Product liability

Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. Although the word "product" has broad connotations, product liability as an area of law is traditionally limited to products in the form of tangible personal property.[1]

United States

In the United States, the majority of product liability laws are determined at the state level and vary widely from state to state.[2] Each type of product liability claim requires proof of different elements in order to present a valid claim.

History

Of the various U.S. states, California was the first to throw away the fiction of a warranty and to boldly assert the doctrine of strict liability in tort for defective products, in the Supreme Court of California's decision in Greenman v. Yuba Power Products, 59 Cal. 2d 57 (1963) (in which the majority opinion was authored by then-Associate Justice Roger J. Traynor). The Greenman decision was highly influential on the development of product liability law in other states.[3]

In Greenman, Traynor cited to his own earlier concurring opinion in Escola v. Coca-Cola Bottling Co., 24 Cal. 2d 453, 462 (1944) (Traynor, J., concurring). In Escola, now widely recognized as a landmark case in American law,[4] Justice Traynor laid the foundation for Greenman with these words:

Even if there is no negligence, however, public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. It is evident that the manufacturer can anticipate some hazards and guard against the recurrence of others, as the public cannot. Those who suffer injury from defective products are unprepared to meet its consequences. The cost of an injury and the loss of time or health may be an overwhelming misfortune to the person injured, and a needless one, for the risk of injury can be insured by the manufacturer and distributed among the public as a cost of doing business. It is to the public interest to discourage the marketing of products having defects that are a menace to the public. If such products nevertheless find their way into the market it is to the public interest to place the responsibility for whatever injury they may cause upon the manufacturer, who, even if he is not negligent in the manufacture of the product, is responsible for its reaching the market. However intermittently such injuries may occur and however haphazardly they may strike, the risk of their occurrence is a constant risk and a general one. Against such a risk there should be general and constant protection and the manufacturer is best situated to afford such protection.

The year after Greenman, the Supreme Court of California proceeded to extend strict liability to all parties involved in the manufacturing, distribution, and sale of defective products (including retailers)[5] and in 1969 made it clear that such defendants were liable not only to direct customers and users, but also to any innocent bystanders randomly injured by defective products.[6]

Many jurisdictions have been swayed by Justice Traynor's arguments on behalf of the strict liability rule in Escola, Greenman, and subsequent cases. In the 40 years after Greenman, the highest courts of nearly all U.S. states and territories followed California's example in imposing strict liability on manufacturers, distributors, and retailers for defective products. In a landmark 1986 decision, the U.S. Supreme Court embraced strict liability for defective products by adopting it as part of federal admiralty law.[7]

Although the Greenman rule was adopted by many other states through Section 402A of the Restatement of Torts, Second (published in 1964 after Greenman), the Supreme Court of California refused to adopt Section 402A's "unreasonably dangerous" limitation upon strict liability in 1972.[8] Thus, strict liability in California is truly strict, in that the plaintiff need not show that the defect was unreasonable or dangerous. On the other hand, in California, the defendant is allowed to introduce evidence in a strict products liability action that the plaintiff contributed to his or her own injuries.[9]

California's courts continue to follow the standard set forth in Greenman. In 2002 the California Supreme Court held that strict liability for defective products applies to makers of component products that are installed into and sold as part of real property.[10] However, strict liability is not limitless. In 2012, the Court held that manufacturers are liable under strict liability and negligence only for defects in their products, as distinguished from other products that could potentially be used in association with their products.[11]

Types of liability

Section 2 of the Restatement (Third) of Torts: Products Liability distinguishes between three major types of product liability claims:

  • Manufacturing defect
  • Design defect
  • Failure to warn (also known as marketing defects)

However, in most states, these are not legal claims in and of themselves, but are pleaded in terms of the theories mentioned above. For example, a plaintiff might plead negligent failure to warn or strict liability for defective design.[12]

  • Manufacturing defects are those that occur in the manufacturing process and usually involve poor-quality materials or shoddy workmanship.
  • Design defects occur where the product design is inherently dangerous or useless (and hence defective) no matter how carefully manufactured; this may be demonstrated either by showing that the product fails to satisfy ordinary consumer expectations as to what constitutes a safe product, or that the risks of the product outweigh its benefits.[13]
  • Failure-to-warn defects arise in products that carry inherent nonobvious dangers. These can be mitigated through adequate warnings to the user, and these dangers are present regardless of how well the product is manufactured and designed for its intended purpose. This also includes fail to provide relevant product instructions or sufficient product warnings.[14]

Theories of liability

In the United States, the claims most commonly associated with product liability are negligence, strict liability, breach of warranty, and various consumer protection claims.[15]

Breach of warranty

Warranties are statements by a manufacturer or seller concerning a product during a commercial transaction. Warranty claims commonly require privity between the injured party and the manufacturer or seller; in plain English, this means they must be dealing with each other directly. Breach of warranty-based product liability claims usually focus on one of three types:

  1. Breach of an express warranty,
  2. Breach of an implied warranty of merchantability, and
  3. Breach of an implied warranty of fitness for a particular purpose.

Express warranty claims focus on express statements by the manufacturer or the seller concerning the product (e.g., "This chainsaw is useful to cut turkeys").

The various implied warranties cover those expectations common to all products (e.g., that a tool is not unreasonably dangerous when used for its proper purpose), unless specifically disclaimed by the manufacturer or the seller. Claims involving real estate may also be brought under a theory of implied warranty of habitability.

Negligence

A basic negligence claim consists of proof of

  1. a duty owed,
  2. a breach of that duty,
  3. the breach was the cause in fact of the plaintiff's injury (actual cause)
  4. the breach proximately caused the plaintiff's injury.
  5. and the plaintiff suffered actual quantifiable injury (damages).

As demonstrated in cases such as Winterbottom v. Wright, the scope of the duty of care was limited to those with whom one was in privity. Later cases like MacPherson v. Buick Motor Co. broadened the duty of care to all who could be foreseeably injured by one's conduct.

Over time, negligence concepts have arisen to deal with certain specific situations, including negligence per se (using a manufacturer's violation of a law or regulation, in place of proof of a duty and a breach) and res ipsa loquitur (an inference of negligence under certain conditions).

Strict liability

Rather than focus on the behavior of the manufacturer (as in negligence), strict liability claims focus on the product itself. Under strict liability, the manufacturer is liable if the product is defective, even if the manufacturer was not negligent in making that product defective.

The difficulty with negligence is that it still requires the plaintiff to prove that the defendant's conduct fell below the relevant standard of care. However, if an entire industry tacitly settles on a somewhat careless standard of conduct (that is, as analyzed from the perspective of a layperson), then the plaintiff may not be able to recover even though he or she is severely injured, because although the defendant's conduct caused his or her injuries, such conduct was not negligent in the legal sense (if everyone within the trade would inevitably testify that the defendant's conduct conformed to that of a reasonable tradeperson in such circumstances). As a practical matter, with the increasing complexity of products, injuries, and medical care (which made many formerly fatal injuries survivable), it is quite a difficult and expensive task to find and retain good expert witnesses who can establish the standard of care, breach, and causation.

Therefore, in the 1940s and 1950s, many American courts departed from the MacPherson standard and decided that it was too harsh to require seriously injured consumer plaintiffs to prove negligence claims against manufacturers or retailers. To avoid having to deny such plaintiffs any relief, these courts began to look for facts in their cases which they could characterize as an express or implied warranty from the manufacturer to the consumer. The res ipsa loquitur doctrine was also stretched to reduce the plaintiff's burden of proof. Over time, the resulting legal fictions became increasingly strained.

Consumer protection

In addition to common law remedies, many states have enacted consumer protection statutes that provide specific remedies for a variety of product defects. Under the product liabiity "economic loss rule", strict liability is generally unavailable for products that damage only themselves. Statutory remedies may apply to defects that merely render the product unusable (and hence cause economic injury) but do not cause physical injury or damage to other property.

The best known examples of consumer protection laws for product defects are lemon laws, which provide protection to purchasers of defective new vehicles and, in a small number of states, used vehicles.

Worldwide

In most nations legislatures have taken the lead in imposing strict liability for defective products. The courts of several countries, including Canada and South Africa, have rejected attempts by lawyers to persuade them to follow California's Greenman holding.

China

China first enacted a Product Quality Law in October 1993 in an attempt to impose strict liability, but the law was badly drafted and was quite weak. After numerous product scandals throughout the 2000s, China finally enacted a much stronger Tort Liability Act in December 2009, followed by a Statute on the Choice of Substantive Law in Foreign-Related Civil Relationships in April 2011, which enables Chinese consumers injured by foreign-made products to request that Chinese courts apply the law of the defendant's place of business. While these two laws are still relatively ineffective against large Chinese manufacturers who are state-owned enterprises (as the defendant can simply have the product defect declared a state secret and then have the plaintiff prosecuted for revealing state secrets), they will enable Chinese consumers to seek some compensation from non-state companies as well as foreign manufacturers.

Europe

In Europe, a movement towards strict liability began with the Council of Europe Convention on Products Liability in regard to Personal Injury and Death (the Strasbourg Convention) in 1977.[16] On July 25, 1985, the European Economic Community adopted the Product Liability Directive. In language similar to Traynor's, the Directive stated that "liability without fault on the part of the producer is the sole means of adequately solving the problem, peculiar to our age of increasing technicality, of a fair apportionment of the risks inherent in modern technological production." However, the Directive also gave each member state the option of imposing a liability cap of 70 million euros per defect. The Directive only imposed strict liability upon manufacturers or importers, and deviated significantly from the U.S. model by refusing to impose strict liability on purely domestic distributors or retailers.

Other nations

The legislatures of many other countries outside the EEC subsequently enacted strict liability regimes based on the European model (that is, generally applying only to manufacturers and importers), including Israel (March 1980, based on an early proposed draft of the Directive), Brazil (September 1990), Peru (November 1991), Australia (July 1992), Russia (February 1992), Switzerland (December 1992), Argentina (October 1993), Japan (June 1994), Taiwan (June 1994), Malaysia (August 1999), South Korea (January 2000), Thailand (December 2007), and South Africa (April 2009).

Debate over strict liability laws

Advocates of strict liability laws argue that strict products liability causes manufacturers to internalize costs they would normally externalize. Strict liability thus requires manufacturers to evaluate the full costs of their products. In this way, strict liability provides a mechanism for ensuring that a product's absolute good outweighs its absolute harm.

Between two parties who are not negligent (manufacturer and consumer), one will necessarily shoulder the costs of product defects. Proponents say it is preferable to place the economic costs on the manufacturer because it can better absorb them and pass them on to other consumers. The manufacturer thus becomes a de facto insurer against its defective products, with premiums built into the product's price.

Strict liability also seeks to diminish the impact of information asymmetry between manufacturers and consumers. Manufacturers have better knowledge of their own products' dangers than do consumers. Therefore, manufacturers properly bear the burden of finding, correcting, and warning consumers of those dangers.

Strict liability reduces litigation costs, because a plaintiff need only prove causation, not imprudence. Where causation is easy to establish, parties to a strict liability suit will most likely settle, because only damages are in dispute.

Critics charge that strict liability creates risk of moral hazard. They claim that strict liability causes consumers to under invest in care even when they are the least-cost avoiders. This, they say, results in a lower aggregate level of care than under a negligence standard. Proponents counter that people have enough natural incentive to avoid inflicting serious harm on themselves to mitigate this concern.

Critics charge that the requiring manufacturers to internalize costs they would otherwise externalize increases the price of goods. Critics claim that in elastic, price-sensitive markets, price increases cause some consumers to seek substitutes for that product. As a result, they say, manufacturers may not produce the socially optimal level of goods. Proponents respond that these consumer opt outs reflect a product whose absolute harm outweighs its absolute value; products that do more harm than good ought not be produced.

In the law and economics literature, there is a debate about whether liability and regulation are substitutes or complements.[17][18][19][20] If they are substitutes, then either liability or regulation should be used. If they are complements, then the joint use of liability and regulation is optimal.

See also

References

  1. ↑ Restatement (Third) of Torts: Products Liability, § 19.
  2. ↑ Logan, Michael A.; Mayer, Zach T.; Fisher, Brian J. (5 August 2010). "Products Liability: Protection for the "Innocent" Seller in Texas". National Law Journal. Retrieved 11 August 2018.
  3. ↑ White, Robert Jeffrey. "Top 10 in torts: evolution in the common law." Trial 32, no. 7 (July 1996): 50-53.
  4. ↑ See, e.g., Lawrence M. Friedman, American Law in the 20th Century (New Haven: Yale University Press, 2004), 356-357, and Jay M. Feinman, Law 101: Everything You Need to Know About the American Legal System, rev. ed. (New York: Oxford University Press, 2006), 165-168.
  5. ↑ Vandermark v. Ford Motor Co., 61 Cal. 2d 256 (1964)
  6. ↑ Elmore v. American Motors Corp., 70 Cal. 2d 578 (1969).
  7. ↑ East River S. S. Corp. v. Transamerica Delaval Inc., 476 U.S. 858 (1986).
  8. ↑ Cronin v. J.B.E. Olson Corp., 8 Cal. 3d 121 (1972).
  9. ↑ Daly v. General Motors Corp., 20 Cal. 3d 725 (1978).
  10. ↑ Jimenez v. Superior Court (T.M. Cobb Co.), 29 Cal. 4th 473 (2002) (finding window manufacturers liable to homebuyers for defective windows that had been installed by developers into new homes).
  11. ↑ O'Neil v. Crane Co., 53 Cal. 4th 335 (2012).
  12. ↑ See, e.g., Merrill v. Navegar, Inc., 26 Cal. 4th 465 (2001).
  13. ↑ Barker v. Lull Engineering, 20 Cal. 3d 413 (1978).
  14. ↑ Noel, Dix W. (1969). "Products Defective because of Inadequate Directions or Warnings". Southwestern Law Journal. 23: 256. Retrieved 11 August 2018.
  15. ↑ Larson, Aaron (6 April 2018). "Product Liability Law: Protecting People from Defective Products". ExpertLaw. Retrieved 11 August 2018.
  16. ↑ "European Convention on Products Liability in regard to Personal Injury and Death". Council of Europe. 1977. Retrieved 2008-04-30.
  17. ↑ Kolstad, Charles D.; Ulen, Thomas S.; Johnson, Gary V. (1990). "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?". The American Economic Review. 80 (4): 888–901. JSTOR 2006714.
  18. ↑ Ewerhart, Christian; Schmitz, Patrick W. (1998). "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements? Comment". The American Economic Review. 88 (4): 1027–1028. JSTOR 117018.
  19. ↑ Shavell, Steven (1984). "A Model of the Optimal Use of Liability and Safety Regulation". The RAND Journal of Economics. 15 (2): 271. doi:10.2307/2555680. ISSN 0741-6261.
  20. ↑ Schmitz, Patrick W. (2000). "On the joint use of liability and safety regulation". International Review of Law and Economics. 20 (3): 371–382. doi:10.1016/s0144-8188(00)00037-5. ISSN 0144-8188.
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