Mass Tort Defense : Mass Tort Defense Lawyer & Attorney : Sean P. Wajert : Dechert Law Firm : Products Liability, Class Actions, Pharmaceutical Litigation

Next week I will be on the road attending the Annual Meeting in Washington, D.C., of the American Law Institute (ALI).  I was pleased to be elected earlier this year to membership in this organization.

As readers may know, the American Law Institute is one of the leading independent organizations in the United States producing scholarly work seeking to clarify, modernize, and otherwise improve the law. The Institute (made up of leading lawyers, judges, and law professors) drafts, discusses, revises, and publishes Restatements of the Law, model statutes, and principles of law that are enormously influential in the courts and legislatures, as well as in legal scholarship and education. ALI has long been influential internationally and, in recent years, more of its work has become international in scope.

By participating in the Institute's work, its members have the opportunity to influence the development of the law in both existing and emerging areas, to work with other lawyers, judges, and academics, to give back to a profession to which they are deeply dedicated, and to contribute to the public good. 

Among the projects of interest to readers are the Restatement (Third) of the law of restitution and unjust enrichment, and the just-published Principles of the Law of Aggregate Litigation.

• Email This
• Print
• Comments
• Trackbacks

The Pennsylvania Supreme Court last week issued an interesting little opinion on the economic loss doctrine. Excavation Technologies, Inc. v. Columbia Gas Company Of Pennsylvania, No. 32 WAP 2008 (Pa. S.Ct. Dec. 29, 2009).

In the context of products liability actions, economic loss generally refers to damages that occur through the loss of the value or use of the goods sold or the cost of repair, when there has been no claim of personal injury or damage to property other than the product. The economic loss doctrine has held that such damages, a product injuring itself in essence, is a claim about a breach of the commercial relationship, and thus must be brought in contract/warranty, and not a tort claim sounding in negligence or strict liability. As the Pennsylvania court put it, the economic loss doctrine provides, “no cause of action exists for negligence that results solely in economic damages unaccompanied by physical injury or property damage.” Adams v. Copper Beach Townhomes Communities, 816 A.2d 301, 305 (Pa. Super. 2003).

The theory is that tort policy concerns with safety are less present when a product damages only itself; damage to only the product really means that the product has not met customer expectations, a natural warranty claim; that warrant y law is best suited to deal with disagreements over product quality, as the parties can negotiate the terms, within limits, of warranty scope, remedies, etc.; and warranty law with its built-in limits on privity and the requirement of forseeability of consequential damages better reflects society’s traditional concern with the fulfillment of reasonable economic expectations. Tort law, on the other hand, protects a product consumer’s interest in being free of injury regardless of the existence of any direct agreement with the product maker.

Most states have adopted some form of the economic loss rule, although with some variation in detail. Some carve out exceptions for sudden calamitous events (that feel like a tort?), or where there is a “special relationship” (isn’t that special?) between the parties, or in a post-sale duty to warn tort claim. This case involved another possible exception. Appellant sued appellee on a theory of negligent misrepresentation under § 552 of the Restatement (Second) of Torts, which generally holds that one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. The state Supreme Court granted an appeal to determine whether § 552 imposes tort liability for economic losses to a contractor caused when a gas utility company fails to mark or improperly marks the location of gas lines.

The Court acknowledged that some lower courts had noted an exception for claims of negligent misrepresentation under § 552, which allows such claims to evade dismissal even if they assert purely economic losses. Bilt-Rite Contractors, Inc. v. Architectural Studio, 866 A.2d 270 (Pa. 2005) (finding negligent misrepresentation claim against architect for economic loss viable under § 552). But the economic loss doctrine is well-established in tort law, said the court. See Aikens v. Baltimore and Ohio Railroad Company, 501 A.2d 277, 278-79 (Pa. Super. 1985) (roots of economic loss doctrine first recognized in Robins Dry Dock and Repair Company v. Flint, 275 U.S. 303 (1927)).  The court distinguished Bilt-Rite as a case involving someone who is in the business of giving information for pecuniary gain, and rejected tort liability for anyone not a professional information provider, including one who is under a public duty to give the information (thus rejecting Section 3 of § 552).

This will help prevent plaintiffs from dressing up warranty claims against typical product sellers as negligent misrepresentation claims evading the doctrine of economic loss.  Readers of MassTortDefense know that it does often matter whether a plaintiff can proceed in tort:  warranty claims may involve defenses like privity and puffing and reliance; there may be limitations on remedies, disclaimers on warranties; a different statute of limitations and accrual date. 
 

• Email This
• Print
• Comments
• Trackbacks

The Wisconsin Supreme Court has affirmed a lower court's dismissal of strict liability and negligence claims against white lead carbonate pigment manufacturers, ruling that a product's characteristic ingredient cannot  constitute a design defect. See Ruben Baez Godoy v. E.I. du Pont Nemours and Co. et al., No. 2006AP2670 (Wisc. S.Ct.).

The court affirmed a circuit court's ruling that the complaint had failed to allege a design feature that rendered defective the design of white carbonate lead pigment, which can be found in white paint.
Plaintiff alleged lead poisoning from white lead carbonate pigment in the paint in his Milwaukee apartment, and sued DuPont, Armstrong Containers, Sherwin-Williams and American Cyanamid.
He asserted that despite alleged knowledge that lead is hazardous to human health, the manufacturers promoted the use of the pigment and marketed it as safe.

The lower court dismissed the design defect claims, finding  that lead is an inherent  characteristic of white lead carbonate, and thus the product cannot be designed without lead. The court of
appeals found that a product cannot be said to be defectively designed when that design is inherent in the nature of the product so that an alternative design would make the product something else.  This is the long-standing, but often misunderstood notion, that an alternative product is not an alternative design.  In those states in which a plaintiff must prove the existence of a feasible alternative design that would have avoided the injury, or in which the defendant may show the absence of any feasible alternative design, it is not enough for a plaintiff to point to a different product that might serve the same use. 

The state Supreme Court affirmed, noting that a claim for defective design cannot be maintained where the presence of lead is the alleged defect in design, and its very presence is a characteristic of the product itself.  Without lead, there can be no white lead carbonate pigment.  The court offered an analogy:  Foil for your kitchen use can be made using ingredients other than aluminum (gold, for example), but aluminum foil cannot be made without aluminum. The presence of aluminum is characteristic of aluminum foil. If the mere presence of aluminum posed a danger, a manufacturer might be liable based on the failure to adequately warn or other claims. However, the manufacturer
would not be liable based on the "design" of aluminum foil for including aluminum.

Interestingly, the court reaffirmed that Wisconsin strict products liability law does not require a
plaintiff to prove the feasibility of an alternative design.  However, the feasibility of an alternative design can be considered when evaluating a design defect claim. While plaintiff argued that it is inconsistent to reject a reasonable alternative design requirement and still maintain that characteristic ingredients of the product cannot support a claim for defective design, the court clarified that it was not requiring that a plaintiff affirmatively prove, through expert testimony, that an alternative design was commercially viable. The court was simply acknowledging that some ingredients cannot be eliminated from a design without eliminating the product itself. When the ingredient cannot be designed out of the product, the Restatement (Second) instructs that although other claims may be theoretically asserted, the proper claim is not design defect.  

That rationale would seem to apply to design defect claims in drug cases, where the characteristics of a chemical constituting an FDA-approved drug are challenged. The "design" of a typical drug cannot be changed without creating a different molecular structure, and hence  a different product, one which would require a second FDA approval.

• Email This
• Print
• Comments
• Trackbacks

The Pennsylvania Supreme Court reversed field and recently dismissed the appeal of a closely watched failure-to-warn case alleging harmful asbestos exposure.  Bugosh v. I.U. North America, et al., No. 7 WAP 2008 (S.Ct. Pa. June 16, 2009).

One of the key issues presented by the case was whether Pennsylvania product liability law would change from its current unique form of somewhat extreme strict liability to the more mainstream Third Restatement approach to the issue of liability for  product sellers.

The divided ruling  by the Court involved the claim of a deceased mesothelioma patient, Edward Bugosh, whose widow had been awarded $1.4 million in damages by a jury in the trial court.  I.U.  North America was a non-manufacturer distributor named in the wrongful death suit, based solely on its predecessor’s sale of a small amount of asbestos-containing products.

Traditional products liability law in the state is based on Section 402A of the Restatement (Second) of Torts, and finds that every party in the distribution chain is strictly liable for any product defect in the product they sold. The Third Restatement treats intermediate sellers differently than manufacturers. Specifically, while under current law, liability can be imposed on manufacturers, retailers and distributors for injuries caused by products with manufacturing, design, or informational defects, regardless of whether a defendant acted reasonably in the preparation and sale of the product at issue, the appeal sought to persuade the state Supreme Court to adopt the approach of Section 2 of the new Restatement, which would require plaintiffs to prove that a defendant acted unreasonably. 

The dismissal order finds review was improvidently granted, but gives no further reason.  Speculation centers on this status of the defendant as an intermediate seller, rather than as an actual manufacturer.  The Court may have felt that this was not the best context to consider a major change in the law.

The case drew tremendous interest, with amici on the appellant’s side to include the Pennsylvania Defense Institute, the Product Liability Advisory Council, Inc., Pennsylvania Chamber of Business and Industry, Coalition for Litigation Justice, Inc., Chamber of Commerce of the United States of
America, National Association of Manufacturers, NFIB Small Business Legal Center, National Association of Wholesaler-Distributors, American Tort Reform Association, American Insurance Association, Property and Casualty Insurers Association of America, National Association of Mutual Insurance Companies, American Chemistry Council, and the Washington Legal Foundation.

This result arguably leaves Pennsylvania law very much muddled, as recently the Third Circuit predicted that Pennsylvania would adopt the Third Restatement. See Berrier v. Simplicity Manufacturing, Inc., 563 F.3d 38 (3d Cir. 2009).  In state court, the traditional Pennsylvania version (based on Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978)) of strict liability prevails, while the federal courts may be following Berrier to apply the Third Restatement in diversity cases based upon Pennsylvania law.

Plaintiff had argued that a return to a fault-based system would unfairly increase the plaintiffs’ burden of proof, and adoption of the Third Restatement would reduce the incentive to product manufacturers and suppliers to distribute safer products. 

In a sharply worded dissent to the dismissal, two justices called the current law severely
deficient, particularly when measured against developed understanding and experience, and argued that necessary adjustments are long overdue. The current distinctions that Pennsylvania law makes between negligence and strict liability have no place in any scheme purporting to recognize that manufacturers and distributors are not outright insurers for all harm involving their products.

• Email This
• Print
• Comments
• Trackbacks

The Third Circuit has predicted that the Pennsylvania Supreme Court would abandon Pennsylvania’s peculiar rule of strict liability and join several other states in adopting the form of product liability espoused in the Third Restatement of Torts. Berrier v. Simplicity Manufacturing, Inc., 2009 WL 1054684 (3d Cir. April 21, 2009). My colleague Jim Beck was on the amicus brief for the defense side, and a law school classmate argued for the plaintiffs. But our interest at MassTortDefense was far more than personal: Pennsylvania product liability law has been regarded as including an antiquated and somewhat unnaturally strict version of strict liability, which, in its attempt to distinguish between negligence and 402A strict liability, seemingly precludes any reference to “foreseeability” or “reasonableness” or other negligence-sounding notions. See Lewis v. Coffing Hoist Division, Duff-Norton Co., 528 A.2d 590 (Pa. 1987); Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978).

That notion impacted mass tort and products defendants adversely in a number of ways. There is typically no balancing of risks and utility of alternative designs permitted; there is no consideration of comparative fault in strict liability that would reduce a verdict where the plaintiff’s conduct is clearly relevant; only when the plaintiff’s conduct is the “sole cause” of his or her injuries does it become relevant. Similarly, evidence of industry standards was arguably inadmissible in Pennsylvania on strict liability claims as it goes to a defendant’s reasonable care. Some state courts have held that compliance with mandatory government regulations would likewise be inadmissible in strict liability. Accordingly, plaintiffs in cases where Pennsylvania law would apply were not bashful about dismissing their negligence count before trial and relying on this version of strict liability.

In Berrier, the primary issue on appeal was whether Pennsylvania’s strict products liability law extends to a child who was injured when her grandfather backed over her foot while using a riding mower that lacked “back-over” protection. The Pennsylvania Supreme Court has never expressly determined if one who is merely a bystander and not a user of a product can bring a products liability claim against a manufacturer to recover for injuries that occur while an intended user is using the manufacturer’s product. So here was a case in which the exclusion of any notion of forseeability (because it smacks of negligence) hits the plaintiff: not being a user and being a “foreseeable plaintiff” or being injured by “foreseeable misuse” shouldn’t be enough under traditional Pennsylvania strict liability law. And that’s what the district court held. Berrier v. Simplicity Corp., 413 F. Supp.2d 431, 442 (E.D. Pa. 2005).

Originally, when faced with the issue, the Third Circuit certified the Third Restatement question to the Pennsylvania Supreme Court. Berrier v. Simplicity Manufacturing, Inc., 2008 WL 538912 (3d Cir. Jan. 17, 2008). The Pennsylvania Supreme Court, however, declined to accept the certified question. Berrier v. Simplicity Manufacturing, Inc., 959 A.2d 900 (Pa. 2008).

Faced with having to decide, the Third Circuit predicted that the Pennsylvania Supreme Court would overturn the 1977 Azzarello case in which it adopted its version of strict liability, and instead adopt the negligence-based standard of the Third Restatement of Torts. If an accurate prediction (and there is a products case before the state Supreme Court at this time, Bugosh v. I.U. North America, Inc., 942 A.2d 897 (Pa. 2008) (question is whether "this Court should apply § 2 of the Restatement (Third) of Torts in place of § 402A of the Restatement (Second) of Torts.”)), this would seem to afford certain bystanders a cause of action in strict liability under the circumstances here; but it arguably would create a much more balanced version of strict liability, as well.

The Restatement (Third) of Torts: Products Liability, § 2, recognizes a design defect claim when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe. It recognizes a claim for inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe.

The court recognized that the Third Restatement therefore eliminates much of the confusion that has resulted from attempting to quarantine negligence concepts and insulate them from strict liability claims. Slip opin. at 40. The Third Circuit relied heavily on the analysis of Justice Saylor in his concurring opinion in Phillips v. Cricket Lighters, 841 A.2d 1000 (Pa. 2003). “We therefore conclude, as Justice Saylor proclaimed in Phillips, that ‘the time has come for this Court . . . to expressly recognize the essential role of risk-utility balancing, a concept derived from negligence doctrine, in design defect litigation.’ 841 A.2d at 1015-16 (Saylor, J., concurring).”  And the federal court relied on the conclusion that the Third Restatement is more consistent with the modern trend of law, as well as the evolving policy considerations that led to the adoption in Pennsylvania of Section 402A in the first place.

• Email This
• Print
• Comments
• Trackbacks