Chapter 10 Product Liability I. Definition of Product Liability



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Chapter 10

Product Liability

I. Definition of Product Liability

Manufacturers and anyone in the chain of product distribution can be legally liable for defective products that cause injury to the purchaser, a user or bystander, or their property. Most states have adopted strict product liability, whereby an injured person may recover damages without showing that the manufacturer was negligent or otherwise at fault without a contractual relationship.


II. Theories of Recovery

The primary theories on which a product liability claim can be brought are breach of warranty, negligence, and strict liability.


A. Breach of Warranty

In a warranty action, the question is whether the quality, characteristics, and safety of the product were consistent with the implied or express representations made by the seller.


1. UCC Warranties  may be either express or implied for merchantability or fitness for a particular purchase, as set forth in Chapter 8.
2. Privity of Contract  Breach-of-warranty is based on contract law. Generally, an injured person to recover for a breach of warranty, he must be in a contractual relationship (privity) with the seller (a consumer or buyer of the product) and prevents recovery from bystanders not in privity with the seller.

B. Negligence

To prove negligence in a product liability case, plaintiff must show defendant did not use reasonable care in designing or manufacturing its product or in providing adequate warnings or failed to comply with statutory requirements. Generally, plaintiffs cannot prove negligence by introducing evidence of “upgrades” taken by a defendant to improve a product. MacPherson is the landmark case in which the defendant manufacturer was found liable for negligence even though there was no contractual relationship between the manufacturer and the plaintiff.
Case 10.1—MacPherson v. Buick Motor Co.

MacPherson purchased a new Buick from a Buick dealer who had purchased the car directly from Buick, the manufacturer. MacPherson was injured when the car ran into a ditch after a wheel collapsed due to faulty wood in the spokes of that wheel. The wheel was made by a manufacturer other than Buick. MacPherson sued Buick Motor Company and won. ISSUE: Can 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 per se between the consumer and the manufacturer? HELD: Yes. The court held that Buick, as the manufacturer, owed a duty to any person who could foreseeably be injured as a result of a defect in the automobile it manufactured.



C. Strict Liability in Tort

Allows a person injured by an unreasonably dangerous product to recover damages from the manufacturer or seller of the product. The basis of liability is the product defect, even though the manufacturer exercised all possible care in the manufacture and sale of the product.


1. Rationale

Strict liability is based on public policy which holds that the law should protect consumers from unsafe products and that manufacturers are better able to bear the costs of injuries by spreading the economic burden to all consumers in the form of higher prices. In short, the goal of strict product liability is to force companies to internalize the costs of product-caused injuries.


2. Elements of Strict Liability Claim

Plaintiff must prove that the plaintiff (or her property) was harmed by a defective product which cause plaintiff’s injury, and the defect existed at the time it left the defendant’s control (sale).


3. Strategy and Punitive Damages Negligence and warranty actions are generally secondary to strict liability which is easier to prove because plaintiff does not have to prove negligence nor privity of contract.
III. Strict Liability for Defective Products

Plaintiffs must prove that the product was defective when it left the hands of the manufacturer or seller, and the defect made the product unreasonably dangerous (it did not meet the consumer’s expectations as to its characteristics).


A. Manufacturing Defect is a flaw in the product that occurs during production, such as a failure to meet the design specifications.

B. Design Defect occurs when inadequate design or poor choice of materials makes a product dangerous, even though it is manufactured correctly.
C. Inadequate Warnings, Labeling, or Instructions

A product may be defective if it does not carry adequate warnings of the risks involved in the normal use of the product.


1. Causation Requirement  Plaintiff must show both that the defendant breached a duty to warn and that the defendant’s failure to warn was the proximate cause (or legal cause) of the plaintiff’s injuries.

2. Bilingual Warnings  In states with a substantial non-English-speaking population, is a manufacturer liable for not printing the warnings or labels on nonprescription drugs?
Case 10.2--Ramirez v. Plough, Inc.

Jorge Ramirez, four months old, was given St. Joseph’s Aspirin for Children, for a cold or upper respiratory infection, by his mother. Jorge developed Reye’s Syndrome, resulting in severe neurological damage and retardation. Plough, the manufacturer, knew Hispanics purchased its product, but the warning on the label was only in English. ISSUE: May a manufacturer of nonprescription drugs that can lead to a deadly illness when taken as normally expected incur tort liability for distributing its products with warnings only in English despite the fact that the manufacturer knows that there are non-English-reading users? HELD: Case dismissed because federal law only requires warning labels in English.



D. Strict Liability: Unavoidably Unsafe Product

Defense that exonerates the manufacturer when the value of using an inherently dangerous product outweighs the risk of harm from its use. For example, certain drugs are generally beneficial but are known to have harmful side effects in some cases.


E. Strict Liability: Definition of Product

Strict liability in tort applies only to products, not services. What qualifies as a product is sometimes not clear. In some cases it is unclear whether an injury was caused by a defective product or a negligently performed service.


Case 10.3 Synopsis--Bell v. T.R. Miller Mill Company, Inc..

On August 12, 1995, Jasmine Bell and her two children, Jasmarie and Jason, were driving in their car on a highway. A van parked on a driveway near the highway rolled down a hill and struck a guy-wire attached to a telephone pole. The telephone pole broke, causing the telephone lines to sag down over the highway and strike Bell’s car. The lines lifted Bell’s car into the air. When the car landed on its back, Jasmarie was ejected; she subsequently died. Jasmine Bell filed a wrongful-death action under the Alabama Extended Manufacturer’s Liability Doctrine (AEMLD) against the manufacturer of the telephone pole, claiming that the pole had been defective and unreasonably dangerous. At the end of Bell’s case at trial, Miller filed a motion for directed verdict, which the court granted. Bell appealed. ISSUE: Is a telephone pole installed in the ground a “product” for purposes of establishing product liability? HELD: The Supreme Court of Alabama found that a telephone pole was a “product.” The directed verdict in favor of the defendant was reversed.


IV. Strict Liability: Who May Be Liable

In theory, each party in the chain of distribution may be liable: manufacturers, distributors, wholesalers, and retailers. Manufacturers of component parts are frequently sued as well.


A. Manufacturers

As long as the manufacturer is in the business of selling the product, it is strictly liable for defective products regardless of how remote the manufacturer is from the final user of the product. Liability may attach even if there is distributor (dealer) final inspections, corrections, and adjustments of the product.


B. Wholesalers

Generally, wholesalers are strictly liable for defects in the products they sell. But some courts find no liability for latent or hidden defects if the wholesaler sells the products in exactly the same condition it received them.




C. Retailers

Generally, retailers are held strictly liable because they have a duty to inspect and care for the products.


D. Sellers of Used Goods and Occasional Sellers

Occasional sellers (garage sales) of used goods are usually not held strictly liable because they are not within the original chain of distribution of the product and their products are sold “as is.” A seller of used goods is, however, strictly liable for any defective repairs or replacements he or she makes.


E. Successor Liability

A successor corporation that purchases or acquiring the assets of another is liable for its debts (and perhaps defective products) if the successor corporation is merely a continuation of the original corporation, or the transaction was entered into to escape liability.


F. Market-Share Liability

Some courts hold that if multiple manufacturers produce identical products, the injured party may not be able to prove which of the defendant manufacturers caused the injury. In certain cases, e.g., prescription drugs, the court may allocate liability on the basis of each defendant’s share of the market. Market-share liability has been rejected in many jurisdictions and challenged on constitutional grounds.


G. Premises Liability

Recently, courts have recognized liability for asbestos-related diseases where a building owner may be found liable for violating its general duty to manage the premises and warn of asbestos dangers.




V. Product Liability Defenses
A. 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.


Case 10.4--Crews v. Hollenbach.

John Hollenbach, an employee of Honcho & Sons, Inc., was excavating land for Honcho in its role as a sub-contractor of Excalibur Cable Communications a subcontractor of Maryland Cable Partners, L.P. During his work, Hollenbach struck a buried natural gas line owned by Washington Gas Light Company and caused a leak in the line. Gas escaped into the air and, as a result, the neighborhood where the gas line was located had to be evacuated. The fire department notified Washington Gas, which dispatched a repair crew to the scene of the leak. Lee James Crews, an employee of Washington gas for over twenty years, was the foreman of the gas line repair team dispatched to repair the leak. While he and his crew worked to repair the leak, the gas ignited and an explosion occurred, seriously injuring Crews. Crews sued Hollenbach, Honcho & Sons, Excalibur Cable Communications, Maryland Cable Partners and Byers Engineering Company (which marked the utility lines), claiming negligence and strict liability. The trial court dismissed the case on the grounds that Crews assumed the risk as part of his job. The Court of Special Appeals affirmed the judgment. Crews appealed.



ISSUE: Is assumption of risk a viable defense against a suit by an employee hired to repair gas leaks who was injured during the process of repair? HELD: Affirmed.

  

B. Comparative Fault

Contributory negligence by the plaintiff is not a defense in a strict liability action. However, the plaintiff’s damages may be reduced by the degree to which his or her own negligence contributed to the injury.
C. Obvious Risk

Manufacturers will generally not be liable for injuries if the use of a product carries a risk that is obvious. Courts reason that a manufacturer need not warn of a certain danger if it is generally known and recognized.


D. Unforeseeable Misuse of the Product

Generally, manufacturers will not be held liable for injuries resulting from abnormal use of its product. But an unusual use that is reasonably foreseeable may be considered a normal use. 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. However, an alteration (using fertilizer for a bomb) is generally not a foreseeable use.


E. Statute of Limitations and Revival Statutes

Generally, a lawsuit must be brought within the statutory time period or else the plaintiff is barred from recovery. The “clock” begins to tick when the person is injured.

1. Date of Injury statutes. When the date of injury is uncertain (asbestos) the statute of limitations does not begin to run until the person discovers the injury.

2. Revival statutes permit plaintiffs to file lawsuits that had been barred previously by the running of the statute of limitations (silicone breast implants).


F. Government-Contractor Defense

A manufacturer of products under contract to the government can avoid product liability if the product was manufactured according to government specifications. The rationale for this immunity is that the manufacturer is acting merely as an agent of the government.


G. State-of-the-Art Defense

This defense shields a manufacturer from liability if no safer product design is generally recognized as being possible. However, a manufacturer can still be liable for manufacturing a defective product with a state-of-the-art design.


H. Preemption Defense

Can be used to preclude state product liability when manufacturer complies with federal laws and regulations that provide minimum safety standards. Defense depends largely on the language and context of the federal statute at issue.


Case 10.5--Geier v. American Honda Motor Company, Inc.

While driving a 1987 Honda Accord, Alexis Geier crashed into a tree and was seriously injured. Although the car had manual shoulder and lap belts that Geier was using at the time of the accident, it had no airbags or other passive restraint devices. Geier and her parents sued American Honda under state law for failing to include a driver’s side airbag. The Federal Motor Vehicle Safety Standard (FMVSS) 208, promulgated pursuant to the National Traffic and Motor Vehicle Safety Act, required auto manufacturers to equip 10 percent of their national fleet of cars with passive restraints, but did not require airbags. The district court dismissed plaintiff’s claim on the grounds that it was preempted by federal law. The U.S. Court of Appeals affirmed, and the Geiers appealed. ISSUE: Does the Safety Act preempt state tort claims based upon a manufacturer’s failure to equip a vehicle with air bags? HELD:  The Supreme Court held that the state product liability claims asserted by Geier conflicted with the objectives of FMVSS 208 and were preempted by the Act. The claims were dismissed.



Bases for Product Liability and Defenses

Theory of Liability

Defenses

Breach of Warranty

No privity of contract

Negligence

Defendant used reasonable care

Contributory or comparative negligence



Strict Liability in Tort

Unavoidably unsafe product

Comparative fault (only reduces damages)

Assumption of risk

Obvious risk Abnormal misuse

Government contractor

Preemption

State of the art


VI. Legislative Developments
A. Statutes of Repose

A statute of repose cuts off the right to assert a cause of action after a specified period of time from the delivery of the product or the completion of the work. The statute of repose is different from a statute of limitations, in which the time period is measured from the time when the injury occurred.


B. Limitations on Punitive Damages

Many states have enacted “tort reform” legislation limiting punitive damages awards: by placing limits on when punitive damages are available or requiring a higher standard of evidence; other states have placed outright caps on punitive damages; and others have banned punitive awards altogether. There are constitutional concerns, however, with some of the tort reform legislation.


C. Codification of Defenses

An injured person’s conduct can be the basis for a defense to a strict liability action. Some states have enacted statutes to codify such defenses, that is, to add them to the code of laws, that courts must follow.


VII. Tobacco and Guns

Dramatic applications of product liability law have been applied against tobacco and gun companies. Litigation by private individuals against gun companies has had mixed results.


VIII. Product Liability Class Actions

Class action suits are procedural devices that allow a large number of plaintiffs to recover against a defendant in a single case. Litigation involving the tobacco industry, asbestos, silicone breast implants, and harmful diet drugs were all resolved through class actions. In some class actions, the class may base its suit on a future illness or physical injury resulting from drug ingestion or exposure to a toxic product.


IX. Problems with the Product Liability System and the Restatement (Third)

The current product liability scheme has been criticized because it assumes that manufacturers are in the best position to insure against loss or to spread the risk of loss among their customers which leads to higher manufacturing costs, ultimately taking its toll on industry efficiency and competitiveness.


A. Restatement (Third) of Torts: Product Liability

The new Restatement avoids the term strict liability by proposing instead that any claim of design defect be supported by a showing of a reasonable alternative design. The effect of this change is to move away from strict liability for defectively designed products. Instead, the reasonable-alternative-design requirement forces plaintiffs to prove that defendants acted wrongly or negligently in choosing an improper design.


Case 10.6--Potter v. Chicago Pneumatic Tool Co.

Plaintiffs, grinders in a shipyard, were injured in the course of working for General Dynamics Corporation. The injuries occurred from using pneumatic tools (to chip, grind, and smooth metal surfaces) manufactured by Defendant. Plaintiffs suffered permanent vascular and neurological impairment of their hands which causes, inter alia, numbness, pain, and an intolerance to cold and were no longer able to work at their former jobs. Plaintiffs sued Defendants for defective tool design (excessive vibrations) and inadequate warnings by Defendant. The trial jury found for Plaintiffs. Defendants appealed. ISSUE: Did the plaintiffs have to show a reasonable alternative design to win in a defective design case? HELD: No. The Connecticut Supreme Court said they did not. However, the jury verdict was vacated and a new trial ordered because the Court found that the Plaintiff’s employer had modified the tools prior to use by Plaintiffs.


X. Product Liability in the European Union: Comparison with U.S. Laws

The EU directive’s basic purpose is to hold manufacturers strictly liable for injuries caused by defects in their products. This represents a fundamental change for manufacturers of products marketed in Europe. The EU product liability directive and defenses are quite similar to the strict liability doctrine prevalent in the United States. Unlike in the United States, a supplier or wholesaler is not strictly liable unless the injured party is unable to identify the manufacturer. Further, a producer can escape liability by proving that the state of scientific knowledge when the product went into circulation was insufficient to allow it to discover the defect.


XI. The Responsible Manager: Reducing Product Liability Risk

Managers have the responsibility to minimize their company’s exposure to liability in the design, manufacture, assembly, and sale of its products. They should:



  • Implement a product-safety program in order to ensure that products are sold in a legally safe condition.

  • Implement internal loss-control procedures, obtain insurance protection, and seek the advice of product liability counsel from the earliest stages of product development.

  • Check the safety of their products both in their intended use and in reasonably foreseeable misuse and develop adequate instructions and comprehensive warnings.

  • Consider the reasonably foreseeable risks of using the product, ways to avoid those risks, and the consequences of ignoring the risks.

  • Have a thorough understanding of all statutes, regulations, and administrative rulings to which a product must conform.

  • Keep internal records of their product engineering and manufacturing decisions.

  • Continuously monitor field reports of injuries caused by both use and misuse of their company’s products.

  • Send post-sale information to purchasers about upgrades and recalls.

  • Establish a product-safety committee and to conduct regular safety audits in order to identify and correct problems.



Study Questions
True-False Questions
__ 1. The UCC provides for only express warranties.
__ 2. Contractual recovery requires privity of contract; hence, bystanders cannot recover.
__ 3. An injured person may recover in strict liability even if the seller has exercised all possible care in the manufacture and sale of the product.
__ 4. The Restatement (Third) proposes to eliminate strict liability.
__ 5. Strict liability is easier to prove than either negligence or breach of warranty.
__ 6. Sellers of used goods are usually held strictly liable because they are within the foreseeable original chain of distribution of the product.
__ 7. A seller of used goods is not strictly liable for any defective repairs or replacements made.
__ 8. Market-share liability was developed by Congress.
__ 9. The defendant in a product liability suit can raise the assumption of the risk defense.
__ 10. Contributory negligence by the plaintiff is a defense in strict liability cases.
__ 11. Ordinarily, the statute of limitations starts to run when the plaintiff becomes aware of the injury.
__ 12. The majority of states deem “state-of-the-art” to refer to what is technologically feasible at the time of design.
__ 13. A statute of limitation cuts off the right to assert a cause of action after a period of time from the delivery of the product or the completion of the work.
__ 14. Today, all defendants in a strict liability action are held jointly and severally liable.
__ 15. Traditionally, most EU member states imposed strict liability on defective products.
Multiple-Choice Questions
__ 1. For a defendant to be held strictly liable, the plaintiff must prove the
I. plaintiff or property was harmed by the product.

II. injury was caused by a defect in the product.

III defect existed at the time the product left the defendant and did not substantially change afterwards.
A. I and II.

B. II and III.

C. I, II, and III.

D. I and III.


__ 2. The principle of strict liability is based on which rationale?

A. The law should protect consumers against unsafe products.

B. Manufacturers should not escape liability simply because there is no contract with the end user of the product.

C. Manufacturers and sellers of products are in the best position to bear the costs of the injuries caused by their products.

D. All of the above.
__ 3. In a strict liability case, what must the plaintiff show to establish a defective product?
I. The product was defective when it left the defendant or seller.

II. The defect made the product unreasonably dangerous.


A. I or II.

B. I and II.

C. Neither I nor II.

D. II only.


__ 4. A product may be dangerous because of a

A. manufacturing defect.

B. design defect.

C. labeling inadequacy.

D. All of the above.
__ 5. The Ford Pinto was an example of a ________ defect.

A. design

B. manufacturing

C. warning

D. labeling
__ 6. Which of the following is not normally in the chain of distribution?

A. Distributor.

B. Retailer.

C. Seller of used products.

D. Wholesaler.
__ 7. A brake manufacturer builds brakes to an auto manufacturer’s specifications. The brakes fail to work properly because of a flaw in the automobile braking system. Who would be liable for the braking problem?

A. Brake manufacturer.

B. Automobile manufacturer.

C. Neither.

D. Both.
__ 8. In service industries, there is liability for
I. negligence.

II. strict liability.

III. design defects.
A. I only.

B. II only.

C. I and II.

D. I, II, and III.


__ 9. A corporation purchasing or acquiring the assets of another is liable for its debts if there is a(n)

A. merger.

B. express or implied agreement to assume such obligations.

C. new corporation, not a continuation of the selling corporation (via successor liability).

D. Both A and B.
__ 10. Lucky uses his lawn mower as a hedge trimmer, resulting in a seriously injured hand. The owner’s manual says to not use the mower for this purpose or in this manner. The mower manufacturer’s best defense in a suit by Lucky is

A. contributory negligence.

B. comparative fault.

C. assumption of the risk.

D. market-share liability.
__ 11. Which statement is false concerning what a manufacturer has to show to avoid product liability under the government-contractor defense?

A. The product was produced according to government specifications.

B. The manufacturer possessed less knowledge about the specifications than the government.

C. The manufacturer exercised proper care in production.

D. The manufacturer deviated from the specifications.
__ 12. Which of the following is a defense to a breach of warranty claim?

A. No privity of contract.

B. Reasonable care used.

C. Contributory negligence.

D. Comparative negligence.
__ 13. Which of the following is not a defense to a negligence claim for product liability?

A. Use of reasonable care.

B. No privity of contract.

C. Contributory negligence.

D. Comparative negligence.
__ 14. Which of the following could not be successfully utilized as a defense to a strict liability tort action?

A. Reasonable care used.

B. Assumption of the risk.

C. Preemption.

D. State of the art.
__ 15. A statute of ________ measures the time to litigate from the time the injury occurred.

A. repose

B. limitation

C. warranty



D. jurisprudence
Essay Questions
1. A hair dryer has a label on it, which states it should not be used in the shower. The same statement appears on the box the dryer came in, and in the manual for the dryer. Should this be sufficient to protect the manufacturer of the hair dryer if a purchaser uses the dryer in the shower and is injured? Explain.
2. Why has market-share liability been rejected in many jurisdictions?
3. What is the preemption defense?






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