Walter L. Cofer and Alicia J. Donahue | Shook Hardy & Bacon | July 30, 2018
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General climate and recent developments
State of legal development
In general terms, how developed are the product regulation and liability laws in your jurisdiction?
The United States has well-developed product liability laws. State law has been developing the nation’s product liability law for over a century:
- 1916 – MacPherson v Buick Motor Co was the first case to apply negligence concepts in a product manufacturing and design defect context.
- 1963 – California adopted the first strict liability theory of recovery in Greenman v Yuba Power Prods Inc.
- 1965 – the American Law Institute codified strict liability in Section 402(A) of its Restatement (Second) of Torts. The section has since been adopted by the vast majority of states.
- 1998 – the Restatement (Third) of Torts reframed strict liability law in certain important respects, but these have not been widely adopted.
The diversity of US product liability law and the general availability of punitive damages, class actions and contingency fees create fertile ground for product liability claims in the United States.
Recent developments
Have there been any notable recent developments in relation to product liability law and product safety law in your jurisdiction, including any regulatory changes and case law?
In recent years, US courts have considered the concept of federal pre-emption of state laws more closely as a fundamental part of the Constitution (in the context of state law consumer protection actions). This case law primarily involves pharmaceutical and medical device products and may play a key role in the defence of consumer product claims since Congress approved the Consumer Product Safety Improvement Act. While this act requires the Consumer Product Safety Commission to impose stricter requirements for consumer goods, it explicitly pre-empts certain state law product claims.
Further, in the last decade, the Supreme Court has issued two decisions that substantially strengthened a defendant’s ability to extract itself from a case before entering discovery via a motion to dismiss the complaint. Following Iqbal and Twombly, federal courts now impose a higher pleading standard (or more stringently enforce the same pleading standard).
Legal framework
Legislation
What primary and secondary legislation governs product safety and liability in your jurisdiction?
No uniform product liability statute or common law exists in the United States – each state defines product liability law under its own standards. However, product liability claims are generally brought under the scope of strict product, tort (negligence or fraud) and warranty.
Further, most states have a version of a deceptive trade practices act or consumer protection statute. Typically, these laws proscribe certain types of sale and marketing practice as unconscionable or deceptive. Some such statutes provide for enhanced penalties and presumptions which favour consumers and allow a prevailing plaintiff to recover attorney’s fees from the defendant.
Regulatory and enforcement authorities
Which government authorities regulate and enforce product safety and liability laws in your jurisdiction, and what is the extent of their powers?
No uniform product liability statute or common law exists in the United States – each state defines product liability law under its own standards. However, certain industries are more highly regulated at the federal level than others (eg, the pharmaceutical, medical device and automotive industries).
Liability
Product defects
How is a ‘product defect’ defined in your jurisdiction?
The states define ‘product defect’ in numerous ways. Generally, a jury will determine whether an alleged product defect exists under one or a combination of two separate defect tests:
- the consumer expectations test; and
- the risk-utility test.
The consumer expectations test provides that a product is unreasonably dangerous if it is dangerous to an extent beyond that which would be contemplated by an ordinary consumer with knowledge of the product common to the community.
The risk utility test attempts to balance the utility of the product against the risks of its particular design.
Broadly speaking, a product can be defective in one of three ways:
- Manufacturing defect – if the product left the defendant’s control with a material deviation from the its intended design specifications, formula or performance standards (one-off rather than systemic).
- Design defect – if the design of the product at issue, rather than an error in the manufacturing process, is alleged to be the cause of the defect (a systemic rather than one-off defect).
- Warning defect – if the defendant’s alleged failure to warn or adequately warn of a reasonable foreseeable danger of the product.
Causation and burden of proof
How is causation of loss or damage established in relation to product liability claims and where does the burden of proof lie? Can this burden be shifted in any way?
Typically, the plaintiff bears the burden of proof on each element of a claim – including causation – though several mechanisms exist for shifting the burden to the defendant. Whether the plaintiff alleges a breach of duty in a tort claim, breach of contract in a warranty claim or product defect in a strict liability claim, the plaintiff must prove by a preponderance of the evidence that the breach or defect proximately caused the plaintiff’s injury.
This analysis involves two distinct concepts: cause-in-fact and policy concerns. The former is often analysed under either the ‘but-for’ or ‘substantial factor’ causation standard, while the latter consider whether, even if the defendant’s conduct factually caused the injury, the relationship between the conduct and the injury is too remote or indirect to support liability as a matter of law.
Some states provide inferences in favour of a plaintiff (eg, a rebuttable presumption of defect where a product malfunctions). In a multi-defendant case, where the plaintiff cannot prove which defendants are liable, the burden of proof may shift to the defendant to prove that they are not the liable party or to show their relative share of liability.
Legal bases for claims
On what legal bases can a product liability claim be brought?
Product liability claims are generally brought under one of three theories:
- strict product liability;
- tort (negligence or fraud); and
- warranty.
Further, most states have some version of a deceptive trade practices act or consumer protection statutes.
Criminal liability
Can a defendant be held criminally liable for defective products?
There is no criminal liability specific to defective products. To be criminally liable under state law, a product manufacturer must have the required level of criminal intent for any other similar crime, otherwise, only the deliberate misrepresentations to federal regulatory bodies with respect to a product that results in death or serious injury may subject officers or agents to criminal penalties.
Liable parties
Which parties can be held liable for defective products?
Theoretically, any entity in the ‘stream of commerce’ – a term of art which usually includes any and all manufacturers, distributors, sellers and importers – may be held liable under a strict liability theory for injury caused by a defective product. Under a negligence theory, only those with a duty to the plaintiff will be potentially liable. Typically, this includes the final manufacturer, but may also include a component parts manufacturer.
Limitation of liability
Can liability be excluded or mitigated in any way?
Many states have so-called ‘sealed container’ or ‘innocent seller’ statutes that insulate non-culpable retailers or other non-manufacturers from liability in certain circumstances.
Litigation
Procedure
What is the procedure for filing a product liability claim before the courts in your jurisdiction?
Generally, in order to file a lawsuit in the United States, a plaintiff must plead the essential facts to make a prima facie case under whichever theories of liability he or she is proceeding. That pleading takes the form of a complaint, which must be served on defendant(s) in the manner required by the local rules where the case is filed. Perfecting service of the complaint on defendant(s) initiates the lawsuit. In order for a court to take up a product liability claim, it must have both personal and subject matter jurisdiction.
Under Federal Rule of Civil Procedure 11, all pleadings must be signed by at least one attorney of record. The signature certifies that:
- it is not being presented for any improper purpose;
- the claims, defences and other legal contentions are warranted by existing law or by a non-frivolous argument for extending, modifying or reversing existing law or for establishing new law;
- the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
- the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.
Interlocutory motions
Can the court issue interlocutory orders or judgments in product liability cases? If so, what rules and procedures apply?
Courts may issue interlocutory orders or judgments in certain product liability cases. Federal Rules of Civil Procedure 54(b) applies to judgments and 28 US Code Section 1292 applies to interlocutory orders.
Pre-trial disclosure
What pre-trial disclosure/discovery mechanisms are available in product liability cases, if any?
Generally, written discovery requests in the form of interrogatories, requests for production and requests for admission are available. Interrogatories are written questions used in discovery to obtain information from the other party. Each interrogatory must be answered separately and fully in writing under oath, unless it is objected to. The objecting party must state the reasons for objection.
A request for production is a request to produce and permit the requesting party or its representative to inspect, copy, test or sample items in the responding party’s possession, custody or control. It may also be a request to permit entry onto designated land or other property possessed or controlled by the responding party.
A request for admission is a written request for the admission, for purposes of the pending action only, of the truth of any matters within the scope of Rule 26.02 of the Federal Rules of Civil Procedure.
Some states and federal courts require parties to submit initial disclosures of relevant information and documents without waiting for a request from an opposing party.
Oral depositions are another key discovery tool. They may be exclusively used for discovering facts about the case or, in some jurisdictions, be used as a substitute for trial testimony.
Evidence standards
What evidence is accepted to support claims in product liability cases? What formalities apply to evidence submission?
Under Rule 26(b)(1) of the Federal Rules of Civil Procedure, parties may obtain discovery regarding any non-privileged matter which is relevant to the subject matter involved in the pending action, whether it relates to:
- the claim or defence of the party seeking discovery; or
- the claim or defence of any other party.
The information sought need not be admissible at trial, but must be reasonably calculated to lead to admissible evidence.
Expert evidence
Under what circumstances will the court appoint an expert to assist it in examining the merits of the case? What rules and procedures apply?
Under Rule 702 of the Federal Rules of Evidence, the court may appoint an expert to assist in examining the merits of a case. If scientific, technical or other specialised knowledge will assist the trier of fact to understand the evidence or determine a fact in issue, then a witness who is qualified as an expert by knowledge, skill, experience, training or education may testify in the form of an opinion or otherwise if:
- his or her scientific, technical or other specialised knowledge will help the trier of fact to understand the evidence or determine a fact in issue;
- the testimony is based on sufficient facts or data;
- the testimony is the product of reliable principles and methods; and
- the expert has reliably applied the principles and methods to the facts of the case.
Can the parties rely on expert witness testimony to support their claims? If so, what rules and procedures apply?
Under Rule 702 of the Federal Rules of Evidence, parties can rely on expert witness testimony to support his or her claims if:
- the knowledge is based on sufficient facts, data or opinions;
- there are sufficient assurances of trustworthiness for the theory;
- the explanative theory was applied in accordance with proper procedures;
- the witness is qualified as an expert by his or her knowledge, skill, experience, training or education to provide such knowledge; and
- the knowledge assists the trier of fact to understand the evidence or determine a fact in issue.
Class actions
Are class actions or any other collective proceedings available for product liability claims in your jurisdiction? If so, what is the procedure for their formation and what benefits do they afford claimants? Are class actions formed on an opt-in or an opt-out basis?
Product liability class actions are permitted under Rule 23 of the Federal Rules of Civil Procedure and applicable state court equivalents. However, collective proceedings are permitted under the Federal Labour Standards Act and do not apply to product liability claims.
Class actions are a procedural mechanism by which a large group of similarly situated plaintiffs may attempt to prosecute a lawsuit based on common claims as a class, instead of individually, as long as certain preconditions are met. A class representative or named plaintiff takes an active role in pursuing the class action claims on behalf of the entire class. Federal Rule of Civil Procedure 23 identifies the circumstances in which class treatment is appropriate in federal courts.
The class action mechanism is designed to simplify litigation involving large numbers of individuals with closely similar claims and encourage uniform decision(s) for the claims. Other benefits afforded claimants in class actions include:
- providing a group remedy for the class without the cost and delay of multiple separate lawsuits (this is particularly important where individual monetary claims are relatively low, making it unlikely that plaintiffs would proceed individually); and
- providing the class with more bargaining power than they may have as individuals.
For class actions certified under Federal Rule of Civil Procedure 23(b)(3), class members must be given the right to opt out of the class action. If a class member falls within the definition of a certified Rule 23(b)(3) class and does not affirmatively opt out, that person automatically becomes a class member generally bound by the outcome of the litigation. However, for class actions certified under Federal Rule of Civil Procedure 23(b)(1) and 23(b)(2), class members are not given the right to opt out.
Appeals
What rules and procedures govern appeals of court decisions?
The Federal Rules of Appellate Procedure govern procedure in US courts of appeals. Most states have their own set of appellate rules and procedures that are listed for the public on the state’s websites.
Statute of limitations
What is the statute of limitations for filing product liability claims?
The time limit for filing product liability claims varies by state and is often dictated by statute. The statute of limitations generally ranges from two to four years after the cause of action accrues, depending on the type of action.
Timeframe
What is the typical duration of proceedings in product liability cases?
There is no set timeframe for the length of a product liability case. Each case will vary depending on:
- the complexity of the matter;
- the amount of discovery;
- the time required to try the case; and
- the nature of the court’s docket.
While many cases settle before trial, most last for several years.
Costs, fees and funding
Can the successful party to the litigation recover court and attorneys’ fees and any other related expenses from the losing party? If so, what rules and procedures apply?
Under the American rule each party pays their own legal fees regardless of who prevails. Although it differs by state, there are statutory exceptions where the prevailing party can recover legal fees from the losing party.
What rules and restrictions (if any) govern contingency fee arrangements?
Contingency fees are permitted in product liability actions. They are usually governed by the state’s rules of professional conduct. Generally, contingency fees range between 25% and 40% of the judgment.
Is third-party litigation funding permitted in your jurisdiction? If so, do any rules or restrictions apply?
Third-party litigation funding is a relatively new concept in the United States. If it exists, laws governing third-party litigation funding vary by state, often focusing on the doctrines of champerty and maintenance and rules regulating attorney conduct. Third-party funding of all types of product liability cases – from individual actions to large multi-district litigations and class actions – is a rising phenomenon in the United States.
Is legal aid (ie, public funding) available to claimants in product liability cases? If so, what rules, restrictions and procedures apply?
Every state makes certain provisions for legal aid to indigent claimants. However, the use of contingency fees has reduced the need for legal aid in product liability claims. Access to legal aid varies by state.
Settlement
What rules and procedures govern the settlement of product liability cases?
Court approval is required for settling certain types of cases such as class actions, wrongful death and cases involving minors or incompetent individuals.
Further, federal law confers subrogation rights to the government when Medicare or Medicaid beneficiaries enter into settlement with an alleged tortfeasor. The law sets mandatory reporting requirements for settling beneficiaries, which plaintiffs and defendants must follow to avoid the statutory penalty of treble damages.
States’ comparative negligence laws can complicate settlement of claims in cases involving joint tortfeasors.
How common are settlements in product liability cases?
Settlements are common in product liability cases. Many variables influence settlement trends and values in product liability cases, including:
- recent jury verdicts involving similar products;
- venue;
- stage of litigation; and
- case type (eg, single plaintiff or mass tort).
Alternative dispute resolution
Are any alternative dispute resolution (ADR) methods required or advised before or in lieu of proceeding with litigation?
ADR methods including negotiation, mediation and arbitration are available and utilised in product liability cases in state and federal courts.
Federal Rule of Civil Procedure 26(f) requires parties to discuss the possibilities for promptly settling or resolving the case at their initial conference.
Further, many jurisdictions’ local rules authorise courts to mandate mediation between the parties.
How commonly is ADR used in relation to product liability cases in your jurisdiction?
Parties regularly engage in ADR in cases pending in jurisdictions that mandate mediation and sometimes voluntarily choose to engage in various forms of ADR.
Defences
Available defences
What defences are available to defendants in product liability cases?
Available defences vary by state, but typically include:
- assumption of risk;
- comparative fault;
- estoppel;
- idiosyncratic reaction;
- learned intermediary;
- pre-emption;
- state of the art;
- statute of repose;
- statute of limitations;
- substantial change or product misuse; and
- unavoidably unsafe products.
Preliminary actions
What preliminary procedural mechanisms are available to defendants, if any?
Defendants can engage a variety of procedural mechanisms early in litigation:
- Defendants can remove a state court action to the federal court based on diversity jurisdiction. Where similar cases have been coordinated into multi-district litigation, defendants may also move to stay the case in federal court pending transfer to the multi-district litigation court.
- Following the initial pleadings, defendants can also bifurcate a preliminary issue. Federal Rule of Civil Procedure 42 enables the court to hold separate proceedings for these issues, which can determine the necessity of trying remaining issues.
- Before trial, defendants often use summary judgment to dispose of specific issues or the entire case.
Further, Rule 53 of the Federal Rules of Civil Procedure allows a judge to appoint a special master to (among other things) address pre-trial and post-trial matters that cannot be effectively and timely addressed by the judge.
Remedies
Damages
What types of damages may be awarded in product liability cases? What rules and standards govern their calculation? Are damages capped?
General damages that flow from the defendant’s wrongdoing may be recovered, such as compensation for pain, suffering and emotional distress. The amount awarded is at the jury’s discretion, although the court can correct the amount if it is a clear abuse of that discretion.
Some states have capped general damages. Special damages that are specific to the plaintiff may also be recovered (eg, out-of-pocket expenses, loss of earnings and medical expenses). The amount is based on the expenses already incurred.
Moreover, a plaintiff may recover expenses that are likely to incur in the future (eg, future medical treatment or loss of employment opportunity). Such amount is calculated through the use of expert testimony and future projections.
Further, to limit the amount of damages awarded in a negligence claim, certain states have passed comparative negligence statutes where the amount of damages is reduced according to the plaintiff’s own negligence that contributed to the injury.
Are punitive damages allowed?
Punitive damages are generally available for certain product liability claims. Higher standards of proof are usually required to obtain a punitive damages judgment. Punitive damages are not available for all types of product liability claims and some states have capped the amount of punitive damages that may be awarded. Existing Supreme Court precedent suggests that the amount of punitive damages must be limited in relation to the compensatory damages awarded in the case.
Other remedies
Are any other remedies available?
Pre-judgment interest may be awarded in certain circumstances. Certain states allow a plaintiff to recover for aggravation of a pre-existing condition where the defendant inflicted a greater loss than would have been expected because of the pre-existing condition. Damages for injury to property other than the defective product are also recoverable, such as damage to homes or crops. In a breach of warranty claim, a plaintiff may recover consequential and incidental damages.
Product recalls
General requirements
Are there any statutory criteria under which a product must be recalled or other corrective action be taken?
The requirements of a recall depend on the federal agency overseeing the defective product at issue:
- The Food and Drug Administration has jurisdiction over cosmetics, foods, drugs, medical devices and tobacco products – 21 CFR Section 7.40 provides general guidance on recall procedures.
- The Consumer Product Safety Commission oversees consumer products used in homes, schools and recreation (eg, coffee makers, toys and lawnmowers) – 15 USC Section 2064 provides general guidance on recall procedures.
- The National Highway Traffic Safety Administration regulates motor vehicles – 49 CFR Section 573.6 provides general guidance on recall procedures.
Generally, a company must contact the appropriate federal agency immediately and report the defective product. Together, the company and agency formulate a plan for recall.
Notification
What rules and procedures govern notification of the product recall to government authorities and the public?
The notification process depends on the federal agency involved. Generally, the company and the federal agency will issue a press or news release to alert the public of the defective product. If the company can identify the specific consumers who own the defective product, a notification letter will be sent directly to those individuals. A website, toll-free telephone number or email address must be established to respond to questions.
Repairs, replacements and refunds
What rules and procedures govern repairs, replacements and refunds for defective products?
It depends on the federal agency, though it generally requires the same procedures as the recall.
Non-compliance
What penalties apply for non-compliance with the legal provisions governing product recalls?
Depending on the federal agency, civil penalties of thousands or millions of dollars (according to the degree of the violation) and criminal penalties may apply.