
on the consumer expectations test?
Opinion!KITTRIDGE, J., writing on behalf of the South
Carolina Supreme Court:
II
■
■
■
■
C
We next address Ford’s two-fold argument that: (1) Branham
failed to prove a reasonable alternative design pursuant to
the risk-utility test; and (2) South Carolina law requires a
risk-utility test in design defect cases to the exclusion of the
consumer expectations test.
For a plaintiff to successfully advance a design defect claim,
he must show that the design of the product caused it to be
“unreasonably dangerous.” In South Carolina, we have traditionally employed two tests to determine whether a product
was unreasonably dangerous as a result of a design defect:
(1) the consumer expectations test and (2) the risk-utility test.
In Claytor v. General Motors Corp., 39 this Court phrased the
consumer expectations test as follows: “The test of whether
a product is or is not defective is whether the product is
unreasonably dangerous to the consumer or user given the
conditions and circumstances that foreseeably attend use
of the product.”
The Claytor Court articulated the risk-utility test in the following manner: “[N]umerous factors must be considered [when
determining whether a product is unreasonably dangerous],
including the usefulness and desirability of the product, the
cost involved for added safety, the likelihood and potential
seriousness of injury, and the obviousness of danger.”
■
■
■
■
Ford contends Branham failed to present evidence of a feasible alternative design. Implicit in Ford’s argument is the
contention that a product may only be shown to be defective
39. 286 S.E.2d 129, 131 (S.C. 1982).
and unreasonably dangerous by way of a risk-utility test, for
by its very nature, the risk-utility test requires a showing
of a reasonable alternative design. Branham counters, arguing that under Claytor he may prove a design defect by
resort to the consumer expectations test or the risk-utility
test. Branham also argues that regardless of which test is
required, he has met both, including evidence of a feasible
alternative design. We agree with Branham’s contention
that he produced evidence of a feasible alternative design.
Branham additionally points out that the jury was charged
on the consumer expectations test and the risk-utility test.
. . . Branham challenged the design of the Ford Bronco II
by pointing to the MacPherson suspension as a reasonable
alternative design. A former Ford vice president, Thomas
Feaheny, testified that the MacPherson suspension system
would have significantly increased the handling and stability
of the Bronco II, making it less prone to rollovers. Branham’s
expert, Dr. Richardson, also noted that the MacPherson suspension system would have enhanced vehicle stability by
lowering the vehicle center of gravity. There was further evidence that the desired sport utility features of the Bronco II
would not have been compromised by using the MacPherson
suspension. Moreover, there is evidence that use of the
MacPherson suspension would not have increased costs.
Whether this evidence satisfies the risk-utility test is ultimately
a jury question. But it is evidence of a feasible alternative
design, sufficient to survive a directed verdict motion.
While the consumer expectations test fits well in manufacturing defect cases, we do agree with Ford that the test
is ill-suited in design defect cases. We hold today that the
exclusive test in a products liability design case is the riskutility test with its requirement of showing a feasible alternative design. In doing so, we recognize our Legislature’s
presence in the area of strict liability for products liability.
CONTINUED
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
In 1974, our Legislature adopted the Restatement (Second)
of Torts § 402A (1965), and identified its comments as legislative intent.40 . . . Since the adoption of section 402A, the
American Law Institute published the Restatement (Third)
of Torts: Products Liability (1998). The third edition effectively moved away from the consumer expectations test for
design defects, and towards a risk-utility test. We believe
the Legislature’s foresight in looking to the American Law
Institute for guidance in this area is instructive.
The Legislature has expressed no intention to foreclose court
consideration of developments in products liability law. For
example, this Court’s approval of the risk-utility test in Claytor
yielded no legislative response. We thus believe the adoption
of the risk-utility test in design defect cases in no manner
infringes on the Legislature’s presence in this area.
Some form of a risk-utility test is employed by an overwhelming majority of the jurisdictions in this country. Some
of these jurisdictions exclusively employ a risk-utility test,
while others do so with a hybrid of the risk-utility and the
consumer expectations test, or an explicit either-or option.
States that exclusively employ the consumer expectations
test are a decided minority.
■
■
■
■
. . . The very nature of feasible alternative design evidence
entails the manufacturer’s decision to employ one design
over another. This weighing of costs and benefits attendant
to that decision is the essence of the risk-utility test.
This approach is in accord with the current edition of the
Restatement of Torts:
A product . . . is defective in design when the foreseeable risks of harm posed by the product could
have been reduced or avoided by the adoption of a
reasonable alternative design by the seller or other
distributor, or a predecessor in the commercial chain
of distribution, and the omission of the alternative
design renders the product not reasonably safe.41
In every design defect case the central recurring fact will be a
product that failed causing damage to a person or his property. Consequently, the focus will be whether the product was
made safe enough. This inquiry is the core of the risk-utility
balancing test in design defect cases, yet we do not suggest
a jury question is created merely because a product can be
made safer. We adhere to our longstanding approval of the
principle that a product is not in a defective condition unreasonably dangerous merely because it “can be made more
safe.” As we observed in Marchant v. Mitchell Distributing Co.:
Most any product can be made more safe.
Automobiles would be more safe with disc brakes
40. S.C. Code Ann. §§ 15-73-10–30.
41. Restatement (Third) of Torts: Prods. Liab. § 2(b) (1998).
PRODUCT LIABILITY
261
and steel-belted radial tires than with ordinary
brakes and ordinary tires, but this does not mean
that an automobile dealer would be held to have
sold a defective product merely because the most
safe equipment is not installed. By a like token, a
bicycle is more safe if equipped with lights and a
bell, but the fact that one is not so equipped does
not create the inference that the bicycle is defective and unreasonably dangerous.42
■
■
■
■
In sum, in a product liability design defect action, the
plaintiff must present evidence of a reasonable alternative
design. The plaintiff will be required to point to a design
flaw in the product and show how his alternative design
would have prevented the product from being unreasonably dangerous. This presentation of an alternative design
must include consideration of the costs, safety and functionality associated with the alternative design. On retrial,
Branham’s design defect claim will proceed pursuant to the
risk-utility test and not the consumer expectations test.
III
Notwithstanding the existence of ample evidence to withstand a directed verdict motion on the handling and stability design defect claim, we reverse and remand for a new
trial [due to several evidentiary errors, including the admission of information that only became known after the truck
was placed into the stream of commerce]. . . .
Result!After embracing the Restatement (Third) ap-
proach to design defects, the court overturned the jury verdict and ordered a new trial. To prevail in the new trial, the
plaintiff will have to show a reasonable alternative design.
Comments!Although the consumer expectations test
is different from the risk–utility test, there is some overlap.
As comment (g) to the Restatement (Third) acknowledged:
[T]he fact that a product design meets consumer
expectations may substantially influence or even be
ultimately determinative on risk-utility balancing in
judging whether the omission of a proposed alternative design renders the product not reasonably
safe. It follows that, while disappointment of consumer expectations may not serve as an independent basis for allowing recovery under Subsection
(b), neither may conformance with consumer expectations serve as an independent basis for denying recovery. Such expectations may be relevant in
both contexts, but in neither are they controlling.
42. 240 S.E.2d 511, 513–14 (S.C. 1977).
Critical Thinking Questions
1. How do the approaches of the Restatement (Second) and the Restatement (Third) with
regard to design defects differ? What public policies are implicated?
2. Should the plaintiff or the defendant have the burden of proving the existence of a
reasonable alternative design?
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
262
UNIT II
THE LEGAL ENVIRONMENT
10-4c Inadequate Warnings, Labeling,
or Instructions
To avoid charges of failure to warn, a product must
carry adequate warnings of the risks involved in its foreseeable use. To prevail in a failure-to-warn case, most
states require the plaintiff to prove that “the defendant
did not adequately warn of a particular risk that was
known or knowable in light of the generally recognized
and prevailing best scientific and medical knowledge
available at the time of manufacture and distribution.”43
For example, the manufacturer of a ladder must warn
the user not to stand on the top step. A product must
also be accompanied by instructions for its safe use.
For example, sellers have been found liable for failing
to provide adequate instructions about the proper use
and capacity of a hook and the assembly and use of a
telescope and sun filter.
Although a warning can shield a manufacturer from
liability for a properly manufactured and designed product,
it cannot shield the manufacturer from liability for a defectively manufactured or designed product. For example,
an automobile manufacturer cannot escape liability for
defectively designed brakes merely by warning that “under
certain conditions this car’s brakes may fail.” As discussed
later, in cases involving unavoidably unsafe products, such
as certain types of vaccines, the adequacy of the warning
determines whether a product known to be dangerous is
also “defective.”
Failure to Warn of Foreseeable Risks or to
Provide Reasonable Instructions under the
Restatement (Third) of Torts: Product Liability
In failure-to-warn cases, the Restatement (Third)
embodies the majority view that defendants are liable
only if they fail to warn of risks that are foreseeable
at the time of sale.44 It also interjects a negligence
standard, however, by providing that a product “is
defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the
product could have been reduced or avoided by the
provision of reasonable instructions or warnings by
the [defendant], . . . and the omission of the instructions or warnings renders the product not reasonably
safe.” 45 Comment (i) acknowledges:
No easy guideline exists for courts to adopt in assessing the
adequacy of product warnings and instructions. In making
their assessments, courts must focus on various factors,
43. Anderson v. Owens-Corning Fiberglass Corp., 810 P.2d 549, 558 (Cal.
1991).
44. See, e.g., Powers v. Taser Int’l, Inc., 174 P.3d 777 (Ariz. Ct. App. 2007)
(defendant is not liable for failure to warn against risks that were unforeseeable at the time of sale).
45. Restatement (Third) of Torts: Prods. Liab. § 2(c) (1998) (emphasis
added).
such as content and comprehensibility, intensity of expression, and the characteristics of expected user groups.46
Comment (i) also explains, “In some cases, excessive
detail may detract from the ability of typical users and
consumers to focus on the important aspects of the warnings, whereas in others reasonably full disclosure will be
necessary to enable informed, efficient choices by product
users.” 47 Few courts have adopted the Restatement (Third)
negligence standard for failure to warn.
Bilingual Warnings
The United States is heterogeneous, and diversity is one
of its great strengths. With diversity can come challenges, however. Misunderstandings may arise due to
differences in culture or language. Legislatures in states
with substantial non-English-speaking populations have
recognized the need for bilingual or multilingual documents in such areas as voting and public services. In the
area of product labeling, requirements may vary. For
example, although the Food and Drug Administration
(FDA) encourages labeling that meets the needs of
non-English speakers, it only requires manufacturers
to provide full labeling in English for nonprescription
drugs except those distributed solely in Puerto Rico or
another territory where the predominant language is
not English.48
Causation Requirement
To prevail on a failure-to-warn claim, the plaintiff must
show that (1) the defendant breached a duty to warn and
(2) the defendant’s failure to warn was the proximate
cause (or legal cause) of the plaintiff’s injuries. The question of proximate cause is one for the jury to determine.
As a result, the vast majority of courts will not disturb a
jury’s finding that a failure to warn was the proximate
cause of an injury. However, in an extreme case—one
in which the court believes no reasonable person could
have deemed the failure to warn a proximate cause of the
plaintiff ’s injury—the court may set aside a verdict on
causation grounds.
Unavoidably Unsafe Products
If the societal value of using an unavoidably unsafe
product outweighs the risk of harm from its use, the
manufacturer may be exonerated from liability as long as
it provided proper warnings. For example, certain drugs
are generally beneficial, but are known to have harmful
side effects in some situations. The authors of both the
Restatement (Second) and the Restatement (Third)
recognized that there should be a separate concept of
product liability for manufacturers of prescription drugs
46. Id. cmt. i.
47. Id.
48. Ramirez v. Plough, Inc., 863 P.2d 167 (Cal. 1993).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
and medical devices. Comment b to section 6 of the
Restatement (Third) articulated the rationale behind
this special treatment:
The traditional refusal by courts to impose tort liability for
defective designs of prescription drugs and medical devices
is based on the fact that a prescription drug or medical
device entails a unique set of risks and benefits. What may
be harmful to one patient may be beneficial to another.
Under Subsection (c) [of section 6] a drug is defectively
designed only when it provides no net benefit to any class
of patients. . . . [M]anufacturers must have ample discretion
to develop useful drugs and devices without subjecting
their design decisions to the ordinary test applicable to
products generally under § 2(b).49
Nearly every jurisdiction in the United States has
followed this reasoning in some form or another.50 For
example, the manufacturer of the Sabin oral polio vaccine
was held not strictly liable to an individual who contracted
polio from the vaccine.51 The odds of contracting polio
from the vaccine were one in a million. The drug’s benefits
outweighed its dangers, and the manufacturer’s warning
about the remote risk of harm was reasonably adequate.52
The National Vaccine Injury Compensation Program is a
“no-fault alternative to the tort system” to resolve claims
that individuals were injured by certain vaccines.53 An
excise tax, collected by the Department of the Treasury,
funds the program.
105 WHO MAY BE STRICTLY LIABLE
FOR PRODUCT DEFECTS?
In theory, each party in the chain of distribution may be
strictly liable for product defects: manufacturers, distributors, wholesalers, and retailers. Although disclaimers of
liability are generally ineffective, parties in the chain of
distribution may (and should) enter into contracts giving
them a right to indemnity (that is, reimbursement) if they
are found liable for defects caused by other members of the
distribution chain.
10-5a Product Manufacturers
A manufacturer will be held strictly liable for its defective products regardless of how remote the manufacturer
is from the final user of the product. The only requirement for strict liability is that the manufacturer be in
the business of selling the injury-causing product. The
49.
50.
51.
52.
53.
Restatement (Third) of Torts: Prod. Liab. § 6 cmt. b (1998).
See Restatement (Second) of Torts § 402A cmt. k (1965).
Johnson v. Am. Cyanamid Co., 718 P.2d 1318 (Kan. 1986).
Id. at 1324–26.
U.S. Dep’t of Health & Human Servs., National Vaccine Injury
Compensation Program, http://www.hrsa.gov/vaccinecompensation/index
.html (last visited Feb. 13, 2014).
PRODUCT LIABILITY
263
manufacturer may be held liable even when the distributor
makes final inspections, corrections, and adjustments of
the product.
10-5b Component Parts Manufacturers
Manufacturers of component parts are frequently sued as
well and are generally liable for any defects in the components they produce. But the maker of a component
part is not liable for defective design specifications for
the entire product as long as (1) the component is not
itself defective and (2) the component manufacturer did
not participate in the design of the finished product.54
For example, the maker of a nondefective seat installed
in a garbage truck was not liable to either the driver of
the truck or the truck manufacturer when the driver was
hurt after the truck rolled over.55 The truck manufacturer had designed the garbage truck and had chosen
which seat to install, and its own attorney had “admitted
that ‘there isn’t anything wrong with the seat.’”56
10-5c Wholesalers
Wholesalers are usually held strictly liable for defects in
the products they sell. In some jurisdictions, however, a
wholesaler is not liable for latent or hidden defects if the
wholesaler sells the products in exactly the same condition
it received them.
10-5d Retailers
A retailer may also be held strictly liable. For example,
in the automobile industry, retailers have a duty to
inspect and care for the products. In several jurisdictions, however, a retailer will not be liable if it did not
contribute to the defect and played no part in the manufacturing process.
10-5e Sellers of Used Goods
and Occasional Sellers
Sellers of used goods are usually not held strictly liable
because they are not within the original chain of distribution of the product.57 In addition, the custom in the
used-goods market is that there are no warranties or expectations relating to the quality of the products (although
some jurisdictions have adopted rules requiring warranties
for used cars). A seller of used goods is, however, strictly
liable for any defective repairs or replacements he or she
makes. Occasional sellers, such as people who host garage
sales, are not strictly liable.
54.
55.
56.
57.
See Restatement (Third) of Torts: Prods. Liab. § 5 (1998).
Bostrom Seating, Inc. v. Crane Carrier Co., 140 S.W.3d 681 (Tex. 2004).
Id. at 684.
Allenberg v. Bentley Hedges Travel Serv., Inc., 22 P.3d 223 (Okla. 2001).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
264
UNIT II
THE LEGAL ENVIRONMENT
106 SUCCESSOR, MARKET-SHARE,
AND PREMISES LIABILITY
Companies may also face product liability because they
acquired the firm that sold the defective product, sold an
undifferentiated product, or operated premises tainted by
defective products.
10-6a Successor Liability
Most states employ the traditional successor liability rule:
a corporation purchasing or acquiring the assets of another
is liable for the acquired company’s product liability and
other debts only when (1) there is a consolidation or
merger of the two corporations,58 (2) the acquirer expressly
or impliedly agrees to assume such obligations, or (3) the
transaction was wrongfully entered into to escape liability.59
A minority of jurisdictions have adopted one of two additional bases for successor liability: the product-line theory
and the continuity-of-enterprise approach.
Product-Line Theory
Under the product-line theory, espoused by the California
Supreme Court,60 a successor that continues to manufacture the same product line as its predecessor, under the
same name and with no outward indication of any change
of ownership, may be held liable for product liability
claims resulting from that product line, even if the particular item was manufactured and sold by the acquired
firm prior to the acquisition.
Continuity-of-Enterprise Approach
Courts applying the continuity-of-enterprise approach
look for constancy between the buyer and seller organizations to determine whether the successor company is
essentially “a mere continuation or reincarnation of the predecessor entity.”61 Among the factors a court will analyze
are similarity of management, personnel, assets, facilities,
operations, and shareholders, and whether the successor
holds itself out to the public as a continuing enterprise.62 For
example, several people injured in a boating accident caused
by defects in the craft successfully used the continuity-ofenterprise approach to sue the company that succeeded the
boat manufacturer.63 Although the name of the company
changed, the owners, officers, employees, address, phone
number, and line of business remained the same.
58. The de facto merger doctrine is discussed in Chapter 19.
59. See, e.g., Nissen Corp. v. Miller, 594 A.2d 564, 565–66 (Md. 1991) (adopting the traditional successor liability exceptions).
60. Ray v. Alad Corp., 560 P.2d 3 (Cal. 1977). But see, e.g., Semenetz v. Sherling
& Walden, Inc., 851 N.E.2d 1170 (N.Y. 2006) (declining to adopt the
“product-line” exception).
61. Nissen Corp., 594 A.2d at 565–66.
62. Turner v. Bituminous Cas. Co., 244 N.W.2d 873 (Mich. 1976).
63. Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640 (5th Cir. 2002)
(applying Florida law).
10-6b Market-Share Liability
When there are multiple manufacturers of identical products, the injured party may not be able to prove which
of the defendant manufacturers sold the product that
caused the injury. In certain unusual cases, particularly
those involving prescription drugs, the court may allocate liability on the basis of each defendant’s share of
the market. This doctrine of market-share liability was
developed by the California Supreme Court in Sindell v.
Abbott Laboratories 64 to address the specific problem of
DES litigation.
The daughters of women who took the drug diethylstilbestrol (DES) during pregnancy alleged that they were
injured by the DES, which, among other things, increased
their likelihood of developing cancer. The harmful effects
of DES were not discovered until many years after the
plaintiffs’ mothers had used the drug. Many of the plaintiffs could not pinpoint which manufacturer was directly
responsible for their injuries. Because all manufacturers
made DES from an identical chemical formula, druggists
typically filled prescriptions from whatever stock they had
on hand. As a result, the plaintiffs sought damages from a
number of DES manufacturers.
Given the difficulty of identifying the defendant
responsible for each plaintiff, the court held that the
fairest approach was to apportion liability based on
each manufacturer’s national market share. The court
reasoned that it was more appropriate that the loss be
borne by those who produced the drug than by those
who suffered injury.
Although the New York Court of Appeals applied
market-share liability in DES cases, it characterized
the DES situation as “a singular case.”65 The Appellate
Division of the Supreme Court of New York (New
York’s intermediate appeals court) refused to extend the
doctrine to lead-based paints because (1) 20% of the
lead pigments could have been manufactured by defendants not named in the litigation; (2) the plaintiffs were
unable to identify the years in which the house at issue
was painted, making it impossible to determine which
defendants manufactured paint during the relevant
period; (3) lead-based paints were not uniform, fungible
products; and (4) there was no signature injury in lead
poisoning cases.66 In contrast, the Wisconsin Supreme
Court extended the doctrine to lead-based paint,67 and
a federal court in New York imposed market-share liability in a case involving well-water contamination by
oil companies.68
64. 607 P.2d 924 (Cal. 1980).
65. Hymowitz v. Eli Lilly & Co., 539 N.E.2d 1069, 1075 (N.Y. 1989).
66. Brenner v. Am. Cyanamid Co., 699 N.Y.S.2d 848, 852-54 (N.Y. App. Div.
1999).
67. Thomas v. Mallett, 701 N.W.2d 523 (Wis. 2005) (utilizing a modified version of market-share liability termed “risk-contribution theory”).
68. In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 175 F. Supp. 2d 593
(S.D.N.Y. 2001).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
Many jurisdictions have rejected market-share liability
outright.69 It has been criticized for being a simplistic
response to a complex problem and for implying that
manufacturers must be insurers of all their industry’s
products. Market-share liability has also been challenged
on the constitutional ground that it violates a defendant’s
right to due process of law because it denies a defendant
the opportunity to prove that its individual products did
not cause the plaintiff’s injury.
10-6c Premises Liability
Courts have imposed liability on building owners for
asbestos-related diseases on a premises liability theory.
Under this theory, a building owner may be found liable
under a theory of negligence for violating its general duty
to manage the premises and warn of asbestos dangers.70
This is in addition to the liability imposed on the manufacturers of the asbestos-laden insulation, roofing, or other
materials. The same theory has been applied to buildings
with mold.
107 PRODUCT LIABILITY
CLASS ACTIONS
Product liability cases are frequently resolved through
class actions, a procedural device that allows a large
number of plaintiffs to recover against a defendant in a
single case. Lawsuits involving the tobacco industry, silicone breast implants, and harmful diet drugs were all
resolved through class actions. The U.S. Supreme Court’s
decisions in both Amchem Products, Inc. v. Windsor 71 and
Wal-Mart v. Dukes 72 have made class certification more
difficult, however.
The Ohio Supreme Court refused to certify a class
of more than 4,000 workers exposed to beryllium at an
Ohio job site who were seeking the creation of a medical
monitoring program.73 The members of the proposed
class spanned forty-six years, multiple contractors, and
multiple locations within the plant. The court concluded
that “lack of cohesiveness is fatal.” 74 As a result, the individual questions outweighed the questions common to
the class.
69. See, e.g., Doe v. Baxter Healthcare Corp., 380 F.3d 399 (8th Cir. 2004)
(rejected theory on “broad policy grounds,” in case involving hemophiliac
who allegedly acquired HIV after taking the drug Factor VIII). This theory
has been “expressly rejected in Illinois.” In re Methyl Tertiary Prods. Liab.
Litig., 175 F. Supp. 2d at 622.
70. CA App. Ct. Reverses Exxon Nonsuit Ruling, 21 No. 12 Andrews Asbestos
Litig. Rep. 11, July 16, 1999. See, e.g., John Crane, Inc. v. Jones, 604 S.E.2d
822 (Ga. 2004).
71. 521 U.S. 591 (1997) (refusing to certify class containing both symptomatic
and asymptomatic asbestos plaintiffs because the class members had different interests).
72. 131 S. Ct. 2541 (2011) (Case 3.1).
73. Wilson v. Brush Wellman, Inc., 817 N.E.2d 59 (Ohio 2004).
74. Id. at 65.
PRODUCT LIABILITY
265
108 COMMON LAW DEFENSES
The defendant in a product liability case may raise the traditional common law tort defenses of assumption of risk
and, in some jurisdictions, a variation of comparative negligence known as comparative fault. Other defenses, such
as obvious risk, sophisticated user, unforeseeable misuse of
the product, the government-contractor defense, and the
state-of-the-art defense, may be available only in product
liability cases. These defenses are sometimes codified into
state statutes, and their acceptance varies from state to
state. Finally, under certain circumstances, state product
liability law is preempted by federal law.
10-8a Assumption of Risk
Under the doctrine of assumption of risk, when a person
voluntarily and unreasonably assumes the risk of a known
danger, the manufacturer is not liable for any resulting
injury. For example, under Michigan law, if the claimant
voluntarily exposed himself or herself to a risk, and that
risk was the proximate cause of the injury, then recovery is
completely barred.75 Thus, if a ladder bears a conspicuous
warning not to stand on the top step, but a person steps
on it anyway and falls, the ladder manufacturer will not
be liable for any injuries caused by the fall.
In contrast, the Ohio Court of Appeals affirmed the
trial court’s finding that the manufacturer of a hammer
was not entitled to an assumption of risk defense when an
alleged manufacturing defect (a “quench crack”) caused
the claw of its hammer to break off during use and severely
injure the user’s eye.76 The hammer came with a sticker
warning users to wear safety goggles because “tools or
struck objects may chip.” Nonetheless, because the plaintiff was not using the hammer to strike an object (he was
using it to break a metal strap on roofing supplies), he did
not expect the tool to chip. The appeals court reasoned
that a manufacturer cannot avail itself of the assumptionof-risk defense unless it can show that (1) the plaintiff
knew of the specific defect, (2) the defect was “patently
dangerous,” and (3) the plaintiff voluntarily exposed
himself or herself to that condition. Because there was no
evidence showing the plaintiff was aware of the quench
crack, the manufacturer could not use the assumption-ofrisk defense.
10-8b Comparative Fault
Contributory negligence by the plaintiff is not a defense
in a strict liability action. Nevertheless, in some states, the
plaintiff’s damages may be reduced by the degree to which
his or her own negligence contributed to the injury. This
doctrine is known as comparative fault.
75. Mich. Comp. Laws § 600.2947(3).
76. Eastman v. Stanley Works, 907 N.E.2d 768, 781 (Ohio Ct. App. 2009).
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
266
UNIT II
THE LEGAL ENVIRONMENT
For example, Michigan law provides that the negligence
of the plaintiff does not bar recovery, but damages are
reduced by his or her degree of fault—that is, the negligence attributed to the plaintiff. 77 Under Wisconsin law, if
the fact finder determines that the degree of the plaintiff’s
fault exceeds 50%, then the plaintiff cannot recover any
damages. If the degree of the plaintiff’s fault is equal to or
less than 50%, then the plaintiff can recover damages, but
the damages will be reduced by the percentage attributed
to the plaintiff. 78
10-8c Obvious Risk
If the use of a product carries an obvious risk, the manufacturer will not be held liable for injuries that result from
ignoring the risk. Although a plaintiff will often argue
that the manufacturer has a duty to warn of the dangers
of a foreseeable use of the product, courts often apply the
standard that a manufacturer need not warn of a danger
that is generally known and recognized.
For example, two men sustained serious injuries in a
collision while they were riding in the cargo bed of a GM
pickup truck. The court rejected their claims that GM was
liable because it had failed to warn of the dangers of riding
in the bed. 79 As the public generally recognizes the dangers
of riding unrestrained in the cargo bed of a moving pickup
truck, GM had no duty to warn of those dangers.
Rather, the duty to warn is measured by what is generally known or should have been known by the class of
sophisticated users. The relevant time for determining
user sophistication is at the time of the plaintiff ’s injury,
rather than the date that the product was manufactured
or distributed.
As the South Carolina Court of Appeals explained:
“[T]he sophisticated user doctrine applies when there is
evidence the seller of a product was aware that an intermediate purchaser [such as a large employer whose employees
would be the ones using the product] understood the
dangers associated with the product and had the ability to
effectively communicate those dangers to the end user.”82 In
such a case, the jury must decide “whether the supplier . . .
acted reasonably in assuming that the intermediary would
recognize the danger and take precautions to protect its
employees.”83
10-8e Unforeseeable Misuse
of the Product
The sophisticated user defense relieves a manufacturer
from liability to a sophisticated user of its product “for
failure to warn of a risk, harm or danger if the sophisticated user knew or should have known of that risk,
harm, or danger.”80 The particular sophisticated user’s
actual knowledge is irrelevant, because “it would be
nearly impossible for a manufacturer to predict or
determine whether a given user or member of the sophisticated group actually has knowledge of the dangers
because of the infinite number of user idiosyncrasies.”81
The manufacturer or seller of a product will not be held
liable for injuries resulting from abnormal use of its
product. For example, unforeseeable misuse of a product
is a defense under Indiana law if it was the proximate
cause of the harm and was not reasonably expected by
the seller at the time the seller conveyed the product to
another party.84 Unusual use that is reasonably foreseeable may be deemed a normal use, however. For example,
operating a lawn mower with the grass bag removed was
held to be a foreseeable use, and the manufacturer was
liable to a bystander injured by an object that shot out of
the unguarded mower.85
As a general rule, a company is not liable for the criminal acts of third parties using its products unless the
company knew or should have known that its negligence
might allow the crime to occur.86 In the following case,
the court considered whether a video game manufacturer
was strictly liable for a teenager’s shooting spree.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
10-8d Sophisticated User
Mich. Comp. Laws § 600.2959.
Wis. Stat. Ann. § 895.045.
Maneely v. General Motors Corp., 108 F.3d 1176 (9th Cir. 1997).
Johnson v. Am. Standard, Inc., 179 P.3d 905, 914 (Cal. 2008).
Id.
Lawing v. Trinity Mfg., Inc. 749 S.E. 2d 126, 132 (S.C. Ct. App. 2013).
Id. at 132.
Ind. Code Ann. § 34-20-6-4.
LaPaglia v. Sears Roebuck & Co., 531 N.Y.S.2d 623 (N.Y. App. Div. 1988).
Gaines-Tabb v. ICI Explosives, USA, Inc., 160 F.3d 613, 621 (10th Cir. 1998).
A CASE IN POINT
SUMMARY
James v. Meow
Media, Inc.
Facts!In 2002, a teenager in Kentucky went on a shooting spree, killing a number
of classmates at the high school he attended. The families of the victims brought a suit
against Meow Media, Inc., which makes and sells video games. The families claimed
that the defendant’s games desensitized the shooter to violence, thereby leading to the
tragedy.
United States Court of
Appeals for the Sixth Circuit
300 F.3d 683 (6th Cir. 2002).
CASE 10.3
CONTINUED
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
PRODUCT LIABILITY
267
Issue Presented!Is the creator of a video game, movie, or Internet site that contains
violent images and themes liable under a theory of either negligence or strict product liability
when children who view these images act violently?
Summary of Opinion!The U.S. Court of Appeals
defendant’s conduct (distributing video games). The court
reiterated that the shooter’s actions were intentional criminal acts and found, in keeping with a century of precedent,
that a third party’s criminal act that causes all of the harm
generally functions as an intervening act, thereby breaking
the chain of causation.
To find a duty of care, the plaintiffs had to show that the
shooter’s actions were reasonably foreseeable by the defendant. After a lengthy discussion, the court concluded that the
shooting was so aberrant as to be unforeseeable by the video
game producer. Furthermore, “individuals are generally entitled to assume that third parties will not commit intentional
criminal acts.” Here, the shooter’s intentional act of murder,
regardless of the situation, made his act unforeseeable to the
defendant. Since there was no duty of care, the defendant
could not have breached a duty of care to the victims.
The court also addressed the defendant’s actions in light of the
First Amendment guarantees of free speech and expression.
Like virtually all U.S. courts, the Sixth Circuit was “loathe . . . to
attach tort liability to the dissemination of ideas.”
for the Sixth Circuit first addressed the negligence claim. In
order to prove negligence, the plaintiffs needed to prove
three separate elements: (1) the defendant owed a duty of
care to the victims, (2) it breached that duty of care, and
(3) the breach was the proximate cause of the injury.
The court then considered whether the plaintiffs had
proved proximate cause by establishing a direct connection between the action (in this case, the shooting) and the
10-8f Government-Contractor Defense
Under the government-contractor defense, a manufacturer of products under contract to the government can
avoid product liability if (1) the product was produced
according to government specifications, (2) the manufacturer possessed less knowledge about the specifications
than did the government agency, (3) the manufacturer
exercised proper skill and care in production, and (4) the
manufacturer did not deviate from the specifications.
The rationale for this immunity is that the manufacturer is acting merely as an agent of the government.
Thus, to hold the manufacturer liable would unfairly
shift the insurance burden from the government to the
manufacturer. As discussed later in this chapter, the
Homeland Security Act extended this defense to certain
products designed to thwart terrorists.
10-8g State-of-the-Art Defense
In some jurisdictions, the state-of-the-art defense shields
a manufacturer from liability for a defective design if
no safer product design is generally recognized as being
possible. As discussed elsewhere in this chapter, the
Restatement (Third) of Torts: Products Liability would
require all plaintiffs asserting defective design to prove the
existence of an alternative design.
The contours of the state-of-the-art defense are often first
laid down by judges, then codified by state legislatures. For
example, an Arizona statute provides a defense “if the plans
or designs for the product or the methods and techniques
Finally, the court characterized as “deeply flawed” the
plaintiffs’ theory that the defendant’s video games, movies, and Internet transmissions were defective products. The
court ruled that video game cartridges, movie cassettes,
and Internet transmissions were not “sufficiently ‘tangible’
to constitute products in the sense of their communicative
content.”
Result!The
plaintiffs had no valid product liability
claim, so their suit was dismissed.
of manufacturing, inspecting, testing and labeling the
product conformed with the state of the art at the time
the product was first sold by defendant.”87
State courts have split over two aspects of this defense.
First, “state of the art” is not defined consistently.
A majority of the states accepting the defense deem “state
of the art” to refer to what is technologically feasible at
the time of design. Accordingly, a manufacturer may
have a duty to use a safer design even if the custom of the
industry is to use a less safe alternative.88 Certain states
define “state of the art” in terms of industry custom (e.g.,
New Jersey89) or with reference to whether the defects were
discoverable when using procedures mandated by a government entity responsible for licensing the product (e.g.,
New Hampshire90).
Second, in states that do not recognize the state-ofthe-art defense, there is a split as to whether to even
allow the introduction of evidence of alternative designs
in defective design cases. Certain courts have ruled that
state-of-the-art evidence is irrelevant, and therefore
inadmissible, in strict product liability cases because it
improperly focuses the jury’s attention on the reasonableness of the manufacturer’s conduct. In contrast, the
overwhelming majority of states hold that state-of-the-art
evidence is relevant simply to determining the adequacy
of the product’s design.
87.
88.
89.
90.
Ariz. Rev. Stat. § 12-683(1).
See Potter v. Chicago Pneumatic Tool Co., 694 A.2d 1319, 1347 (Conn. 1997).
N.J. Stat. Ann. § 2A:58C-3.
N.H. Rev. Stat. Ann. § 507:8-g.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
268
UNIT II
THE LEGAL ENVIRONMENT
The state-of-the art defense has also been applied in
certain failure-to-warn cases. For example, a Missouri
statute provides that if the defendant can prove the dangerous nature of the product was not known and could not
reasonably have been discovered at the time the product
was placed into the stream of commerce, then the defendant will not be held liable for failure to warn.91
10-8h Preemption Defense
Perhaps the most significant and controversial of the defenses
to product liability is the preemption defense, whereby
certain federal laws and regulations that set minimum
safety standards are held to preempt state-law product liability claims. As the Supreme Court explained in Mutual
Pharmaceutical Co., Inc. v. Bartlett,92 “[t]he Supremacy
Clause provides that the laws and treaties of the United
States ‘shall be the supreme Law of the Land . . . any Thing
in the Constitution or Laws of any State to the Contrary
notwithstanding.’ Accordingly, it has long been settled that
state laws that conflict with federal law are ‘without effect.’”
Accordingly, manufacturers that meet the federal standards
will sometimes be granted immunity from product liability
claims on the grounds of federal preemption.
The rationale for deferring to the federal regulatory
scheme is that allowing states to impose fifty different sets
of requirements would frustrate the purpose of a uniform
federal scheme. As a representative of the medical device
industry put it, “What it boils down to is whether we
want to have the experts at the FDA tell us what is a safe
pacemaker, or do we want each jury designing its own
pacemaker—one doing it one way in Brooklyn and one
doing it another way in Missouri?”93
Manufacturing groups want preemption to serve as a
“silver bullet” defense, effectively eliminating the possibility
of state-law product liability claims in any sphere governed by
federal safety law and regulation. In practice, compliance with
a regulatory scheme is not always a valid defense.94 Instead,
the availability of the preemption defense depends largely on
the language and context of the federal statute at issue.
91. Mo. Ann. Stat. § 537.764.
92. 133 S. Ct. 2466, 2472–73 (2013).
93. Paul M. Barrett, Lora Lohr’s Pacemaker May Alter Liability Law, Wall St.
J., Apr. 9, 1996, at B1 (quoting Victor Schwartz).
94. See, e.g., Sprietsma v. Mercury Marine, 537 U.S. 51 (2002) (holding that
state common law tort claims arising out of the death of a woman who fell
off a boat and was struck by a propeller manufactured by the defendant were
not preempted by the Federal Boat Safety Act of 1971 or by the U.S. Coast
Guard’s decision not to issue a regulation requiring propeller guards on boat
motors). The U.S. Supreme Court reasoned that neither the language nor the
scope of the statute indicated that Congress intended federal law to occupy
the field exclusively. There was no implied conflict preemption because a private party could comply with both state and federal requirements. Finally, the
Coast Guard’s decision not to adopt a regulation requiring propeller guards
on motorboats was deemed not to be “the functional equivalent of a regulation prohibiting all States and their political subdivisions from adopting
such a regulation.” Even though the Coast Guard’s decision “was undoubtedly intentional and carefully considered, it does not convey an ‘authoritative’
message of a federal policy against propeller guards.” Id. at 67.
In general, the more rigorous the federal regulatory
process, the more likely that product liability claims will be
preempted. For example, Medtronic, Inc. v. Lohr 95 involved
a pacemaker that the Food and Drug Administration
(FDA) had cleared pursuant to an exemption from thorough review for medical devices “substantially equivalent”
to devices already on the market.96 Because the Medtronic
pacemaker had not undergone rigorous premarket regulatory examination, the plaintiff’s state-law product liability
claims were not preempted.97
In 2013, DePuy Orthopaedics, Inc., a division of
Johnson & Johnson, faced thousands of design defect
product liability suits involving its metal-on-metal hip
implants, including the articular surface replacement XL
(ASR XL).98 The product fell under the exemption for
“substantially equivalent” devices and underwent only a
limited FDA review process; thus, the suits were not preempted.99 Trial results have been mixed. A plaintiff in a
California state court proceeding was awarded more than
$8 million for pain and suffering, as well as $338,000 for
medical expenses; but one month later, Johnson & Johnson
won a case in an Illinois state court. In November 2013,
Johnson & Johnson announced a $2.5 billion plan to settle
approximately eight thousand pending lawsuits involving
the product.100 The estimated average payout per plaintiff,
after attorney’s fees, was estimated at $160,000.101 The
settlement was contingent on 94% of the eligible plaintiffs
submitting the required paperwork by April 2014.
In a case involving a Medtronic catheter that had undergone the more thorough premarket approval process,102 the
U.S. Supreme Court ruled that state tort liability claims
of strict liability, breach of warranty, and negligent design
were preempted by the Medical Device Amendments of
1976 (MDA).103 The MDA provides:
Except as provided in subsection (b) of this section, no
State or political subdivision of a State may establish or continue in effect with respect to a device intended for human
use any requirement—
(1) which is different from, or in addition to, any requirement
applicable under this chapter to the device, and
95. 518 U.S. 470 (1996).
96. 21 U.S.C. § 360(k).
97. This interpretation was supported by the FDA’s proposal of regulations to
clarify its position.
98. George Conk, First Hip Replacement Trial Set to Begin, Torts Today
Blog Spot (Sept. 3, 2013), http://tortstoday.blogspot.com/2013/09/first
-hip-replacement-trial-set-to-begin.html; Amanda Bronstad, First Hip
Replacement Trial Set to Begin, Nat’l L J., Aug. 29, 2013, available at http://
www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202617543405&First_Hip
_Replacement_Trial_Set_to_Begin#ixzz2dpgUD3tW.
99. Conk, supra note 98.
100. Barry Meier, Frustration From a Deal on Hip Implants, N.Y. Times, Nov. 25,
2013, at B1.
101. Id.
102. Riegel v. Medtronic, Inc., 552 U.S. 312 (2008).
103. The MDA (Pub. L. No. 94-295, 90 Stat. 539 (1976)) amended the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
CHAPTER 10
(2) which relates to the safety or effectiveness of the device
or to any other matter included in a requirement applicable
to the device under this chapter.104
The Court observed that premarket approval is a “rigorous” process and that “[t]he FDA spends an average
of 1,200 hours reviewing each application and grants
approval only if it finds there is a ‘reasonable assurance’
of a device’s ‘safety and effectiveness.’” Because the benefits are weighed against the risk of injury, the FDA may
approve a device that poses substantial risks if it offers
significant benefit compared with available alternatives.
The Court held that common law causes of action for
negligence and strict liability imposed “requirements” that
were different from those imposed by the FDA and were
therefore preempted, reasoning:
State tort law that requires a manufacturer’s catheters to
be safer, but hence less effective, than the model the FDA
has approved disrupts the federal scheme no less than state
regulatory law to the same effect. Indeed, one would think
that tort law, applied by juries under a negligence or strictliability standard, is less deserving of preservation. A state
statute, or a regulation adopted by a state agency, could
at least be expected to apply cost-benefit analysis similar
to that applied by the experts at the FDA: How many more
lives will be saved by a device which, along with its greater
effectiveness, brings a greater risk of harm? A jury, on the
other hand, sees only the cost of a more dangerous design,
and is not concerned with its benefits; the patients who
reaped those benefits are not represented in court.105
In contrast, the Court ruled that federal law did not
preempt state laws providing for damages for claims premised on a violation of FDA regulations. It found that
such state laws “parallel,” but do not add to, federal
requirements.
The dissent in Riegel quoted a statement by the former
general counsel of the FDA acknowledging that “FDA
regulation of a device cannot anticipate and protect
against all safety risks to individual consumers.”106 Until
the FDA filed an amicus brief arguing for total preemption in the Riegel case, the agency’s position had been that
FDA approval and state tort liability each provided “a significant, yet distinct, layer of consumer protection.”107
In 2008, an evenly split U.S. Supreme Court affirmed
a New York court ruling that federal law does not preempt
claims against a drug company that fraudulently gained
104. 21 U.S.C. § 360k(a).
105. Riegel, 552 U.S. at 325. The Court noted: “The Riegels [the plaintiffs] . . .
invoke §360h(d), which provides that compliance with certain FDA orders
‘shall not relieve any person from liability under Federal or State law.’ This
indicates that some state-law claims are not pre-empted, as we held in Lohr.
But it could not possibly mean that all state-law claims are not pre-empted,
since that would deprive the MDA pre-emption clause of all content. And it
provides no guidance as to which state-law claims are pre-empted and which
are not.” Id. at 325 n.4.
106. Id. at 337 (Ginsburg, J., dissenting).
107. Id.
PRODUCT LIABILITY
269
FDA approval of the drug in question.108 One year later,
in Wyeth v. Levine,109 the Supreme Court held that FDA
approval of a brand-name drug label does not preempt
an inadequate warning claim under state law. The Court
found substantial evidence that Congress did not intend
for FDA oversight to be the exclusive means of ensuring
drug safety and effectiveness. The FDA has “limited
resources” for postapproval monitoring of drug safety,
and manufacturers have “superior access” to data about
their drugs. This was not a case of impossibility: Wyeth
could have satisfied both its state-law duty to provide a
stronger warning and its federal labeling duties by seeking
FDA approval of a strengthened label. In fact, the FDA’s
“changes being effected” (CBE) procedure authorizes drug
manufacturers to alter labels to reflect new safety information before FDA approval of the new label.
In PLIVA, Inc. v. Mensing,110 the Supreme Court held
that state-law failure-to-warn claims for generic drugs are
preempted by the federal law requiring generic drugs to
bear the same FDA-approved labels as the brand-name
drugs from which they are derived. The Court concluded
that a conflict existed because it was “impossible” for the
generic manufacturers of metoclopramide, the generic form
of Reglan, to comply with both the federal and the state
requirements.111 If the generic manufacturers had independently changed their labels to comply with state law,
they would have violated federal law. The Court rejected
the argument that the generic manufacturers could not
prove impossibility because they did not even try to persuade the FDA to require a safer label, holding: “[W]hen
a party cannot satisfy its state duties without the Federal
Government’s special permission and assistance, which is
dependent on the exercise of judgment by a federal agency,
that party cannot independently satisfy those state duties
for pre-emption purposes.”112
The Supreme Court acknowledged that “from the perspective of [the plaintiffs], finding pre-emption here but
not in Wyeth makes little sense. Had [they] taken Reglan,
the brand-name drug prescribed by their doctors, Wyeth
would control and their lawsuits would not be pre-empted.
But because pharmacists, acting in full accord with state
law, substituted generic metoclopramide instead, federal
law pre-empts these lawsuits.”113 The Court reasoned that
it is the job of Congress and the FDA, and not the courts,
to change federal law.
In Justice Sotomayor’s dissent, in which Justices Breyer,
Ginsburg, and Kagan joined, she stated: “The Court gets
108. Warner-Lambert Co. v. Kent, 552 U.S. 440 (2008). The Court was evenly
split, with Chief Justice Roberts recusing himself. By rule, an evenly divided
Court affirms the lower court ruling, but carries no precedential weight.
Linda Greenhouse, Court Allows Suit Against Drug Maker, N.Y. Times, Mar. 4,
2008, at A21.
109. 555 U.S. 555 (2009).
110. 131 S. Ct. 2567 (2011).
111. Id. at 2577.
112. Id. at 2581.
113. Id. at 2581.
Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic...
Purchase answer to see full
attachment