Product Liability:
A Review
TECH-435
Legal Aspects of Safety
Dr. E. Hansen, CIE, CHCM
Northern Illinois University
Department of Technology
Introduction
• The manufacturer of a product must
exercise reasonable care to prevent injury
to consumers and others who may come in
contact with their product. This reasonable
care includes insuring that the product is fit
for its intended purpose. Product liability or
negligence may also extend to dealers,
sellers, suppliers, repairers and others
within the product chain.
Brief History
While the product liability cases today stem from the Consumer
Product Safety Act (CPSA) of 1972 ("CPSA," 1972) prior
historical cases and events fueled the debate and subsequent
passage of the act.
•
Prior to the turn of the century the general attitude was that of
caveat emptor, or “buyer beware” based on common law.
– “The logic was simple: people should examine what they are to receive
before they buy it.” The origins for caveat emptor stem from “early
English social and legal philosophy reflected [in] the manufacturing
nature of the economy (Vaughn, 1999).”
Two differing views on the “first case” of product liability:
•
McPherson v. Buick Motor Company (Vaughn, 1999)
•
Donaghue v. Stevenson (Vogt, 2000).
Brief History: “First” Case # 1
In his book, Legal Aspects of Engineering, Richard Vaughn claims
the origin of product liability stems from the McPherson v. Buick
Motor Company case in 1916.
•
The plaintiff in the case suffered injuries when the wheel on his
new Buick collapsed.
•
The judge ruled in favor of the plaintiff despite the use of the
historical defenses of caveat emptor and privity of contract (an
individual can not recover damages from the manufacturer, only
the “middlemen”).
•
The judge’s “reasoning is virtually a statement of products
liability law as it evolved years later.” It was also during this
time that the philosophies of negligence and warranty were
developed.
(Vaughn, 1999)
Brief History: “First” Case # 2
According to Susan Vogt, in her article Warning: Product liability
law is extremely hot!, the first product liability lawsuit was
Donaghue versus Stevenson decided the British House of
Lords in 1932.
• This case was about a snail that was almost swallowed by a
woman who discovered it in a bottle of ginger beer.
• “Its importance lies in the fact that the manufacturer was held
liable, despite the absence of a contractual relationship,
because the damages suffered were a foreseeable result of
the manufacturer's negligence.” (Vogt, 2000)
Theories of Product Liability
Product Liability
Negligence
Breach of
Warranty
Strict Product
Liability
Breach of
Express Warranty
Breach of
Implied Warranty
Merchantability
Theories of Product Liability
(continued)
• In most areas of the country the “plaintiff’s
cause of action may be based on one or more
of three different theories (Kionka, 1999)”:
– Negligence
– Breach of Warranty
• Express warranties
• Implied warranties
• Merchantability and fitness for a particular use
– Strict Liability
Negligence
• “is the committing of an act, which a
person exercising ordinary care would
not do under similar circumstances - or
the failure to do what a person exercising
ordinary care would do under similar
circumstances.” (legal-definitions.com)
Negligence  Case Example
Richelman v Kewanee Machinery And Conveyor Company
•
Suit based upon negligence and strict liability was brought against
manufacturer designer as result of two-year nine-month-old child
having suffered a traumatic amputation of his right leg when he
became entangled in a grain auger located in his grandfather's
farmyard.
•
The Circuit Court, St. Clair County, William P. Fleming, J., entered
judgment, based on jury's findings, against manufacturer designer.
Manufacturer designer appealed.
•
The Appellate Court, Moran, J., held that whether child's injuries
upon inadvertently tripping or falling into open hopper was
foreseeable was question for jury, inasmuch as defendant could
"objectively expect" that if an adult with a smaller than 45/8 shoe
width were to trip or fall near auger he could be injured because of
inadequate safety guard.
("Richelman v. Kewanee Machinery And Conveyor Company," 1978)
Breach of Warranty
a warranty is an express or implied undertaking
by a seller guaranteeing that the thing being
sold is as promised (legal-definitions.com).
• The primary breach of a “warranty” is the
fitness of use of the product.
• “Product liability law is primarily concerned
with three of these warranties (Kionka, 1999):
• Express warranties
• Implied warranties
• Merchantability and fitness for a particular use
Express Warranties
• The representations or promises relating to the
material facts about the products, as described in
salespersons’ statements, in pictures or writing on
product or product packaging, and in advertisements
persuaded the consumer to buy product.
• A breach occurs when these representations are not
true.
• In other words an express warranty is “a promissory
assertion of fact about the product which the seller
made as a part of the sales transaction and which
was a ‘basis of the bargain.”
(Kionka, 1999)
Implied Warranties
• “those [warranties] created and imposed by law, and
accompany the transfer of title to goods unless
expressly and clearly limited or excluded by the
contract.” (Kionka, 1999)
• These warranties are not dependent on whether the
manufacturer has made any actual statements or
representations about its product.
• “The implied warranty extends to both uses and that are
reasonably foreseeable. An implied warranty extends to
all persons who the manufacturer, seller, lessor, or
supplier might reasonable have expected to use,
consume or be affected by the goods.” (Bonsignore, 2003)
Express/Implied Warranties
 Case Example
Cipollone v. Liggett Group, Inc.
• Cipollone is particularly notable for its legacy of
preemption in interpreting the 1965 and 1969 Acts.
Because merchants must properly package and
label goods in order for them to be merchantable,
the Supreme Court’s interpretation of the 1965 and
1969 Acts is crucial to an analysis of the implied
warranty of merchantability. (Crawford, 2002)
• If plaintiffs cannot bypass the preemption issues
posed by Cipollone, then juries will never evaluate
the merits of their claims and those causes of action
will fail. (Crawford, 2002)
Express/Implied Warranties
 Case Example
(continued)
• Rose Cipollone, a smoker for forty-two years, contracted
lung cancer and filed suit against the Liggett Group, Inc.,
which had manufactured the cigarettes she had smoked.
After Cipollone died from lung cancer in 1984, her
husband, Antonio, continued the action as the executor
of his wife’s estate. (Crawford, 2002)
• The Cipollones’ complaint alleged many claims, including
strict liability, negligence, breach of warranty, and
intentional tort. After an interlocutory appeal and a
$400,000 verdict for the Cipollones, the Third Circuit
heard the case for the final time and affirmed the district
court’s finding of a broad preemptive effect for the 1969
Act. (Crawford, 2002)
Express/Implied Warranties
 Case Example
(continued)
• The Court of Appeals found that the 1969 Act
preempts “state law damage actions” that
“challenge . . . the propriety of a party’s actions with
respect to the advertising and promotion of
cigarettes.” Therefore, the “plaintiff’s post-1965
failure to warn, express warranty, and intentional
tort claims” were preempted because they were
based on the “advertising and promotion of
cigarettes.” The Supreme Court subsequently
granted certiorari for review. (Crawford, 2002)
Express/Implied Warranties
 Case Example
(continued)
•
Justice Stevens produced the most important opinion of the case,
although it did not garner a majority of the Court. Stevens found that
the preemptive effect of the 1969 Act barred “requirement[s] or
prohibition[s]” imposed by state law relating to advertising and
promotion of cigarettes, and therefore the 1969 Act would preempt
most claims arising under state statutes and the common law.
•
The key question in the analysis is “whether the legal duty that is the
predicate of the common-law damages action constitutes a
‘requirement or prohibition based on smoking and health . . . imposed
under State law with respect to . . . advertising or promotion.’”
•
Justice Stevens concluded that the Cipollone’s claims for failure to
warn, breach of express warranty, and fraudulent misrepresentation
were preempted; however, the state law conspiracy claim remained.
Despite the fractured nature of the Cipollone decision, most circuits
have adopted Justice Stevens’s plurality opinion. (Crawford, 2002)
Merchantability and fitness
for a particular use
• Merchantability and fitness for a particular use –
“requires that the product (and its container) meet
certain minimum standards of quality, chiefly that it
be fit for the ordinary purposes for which the goods
are sold. This includes a standard of reasonable
safety.”
• This is furthered with “fitness for a particular
purpose” where the seller “knows or has reason to
know” what specific purpose the goods sold will be
used for and the purchaser of these goods is
relying on the supplier to provide “suitable” goods.
(Kionka, 1999)
Merchantability
 Case Example
SKAGGS V. CHAMPION INTERNATIONAL
• Tim Skaggs, [born on March 5, 1950] died on October 17,
1991 from acute lymphoblastic leukemia. Tim worked for
Simpson Lumber Company at its Arcata mill starting at age
21. His initial employment as a night shift laborer resulted in
his working at various jobs, including assignments to the paint
line department where he handled and sawed lumber treated
with Woodlife, a wood preservative manufactured and sold to
Simpson by Champion.
• Although this action sought to hold Champion liable for
negligence in not warning about the hazards of this product,
which Champion knew was being handled improperly by its
customers, and for breach of warranty, the primary legal basis
for this action was for selling a defective product. (Alexander, 1998a)
Merchantability
 Case Example
(continued)
• In the Skaggs case the plaintiffs claimed that Defendant
Champion International was negligent in the production,
retailing and distribution of Woodlife Clear RTU contaminated
with dioxins and furans, was strictly liable for producing and
distributing a defective chemical product and additionally liable
for breaching an implied warranty that Woodlife with
pentachlorophenal was of good and merchantable quality,
safe and fit for its intended use.
• It was also claimed that the Defendants knew this product was
hazardous, misrepresented that it was safe to use and
concealed from Simpson that many people inadvertently and
routinely handled it in a dangerous manner. (Alexander, 1998a)
Merchantability
 Case Example
(continued)
• The Skaggs case settled before Judge Michael
Brown, following the denial of Champion's motion
for summary judgment and after the completion of
expert depositions before the scheduled trial. While
denying liability, the Defendant paid $550,000 in
settlement of all claims, a substantial recovery in
Humboldt County where the primary industries are
logging and fishing and average income is in the
lowest twenty percent of California counties.
(Alexander, 1998a)
Strict Liability
• “Under a strict liability standard, once the plaintiff
establishes that a product is defective, liability
results from that fact alone no matter how much
care was applied during design, manufacture,
marketing, distribution and sale (Larson, 2003).”
• The term “strict,” in this situation, refers to the fact
that the injured product user need not show
negligence or fault. Commonly most states follow
the rule of products liability as set forth in section
402A of the Restatement of Torts.
Strict Liability
 Case Example
Toole v. Richardson
• Toole v. Richardson (1967) Cal.App.2d 689, 710, 60 Cal.Rptr.
398 involves the infamous MER/29. In affirming a jury verdict
for the plaintiff’s eye damage as a result of inadequate
warnings given with this prescription drug, Justice Salsman
found there was substantial evidence to support the jury¹s
verdict and award of punitive damages. On the strict liability
question the court stated:
• The possibility of eye injury and age was known to appellant
before product was placed on the market yet no warning of
this danger was given until the weight of accumulating
evidence and the insistence of the FDA compelled it. Thus
strict liability justified on the ground that the product was
marketed without proper warning of its known dangerous
effect. (Id., p.710.)
(Alexander, 1998b)
Restatements
• Restatements are highly regarded distillations of common law
prepared by the American Law Institute (ALI).
• The goal is to distill the "black letter law" from cases, to
indicate a trend in common law, and, occasionally, to
recommend what a rule of law should be.
• In essence, they "restate" existing common law into a series
of principles or rules.
• Restatements are not primary law, however they are
considered persuasive authority by many courts.
– Numerous Restatement sections have become primary law when
a court or legislature has adopted its language
(Harvard, 2003).
Restatements (continued)
• In 1998 the third edition of Restatements was
published.
• There have been debates and challenges to
this edition.
• Many states have adhered more closely with
the second edition of the Restatements that
was published in 1965.
• The wording of section 402 and 403 of this
Restatement is important:
Restatements: s 402A
Special Liability Of Seller Of Product For Physical Harm To
User Or Consumer
1.
2.
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.
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
(Restatement of Torts, 1965).
Restatements: s 402B
Misrepresentation By Seller Of Chattels To Consumer
1.
One engaged in the business of selling chattels who, by
advertising, labels, or otherwise, makes to the public a
misrepresentation of a material fact concerning the
character or quality of a chattel sold by him is subject to
liability for physical harm to a consumer of the chattel
caused by justifiable reliance upon the misrepresentation,
even though
a.
it is not made fraudulently or negligently, and
b.
the consumer has not bought the chattel from or entered into
any contractual relation with the seller
(Restatement of Torts, 1965).
Basis for Product Liability
Product Liability
Basis
Manufacturing
Defect
Design
Defect
Faulty Mfg. Process
Malfunction
Product or Packaging
Reasonable Alternative Design
Hardest to Prove
Failure to
Warn
Failure to
Warn
Ineadequate
Warning
Basis for Product Liability
• While the laws applicable to defective product
cases varies from state to state, there are three
legal theories common to all jurisdictions which
may form the basis of a successful product
liability case:
– Manufacturing defect
– Design defect
– Failure to warn, or "inadequate warning
Manufacturing Defect
• In such cases the injury was caused as a
result of defect in the manufacturing of
the product.
These cases are the
hardest to prove, as evidence the
example below is of a case that was lost.
• Case example:
Meli v. General Motors Corp.
Meli v. General Motors Corp.
• The plaintiff blamed an accident on a broken accelerator
spring, but could not isolate a possible manufacturing defect
that would have caused the accident, the Court found that the
trial court properly granted a directed verdict to the defendant.
• In addition to having been driven for over 32,000 miles, the
vehicle had been serviced numerous times.
• Because the accelerator spring had been exposed during
service, there was no reason to conclude that a defect in
manufacture was any more likely than negligent service to
have been the cause of the accident. ("Sundberg v. Keller Ladder," 2002)
Design Defect
• In these cases the injury was caused by a poor
design despite the fact that there may be no
defect in the individual product itself.
• This design defect is not limited to the product
itself. Improper packaging resulting in safety
related damage during shipping and handling
may also be considered.
– Case Example:
Babcock v. General Motors Corporation
Babcock v. General Motors
Corporation
• The [United States Court of Appeals] case
arose from an accident on February 21, 1998,
when a General Motors pickup truck driven by
Paul A. Babcock, III, went off the road and
struck a tree. The accident rendered Babcock a
paraplegic. On June 15, 1999, Babcock died as
a result of complications from his injuries
•
Plaintiff brought suit alleging negligence and
strict liability against the defendant.
("Babcock v. General Motors Corp., 299 F.3d 60 (1st Cir. 2002)," 2002)
Babcock v.
General Motors Corporation
(continued)
• The jury returned a verdict finding GM liable on the
negligence count and not liable on the strict liability
count. It is undisputed that when Babcock was first
seen after the accident his seat belt was not
fastened around him.
• The complaint alleged that Babcock was wearing
his seat belt prior to the accident, but that the belt
unbuckled as soon as pressure was exerted on it
and the buckle released due to a condition known
as "false latching." The main focus of the trial was
on this claim of false latching.
("Babcock v. General Motors Corp., 299 F.3d 60 (1st Cir. 2002)," 2002)
Babcock v.
General Motors Corporation
(continued)
• The original case was proven by the plaintiff and awarded
unspecified amount. This case was won largely in part of
expert testimony.
• The expert “determined crash speed by methodology
generally accepted in accident reconstruction field and
approved by National Highway Traffic Safety Administration
(NHTSA) (Nordberg, 2003) .” His opinion was that the
“seatbelt would have restrained passenger at that speed if
nondefective and in use, and concluded from inspection of
seatbelt that it had indeed been in use just prior to impact
(Nordberg, 2003) .” He also showed an alternative design
from Volvo that helps prevent false latching.
• This case was affirmed and the court further awarded the
plaintiff legal and court fees incurred during the appeals
process.
Failure to Warn /
Inadequate Warning
• These cases refer to injuries caused as a result
of a product known to be potentially dangerous
which was sold without warning labels or
having inadequate labeling to properly warn the
consumer. Including inadequate or no
instructions for proper setup, use or
maintenance.
– Example of failure to warn: Gall v. Union Ice Co
– Example of inadequate warning: Laramendy v. Myers
Gall v. Union Ice Co
• (1952) 108 Cal.App. 303, 230 P.2d 48
• Involved the absence of sufficient warning
labels on drums of sulfuric acid that exploded.
• Affirming verdicts for the plaintiffs, the court
held that the question of defendants chemical
companies' negligence in failing to place proper
warning labels on sulfuric acid drums were for
the jury (Alexander, 1998b).
Laramendy v. Myers
• (1954) 126 Cal.App.2d 636, 272 P.2d 824. A theatrical
smoke-producing device set fire to a child's dress.
• "The written directions which were with the device when
it was received, warned: to hold the device away from
the face while filling the hole with powder; and to stand
back without making contact (when the device is on the
floor) so that 'puff' will not strike face."
• Notwithstanding these warnings the court found the
warning was incomplete, affirmed a verdict for plaintiff,
and held that the "defendants neglected to reasonably
warn of the dangerous propensities of the device. …
There was no warning of danger from fire." Id., at p.639.
(Alexander, 1998b).
Legal Stages
Stages of
Legal Process
Stage 1
COMPLAINT
Answer
Third Party Move to
Contribution Discovery
Stage 2
Stage 3
DISCOVERY PRE-TRIAL
Stage 4
TRIAL
Motion to Includes Summary Move to Decision
Dismiss Depostions Judgement Trial Defendent
Dismiss
Move to
Discovery
Accept
Decsion
Move to
Appeal
Stage 5
APPEAL
Decision
Plaintif
Accept
Decsion
Move to
Appeal
Product Liability:
Good & Questionable Results
• Product liability cases have undoubtedly changed the way
products reach consumers.
• Product liability cases are on the rise.
• The upside to these cases is consumers should be more
confident in the products they buy.
• Products should be safer and if a dangerous product
causes an injury there have been precedents set to rectify
the situation.
• The downside, however is that with the increase in
legitimate cases there has also been a rise in cases with
little or no merit, individuals and ethically questionable
attorneys out for an easy financial gain.
Positive product liability cases
1
2
3
4
5
THE HARMFUL
PRODUCT
THE CORPORATE
MISCONDUCT
THE POSITIVE
CHANGE
Children severely burned by
highly flammable pajamas.
Riegel Textile aware of
hazard, but chose not to treat
pajamas with flame-retardant
chemicals.
Playtex willfully disregarded
studies and medical reports
linking product to Toxic
Shock.
Johnson & Johnson knew of
danger for years, yet
instructed agents not to
mention it to clients.
Airco was aware its design
was risky.
$1 million punitive award
forces unsafe product off
the market.
Ford knew of defective
transmission design, yet failed
to warn consumers.
Transmission safely
redesigned after $4
million punitive award.
Women dying from Toxic
Shock Syndrome after
using super- absorbent
tampons.
Tylenol turns toxic,
destroying liver when mixed
with alcohol.
Faulty surgical ventilator
cuts off oxygen supply,
causing brain, lung
damage.
Defect in car transmission
causes automobile to
suddenly move in reverse.
Deadly product removed
from market after $10
million punitive award.
$8.8 million award spurs
company to put warnings
on its products.
Airco issues medical
device alert after $3
million punitive award.
Source: http://www.atla.org/secrecy/data/differ.aspx (ATLA, 2001)
Positive product liability cases
(continued)
THE HARMFUL
PRODUCT
THE CORPORATE
MISCONDUCT
THE POSITIVE
CHANGE
6
Young athletes dying from
head, spinal injuries due to
unsafe football helmets.
Manufacturers slow to
acknowledge danger of their
poorly designed product.
7
Arthritis pain-relief drug
causes fatal kidney-liver
ailment.
Eli Lilly knew of hazard, but
failed to inform doctors,
patients and FDA.
After inhaling asbestos,
workers contract
asbestosis, which causes
lung cancer.
Babies tragically being
hanged to death on
headboard of crib.
Manufacturers knew danger
of asbestos for decades, but
concealed risk from public.
Defective minivan door
latch responsible for 37
deaths, 98 injuries and 134
ejections.
Chrysler knew latch was
unsafe, yet did not take steps
to fix design or warn
consumers.
Liability claims spur
improved helmet design;
no deaths for first time in
60 years.
$6 million punitive award
forces company to
remove drug from world
market.
Asbestos taken off
market thanks to liability
claims and punitive
damages.
Company stepped up
recall of crib, public
notification effort after
$475,000 punitive award.
Latch redesigned, old
latches replaced in
response to class action
lawsuit, NTSB pressure.
8
9
1
0
Bassett Furniture, which had
stopped making crib, failed to
notify owners of hazard.
Source: http://www.atla.org/secrecy/data/differ.aspx (ATLA, 2001)
Questionable Results
• Product liability cases have encouraged
manufacturers to design, manufacture and
distribute safer products. However, with the
potential for, and increasing numbers of, frivolous
lawsuits something should be done to regulate the
current system. This is not to say that society
should return to the days “buyer beware,” but rather
the system needs to move away from the current
trend of “seller beware.”
• Two cases with questionable results:
– The McDonald’s Coffee Case
– Carrying a Full Fish Tank Full of Water
The McDonalds Coffee Case
• In February of 1992 a New Mexico senior citizen, Stella
Liebeck, was a passenger in her grandson's car when she
suffered third-degree burns from McDonald's coffee.
• After receiving the coffee from the drive-through window, the
grandson pulled over to allow his grandmother to add cream
and sugar to her coffee. In attempting to remove the plastic lid,
the coffee spilled into her lap causing severe burns to her
upper thigh area.
• She was hospitalized for eight days, during which time she
underwent numerous skin grafts. When McDonalds's refused
to settle the case for $20,000, the grandmother retained an
attorney to file charges against McDonald's.
• During discovery, documents obtained from McDonald¹s
showed more than 700 claims by people burned by its coffee
between 1982 and 1992, proving that McDonald's had
knowledge of the dangers of their product.
The McDonalds Coffee Case
(continued)
Other facts in the case:
•
McDonald's quality assurance manager testified that the company
actively enforces a requirement that coffee be held in the pot at 185
degrees, plus or minus five degrees
•
Plaintiff's expert testified that liquids, at 180 degrees, will cause a full
thickness burn to human skin in two to seven seconds.
•
McDonald's asserted that customers buy coffee on their way to work
or home, intending to consume it there.
•
The jury awarded Liebeck $200,000 in compensatory damages. This
amount was reduced to $160,000 because the jury found Liebeck 20
percent at fault in the spill. The jury also awarded Liebeck $2.7
million in punitive damages.
•
The trial court subsequently reduced the punitive award to $480,000.
•
The judge called McDonald's conduct reckless, callous and willful.
Source: Consumer Attorneys Association of Los Angeles (CAALA)
The McDonalds Coffee Case
(continued)
• The questionably “positive” result is that now
McDonalds places the following warning on their
coffee cups:
“Warning: Contents Hot.”
• In this author’s opinion this case was completely
frivolous with no benefit to safety whatsoever:
“Most people, except the very young or the
mentally disadvantaged, would expect that hot
coffee would be hot. But our courts and our
judges seem to have retreated from the
reasonable person standard in holding
companies liable for product misuse.”
(Smith, 1997)
Carrying a Full Fish Tank Full of Water
Source: Mealey's Litigation Reports (mealeys.com, 2003)
• SALEM, Ore. -- A plaintiff who won a jury
verdict after she was seriously injured by a
shattering fishbowl has less than four weeks to
decide whether to accept remittitur of her
punitive damages award or face a new trial to
set the proper amount
(Arleen E. Waddill v. Anchor Hocking, Inc., No. A91012, Ore. App.).
– The case was back before the Oregon Court of
Appeals after the U.S. Supreme Court, citing State
Farm v. Campbell (538 U.S. __, 123 S. Ct. 1513
[2003]), vacated the $1 million award based on
compensatory damages one-tenth the size.
Carrying a Full Fish Tank Full of Water
(continued)
• Arleen E. Waddill was carrying a fishbowl
containing water in her arms when the glass
bowl shattered, slicing the ulnar artery, ulnar
nerve and a tendon in her left arm and
lacerating the index finger and an artery and
nerve on her right hand.
• Waddill suffered lingering pain, numbness and
weakness in her arms that her physician told
her would be permanent.
• Waddill sued Anchor Hocking Inc., which made
the fishbowl, complaining that the company
failed to attach a warning to the fishbowl
against carrying it when loaded with water.
Source: Mealey's Litigation Reports (mealeys.com, 2003)
Carrying a Full Fish Tank Full of Water
(continued)
• Anchor Hocking knew of three other incidents in
which customers were injured in similar
circumstances but did nothing to improve the
product's safety and in fact destroyed records
pertaining to those incidents, she alleged.
• A Multnomah County Circuit Court jury found that
Anchor Hocking was negligent and that the fishbowl
was dangerously defective because of the
company's failure to affix an appropriate warning.
• It assessed actual damages of $132,472, reduced
to $100,854 by the jury's finding that Waddill was 25
percent at fault, and awarded $1 million in punitive
damages.
Source: Mealey's Litigation Reports (mealeys.com, 2003)
Carrying a Full Fish Tank Full of Water
(continued)
• A panel of the Oregon Court of Appeals affirmed the
judgment in its entirety, finding that the jury's
decision to award punitive damages complied with
both state and federal law, including the U.S.
Constitution's 14th Amendment.
• The U.S. Supreme Court, however, granted
certiorari to Anchor Hocking, vacated the award and
remanded to the appellate court for further
consideration in light of State Farm.
– The panel concluded that the maximum constitutionally permissible
award in the instant case was four times the compensatory damages, or
$403,416.
– However, it offered Waddill the choice of accepting the reduced
amount or consenting to a new trial to establish a more
appropriate level of punitive damages.
Source: Mealey's Litigation Reports (mealeys.com, 2003)
Carrying a Full Fish Tank Full of Water
(continued)
• The questionably “positive” result is not yet known,
as the new trial has not yet been set.
• Undoubtedly, Anchor Hocking will have to place a
warning label so that people know not to carry a full
fish tank full of water.
• Sympathy is felt for the individual and resulting
injuries, but should Anchor Hocking have to pay for
her lapse in judgment?
• Humanity will not be better served if a warning label
is affixed to every fish tank that says:
“Warning: Full Fish Tanks May Cause Injuries If
Carried When Full Of Liquid.”
Warning Label Overkill
• Many people question the validity of warning
labels on products.
• The litigious nature of our society has
manufacturers affixing labels to protect
themselves from these rising court costs and
people out to make easy money.
• The following slide contains a few warning
labels that are obviously due to product liability
laws and generous courts.
Warning Label Overkill
(continued)
The Consumer Alert website provides the following eight real
warning labels as examples of “warning overkill:”
•
Box of staples: "Caution: Staples have sharp points for easy
penetration so handle with care."
•
Car sun shield: "Do not drive with sun shield in place."
•
Sled: "This product does not have brakes."
•
Marbles: "Choking hazard - This toy is a marble.”
•
Ladder: "Do not overreach."
•
Child's play helmet: "This is a toy."
•
Hair dryer: "Do not use while sleeping."
•
Roller blading: "Learn how to control your speed, brake and stop.“
(Smith, 1997)
What Does Tort Liability Cost?
According to statisticians at the U.S. Department of
Justice:
• Juries in the 75 largest counties disposed of 12,000
tort, contract, and real property rights cases during a
12-month period ending June 30, 1992.
• Jury cases were 2% of the 762,000 tort, contract,
and real property cases disposed by State courts of
general jurisdiction in the Nation's most populous
counties.
• Thirty-three percent of cases decided by juries were
automobile accident suits.
(DeFrances; et al.)
What Does Tort Liability Cost?
(continued)
• 11% were medical malpractice
• 5% were product liability and toxic substance cases.
• In half of all jury cases, the jury found in favor of the
plaintiff and in the 12-month period awarded an
estimated $2.7 billion in compensatory and punitive
damages.
• The median total award for a plaintiff was $52,000.
• Punitive damages were awarded in 6% of the jury
cases with a plaintiff winner.
• Median punitive award was $50,000; average time
from complaint filing to jury verdict was 2.5 years.
(DeFrances; et al.)
What Does Tort Liability Cost?
(continued)
• Claimants and plaintiffs are paid for economic
losses sustained.
• Additionally they are paid for non-economic losses,
such as pain, suffering, claimant’s attorneys’ fees
and administrative costs.
• A reflection of the cost of the tort system is the price
of liability insurance in defense of these claims
(III, 2003b).
What Does Tort Liability Cost?
(continued)
U.S. TORT COSTS RELATIVE TO GDP AND POPULATION
Year
1950
1960
1970
1980
1990
2000
2001
U.S. tort
costs
($ billions)
U.S. GDP
($ billions)
Tort cost as
% of GDP
U.S.
population
(millions)
$1.80
5.4
13.9
43
129.6
179.7
205.4
$294
527
1,040
2,796
5,803
9,825
10,082
0.61%
1.03%
1.33%
1.54%
2.23%
1.83%
2.04%
152
181
205
228
249
281
285
Inflationadjusted (1)
Tort cost per tort cost
citizen
per citizen
$12
30
68
189
520
638
721
(1) Restated in year 2001 dollars.
Source: Tillinghast-Towers Perrin. through www.iii.org
$87
180
309
406
704
657
721
Conclusion
Product liability cases have encouraged
manufacturers to design, manufacture and
distribute safer products. Furthermore, product
liability cases have rightfully forced these same
manufacturers to properly warn consumers of
the potential dangers with their products.
However, with the potential for, and increasing
numbers of, frivolous lawsuits something
should be done to regulate the current system.
This is not to say that society should return to
the days of caveat emptor, or “buyer beware,”
but rather the system needs to move away from
the current trend of “seller beware.”
Conclusion
(continued)
In 1992, on the campaign trail, the first President
Bush (George H. Bush) summed it up best
when he made the following remarks:
“Product liability laws vary from State to State, and the
rules have encouraged these crazy lawsuits and
outrageous awards. And the cost of insurance keeps
going right out through the roof, keeps skyrocketing. Big
deal, right? So companies have to pay extra for a few
lawyers. But it's not just companies who foot the bill; we
all pay higher prices for everything from medicine to
stepladders. We never get to see a lot of good products
because companies are afraid of excessive lawsuits
(Bush, 1992).”
Conclusion
(continued)
“In 1985 Senator Robert Kasten of Wisconsin introduced
legislation that would replace the current open-ended
system with uniform rules (Hansen, 2003).” This legislation
was in response to the fact that “almost half of all the
money paid out in these kinds of cases goes not to the
injured party, but to the lawyers (Bush, 1992).” Senator
Kasten led the charge for reform but lost his senatorial
seat in 1992.
Since then various reform measures have been proposed.
One of the reforms suggested was to limit punitive
damages to the first successful claimant in suits
involving a single product and a single manufacturer.
Another reform suggested was to “cap” non-economic
damages at $100,000 or $250,000. (III, 2003a)
Conclusion
(continued)
There is evidence of a changing attitude towards
excessive claims. In 2001, the U.S. Supreme Court
said that appellate courts must “carefully analyze
the evidence used to determine the amount of an
award for punitive damages, rather than rely on the
judgment of the trial court, to ensure that the rights
of both individuals and corporations are protected.”
(III, 2003a)
The federal government should impose limits and
pass some level of tort reform because without
clear limits there can be dramatic and excessively
costly deviations from realistic damages.
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