Design Defect Claim Rejected for Lack of Cost Estimate on Alternative Design

A federal court in Texas recently rejected design defect claims in a product liability case when plaintiff failed to offer a required cost estimate for the proposed alternative design. See Flynn, et al v. American Honda Motor Co. Inc., et al, No. 4:11-cv-3908 (S.D. Tex. 2015).

Plaintiff was involved in a fatal a collision with a Chevrolet truck. Ms. Flynn’s airbags deployed but, as alleged in the complaint, supposedly only after a delay.  Her parents brought this suit to recover damages resulting from the allegedly defective airbag system.  In the three years since this suit was filed, the parties had engaged in extensive discovery, including investigations by and depositions of numerous expert witnesses. Honda moved for summary judgment on Plaintiffs’ claims of a design defect under theories of strict liability, breach of warranty, and negligence.

Under Federal Rule of Civil Procedure 56, summary judgment is warranted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Importantly, “the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material.” Willis v. Roche Biomed. Lab., 61 F.3d 313, 315 (5th Cir.1995). Material facts are those whose resolution “might affect the outcome of the suit under the governing law.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Id. A court may consider any evidence in the record, “including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed. R. Civ. P. 56(c)(1)(A). “However, neither conclusory allegations nor hearsay, unsubstantiated assertions, or unsupported speculation will suffice to create or negate a genuine issue of fact.” Neal v. City of Hempstead, Tex., No. 4:12-CV-1733, 2014 WL 3907770, at *1 (S.D. Tex. Aug. 11, 2014).

Texas products liability law recognizes three kinds of product defects that will give rise to an actionable claim: manufacturing defects, design defects, and marketing defects. Temple EasTex, Inc. v. Old Orchard Creek Partners, Ltd., 848 S.W.2d 724, 732 (Tex. App. 1992), writ denied, (Sept. 29, 1993). Liability for personal injuries caused by a product's defective design can be imposed under several underlying legal theories, among them negligence, breach of warranty, and strict products liability. The requisite proof for recovery on a design defect claim was prescribed by statute in 1993 and made the same for any legal theory asserted.” Hyundai Motor Co. v. Rodriguez ex rel. Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999). To prevail on his design defect claim, a plaintiff must prove that “(1) the product was defectively designed so as to render it unreasonably dangerous; (2) a safer alternative design
existed; and (3) the defect was a producing cause of the injury for which the plaintiff seeks
recovery.” Casey v. Toyota Motor Eng'g & Mfg. N. Am., Inc., 770 F.3d 322, 330 (5th Cir. 2014).

Texas law defines “safer alternate design” as a product design other than the one actually used, that in reasonable probability:

(1) would have prevented or significantly reduced the risk of the plaintiff's personal injury, property damage, or death without substantially impairing the product's utility; and
(2) was economically and technologically feasible at the time the product left the control of the manufacturer or seller by the application of existing or reasonably achievable scientific knowledge.
TEX. CIV. PRAC. & REM. CODE § 82.005(b). See also Casey, 770 F.3d at 331; Hodges v. Mack
Trucks, Inc., 474 F.3d 188, 196 (5th Cir. 2006).

Honda argued that summary judgment was appropriate because plaintiffs did not present such evidence of a safer alternative design -- instead offering an algorithm that was a generalized concept for a design, which is insufficient under Texas law. Honda used one algorithm and Plaintiffs proposed that a different one – an algorithm patented by Plaintiffs’ expert – should have been used instead. The question of whether an algorithm and its alleged fit to a particular vehicle can constitute a safer alternative design was, the court said, one it need not consider here because, in an event, of Plaintiffs’ failure to provide evidence of economic feasibility. By definition, a safer alternative design must be reasonably probable to be economically feasible at the time the product left control of the manufacturer. See TEX. CIV. PRAC. & REM. CODE § 82.005(b)(2). “To establish economic feasibility, the plaintiff must introduce proof of the ‘cost of incorporating [the] technology.’” Casey, 770 F.3d at 334 (citing Honda of Am. Mfg., Inc. v. Norman, 104 S.W.3d 600, 607 (Tex.Ct.App.2003)). “To prove economic feasibility where the product is not yet in use, courts generally require a party to present evidence of either an estimate or range of the cost of the alternative design.” Casey, 770 F.3d at 335 (citing Brochtrup v. Mercury Marine, 426 Fed.Appx. 335, 339 (5th Cir.2011) (concluding that testimony from builder of alternative design that building cost was $400 was sufficient evidence of economic feasibility to avoid judgment as a matter of law); A.O. Smith Corp. v. Settlement Inv. Mgmt., No. 2–04–270–CV, 2006 WL 176815, at *3–4 (Tex. Ct. App. Jan. 26, 2006) (concluding that detailed testimony about how proposed alternative design would add between $5 and $200 per unit was some evidence of economic feasibility). 

In this case, Plaintiffs presented no evidence of either an estimate or a range of the cost of implementing their expert's alternative algorithm. Specifically, the expert report and deposition transcript offered no such calculation, and thus the court found summary judgment appropriate for Honda on Plaintiff’s design defect claim.

 

 

Advisory Group Recommends Cost/Benefit Analysis for CPSC Regulations

We have posted before about the impact of regulations on clients and indirectly on product litigation. Earlier this month the Administrative Conference of the United States, a federal advisory council, gave its approval to a policy recommendation encouraging independent regulatory agencies to apply formal cost-benefit analysis to their rule-making efforts. One affected agency would be the Consumer Product Safety Commission.

Readers may know that the ACUS is an independent federal agency dedicated to improving the administrative process through consensus-driven applied research, providing nonpartisan expert advice and recommendations for improvement of federal agency procedures. Its membership is composed of federal officials and experts with diverse views and backgrounds from both the private sector and academia.

Several independent regulatory agencies are not subject to the benefit-cost analysis requirements of various Executive Orders or legislation.  The ACUS undertook a project to examine the possible use of benefit-cost analysis at independent regulatory agencies and to highlight any innovative practices those agencies could use. The group adopted a recommendation encouraging agencies to voluntarily adopt certain practices that other agencies have developed when conducting regulatory analyses for major rules. The recommendation, first, identifies various policies and practices used in several regulatory agencies and offers a series of proposals to encourage their use in other agencies. For example, it recommends that each independent regulatory agency develop written guidance on the preparation of benefit-cost and other types of regulatory analyses.

Second, the recommendation highlights a series of analytical practices that OMB has promulgated in the past. For example, it recommends that agencies’ analyses be as transparent and reproducible as practicable, subject to the limitations of law and applicable policies (including preventing the disclosure of proprietary information or trade secrets, or other confidential information). The recommendation does not
seek to establish a one-size-fits-all approach to regulatory analysis, and recognizes that each agency must tailor the analyses it conducts to accord with relevant statutory requirements, its own regulatory priorities, and the potential impact of the analysis on regulatory decision-making to ensure proper use of limited agency resources. 

Note that during the debate on the measure, at least one CPSC commissioner argued against requiring a cost-benefit analysis.

Following the report, Senate Bill 1173 was introduced to require independent agencies to analyze the costs and benefits of new regulations and to tailor new rules to minimize unnecessary burdens on the economy. "The Independent Agency Regulatory Analysis Act of 2013" would apply to any proposed new rule with an economic impact of $100 million or more annually. Sponsors argue there is no good reason the independent agencies should not conduct the same important review other executive agencies must.