Manufacturer Responsibility: Are Products Safer and Manufacturers More Responsible? (Part 2)

B. Punitive Damages

Punitive damages is the one greatest legal weapon plaintiffs have in forcing manufacturers to produce safer products due to its deterrent effect.

Punitive damages are awarded in less than 5 percent of civil jury verdicts. (16) Between 1965 and 1990, there were only 355 such awards in product liability cases.(17) More than half of those awards were reduced or overturned on appeal. It is not necessarily its implementation which is important, rather it is the threat of its use which deters manufacturers from cutting safety corners. Those who do choose to "test the waters" such as Ford's Pinto fuel tanks and A.H. Robins' Dalkon Shield are further deterred from future wrong doings when punitive damages are awarded.

190 of 252 non-asbestos defendants who were subject to punitive damages awards between 1969 and 1990 "have taken some safety step in the wake of punitive damages litigation. In 80 percent of these cases, there were steps such as fortified warnings, product withdrawals, and safety features added to products which followed shortly after the litigation."(18)

C. Competitiveness

Finally, the role of product liability litigation not only compensates victims and improves safety, but also improves the quality of American products.

"Our products, because of their superior reputation for safety, due in part to the effects of product liability over the last 20 years, have a superior reputation in the international marketplace . . . [We] cannot compete at this time with the low labor costs of newly industrializing countries, but we can compete very effectively . . . in safety, and it would be a great risk to out international competitiveness to toy with the tort system that helps bring about that competitive advantage."(19)

III. Conclusions

Since the mid to late 1960's, product liability cases using the legal tools of strict liability, joint and several liability, and punitive damages, have clearly improved the safety and quality of products produced by American manufacturers. In addition to saving 6,000 lives every year, product liability cases serve Americans and our clients and their families by receiving compensation which allows them to continue functioning in society after severe injuries or death. It also does well for our law firms.

We should not take for granted the tremendous hard work, courage, and innovative theories of law necessary to prove victorious in product liability cases. From children's sleepwear to medical implants, product liability cases have forced manufacturers to produce safer products.

In May of 1997, the American Law Institute adopted the Restatement of the Law Third, Torts: Products Liability. This Restatement represents an attempt to "organize, clarify and restate thirty years of case law decided under a single provision, section 402A of the Restatement (Second) of Torts. (20)

The ALI's new Restatement and its comments, feature three significant departures from the traditional analysis of product defectiveness. First, the new Restatement rejects the "one size fits all" definition of defect found in section 402A of the Restatement (Second) of Torts and establishes three distinct categories of defect: (1) manufacturing defect; (2) defect in design; and (3) a defect based on inadequate warnings." (21) Historically, most courts and commentators have routinely differentiated between these categories of product defects, however, in an attempt to clarify product liability law the new Restatement now affirmatively recognizes these functional categories.(22)

The second change, and by far the most significant and controversial, is section 2(b)'s elimination of the consumer expectation test and its adoption of a risk-utility test based on the "foreseeable risks of harm" and proof of "a reasonable alternative design." While various jurisdictions have used a risk-utility test in the past, the new Restatement's version is notably different in that it requires proof of a "feasible" reasonable alternative design as its main component.(23)

The third change proposed by the new Restatement adopts a negligence standard for design defects and warning defect cases. (24) The new standard is based largely on criticism of 402A's strict liability standard which arguably holds a seller liable despite the lack of a reasonable alternative design. A majority of courts already apply a negligence based theory under the misnomer of strict liability in these types of cases.

Part I of this presentation will focus on Section 2(b) and the changes it holds for product liability practitioners. Part II discusses recent case law adopting the new Restatement's position that an adequate warning will not necessarily vitiate liability when a safer reasonable design is available. Part III briefly describes some of the other key provisions in the new Restatement.

I. Section 2(b): Foreseeable Risks & Reasonable Alternative Design

Section 402A purported to establish a strict liability cause of action for product defects. In product liability cases this meant that a seller could be held liable for a product defect "simply upon proof that a product was defective and the defect caused the plaintiff's injury. Proof that some fault of the seller created the defect would not be necessary."(25) This theory of strict liability proved useful in manufacturing defect cases, but critics argued that it was inadequate to the determination of defectiveness in design and warning defect cases.(26) These criticisms, in large part, led to the adoption of a negligence based theory of fault for design defect and warning defect cases in the new Restatement.

A. Risk-Utility over Consumer Expectations

The traditional basis for establishing liability in design defect cases was rooted in a consumer expectations test derived from the comments to section 402A. Comment g of that section defined a "defective condition" as "a condition not contemplated by the ultimate consumer, which will be unreasonably dangerous to him."(27) Comment i defined "unreasonably dangerous" as "dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics."(28) Under this consumer expectations test the defectiveness of a product is measured by the "risks of use not contemplated by the "ordinary user." (29) In other words, when a product functions in a manner not contemplated by the user, and that function injures the user, the manufacturer may be held liable under strict liability.

Manufacturers argued that the consumer expectations test was too subjective to be applied in defective design cases. They claimed that where the product was "generally made as intended" and where an alternative design did not exist, that it was unfair to subject the seller to strict liability based on risks not contemplated by the consumer.(30) It appears that the reporters for the new Restatement liked this argument well enough to replace the traditional consumer expectations test with a risk-utility test. (31) While various jurisdictions currently recognize and favor the risk-utility test over the consumer expectations test, the new Restatement's version is notably different. The existence of a safer alternative design is no longer just one of many factors to consider in determining defectiveness, it is now the determinative factor. It appears that if a plaintiff cannot prove the availability of a safer reasonable alternative design, the case will be dismissed. (32) In addition, plaintiffs must prove that an alternative design is "reasonable" rather than just feasible.(33) Whereas feasibility only required proof that it was possible to construct a reasonable alternative design, the reasonable requirement of the new Restatement places the burden on the plaintiff to prove, in light of risk and utility, cost and benefit, that the alternative design was reasonable. (34)

While plaintiffs in design defect cases often attempt to provide evidence of an alternative design, sometimes proof of an alternative design is not possible or simply too costly. The controversy over the new risk-utility test lies with the absolute nature of the alternative-design requirement. (35) It appears that if a plaintiff cannot prove that a reasonable alternative design existed then the plaintiff's case may be dismissed. (36) As such, if the courts choose to adopt section 2(b)'s requirement of a reasonable alternative design, many injured consumers will be denied compensation. For instance, if plaintiffs had "been required to develop a 'better' Dalkon Shield, a 'better' breast implant, 'better' asbestos, and so on, many of their claims would have been eliminated..." (37)

There is, however, a noteworthy exception to the absolute requirement of proving the existence of a reasonable alternative. Section 2, Comment e of the new Restatement, the "Habush Amendment,"(38) provides that "the designs of some products are so manifestly unreasonable, in that they have low social utility and high degree of danger, that liability should attach even absent proof of a reasonable alternative design."(39)

In addition to the required proof of a reasonable alternative design, § 2(b) also provides that defectiveness of design "is going to be measured by the 'foreseeable risks of harm posed by the product,' rather than by the risks of use not contemplated by the 'ordinary user.'" (40) Under 402A, courts employing the risk-utility test generally imputed knowledge of the risk to the seller when a product injured the user. (41) Under the new Restatement, the risks must now be those that are foreseeable by the seller at the time of sale. It should be noted, however, that in various instances Section 2(b)'s "foreseeable risks" provision may help plaintiffs. For instance, in Todd v. Societe BIC S.A., 991 F. 2d 1334 (7th Cir. 1993), "in which the risk of a cigarette lighter used by a child might be deemed foreseeable but not within the scope of section 402A, since a child was not an 'ordinary user.'" (42) courts often would not grant recovery where the person injured was not an "ordinary user."

II. Warnings are not Acceptable Alternative to Safe Design

Under comment j of Section 402A, an adequate warning was generally held to insulate a manufacturer from liability regardless of the feasibility or reasonableness of a safer alternative design.

Under the new Restatement it appears that warnings, whether adequate or not, will not longer vitiate liability where a safer design was available to the manufacturer. Two high-level courts have recently adopted the new Restatement's comment L to section 2 which provides that an adequate warning is not a substitute for a safe design that would eliminate the hazard from the product." (43)

In Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W. 2d 328 (Tex. 1998), a mechanic was injured when he was struck in the face by a 16-inch tire that exploded as he tried to mount it on a 16 ½-inch rim. Attached to the tire was a prominent warning label depicting yellow and red highlights as well as a pictograph of a worker being thrown into the air by an exploding tire. (44) Martinez alleged that the Goodrich tire was defective in that it failed to incorporate a safer alternative design that would have reduced the risk of explosion or prevented the accident. Goodrich argued that Comment j of the Restatement (Second) of Torts should be applied and as such, the tire should be found to be neither defective in condition nor unreasonably dangerous where adequate warning is given. The court agreed with Martinez and held that adequate warnings are not an acceptable alternative to a safe design. In reaching this conclusion the found that Comment l of the new Restatement § 2 specifically rejects Comment j of the Restatement (Second) of Torts.(45) The court also noted that "the fact that a danger is open and obvious (and thus need not be warned against) does not preclude a finding of product defect when a safer, reasonable alternative design exists."(46)

In Rogers v. Ingersoll-Rand Co., 144 F.3d 841 (D..C. Cir. 1998), the court adopted Comment l of Section 2 and held that despite adequate warnings "a manufacturer may have a heightened responsibility to incorporate additional safety features to guard against foreseeable harm." (47) In Rogers, a road-crew worker was severely injured when a 50,000 pound milling machine rolled over her foot and leg. When the accident occurred the worker was standing with her back to the machine and the machine's alarm-designed to sound when the unit backs up-failed to sound. The defendant presented its operation and maintenance manual which warned and instructed users to "(1) stay ten feet away form the rear of the machine when it is operating; (2) verify that the back-up alarm works; and (3) 'check area for people or obstructions in your line of travel.'"(48) Based on these warnings the defendant proposed jury instructions that directed the jury to "'find for the defendant' if it found 'that the milling machine was accompanied by adequate warnings which made the milling machine safe for use if the warnings are followed.'" (49) The court refused to apply this instruction stating that the "instruction assumes that an adequate warning by itself would immunize a manufacturer from any liability caused by its defectively designed product. This is not a correct statement of applicable law."(50) In adopting comment l of Section 2, the court clarified that the adequacy of a warning is not the "sole consideration in the risk-utility analysis," and a warning cannot take the place of a reasonably safe design.(51)

III. Other Key Provisions§ 3. Circumstantial Evidence Supporting Inference of Product Defect

Contrary to some jurisdictions, § 3 states that the plaintiff need not identify a specific defect when the plaintiff is harmed, rather that defect can be inferred by circumstantial evidence. However, under this section, the plaintiff still bears the burden of proving that a defect existed at the time the product left the defendant's possession.

§ 4. Non-Compliance and Compliance with Safety Statutes or RegulationsA. Non-Compliance

Essentially, a product will be deemed defective per se, where it fails to comply with an applicable governmental safety regulation or statute.

B. Compliance

On the other hand, compliance with an applicable regulation or statute does not vitiate liability, rather it is but one factor to consider when determining whether a product is defective.

§ 10. Liability of Commercial Product Seller or Distributor for Harm Caused by Post-sale Failure to Warn

The Restatement (Second) of Torts did not address this topic. However, under the new Restatement "a product seller under appropriate circumstances may be subject to liability for failure to warn of newly discovered dangers in the use of a product about which the seller obtains actual or constructive knowledge after the time of the sale of the product."(52) Note, some jurisdictions already impose such a duty.

16. According to a 1990 American Bar Foundation study of 25,000 jury verdicts in 11 states over a four-year period.

17. Rustad, supra note 6.

18. Rustad, supra. note 6, at 28.

19. Testimony of Professor Mark Hager, Assistant Professor of Law, Washington College of Law, American University, at Consumer Subcommittee Hearing on S. 1400, April 5, 1990, transcript at 126.

20. William E. Westerbeke, " The Sources of Controversy in the New Restement of Products Liability: Strict Liability Versus Products Liability." 8-Fall Kan. J.L. & Pub. Pol'y1, at 1 (1998).

21. RESTATEMENT OF THE LAW THIRD, TORTS: PRODUCTS LIABILITY. See Comment a, §1 and the reporter's notes following. See also § 2(b), and comments.

22. Westerbeke,at 9.

23. James A. Henderson, Jr., "Restatement Third, Torts: Products Liability: What Hath the ALI Wrought?" 64 Def. Couns. J. 501 at 507. (Oct. 1997).

24. Westerbeke, at 9. See generally § 2 and comments.

25. Westerbeke at 6.

26. See generally, James A. Henderson, Jr., "Restatement Third, Torts: Products Liability: What Hath the ALI Wrought?" 64 Def. Couns. J. 501. (Oct. 1997).

27. Westerbeke, at 9. citing, RESTATEMENT (SECOND) OF TORTS § 402A, cmt. g.

28. Westerbeke, at 9. citing, RESTATEMENT (SECOND) OF TORTS § 402A, cmt. i.

29. Henderson at 507.

30. Larry S. Stewart, " A New Frontier: Design Defect Cases and the New Restatement." 34-Nov Trial 20, 21 (1998).

31. Henderson at 507-508. (Comment g and i of Section 402A have been eliminated from the new Restatement). See Comment d ("Whereas a manufacturing defect consists of a product unit's failure to meet the manufacturer's design specifications, a product asserted to have a defective design meets the manufacturer's design specifications but raises the question whether the specifications themselves create unreasonable risks. Answering that question requires reference to a standard outside the specifications. Subsection (b) adopts a reasonableness ("risk-utility" balancing) test as the standard for judging the defectiveness of product designs."

32. Note, however, that proof of an alternative reasonable design does not necessarily require a prototype, rather expert testimony may suffice.

33. Henderson at 507.

34. See Comment f.

35. Larry S. Stewart, " A New Frontier: Design Defect Cases and the New Restatement." 34-Nov Trial 20, 21 (1998).

36. Id.

37. Id. at 21.

38. Named for its sponsor, Robert Habush, a former American Trial Lawyers Association (ATLA) president.

39. See RESTATEMENT OF THE LAW, THIRD, TORTS: PRODUCTS LIABILITY, Section 2, cmt. e. (comment e gives a specific illustration involving a toy gun that shoots hard rubber pellets with enough velocity to significantly injure children. Comment e states that while toy guns that don't shoot hard pellets may be a reasonable alternative, where the consumer purchases the hard-pellet gun for the realism of the hard pellets, then no reasonable alternative may be found and cmt. e may provide an "escape hatch" for the reasonable alternative design requirement.).

40. Henderson, at 507.

41. Westerbeke, at 10.

42. Henderson, at 507.

43. Rogers v. Ingersoll-Rand Co., 144 F.3d 841 (D..C. Cir. 198); Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W. 2d 328 (Tex. 1998).

44. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W. 2d 328, 332 (Tex. 1998)(The label stated: DANGER: NEVER MOUNT A 16" SIZE DIAMETER TIRE ON A 16.5" RIM. Mounting a 16" tire on a 16.5" rim can cause severe injury or death. While it is possible to pass a 16" diameter tire over the lip r flange of a 16.5" size diameter rim, it cannot position itself against the rim flange. If an attempt is made to seat the bead by inflating the tire, the tire bead will break with explosive force.).

45. Id. at 336. See Reporter's Notes in the New Restatement referring to Comment J as "unfortunate language" that "had elicited heavy criticism form a host of commentators."

46. Id.

47. Rogers v. Ingersoll-Rand Co., 144 F.3d 841, 845 (D..C. Cir. 1998), citing RESTATEMENT (THIRD) OF TORTS: PRODUCTS LIABILITY § 2 CMT. L (1997) ("[W]arnings are not ... a substitute for the provision of a reasonably safe design.... Just as warnings may be ignored, so may obvious or generally known risks be ignored, leaving a residuum of risk great enough to require adopting a safer design.").

48. Id. at 843.

49. Id.

50. Id. at 843.

51. Id. at 844.

52. Henderson, at 522.