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1 PRODUCTS LIABILITY Text – Chapter 20

2 Learning Objectives Evolution of product liability law
Theories of product liability recovery: Express warranty, implied warranties, negligence, strict liability Other theories of recovery Time limitations, disclaimers, defenses Damages 20 - 2

3 Development of Product Liability Law
Product liability law refers to the body of legal rules governing civil lawsuits for losses and harms resulting from a defendant’s furnishing of defective goods Rule was caveat emptor (buyer beware), but has shifted over the past century to caveat venditor (let the seller beware) since sellers are better able than consumers to bear the costs of defective products 20 - 3

4 Product Liability Theories
Product liability law is partly grounded in contract law and partly grounded in tort law Contract theories are based on an express or implied warranty Tort theories are based on arguments of negligence or strict liability 20 - 4

5 Express Warranty UCC 2–313(1): express warranty may be created in any of three ways: If affirmation of fact or promise about goods becomes part of the basis of the bargain Statements of value or opinion and sales puffery do not constitute a warranty Advertisements may contain statements of warranty as well as sales puffery 20 - 5

6 Example of Express Warranty
Felley v. Singleton: Felley bought a used car from the Singletons based on statement of “good mechanical condition” Car actually was in poor condition Court: “In the context of a used car sale, representations by the seller such as the car is ‘in good mechanical condition’ are presumed to be affirmations of fact that become part of the basis of the bargain 20 - 6

7 Express Warranty Two other express warranties:
A description of the goods that becomes part of the bargain creates an express warranty that the goods will conform to description A sample or model of goods to be sold creates an express warranty that goods will conform to sample 20 - 7

8 Implied Warranties Implied warranties are created by operation of law rather than seller’s express statements Warranty of merchantability [UCC 2-314(1)] Seller must be a merchant in the goods of the kind sold Warranty of fitness for a particular purpose [UCC section 2–315] Seller must know the goods are to be used for special purpose 20 - 8

9 Implied Warranty of Merchantability
In implied warranty cases, plaintiff argues that seller breached warranty by selling unmerchantable goods and plaintiff should recover damages Merchantability, essentially, is that goods must be fit for the ordinary purposes for which such goods are used 20 - 9

10 Meaning of Merchantability
Crowe v. CarMax Auto Superstores, Inc.: Couple bought car from CarMax with express warranties. Car required many repairs, all covered by warranties, but couple sued CarMax claiming unmerchantability Court found for CarMax: goods need not be perfect to be fit for their ordinary purposes, but must only meet reasonable expectations of average consumer Couple had unreasonable expectations In this case, all repairs covered by warranties (original express warranty plus purchased extended warranty) and many repairs justified due to wear and tear. Court found the couple had unreasonable expectations for a used car.

11 Meaning of Merchantability
Hong v. Marriott Corp.: Demonstrates disagreement over standard for food products alleged to be unmerchantable because they contain harmful objects or substances Under foreign–natural test, defendant is liable if object or substance is “foreign” to the product, but not liable if it is “natural” to the product But reasonable expectations test increasing in use Person bit into chicken wing and found unusual object, probably chicken’s aorta or trachea. Court denied defendant’s motion for summary judgement: “Thus, a question is presented that precludes the grant of summary judgment. The jury must determine whether a piece of fast food fried chicken is merchantable if it contains an inedible item of the chicken’s anatomy. Of course, the jury will be instructed that the consumer’s reasonable expectations form a part of the merchantability concept.

12 Implied Warranty of Fitness for a Particular Purpose
Warranty of fitness for a particular purpose implied if: (1) seller has reason to know a particular purpose for which buyer requires the goods; (2) seller has reason to know that buyer is relying on seller’s skill or judgment for the selection of suitable goods; and (3) buyer actually relies on seller’s skill or judgment in purchasing the goods See Bako v. Crystal Cabinet Works, Inc. In this case, the plaintiffs won on the basis of negligence rather than implied warranties. Court opinion regarding implied warranty of merchantability: “A thorough review of the record shows that the defendants did not breach the implied warranty of merchantability [in regard to the] cans of stain [they sold to] the Bakos. Mrs. Bako testified that there were no problems with the application of the stain, in and of itself, to the wood trim and wood floors. [Her] testimony illustrates that the stain satisfied the implied warranty of merchantability. The Bakos applied the stain and had no problems with its application. It was only when the Bakos erroneously combined the lacquer- based stain with the polyurethane sealant that the Bakos began to experience adhesion problems between the stain and the polyurethane sealant. The stain did just what stain was supposed to do: it colored the wood. As such, there was no breach of the implied warranty of merchantability.” Court opinion regarding warranty of fitness for a particular purpose: “The Bakos also claim that the defendants violated the implied warranty of fitness for a particular purpose…. The Bakos failed to present sufficient evidence at trial to recover for breach of the implied warranty of fitness for a particular purpose. Mrs. Bako’s testimony demonstrated that the Bakos did not rely upon Mann’s skill and judgment when purchasing the stain from DW. As such, they may not recover against DW for breach of the implied warranty of fitness for a particular purpose.”

13 Negligence Theory Product liability suits based on negligence allege that seller or manufacturer breached a duty to plaintiff by failing to eliminate a reasonably foreseeable risk of harm: (1) negligent manufacture of the goods (including improper materials and packaging) (2) negligent inspection (3) negligent failure to provide adequate warnings (4) negligent design

14 Jarvis v. Ford Motor Co. Allegations of Plaintiff:
A new Ford Aerostar suddenly accelerated and, despite attempting to brake, acceleration resulted in an accident injuring Jarvis Witnesses to the incident supported Plaintiff’s efforts to control van Witnesses recounted similar Aerostar incidents Expert witnesses testified that vacuum powered brakes would fail with sudden acceleration and design flaws existed in the Aerostar system A six-day-old 1991 Ford Aerostar driven by plaintiff-appellant Jarvis suddenly accelerated, resulting in an accident in which Jarvis sustained severe injuries. Jarvis contended the Aerostar “took off” even though she had not depressed the accelerator and she was unable to stop the van by pumping the brakes. She sued Ford Motor Company in a federal district court, claiming that Ford’s negligence in designing the Aerostar’s cruise control system led to the sudden acceleration and her accident. The injury sustained by Jarvis in the accident prevented her from returning to her previous employment. Jarvis testified at trial that she started the Aerostar in the driveway of her home with her right foot “lightly on the brake.” After she turned on the ignition, the engine suddenly revved and the vehicle “took off.” As the van accelerated, Jarvis pumped the brake with both feet, looking down to make sure her feet were on the brake pedal. The van would not stop. She steered to avoid people walking in the road and then heard saplings brushing against the side of the van before she blacked out. Jarvis’s father, who was standing in the vicinity of the accident scene, testified that he saw the van starting off at an “unusually fast speed” for his daughter. As the Aerostar passed him, he saw Jarvis “holding on to the steering wheel very tight; her body was going back and forth ever so slightly.” Another witness testified that she saw Jarvis’s van moving quickly down the road and that she did not see any brake lights illuminated. A police officer who was called to the accident scene testified that he saw no marks on the road near the scene. Jarvis’s father had been the last one to use the Aerostar before the accident. When asked at trial whether he had left the parking brake on, Jarvis’s father testified that it was his “normal habit” to put it on, but that he had “no memory of it as such” in this case. When asked directly, he answered, “I’m not certain I put it in with the parking brake on.” George Pope, an accident reconstruction specialist who testified for Jarvis, stated that the van traveled approximately 330 feet and did some braking that slowed it to 15 to 20 miles per hour before it entered a ditch and turned over. Pope testified that the Aerostar had vacuum power brakes that draw their vacuum from the engine, but that the engine does not create the necessary vacuum when accelerating full throttle. Even though a check valve traps a reservoir of vacuum for use when the engine vacuum is low, this reserve can be depleted after one-and-a-half hard brake applications. Therefore, according to Pope, if Jarvis pumped the brakes in an effort to stop the Aerostar after it began accelerating at full throttle, she would have lost approximately 1000 pounds of additional force that the booster normally could have supplied to the brakes. Pope concluded that “under those circumstances , it will feel to a person like they’ve lost their brakes, [because] they’re pushing and nothing is happening.” In support of her claim that the Aerostar had suddenly accelerated even though she did not press the accelerator, Jarvis presented testimony from five Aerostar owners who recounted having had similar problems with their 1989 or 1990 Aerostars. In addition, the jury was presented with evidence that Ford had received reports of incidents of sudden acceleration in a total of 560 Aerostars. Samuel J. Sero, an electrical engineer, testified as an expert for Jarvis. He offered a theory noting possible electrical malfunctions and mechanical reasons that could have caused the sudden acceleration to occur. This theory focused on the design and workings of Aerostar’s cruise control system. Sero also testified concerning a possible alternative design of the Aerostar’s cruise control system—a design that he believed would have prevented the sudden acceleration problem if the design had been implemented by Ford.

15 Jarvis v. Ford Motor Co. Defense of Defendant:
Acceleration due to driver error, mistaking accelerator for brake pedal As shown in driver’s manual, pumping action Jarvis applied to brakes was improper for the situation Expert witnesses stated the Aerostar system was not defective and had a safety backup In its defense, Ford claimed principally that the acceleration was the result of a driver error by Jarvis. Ford contended that Jarvis must have been unaware that the parking brake had been set and must have mistaken the accelerator pedal for the brake pedal. Ford also presented expert testimony that the Aerostar would not have malfunctioned in the manner suggested by Jarvis’s expert. In addition, Ford maintained that the existence of the Aerostar’s dump valve, a spring-loaded plunger designed to open when the brake pedal is depressed, would have effectively stopped the Aerostar from accelerating when Jarvis applied the brakes, even if the cruise control had malfunctioned as Sero suggested. Jarvis’s testimony regarding braking was that she tried to stop the Aerostar by pumping the brakes, as her father had taught her to do when she was first learning to drive. Jarvis offered three possible explanations at trial for why the dump valve did not permit her to stop the Aerostar from accelerating: (1) the dump valve was malfunctioning; (2) Jarvis was pumping the brakes, causing the Aerostar to reinstate an electrical malfunction in the cruise control mechanism and commence acceleration every time her foot rose from the pedal in the pumping action; or (3) Jarvis had not pressed far enough on the brakes to activate the dump valve. Although Ford’s expert testified that he tested the dump valve after the accident and found that it had no leaks, there was no evidence as to whether the dump valve could have malfunctioned in a way that would not necessarily have been evident at the time Ford’s expert examined the Aerostar.

16 Jarvis v. Ford Motor Co. Jury Verdict & Procedural History:
Ford negligently designed Aerostar’s cruise control system which was a substantial factor in causing the accident Jarvis’s negligence also a substantial factor in causing accident Apportioned 65 percent of the fault to Ford and 35 percent to Jarvis, awarding $1 million+ damages Ford moved to set aside verdict and trial judge granted the motion, entering judgment for Ford The jury concluded that Ford negligently designed the Aerostar’s cruise control system, that this was a substantial factor in causing the accident, and that Jarvis’s negligence was also a substantial factor in causing the accident. It apportioned 65 percent of the fault to Ford and 35 percent to Jarvis, presumably because of evidence that the Aerostar owner’s manual directs drivers to apply the brakes firmly with one stroke and not in a pumping action. A single application of the brakes, according to the testimony, would not have exhausted the vacuum reservoir of the power assist to the brakes and would thus have aided Jarvis’s ability to stop the vehicle. The jury awarded Jarvis more than $1 million in damages for past and future medical insurance premiums, lost earnings, and pain and suffering. Asserting that the only logical conclusion to be drawn from the evidence was that Jarvis never applied the brake pedal and mistakenly applied the accelerator instead, Ford moved for judgment as a matter of law (judgment notwithstanding the verdict). The trial judge granted Ford’s motion, set aside the verdict, and entered judgment in Ford’s favor. Jarvis appealed to the United States Court of Appeals for the Second Circuit.

17 Jarvis v. Ford Motor Co. Legal Opinion on Appeal:
A court cannot assess weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury. Conflicting evidence existed and not enough evidence supported Ford’s theory of the accident to satisfy the requirement for judgment as a matter of law Ultimate issue of Ford’s negligence is a jury question Case remanded with instructions to reinstate jury verdict in favor of Jarvis Court: “Judgment as a matter of law is appropriate when ‘a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.’ The court cannot assess the weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury…. In granting Ford’s motion for judgment as a matter of law, the district court relied upon the fact that Jarvis’s expert had not established that the cruise control malfunctions he outlined were substantially likely to occur. …The district court erred in requiring proof of a specific defect in the Aerostar’s cruise control and in not considering Jarvis’s circumstantial evidence of a defect…. If Jarvis’s six-day-old Aerostar performed in this manner, a jury could reasonably conclude that it was “defective when put on the market by Ford,”…Construing the evidence in Jarvis’s favor and crediting her version of events, a reasonable jury could find that Ford breached its duty of care. …Ford conceivably could have offered scientific proof that the cruise control would not have malfunctioned in the manner alleged that so outweighed Jarvis’s proof as to warrant judgment as a matter of law for Ford. This is not such a case…. The record as a whole, viewed in the light most favorable to Jarvis, supplies little evidence to support Ford’s theory of the accident. While we agree that some evidence in the record is consistent with this theory, judgment as a matter of law demands far more…. In sum, we find the ultimate issue of Ford’s negligence to be a jury question….. Together, this evidence [by Jarvis] provided the jury with a sufficient evidentiary basis to reasonably conclude that the cruise control mechanism had been defectively designed. District court’s judgment as matter of law for Ford vacated; case remanded to district court with instruction to reinstate jury verdict in favor of Jarvis.”

18 Strict Liability Theory
American Law Institute published section 402A of Restatement (Second) of Torts (1965) Most important reason is socialization-of-risk strategy: strict liability makes it easier for plaintiffs to prove breach of duty and sellers pass on costs in higher prices Another reason: stimulates manufacturers to design and build safer products

19 Restatement (Third) of Torts
Published in 1998, basic rule is: “One engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect.” Three kinds of product defects: manufacturing defects, inadequate warnings or instructions, design defects In 1998, the American Law Institute published its Restatement (Third) of Torts: Product Liability. Although many courts now discuss the new Restatement, it has not supplanted negligence and section 402A in most states as we write in The Restatement (Third), however, may signal the likely evolution of product liability law in the coming years.

20 Strict Liability Cases
Phillips v. Cricket Lighters Court held that a manufacturer will not be held strictly liable for failing to design a product that was safe for use by any reasonably foreseeable user, but remanded negligence issue to jury Wright v. Brooke Group Limited Iowa Supreme Court announced that in design defect cases, Iowa will follow the Restatement (Third)’s rule rather than previously applied rules of strict liability and negligence Phillips v. Cricket Lighters: Robyn Williams placed her purse on top of the refrigerator at her family’s apartment. Later, her two-year-old son, Jerome, managed to pull the purse down. Jerome then retrieved a Cricket disposable butane cigarette lighter from the purse. The lighter lacked any child-resistant feature. Jerome used the lighter to ignite some linens. As the fire spread throughout the apartment, his brother unsuccessfully attempted to rouse his mother. Neil then made his way to a window and began screaming. A neighbor rescued him, but Robyn, Jerome, and another one of Robyn’s children, died in the fire…. Lawsuit predicated on the basic contention that the defendants’ lighter was defectively designed because it did not have childproof features. Trial court granted summary judgment in favor of the defendants…. appellate court held that for strict liability purposes, a product must be safe for its intended use—here, to create a flame—when used by any user, whether intended or unintended…. defendants, referred to below as “Appellants,” appealed to the Supreme Court of Pennsylvania….. State supreme court concluded that “in a strict liability design defect claim, the plaintiff must establish that the product was unsafe for its intended user. We also explicitly state that a manufacturer will not be held strictly liable for failing to design a product that was safe for use by any reasonably foreseeable user, as such a standard would improperly import negligence concepts into strict liability law…. we conclude that There was a jury question as to whether Appellants were negligent in designing a butane lighter that lacked a child safety device.” Wright v. Brooke Group Ltd.: Robert and DeAnn Wright sued various cigarette manufacturers in federal district court in an effort to obtain damages for harms allegedly resulting from Robert’s cigarette smoking. The plaintiffs made various claims, including negligence, strict liability, breach of implied warranty, breach of express warranty, fraudulent misrepresentation and nondisclosure, and civil conspiracy. The defendants’ motion to dismiss was largely overruled by the federal court. Thereafter, the defendants asked the federal court to certify questions of law to the Iowa Supreme Court, in accordance with Iowa Code § 684A.1 Concluding that the case presented potentially determinative state law questions as to which there was either no controlling precedent or ambiguous precedent, the federal court certified various questions to the Iowa Supreme Court. Two of the certified questions dealt with strict liability. They read as follows: “In a design defect products liability case, what test applies under Iowa law to determine whether cigarettes are unreasonably dangerous? What requirements must be met under the applicable test?” The Iowa Supreme Court issued an opinion answering the various questions certified by the federal court. The opinion concluded: “Iowa will follow the Restatement (Third)’s rule rather than previously applied rules of strict liability and negligence.”

21 Other Product Liability Theories
Federal Magnuson-Moss Warranty Act applies to sales of consumer products > $10 per item: If written warranty, it must be full or limited Full warranty promises to (1) remedy any defects in the product and (2) replace product or refund purchase price if, after reasonable number of attempts, it cannot be repaired Seller who gives a limited warranty is bound to whatever promises it actually makes

22 Other Product Liability Theories
A seller’s misrepresentation about a material fact about the product — a fact that would matter to a reasonable buyer – may invoke liability to a buyer Industrywide liability: plaintiffs bypass problems of causation that exist where several firms within an industry manufactured a harmful standardized product, and plaintiff cannot prove which firm produced the injurious product

23 Damages Consequential damages: personal injury, property damage, indirect economic loss (e.g., lost profits or lost business reputation), and noneconomic loss, such as pain and suffering, physical impairment, mental distress, loss of enjoyment of life, loss of companionship or consortium, inconvenience, and disfigurement

24 Damages Basis-of-the-bargain damages: Punitive damages:
Buyers of defective goods loss of full value for the goods’ purchase price is a direct economic loss (value of goods as promised under the contract minus value of goods as received) Punitive damages: Intended to punish defendants who have acted in an especially outrageous fashion, and to deter them and others from so acting in the future

25 Disclaimers Product liability disclaimer is a clause in the sales contract whereby the seller attempts to eliminate liability it might otherwise have under the theories of recovery described earlier in the chapter Example: Car sold “as is” UCC section 2–316(2) makes it relatively easy for sellers to disclaim the implied warranties of merchantability and fitness for a particular purpose. Doctrine of unconscionability established by UCC section 2–302 may apply to limit disclaimers Magnuson- Moss Act also limits a seller’s ability to disclaim implied warranties.

26 Disclaimers & Limitations
Remedy limitation is a clause attempting to block recovery of certain damages Example of time limitation: “30 day warranty” See Trinity Industries, Inc. v. McKinnon Bridge Co. The Trinity Industries case deals with bridge construction and collapse event in which the contract had a limitation of remedy. Issue: whether the limitation either failed of its essential purpose or was unconscionable.

27 Defenses Three main defenses in a product liability suit are the overlapping trio of product misuse, assumption of risk, and contributory negligence What could happen on a construction site? What defenses would exist?

28 Product Liability Statistics
Tort claims account for only 5% of the 19.7 million civil claims filed in state courts (Nat’l Center for State Courts, 1992) Products liability cases account for 4% of all tort cases in state courts (Nat’l Center for State Courts, 1992) The number of lawsuits filed per capita has remained relatively steady over the past several decades Opportunity to discuss myths about torts and product liability, especially urban legends (see about lawsuits.

29 Product Liability Statistics
Business cases (financial damages) account for 47% of all punitive damage awards (Rand Institute for Civil Justice, 1996) In contrast, only 4.4% and 2% of punitive damage awards are due to product liability and medical malpractice cases respectively (Rand Institute for Civil Justice, 1996) Again, these statistics have remained relatively stable for decades. Opportunity to discuss why these statistics reflect a commercial world more litigious than the media portrays.

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