1. C H A P T E R
20
Product Liability
A manufacturer is not through with
his customer when a sale is
completed. He has then only
started with his customer.
Henry Ford, founder of Ford Motor
Company, in My Life and Work
(co-written with Samuel Crowther,
1922)
20-1
2. Learning Objectives
• Explain what is required to create an
express or implied warranty
• Identify major categories of product
liability claims based in negligence
• Differentiate strict liability claims from
those based on negligence theory
• Describe the role of comparative
negligence
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3. Development of
Product Liability Law
• Product liability law refers to the body of
legal rules governing civil lawsuits for losses
and harms resulting from a defendant’s
furnishing of defective goods
• Rule was caveat emptor (buyer beware),
but has shifted over the past century to
caveat venditor (let the seller beware)
since sellers are better able than
consumers to bear the costs of defective
products
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4. Product Liability Theories
• Product liability law is partly grounded
in contract law and partly grounded in
tort law
• Contract theories are based on an
express or implied warranty
• Tort theories are based on arguments
of negligence or strict liability
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5. Express Warranty
• UCC 2–313(1): express warranty may
be created in any of three ways:
– If affirmation of fact or promise about
goods becomes part of the basis of
the bargain
• Statements of value or opinion and sales
puffery do not constitute a warranty
• Advertisements may contain statements
of warranty as well as sales puffery
20-5
6. Example of Express Warranty
• Royal Indemnity Co. v. Tyco Fire Products, LP:
Apartment complex fire linked to defects in
sprinkler system and plaintiff insurer sued Tyco
on breach of express warranty theory
• Technical data sheet expressed a one-year
warranty, not an warranty of future
performance for an indefinite amount of time
• Trial court’s dismissal of express warranty claim
affirmed
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7. Express Warranty
• Two other express warranties:
– A description of the goods that
becomes part of the bargain
creates an express warranty that the
goods will conform to description
– A sample or model of goods to be
sold creates an express warranty
that goods will conform to sample
20-7
8. Implied Warranties
• Implied warranties are created by
operation of law rather than seller’s
express statements
– Warranty of merchantability [UCC 2-314(1)]
• Seller must be a merchant in the goods of the
kind sold
– Warranty of fitness for a particular purpose
[UCC section 2–315]
• Seller must know the goods are to be used for
special purpose
20-8
9. Implied Warranty of Merchantability
• In implied warranty cases, plaintiff
argues that seller breached warranty by
selling unmerchantable goods and
plaintiff should recover damages
– Privity of contract between consumer and
manufacturer is not required
• Merchantability, essentially, is that
goods must be fit for the ordinary
purposes for which such goods are used
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10. Meaning of Merchantability
• Crowe v. CarMax Auto Superstores, Inc.:
– Couple bought car from CarMax with express
warranties. Car required many repairs, all
covered by warranties, but couple sued
CarMax claiming unmerchantability
– Court found for CarMax: goods need not be
perfect to be fit for their ordinary purposes,
but must only meet reasonable expectations
of average consumer
• Couple had unreasonable expectations
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11. Meaning of Merchantability
• Newton v. Standard Candy Co.:
– Demonstrates disagreement over standard
for food products alleged to be
unmerchantable because they contain
harmful objects or substances
– Under foreign–natural test, defendant is liable
if object or substance is “foreign” to the
product, but not liable if it is “natural” to the
product
– But reasonable expectations test increasing
in use
20-11
12. Implied Warranty of
Fitness for a Particular Purpose
• Warranty of fitness for a particular purpose
implied if: (1) seller has reason to know a
particular purpose for which buyer requires
the goods; (2) seller has reason to know that
buyer is relying on seller’s skill or judgment
for the selection of suitable goods; and (3)
buyer actually relies on seller’s skill or
judgment in purchasing the goods
– See Moss v. Batesville Casket Co.
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13. Negligence Theory
• Product liability suits based on negligence
allege that manufacturer or seller
breached a duty to plaintiff by failing to
eliminate a reasonably foreseeable risk of
harm:
– negligent manufacture of the goods (including
improper materials and packaging)
– negligent inspection
– negligent failure to provide adequate warnings
– negligent design
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14. Croskey v. BMW of North America, Inc
.
• Facts and Procedural History:
– Croskey severely burned when plastic neck
on car radiator failed and spewed
scalding radiator fluid
– Croskey pleaded two theories: negligent
design and negligent failure to warn
– Evidence of similar incidents existed, but
court excluded for negligent design claim
– Jury returned verdict in favor of
defendants
20-14
15. Croskey v.
BMW of North America, Inc.
• Appellate Court:
– Primary issue is design
defect, which requires
plaintiff to show that the
product was not reasonably
safe for its foreseeable uses
and a risk-utility analysis
favored a safer design
– Trial court wrongly excluded
evidence of similar incidents
– Reversed and remanded
20-15
16. Strict Liability Theory
• American Law Institute published
section 402A of Restatement (Second)
of Torts (1965)
– Most important reason is socialization-of-risk
strategy: strict liability makes it easier for
plaintiffs to prove breach of duty and sellers
pass on costs in higher prices
– Another reason: stimulates manufacturers to
design and build safer products
20-16
17. Restatement (Third) of Torts
• Published in 1998, basic rule is: “One engaged in
the business of selling or otherwise distributing
products who sells or distributes a defective
product is subject to liability for harm to persons
or property caused by the defect.”
• Three kinds of product defects: manufacturing
defects, inadequate warnings or instructions,
design defects
20-17
18. Branham v. Ford Motor Co.
• Plaintiff was passenger in Ford Bronco involved in
a rollover and sued Ford for defective seatbelt
sleeve and handling and stability design defect
• Jury awarded damages and Ford appealed
• In design defect cases, plaintiff must show
existence of reasonable design alternative
and risk-utility test, with objective factors,
provides best means to analyze whether
product is designed defectively
– Affirmed in part, reversed in part; case remanded
20-18
19. Other Product Liability Theories
• Federal Magnuson-Moss Warranty Act
applies to sales of consumer products
more than $10 per item:
– If written warranty, it must be full or limited
– Full warranty promises to (1) remedy any defects
in the product and (2) replace product or refund
purchase price if, after reasonable number of
attempts, it cannot be repaired
– Seller who gives a limited warranty is bound to
whatever promises it actually makes
20-19
20. Other Product Liability Theories
• A seller’s misrepresentation about a material
fact about the product — a fact that would
matter to a reasonable buyer – may invoke
liability to a buyer
• Industrywide liability: plaintiffs bypass
problems of causation that exist where
several firms within an industry manufactured
a harmful standardized product, and plaintiff
cannot prove which firm produced the
injurious product
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21. Damages
• Consequential damages: personal
injury, property damage, indirect
economic loss (e.g., lost profits or lost
business reputation), and noneconomic
loss, such as pain and suffering, physical
impairment, mental distress, loss of
enjoyment of life, loss of companionship
or consortium, inconvenience, and
disfigurement
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22. Damages
• Basis-of-the-bargain damages:
– Buyers of defective goods loss of full value for
the goods’ purchase price is direct economic
loss (value of goods as promised under the
contract minus value of goods as received)
• Punitive damages:
– Intended to punish defendants who have
acted in an especially outrageous fashion,
and to deter them and others from so acting
in the future
20-22
23. Disclaimers
• Product liability disclaimer is a clause in the
sales contract whereby the seller attempts
to eliminate liability it might otherwise have
under the theories of recovery described
earlier in the chapter
• Wilke v. Woodhouse Ford, Inc.: court
upheld implied warranty disclaimer, but
possible liability for negligent failure to
inspect product
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24. Disclaimers & Limitations
• Remedy limitation is a clause attempting
to block recovery of certain damages
– Example of time limitation: “30 day
warranty”
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25. Defenses
• Three main defenses in
a product liability suit
are the overlapping trio
of product misuse,
assumption of risk, and
contributory negligence
– What could happen on a
construction site? What
defenses would exist?
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26. Comparative Negligence
• Most states require fact-finder to apportion
damages based on relative fault of plaintiff’s
and defendant’s percentage shares of the
total fault for the injury
– Plaintiff is awarded total provable damages
times defendant’s percentage of fault
• Green v. Ford Motor Co.: fact-finder shall
apportion fault to injured person only if fault of
injured person is a proximate cause of injuries
for which damages are sought
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27. Preemption and
Regulatory Compliance
• Preemption defense rests on a federal
supremacy premise, that federal law
overrides state law when the two conflict
– Riegel v. Medtronic, Inc.: state claims by
plaintiffs preempted by federal statute
dealing with medical devices
• Courts mixed whether to treat regulatory
compliance as full defense or mere
factor in determining defendant’s liability
20-27
28. Test Your Knowledge
• True=A, False = B
– Implied warranties are created by seller’s
conduct rather than express statements
– Merchantability, essentially, is that goods
must be fit for the ordinary purposes for
which such goods are used
– A disclaimer is a clause in the sales
contract in which seller attempts to
eliminate liability seller might otherwise
have under law
20-28
29. Test Your Knowledge
• True=A, False = B
– Under foreign–natural test, defendant is liable
if object or substance is “foreign” to product,
but not liable if it is “natural” to the product
– Under the Restatement of Torts (Third), three
kinds of product defects exist:
manufacturing defects, inadequate
warnings, design defects
– The Magnuson-Moss Warranty Act requires
every written warranty to be a full warranty
20-29
30. Test Your Knowledge
• Multiple Choice
– Express warranty may be created by
________ that becomes part of the basis of
the bargain for the agreement:
a statement of fact or promise about goods
• a description of the goods indicating goods will
conform to the description
• a sample or model of goods to be sold
indicating goods will conform to the sample
• all of the above
• both A and B, but not C
20-30
31. Test Your Knowledge
• Multiple Choice
– Drew was injured when his car rolled
over after the tires delaminated and
caused him to lose control. Drew could
sue, claiming:
a) negligence (design or manufacture)
b) strict liability
c) breach of warranty
d) all of the above
20-31
32. Thought Question
• What is your opinion
of product liability
lawsuits? If you were
injured by a defective
product, would you
file a lawsuit against
the manufacturer?
20-32
Hinweis der Redaktion
Hyperlink is to the court’s opinion in pdf. Issue was whether plaintiff’s claim was barred by the statute of limitations (repose).
Vertical privity between a consumer and manufacturer is no longer required as a condition to a claim by the consumer against the manufacturer for breach of the manufacturer’s implied warranty of merchantability. See Hyundai Motor America, Inc. v. Goodin.
Hyperlink is to the appellate court’s opinion. In this case, all repairs covered by warranties (original express warranty plus purchased extended warranty) and many repairs justified due to wear and tear. Court found the couple had unreasonable expectations for a used car.
Standard Candy Co., a Tennessee firm, produces candy bars, including one known as the “Goo Goo Cluster.” The Goo Goo Cluster candy bar contains peanuts provided to Standard Candy by an outside supplier. When Nebraska resident James Newton II purchased a Goo Goo Cluster and bit into it, he encountered what he claimed to be an undeveloped peanut. Newton maintained that biting the undeveloped peanut caused him to experience a damaged tooth as well as recurring jaw-locking and hearing loss problems. Relying on diversity of citizenship jurisdiction, Newton filed a breach of implied warranty of merchantability lawsuit against Standard Candy in the U.S. District Court for the District of Nebraska. Standard Candy moved for summary judgment in its favor. Court: “The “foreign-natural” doctrine provides there is no liability if the food product is natural to the ingredients, whereas liability exists [for resulting injuries] if the substance is foreign to the ingredients…. Standard Candy argues that if Nebraska follows this doctrine, it is clearly not liable. Newton’s injuries were a result of a peanut, which is part of the ingredients found in a Goo Goo Cluster. Likewise, under the “reasonable expectation of the consumer” doctrine, Standard Candy argues that Newton cannot assert liability…. Standard Candy argues that under this test, Newton would [have been] reasonably aware of peanuts in a Goo Goo Cluster candy bar…. The court concludes that the motion for summary judgment must be denied. There are significant factual disputes that must be decided by the jury. The court also finds that Newton does not necessarily need an expert [on undeveloped peanuts] to prove his case. The testimony of Standard Candy’s employees, Sherry and Shraybman, [is] sufficient to establish the existence of both burnt and undeveloped peanuts. Mr. Sherry will be able to testify as to his knowledge regarding undeveloped peanuts based on his work observations. In addition, he might very well qualify as an expert in this regard. Additionally, Ms. Shraybman . . . will be permitted to testify . . . based on [her] experience working for Standard Candy.”
Hyperlink is to supreme court’s opinion. Court opinion regarding implied warranty of merchantability: “Batesville contends that the ordinary purpose of a wooden casket is to house the remains of the departed until interment…. [T]he record does not indicate that the plaintiffs ever stated a specified period of time that they, as reasonable customers, would have reasonably expected the wooden casket to last…. [Under the circumstances, the] trial court [appropriately] found that the ordinary purpose for which the casket was designed ceased once the pallbearers bore the casket from the hearse to the grave site for burial. [In any event,] [a]s previously stated, the record also fails to demonstrate that the remains were damaged in any way from the alleged cracks and separation when the casket and body were exhumed.” Court opinion regarding warranty of fitness for a particular purpose: “Here, the evidence did not justify the submission of this case to a jury on the [implied] warranty of fitness for a particular purpose [claim]. Nothing in the record provides that the plaintiffs identified any particular purpose to the defendants when the casket was selected. Furthermore, assuming arguendo that the plaintiffs sought to preserve their mother’s remains for some unspecified, indefinite period of time in the wooden casket, the record is completely devoid of any proof that the body had been damaged in any way by the alleged problems with the casket.”
Hyperlink is to the appellate court opinion. William Croskey was seriously injured in July 2000 when his girlfriend’s 1992 BMW automobile overheated and he opened the hood to add fluid. Because the plastic neck on the car’s radiator failed, scalding radiator fluid spewed out and came in contact with Croskey, severely burning him. Relying on diversity of citizenship jurisdiction, Croskey filed suit in the U.S. District Court for the Eastern District of Michigan against the car’s manufacturer, Bayerische Motoren Werk Aktiengesellschaft (BMW AG), and the North American distributor of BMW vehicles, BMW of North America, Inc. (BMW NA). Croskey pleaded two alternative claims: (1) negligent design on the part of BMW AG; and (2) negligent failure to warn on the part of BMW AG and BMW NA. Deciding an evidentiary question prior to trial, the district court ruled that Croskey could use evidence of substantially similar incidents of plastic neck failure if those incidents came to the attention of the defendants and if the incidents occurred between 1991 and the date Croskey was injured. However, the court allowed this evidence to be used only in regard to the negligent failure to warn claim, and prohibited its use in regard to the negligent design claim. The court also ruled that concerning the negligent failure to warn claim, the defendants could introduce evidence of the number of BMWs sold with plastic-necked radiators between 1994 (when the defendants first learned of a neck failure) and the date of the Croskey incident. The purpose of such evidence was to show the likelihood—or lack of likelihood—of a neck failure. The case proceeded to trial. Rejecting Croskey’s negligent design and negligent failure to warn claims, the jury returned a verdict in favor of the defendants. Croskey appealed to the U.S. Court of Appeals for the Sixth Circuit.
Court: “A negligence claim in a product liability action looks to the [defendant’s] conduct and not the mere existence of a product’s defect to determine whether the [defendant’s] conduct was reasonable under the circumstances. [The plaintiff, Croskey,] claims that the defendants were negligent because they knew that the plastic used on the radiator “neck” could become brittle and break over time (the “defect”),…[and] that even if the defendants did not know the product was defective when it left [their] possession, [they] became aware later of the defect and were under a duty to warn consumers.” “ The primary issue in this appeal [centers around] the plaintiff ’s efforts to prove negligence under a theory of design defect. To prove a design defect under Michigan law, a plaintiff must show that the product was not reasonably safe for its foreseeable uses and that a risk-utility analysis favored a safer design. Under this approach, a plaintiff must show that (1) the product was not reasonably safe when it left the control of the manufacturer; and (2) a “feasible alternative production practice was available that would have prevented the harm without significantly impairing the usefulness or desirability of the product to users.” [Citations of authority omitted.] Plaintiffs may use both direct and circumstantial evidence to prove a design defect claim. A risk-utility balancing test [must be used]. …we hold it was error for the district court to make a blanket exclusion of all “other incidents” evidence by plaintiff to prove a negligence claim involving a design defect. …On retrial, the plaintiff will also be allowed to put on similar incidents evidence to prove his design defect claim.”
In 1998, the American Law Institute published its Restatement (Third) of Torts: Product Liability. Although many courts now discuss the new Restatement, it has not supplanted negligence and section 402A in most states as we write in 2005. The Restatement (Third), however, may signal the likely evolution of product liability law in the coming years.
Hale purchased used Ford Bronco in 1999. The vehicle was manufactured in 1986 and had 137,500 miles on it. In 2001, Hale was driving with her child in the passenger seat and Plaintiff Jesse Branham, III ("Plaintiff") in the backseat. No one was wearing a seatbelt. Hale turned to the backseat to ask the children to quiet down and veered toward the shoulder of the road and the right wheel left the roadway. She responded by overcorrecting to the left. The overcorrection led to the vehicle rolling over, and Plaintiff was thrown from the vehicle and injured. Plaintiff filed a lawsuit against Ford and Hale in Hampton County. Plaintiff did not seriously pursue the case against Hale. The case against Ford was based on two product liability claims (a defective seatbelt sleeve claim and a "handling and stability" design defect claim relating to the rollover). Both claims were pursued in negligence and strict liability. Jury awarded plaintiff $16 million in actual damages and $15 million in punitive damages. Ford appealed. Plaintiff must prove (a) element of defective and unreasonably dangerous condition of product before determining manufacturer fault, and (b) existence of reasonable design alternative; risk-utility test should guide unreasonable dangerousness.
Hyperlink is to case opinion on the Findlaw.com website. UCC section 2–316(2) makes it relatively easy for sellers to disclaim the implied warranties of merchantability and fitness for a particular purpose. Doctrine of unconscionability established by UCC section 2–302 may apply to limit disclaimers Magnuson- Moss Act also limits a seller’s ability to disclaim implied warranties.
Hyperlink is to the Supreme Court decision. The Medical Device Amendments of 1976 (MDA) created federal safety oversight scheme for medical devices and pushed back state oversight schemes. The most extensive oversight is reserved for Class III devices that undergo the premarket approval process. Class III devices may enter the market only if the FDA reviews their design, labeling, and manufacturing specifications and determines that the specifications provide a reasonable assurance of safety and effectiveness. Charles Riegel and his wife, petitioner Donna Riegel, brought suit against respondent Medtronic after a Medtronic catheter (a Class III device) ruptured in Charles Riegel’s coronary artery during heart surgery. The Riegels alleged that the device was designed, labeled, and manufactured in manner that violated New York state law. The District Court held that the MDA pre-empted the Riegels’ various claims, including strict liability, breach of implied warranty, and negligence. The trial court held in favor of Medtronic on the basis that the state law claims were preempted by the federal MDA. The Second Circuit affirmed in favor of Medtronic and the Supreme Court affirmed. A non-profit organization, Public Citizen, represented the plaintiffs on appeal and before the Supreme Court. The Food and Drug Administration (FDA) has the mandate to conduct the pre-market approval for devices under the MDA, but has no independent research capability. Consequently, the FDA sends the research results provided by the manufacturer to a panel of experts who advise the FDA in making its decision. In granting pre-market approval, the FDA does not make a finding that the device is factually safe and effective for its intended use, but only concludes that there is “reasonable assurance” that it is safe and effective.
False. Implied warranties are created by operation of law rather than seller’s express statements True. True.
True. True. False. Magnuson-Moss Warranty Act provides that i f warranty is written, it must be full or limited: Full warranty promises to (1) remedy any defects in the product and (2) replace product or refund purchase price if, after reasonable number of attempts, it cannot be repaired Seller who gives a limited warranty is bound to whatever promises it actually makes
The correct answer is (d).
The correct answer is (d).
If students claim they wouldn’t file suit, ask if they’d file suit if their child or parent was seriously injured. Opportunity to discuss the chapter opening case, Ernst v. Merck & Co., Inc. On August 19, 2005, a Texas jury found Merck & Co., Inc. liable for the death of Robert C. Ernst, who had taken the company's pain relief drug, Vioxx. The jury awarded Ernst's widow damages totaling $253.5 million, $24.5 million of which covered economic losses and mental anguish. Jurors arrived at a $229 million figure for punitive damages because that was how much money company executives estimated they would save by delaying a change in Vioxx's warning label. Under Texas state law, the punitive damages award was automatically reduced to $1.6 million. Interestingly, accordingly to Merck’s records, Merck made approximately $1.6 million in worldwide sales from Vioxx every 6 hours and 40 minutes the drug was on the market. Juror comments from the Ernst case are illustrative: “‘ Merck did not let us know the full problems of the drug,’ juror Rhonda Wade said. ‘I was shocked.’” [The Dallas Morning News, 8/20/05] Juror Stacy Smith: “The issue, to me, was, did Merck know before they put the drug on the market, and when they did, why didn't they do something about it immediately?” [World News Tonight, ABC News Transcripts, 8/19/05] A press release on Merck’s website after the Ernst v. Merck verdict is also illustrative: “WHITEHOUSE STATION, N.J., Aug. 20, 2005 - Friday’s verdict in Texas was a disappointment to all of us at Merck because we know we acted responsibly. Merck is driven by science and our commitment to acting in the best interest of patients.” Compare that press release to one almost one year earlier: “WHITEHOUSE STATION, N.J., Sept. 30, 2004 Merck & Co., Inc. today announced a voluntary worldwide withdrawal of VIOXX® (rofecoxib), its arthritis and acute pain medication. The company’s decision, which is effective immediately, is based on new, three-year data…’We are taking this action because we believe it best serves the interests of patients,’ said Raymond V. Gilmartin, chairman, president and chief executive officer of Merck.”