E MERGING I SSUES IN
M ANAGEMENT (M GMT 440)
Negligence, Product Liability and Damages (Consumerism –
Chapter 15)
Professor Charles H. Smith
Summer 2012
T RADITIONAL T HEORIES U SED
IN D EFECTIVE P RODUCT C ASES

Our coverage of this chapter will be limited to
defective product cases only (pages 534-48 only)
which feature the following tort theories

Negligence.

Product liability.

Breach of express or implied warranty.

We will cover negligence and product liability
only since breach of warranty is largely
included in those two theories anyway.
H ISTORY OF H OW C OURTS
D EALT W ITH D EFECTIVE
P RODUCT C ASES

In the past, the buyer/user bought/used a
product at his/her own risk – “caveat emptor.”

After all, manufacturing was a big part of the U.S.
economy that was really taking off due to the
Industrial Revolution of the mid to late 19th
Century.

However, as time went on, attitudes changed so
that an injured person could be compensated for
losses suffered due to a defective product.
N EGLIGENCE

Most popular legal theory used in tort cases; e.g.,
cases involving defective products but also auto
and slip-and-fall accidents.

Intentional misconduct not required; instead,
negligence involves an accident, misjudgment,
mistake, etc.

Differentiate from intentional torts such as fraud
which require some kind of conscious action.

Examples – running the red light; shooting gun in
the air.
E LEMENTS OF A N EGLIGENCE
C ASE

Plaintiff must prove all four of the following


Duty of care – defendant owes a duty of care to plaintiff, who
may be specific person or part of group of any size; examples
include

Driving to school or work.

Manufacturer or assembler of product.
Breach – defendant breaches the duty of care owed to
plaintiff; examples include

Driver disobeys traffic laws.

Product not assembled correctly.
E LEMENTS OF A N EGLIGENCE
C ASE CONT.

Plaintiff must prove all four of the following cont.


Causation and damage – defendant’s breach of the duty of
care owed to plaintiff causes damage (financial loss) to plaintiff

Causation – logical or reasonable relationship between
defendant’s bad act and plaintiff’s financial loss; examples
include Palsgraf and Vons truck driver cases.

Damage – financial loss, which can be determined in many
ways (see slides re what can plaintiff win in court).

Often, plaintiff will build negligence case on serious
injuries or other obvious financial loss but will be unable
to provide link of causation to defendant’s bad act.
1st line of defense is to show one or more elements missing.
D EFENSES
TO
N EGLIGENCE
Even if plaintiff proves all elements of negligence, defendant
still has some defenses, such as


Assumption of the risk – plaintiff cannot win negligence
case because he/she injured while in dangerous situation.

Traditional scenario – “fireman’s rule” (injury suffered
while performing inherently dangerous job); e.g.,
firefighter injured due to defective hose while fighting fire
cannot win negligence case vs. hose manufacturer.

More current scenario – injury suffered while plaintiff
engaged in recreational or sports activities; e.g., person
injured due to opponent’s negligence while playing
basketball cannot win negligence case vs. opponent.

Ethics/policy question – what is the purpose of the
assumption of the risk defense?
D EFENSES TO N EGLIGENCE
CONT.

Another defense is where the defendant disclaims some or all fault in the
following situations

Comparative negligence – liability proportionate to percentage
of plaintiff’s fault; recognizes that plaintiff may contribute to the
accident but should still be entitled to some money.

Example – product assembled incorrectly by retailer but
plaintiff careless while using it.

3rd party’s fault – liability proportionate to percentage of
negligence or other tort of 3rd party who can be co-defendant or
anyone else who caused injury.

Superseding/intervening cause – is there a break in the causal
connection between defendant’s bad act and plaintiff’s
damage?

Example – unassembled product provided by manufacturer
to retailer/independent contractor/consumer who then
incorrectly assembles product.
P RODUCT L IABILITY

“Product liability” (sometimes called “products
liability” or “strict products liability”) recognizes that
there will be injuries resulting from the intended use
of mass-produced product.


“Intended use” examples.
Theory developed as a policy decision

Someone other than the injured consumer or
bystander should be legally responsible for damage
caused by these products – i.e., manufacturer,
retailer, etc. can be held liable even if “reasonable
care” taken . . . after all, who is making money from
the sale of the product?
P RODUCT L IABILITY –
D EFECT T HEORIES
Three types of defect theories can be
used to prove a product liability case



Manufacturing defect.

Design defect.

Warning defect.
More than one theory might apply to
same situation.
P RODUCT L IABILITY –
M ANUFACTURING D EFECT

Manufacturing defect occurs when a problem,
mistake, etc. in the manufacturing process causes
the product to be assembled improperly which can
cause injury even if product used as intended.

Example – product assembled incorrectly due to
human or mechanical error.

Student examples.
P RODUCT L IABILITY –
D ESIGN D EFECT

Design defect happens when a problem, mistake,
etc. in the design of the product causes the product
to be inherently defective which can result in injury
even if product used as intended.

Example – Ford Explorer tire case.

Student examples.
P RODUCT L IABILITY –
WARNING D EFECT

Warning defect is when an inadequate warning or lack
of any warning results in injury that could have been
avoided with proper warning even if product used as
intended.

Example – warnings on plastic bags; aerosol spray case.

Student examples.

Ethics/Policy Question – should a product manufacturer
be able to avoid liability by placing a label with a
disclaimer or limitation of remedies on the product?
D EFECTIVE P RODUCT C ASES
– S TRATEGY

Product liability and negligence can be
alleged in the same case – this gives the
plaintiff some options since

If cannot prove fault for negligence
(breach of duty of care), use product
liability as a “fall-back” postion.

But, if fault for negligence can be
proved, then the jury may award more
money against a defendant who is
“blameworthy” and “did a bad thing.”
D EFECTIVE P RODUCT C ASES –
W HAT C AN P LAINTIFF W IN IN
C OURT ?

The goal of any tort case is compensation
which usually falls into two categories

Special damages – can be measured in
exact terms; easiest to prove since
usually documentation and/or other
clear way to show nature/amount; e.g.,
medical bills in personal injury case,
contract or pay stubs re loss of income.

General damages – intangible “quality of
life” damages (e.g., emotional distress or
pain and suffering) – harder to prove
with any precision.
D EFECTIVE P RODUCT C ASES –
W HAT C AN P LAINTIFF W IN IN
C OURT ?
 General damages cont.
 Every case is different based
on the facts, the victim, and
the “badness” of the
defendant’s conduct.
 Ethics/policy questions
 What is the legitimacy
of a general damages
claim?
 How to justify a general
damages claim?
 How could a general
damages claim be
abused?
D EFECTIVE P RODUCT C ASES
– W HAT C AN P LAINTIFF W IN
IN C OURT ? CONT.

How to evaluate damages for settlement purposes; after all, the
vast majority of lawsuits do not go to trial since most are
settled and the others are dismissed.

Ordinary injury case – negligence or product liability

Special damages can be easily calculated since they are
supported by documentation or other clear evidence.

General damages – not so easy, but one method is to
multiply the amount of special damages by three.

Add these two up and you often get a reasonable
settlement figure.

Of course, many other factors – legal and non-legal – may
come into play in this calculation; student examples.
D EFECTIVE P RODUCT C ASES –
W HAT C AN P LAINTIFF W IN IN
C OURT ? CONT.

No punitive damages (money awarded to plaintiff in addition
to special and general damages to punish defendant) in
negligence and product liability cases since only available for
intentional torts such as fraud, defamation, or assault and
battery.


Exception based on intentional misconduct – Grimshaw v.
Ford Motor Co. (Pinto case); why was the plaintiff
awarded punitive damages in this defective product
case?
Ordinarily, no injunction (judgment telling defendant to stop
doing bad act) unless the wrongdoing is ongoing; threat of
judgment of damages is designed to serve as deterrent to
manufacturing defective products.
D EFECTIVE P RODUCT C ASES –
W HAT C AN P LAINTIFF W IN IN
C OURT ? CONT.

Ethics/Policy Question – should there be any
limitations on the type or amount of
damages?

Ethics/Policy Question – if a defendant wins,
should he/she/it be entitled to recover
attorney’s fees from the unsuccessful
plaintiff? If so, under what circumstances?

Ethics/Policy Question – is a judgment of
damages (or the threat of one) the best way
to deter defective products?
M C D ONALD ’ S C ASE S TUDIES

Pelman v. McDonald’s – guardians of
two obese children filed suit seeking
to hold McDonald’s responsible for the
children’s weight.

Liebeck v. McDonald’s – the “hot
coffee” case.

See next slide for questions to be
discussed with small groups in class.
M C D ONALD ' S C ASE S TUDIES
CONT.

Which legal theory(ies) could have been applicable in
these lawsuits?

What was the outcome of these lawsuits?


Did McDonald’s make any changes which might be
attributable to these lawsuits?


Ethics/Policy Question – What is your opinion of the
outcome of these lawsuits?
Ethics/Policy Question – What could be the
reason(s) for these changes?
Assume that the plaintiffs in these lawsuits would be
entitled to damages – what kind and how much?