Jennifer H. Davidow, Mark Callender, Carliss Chatman, Patrick M. Dennis, Justin A. Hodge, Persis Mehta, Holly O’Neal Rumbaugh, and L. Boyd Smith Jr.

I. Introduction .................................................................................. II. Products Liability .......................................................................... A. Theories of Liability ............................................................... 1. Design Defect..................................................................... 2. Failure to Warn .................................................................. 3. Use of Product ................................................................... 4. Defenses ............................................................................. 5. Damages ............................................................................. B. Particular Products.................................................................. 1. Cigarettes ........................................................................... 2. Tires and Vehicles .............................................................. 3. Other Products ................................................................... C. Entities .................................................................................... 1. Professional Vendors .......................................................... 2. Auctioneers ......................................................................... 3. Manufacturers of Equivalent Product ............................... 4. Successor Entities............................................................... D. Legislation ............................................................................... III. Preemption .................................................................................... A. Medical Devices ......................................................................

616 617 617 617 617 618 619 621 622 622 623 623 624 624 624 624 625 626 627 627

Jennifer H. Davidow, Mark Callender, Carliss Chatman, Patrick M. Dennis, Justin A. Hodge, Persis Mehta, and Holly O’Neal Rumbaugh are associates in the Houston office of Vinson & Elkins LLP. L. Boyd Smith Jr. is a partner in the Houston office of Vinson & Elkins LLP. The authors thank Mindga Zhao, a law student at Georgetown University Law Center, for his research assistance.



Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

B. Pharmaceuticals....................................................................... C. Tobacco.................................................................................... IV. Product Liability Class Action Developments ............................. A. CAFA Does Not Shift Burden to Prove Federal Jurisdiction Is Proper .............................................................. B. Party Seeking Remand Has Burden to Prove CAFA’s Exceptions ................................................................... 1. Local Controversy Exception ............................................ 2. State Action Exception....................................................... V. Consumer Law Issues.................................................................... A. State Lemon Laws ................................................................... 1. Automobile Leases and Lemon Laws ................................ a. Lessee as a Qualifying Consumer ................................. b. Previously Leased Cars Are New Motor Vehicles ........ 2. Purchase Price of Vehicle Does Not Include Inflated Value Under Installment Contract ....................... 3. Defect Need Not Exist at Time of Trial/Arbitration ........ 4. Arbitration Is Prerequisite to Suit ...................................... 5. Arbitration Does Not Limit Other Remedies ................... 6. Right to Appeal Cannot Be Conditioned on Paying Attorney Fees.......................................................... B. Arbitration Provisions in Automobile Purchase Agreements .............................................................. 1. Arbitration Provision Held Unenforceable ....................... 2. Nonsignatory to Purchase Agreement Can Compel Arbitration .......................................................................... 3. Third-Party Beneficiaries Bound by Arbitration Agreement .......................................................................... VI. Restatement (Third) of Torts: Products Liability ................................ A. Section 1: Liability of Commercial Seller/Distributor .......... B. Section 2: Design, Warning, and Manufacturing Defect ....... C. Section 3: Inference of Causation ........................................... D. Section 5: Liability of Component Part Supplier for Defects in Integrated Products.......................................... E. Section 6: Liability of Commercial Seller or Distributor of Prescription Drugs or Medicine ..................... F. Section 19: Definition of Product ...........................................

628 629 629 629 630 630 631 632 632 632 632 633 633 634 635 635 636 636 636 636 637 638 638 638 639 640 642 642

i. introduction
This article reviews and summarizes the major developments and cases in the areas of products liability, general liability, and consumer law between September 2005 and September 2006.

Recent Developments in Products, General Liability, and Consumer Law


ii. products liability
A. Theories of Liability 1. Design Defect In Tran v. Toyota Motor Corp.,1 the Eleventh Circuit confirmed that Florida products liability law incorporates both the consumer expectations test and the risk utility test.2 The plaintiff, a car accident survivor, brought negligence and strict liability claims against Toyota, alleging the car’s seat belt system was defectively designed. The plaintiff requested a jury instruction that was drawn from the Florida Standard Jury Instruction PL 5:
A product is unreasonably dangerous because of its design if the product fails to perform as safely as an ordinary consumer would expect when used as intended or in a manner reasonably foreseeable by the manufacturer or the risk of danger in the design outweighs the benefits.3

The district court refused the instruction as “inappropriate” and instead instructed the jury based on § 2 of the Restatement (Third) of Torts: Products Liability. The instruction centered on the risk utility test and, although it mentioned consumer expectations as a factor to consider, it did not make the consumer expectations test an independent basis of liability, as the plaintiff had requested.4 The court of appeals reversed, relying on a Florida court of appeals opinion that was written after Tran’s trial,5 holding that the consumer expectations test applied to cases involving seat belts in particular.6 The Eleventh Circuit “[did] not hold that the consumer expectations test jury instruction is required in all product liability cases,” but rather held that “the instruction is proper as an independent basis for liability under Florida law when the product in question is one about which an ordinary consumer could form expectations.”7 2. Failure to Warn A New York federal district court noted in Henry v. Rehab Plus, Inc.8 that the risk utility balancing test in failure to warn cases “is the same as the inquiry in a traditional negligence action where the reasonableness of the actor’s conduct is considered in light of a number of situational and policy
1. 2. 3. 4. 5. 6. 7. 8. 420 F.3d 1310 (11th Cir. 2005). Id. at 1314. Id. at 1312. Id. at 1312–13. Force v. Ford Motor Co., 879 So. 2d 103 (Fla. Dist. Ct. App. 2004). Tran, 420 F.3d at 1314. Id. 404 F. Supp. 2d 435 (E.D.N.Y. 2005).


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

driven factors.”9 A Sears employee whose job included heavy lifting sued the manufacturer of the back support belt he wore on the job after he injured his back while wearing the belt.10 There was evidence that the manufacturer included no warnings with its support belts, despite studies from the mid-1990s finding use of a back support belt may falsely lead a worker to believe that he is protected. This belief may in turn cause him to lift more weight than he would have without a belt, thereby subjecting himself to even greater risk.11 The court held that a jury could find this to be a foreseeable risk of latent danger of which the manufacturer had a duty to warn. For that reason, the court denied summary judgment on both the negligence and strict liability failure to warn claims.12 Wisconsin law also draws no distinction between negligence and strict liability when it comes to claims complaining of an inadequate warning. Michaels v. Mr. Heater13 involved a propane gas heater that exploded and killed the plaintiff’s husband. The plaintiff alleged that the heater was unreasonably dangerous because, among other things, it lacked adequately placed warnings explaining the danger of potential gas leakage.14 The court observed, “Wisconsin permits plaintiffs to bring both strict liability and negligence claims premised upon the inadequacy of a product’s warnings . . . [but] has not distinguished between the liability standards that govern each claim.”15 The court ultimately denied summary judgment for the defendant, and its holding turned on causation—specifically, whether causation may be inferred if a warning is found to be inadequate. Recognizing that Wisconsin appellate courts have decided the issue differently, the court held that once a plaintiff proves the warning was inadequate, the jury may infer that an adequate warning would have been heeded.16 3. Use of Product The Indiana Supreme Court held in Vaughn v. Daniels Co. (West Virginia), Inc.17 “that ‘use’ of a product under the Indiana Products Liability Act18 does not include assembly and installation where the seller retains an obligation . . . to deliver a fully assembled and installed product.”19 Daniels agreed
9. Id. at 442–43 (internal quotations omitted). 10. See id. at 441. 11. Id. at 441–42. 12. See id. at 442 (negligence), 443 (strict liability). 13. 411 F. Supp. 2d 992 (W.D. Wis. 2006). 14. Id. at 1003. 15. Id. at 1003–04. 16. See id. at 1005–07. 17. 841 N.E.2d 1133 (Ind. 2006). 18. As discussed in part VI below, Indiana has not adopted the Restatement (Third) of Torts: Products Liability, § 1, which eliminates the user/consumer requirement and allows any “person” injured by a defective product to be a proper plaintiff. See id. at 1140 n.6. 19. Id. at 1136.

Recent Developments in Products, General Liability, and Consumer Law


“to design and install a heavy media coal sump” for Solar Sources. Daniels contracted with Trimble to assemble and install the sump. The plaintiff, a Trimble employee, was assembling the sump when he fell and was injured.20 He sued Daniels for strict products liability, among other things.21 The plaintiff could not be a “user” or “consumer” of a product whose assembly was not complete and where the product was to be delivered and assembled.22 That is, “use and consumption may include assembly and installation of a product, but only if the product is ‘expected to reach the ultimate user or consumer’ in an unassembled or uninstalled form.”23 Pennsylvania Department of General Services v. United States Mineral Products Co.24 involved governmental entities’ claims against chemical companies regarding PCB contamination discovered after a fire. Testing during the cleanup phase following the fire revealed the presence of PCBs.25 The chemical manufacturer requested a jury instruction that a manufacturer is not liable for injuries resulting from the unintended use of its product, even if such unintended use was foreseeable, and that subjecting a product to a fire is an unintended use.26 The trial court refused the instruction, but the state supreme court held that the refusal was erroneous.27 Recognizing that it was reasonably foreseeable that building materials might be subjected to a fire, the court nonetheless reasoned that foreseeability has no place in the strict liability arena.28 Justice Newman dissented as to this issue only, analogizing the legal principle in this case to the crashworthiness doctrine. That is, it may be true that the PCBs were not intended to be subjected to a fire, but because it is foreseeable that they might be, the manufacturer has a duty to ensure reasonable safety in that situation.29 4. Defenses In Hadar v. Avco Corp.,30 a Pennsylvania appellate court considered the scope of the assumption-of-the-risk defense. A farmer was using a corn picker machine and noticed that the corncobs were getting stuck in the machine’s rollers. He tried using a three-foot cornstalk to push the corncobs through the rollers while the machine was still running, but the rollers pulled both the stalk and the plaintiff’s hand into the corn picker.31
20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. See id. Id. Id. at 1141–42. Id. at 1141. 898 A.2d 590 (Pa. 2006). See id. at 593. See id. at 600. Id. Id. at 601. See id. at 617–18. 886 A.2d 225 (Pa. Super. Ct. 2005). Id. at 227.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

The trial court decided that the plaintiff “voluntarily assumed the risk of the specific injury he suffered when he attempted to unclog the corn picker by using the 3-foot corn stalk and by . . . doing so while the tractor was still in operation with the power takeoff engaged.”32 The appellate court disagreed, stating that although Hadar knew that placing his hands near the husking rollers was dangerous, he did not appreciate the specific risk of trying to clear the husking rollers with a threefoot-long cornstalk.33 “Whether or not he knew of the specific danger in light of his experience and assumed the risk or whether he acted as a reasonable person under the facts of this case is a jury question.”34 The court reversed the summary judgment granted to the defendant.35 One justice dissented, agreeing with the trial court that the plaintiff “voluntarily and knowingly assumed the risk of the injury he sustained.”36 County of Santa Clara v. Atlantic Richfield Co.37 involved an interesting twist on the statute of limitations defense: the court held that not only were the plaintiffs’ claims not time-barred, they had not yet accrued.38 Governmental entities filed a class action against lead manufacturers alleging several causes of action in connection with the dangers of lead paint.39 The damages sought were
(1) costs that had been incurred to educate the public about the hazards of lead and the steps to take to minimize the risk; (2) costs incurred to inspect and test property and the environment for the presence of lead; (3) costs incurred to train and fund staff to investigate and respond to lead-contaminated properties and lead-exposed children; and (4) costs incurred for “Property Damage,” which was identified as “abatement, removal, replacement, and/or remediation of Lead in private, county, and city owned, managed, leased, controlled, and/or maintained properties.”40

The defendants were granted summary judgment based on the statute of limitations.41 The court of appeal analysis turned on the economic loss doctrine, under which a plaintiff cannot recover in products liability for economic loss alone, but only for physical injury to people or property.42 The court reasoned

32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42.

Id. Id. at 229. Id. at 230. Id. Id. at 231 (Orie-Melvin, J., dissenting). 40 Cal. Rptr. 3d 313 (Ct. App. 2006). Id. at 335. Id. at 319. Id. at 321. Id. at 323. See id. at 335.

Recent Developments in Products, General Liability, and Consumer Law


that because the plaintiffs had not alleged any physical damage to property, i.e., damage to the homes or buildings caused by the lead paint, their claims had not yet accrued.43 It would be different, the court said, if the plaintiffs were suing for personal injuries due to the lead:
While a human being who had suffered lead poisoning as a result of exposure to deteriorating lead paint in plaintiffs’ buildings might have a viable negligence or strict liability cause of action that is not vulnerable to a statute of limitations defense, plaintiffs, as the owners of structures simply containing deteriorating lead paint, do not.44

Finding that the plaintiffs’ causes of action had not accrued, the court reversed the summary judgment.45 5. Damages The Supreme Court of New Hampshire considered the application of the economic loss doctrine in Kelleher v. Marvin Lumber & Cedar Co.46 The plaintiff’s home windows rotted, so the homeowner sued the window manufacturer.47 The defendant asserted that the plaintiff’s strict liability claim was barred to the extent it sought damages for economic loss.48 In this case, the court observed, “economic losses encompass both damage to the defective product itself and the diminution in value of the product because it is inferior in quality.”49 When a defective product accidentally causes harm to persons or property, the harm is treated as personal injury or property damage, not economic loss.50 The plaintiff had alleged that the water leakage from the defective windows caused substantial property damage to his home, and the court held that the plaintiff had produced sufficient evidence of these noneconomic losses to survive summary judgment.51 The court also noted that a plaintiff’s general duty to mitigate damages coexists with the economic loss doctrine. A plaintiff may recover reasonable mitigation expenses he incurred in order to retard the defective product’s damage.52 The plaintiff purchased new windows to stop the damage to his home. To the extent that the new windows were reasonably required to prevent further water leakage and related property damage, the plaintiff was entitled to recover the costs of the new windows.53
43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. See id. Id. at 341. See id. at 342. 891 A.2d 477 (N.H. 2006). Id. at 484. Id. at 495. Id. Id. Id. Id. at 496. Id. at 496–97.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

The First Circuit predicted Puerto Rico would apply the economic loss doctrine in a products liability case in Isla Nena Air Services, Inc. v. Cessna Aircraft Co.54 A commercial airline sued the aircraft and engine manufacturers for damage to the aircraft arising out of an accident in which there were no injuries.55 The First Circuit noted that the Puerto Rico Supreme Court consistently looks to California law for its strict liability jurisprudence and in part because California follows the economic loss doctrine, Puerto Rico probably would as well.56 B. Particular Products 1. Cigarettes In Estate of Schwarz v. Philip Morris,57 the Oregon Court of Appeals held that a low tar cigarette manufacturer was not entitled to a directed verdict on the plaintiff’s products liability claim.58 The plaintiff alleged that the defendant’s cigarettes were “defective and unreasonably dangerous” in part because (1) “the cigarettes contained added ammonia to increase the effects of nicotine,” and (2) “the cigarettes or their smoke contained altered pH so as to increase the effects of nicotine.”59 Oregon’s products liability statute60 incorporates § 402(a) of the Restatement (Second) of Torts; and the defendant argued that, under comment i to § 402(a), good tobacco is not defective just because the effects of smoking are dangerous.61 The court agreed in principle, but found that the plaintiff had adduced evidence that the defendant’s cigarettes were not unadulterated but rather contained added ammonia; in other words, they did not contain the “good tobacco” contemplated by comment i.62 The defendant also argued that its cigarettes could not have caused the plaintiff/decedent’s injuries because the evidence was undisputed that the decedent was addicted to tobacco well before she started smoking the defendant’s brand of cigarettes.63 The court rejected that argument because the jury could have found that the decedent switched to the defendant’s low tar cigarettes as an intermediate step to quit smoking or that the decedent could have smoked more if she thought the low tar cigarettes were safer.64
54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 449 F.3d 85, 92 (1st Cir. 2006). See id. at 86. See id. at 92. 135 P.3d 409 (Or. Ct. App. 2006). Id. at 438. Id. at 437. Or. Rev. Stat. § 30.920 (1988). Estate of Schwarz, 135 P.3d at 436–37. Id. at 437. Id. See id.

Recent Developments in Products, General Liability, and Consumer Law


2. Tires and Vehicles The court in Benico v. Bridgestone/Firestone, Inc.65 held that a twelve-year-old tire was beyond its presumptive useful sale life and granted summary judgment for the tire manufacturer. The holding was based on a rebuttable presumption in the Washington statute of repose that “[i]f the harm was caused more than twelve years after the time of delivery [of the product], a presumption arises that the harm was caused after the useful sale life had expired.”66 The presumption was rebuttable by evidence that the seller warranted the tire beyond its useful sale life, that the seller intentionally misrepresented facts about the tire, or that the harm was caused by exposure to a defective product during the useful sale life of the tire even though the harm did not manifest itself until after the useful sale life had expired.67 Because the plaintiff had not adduced any such evidence, the court dismissed the plaintiff’s claims.68 The plaintiff in Scaffidi v. United Nissan69 brought strict products liability claims, among others, against a car dealer regarding a used car that the plaintiff claimed was defective. Shortly after buying the car, the plaintiff was involved in a major accident in which the car was totaled and later sold for scrap.70 The defendant moved for summary judgment as there was no car and, therefore, no evidence that the car was defective at the time of purchase. The court agreed and granted summary judgment.71 3. Other Products In Souza v. Squaw Valley Ski Corp.,72 an eight-year-old skier collided with a snowmaking hydrant on a ski run and sued the ski resort and the hydrant distributor for negligence and products liability. The plaintiff alleged that the snowmaking equipment, the hydrant, and its nozzle were defective because of their defectively designed location, padding, and uphill direction.73 The trial court granted summary judgment for the defendants on this claim because “a plainly visible and generally avoidable snowmaking hydrant is not made defective simply because a skier runs into it.”74 The court of appeals affirmed, explaining thus:
[The plaintiff] neither used the hydrant and nozzle, nor was she a bystander to its use. [The plaintiff] simply ran into the product, injuring herself. It is
65. 66. 67. 68. 69. 70. 71. 72. 73. 74. No. CV-04-0292-LRS, 2005 WL 2757243 (E.D. Wash. Oct. 25, 2005). Id. at *2 (quoting Wash. Rev. Code § 7.72.060(2)). See id. See id. at *3. 425 F. Supp. 2d 1172 (D. Nev. 2005). Id. at 1177–78. See id. at 1192. 41 Cal. Rptr. 3d 389 (Ct. App. 2006). Id. at 393. Id. at 396.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

undisputed that the hydrant/nozzle was functioning properly as snowmaking equipment, and was not being used as a product at the time [the plaintiff] crashed into it.75

C. Entities 1. Professional Vendors The question in Adams v. Owens-Corning Fiberglas Corp.76 was whether one of the defendants was a manufacturer, a professional vendor of asbestoscontaining gaskets, or just a nonmanufacturer seller of the gaskets. The defendant argued that the only element that might have made the gaskets hazardous was the existence of asbestos in the gasket material from which they were cut and that because the defendant did not put the asbestos in that material, it could not be strictly liable.77 The court found that this argument ignored the possibility of professional vendor liability, by which the initial manufacturer as well as the seller can be strictly liable, even if the seller merely passes on the finished product without making a modification that renders the product defective.78 Although the court of appeals did not hold that the defendant was a manufacturer or professional vendor as a matter of law, it did hold that the plaintiffs produced sufficient evidence to withstand summary judgment.79 2. Auctioneers In Gomez de Hernandez v. New Texas Auto Auction Services, a Texas appellate court held that an auctioneer could be held strictly liable for alleged defects in the vehicle it auctioned.80 The court based its holding on the established Texas law that merely introducing a product into the stream of commerce subjects that person to strict liability.81 Finding that the auctioneer was not entitled to judgment as a matter of law, the court reversed the summary judgment granted to the auctioneer.82 3. Manufacturers of Equivalent Product The primary issue in Goldych v. Eli Lilly & Co.83 was whether a prescription drug manufacturer could be liable for a death caused by another company’s generic equivalent of the drug. The plaintiff pleaded claims for fraud,
75. 76. 77. 78. 79. 80. 81. 82. 83. Id. 923 So. 2d 118 (La. Ct. App. 2005). Id. at 124. Id. Id. at 125 & n.9. 193 S.W.3d 220 (Tex. App. 2006). Id. at 225–26. Id. at 226. No. 5:04-CV-1477, 2006 WL 2038436 (N.D.N.Y. July 19, 2006).

Recent Developments in Products, General Liability, and Consumer Law


fraudulent concealment, negligence, and negligent misrepresentation.84 According to the defendant, the plaintiff’s real claims sounded in products liability, but those claims would fail as a matter of law because it was undisputed that the defendant did not manufacture the drug.85 With no New York precedent, the court relied heavily on a May 2006 decision from the Eastern District of Pennsylvania, Colacicco v. Apotex,86 as well as an earlier Fourth Circuit opinion.87 Drawing from Colacicco, the court stated that public policy did not support holding one manufacturer liable for another manufacturer’s products, even in the generic drug context.88 “When a generic manufacturer blindly accepts the brand name manufacturer’s warnings and representations, it does so at its own risk.”89 4. Successor Entities In Semenetz v. Sherling & Walden,90 New York joined the majority of states in rejecting the product line exception, which allows a successor manufacturer to be held liable for its predecessor’s torts if the successor continues the output of the predecessor’s line of products.91 The court reasoned that (1) the successor manufacturer, often a small business, may have difficulty obtaining insurance coverage if it will be held responsible for another manufacturer’s products; (2) the product line exception “threatens ‘economic annihilation’ for small businesses”; and (3) extending liability to the successor “places responsibility for a defective product on a party that did not put the product into the stream of commerce.”92 The Supreme Court of South Carolina answered a federal district court’s certified questions in Simmons v. Mark Lift Industries93 and stated that a successor corporation that acquired the assets of its bankrupt predecessor may be held liable for one of the predecessor’s defective products, but only if “(1) there was an agreement to assume such [liability], (2) the circumstances surrounding the transaction warrants [sic] a finding of a consolidation or merger of the two corporations, (3) the successor . . . was a mere continuation of the predecessor, or (4) the transaction was entered into fraudulently for the purpose of wrongfully defeating . . . claims.”94 These exceptions stem from the court’s 1924 decision in Brown v. American
84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. Id. at *2. Id. 432 F. Supp. 2d 514 (E.D. Pa. 2006). Foster v. Am. Home Prods. Corp., 29 F.3d 165 (4th Cir. 1994). See Goldych, 2006 WL 2038436, at *5 (citing Colacicco, 432 F. Supp. 2d at 541–42). Id. at *4 (citing Foster, 29 F.3d at 169). 818 N.Y.S.2d 819 (2006). See id. at 822 (citing Ray v. Alad Corp., 560 P.2d 3 (Cal. 1977)). See id. at 823–24. 622 S.E.2d 213 (S.C. 2005). See id. at 215.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

Railway Express Co.95 Although Brown concerned the debts of a predecessor company, the court found its analysis equally applicable in the tort claims context.96 The court also stated that the ability of a nonbankrupt codefendant to answer in judgment is irrelevant to the question of a successor company’s liability.97 Justice Burnett dissented, advocating a broader interpretation of the “mere continuation” exception.98 D. Legislation The Help Efficient, Accessible, Low-Cost, Timely Healthcare (“HEALTH”) Act of 200599 prohibits punitive damages in a product liability suit concerning a medical product if the product is approved by the Food and Drug Administration (“FDA”) or is generally recognized among qualified experts as safe and efficient pursuant to the conditions established by the FDA.100 The punitive damages provision is part of a broader tort reform bill that caps noneconomic damages in medical malpractice cases at $250,000,101 establishes limitations on attorney fees,102 requires future damages to be reduced to present value, allows providers to annuitize awards in excess of $50,000,103 and revises statutes of limitations to three years from the date of injury for minors and to the ninth birthday for those under six.104 As of the writing of this article, the bill has passed in the House of Representatives and has been referred to the Senate Committee on the Judiciary.105 The Bioterror and Pandemic Preparedness Protection Act106 provides “liability protections for certain pandemics, epidemics, and security countermeasures.” If approved, the act will amend title 28 of the U.S. Code to establish an exclusive federal cause of action against only the United States for all claims related to a qualified pandemic or epidemic product.107 The U.S. District Court for the District of Columbia would have exclusive jurisdiction over these claims, and no claims would be allowed against manufacturers, distributors, and/or health care providers.108 Effective September 1, 2005, chapter 90 of the Texas Civil Practice and Remedies Code sets new standards for claims involving asbestos and silica.
95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 123 S.E. 97 (S.C. 1924). See Simmons, 622 S.E.2d at 215. See id. at 215. See generally id. at 217–22 (Burnett, J., dissenting). H.R. 5, 109th Cong. (2005). Id. § 7(c)(1). Id. § 4(b). Id. § 4(c). Id. § 8. Id. § 3. See H.R. 3970, 109th Cong. (2005). Id. § 2(a) (quoting what is to become 28 U.S.C. § 4101(a)). Id. § 1(B), (C).

Recent Developments in Products, General Liability, and Consumer Law


A claimant asserting an asbestos- or silica-related injury is now required to provide an expert medical report attesting to certain minimum levels of diagnosis and impairment.109 The report must be served on the defendant within thirty days of the defendant’s answer or other appearance in the case.110 If the plaintiff fails to serve such a report or if the report does not comply with the statutory requirements, the court may, upon the defendant’s motion, dismiss the plaintiff’s claims without prejudice.111 Chapter 90 also provides for consolidation of existing asbestos and silica claims into multidistrict litigation.112

iii. preemption
A. Medical Devices The Second Circuit joined the Third, Fifth, Sixth, Seventh, and Eighth Circuits in applying federal preemption for medical devices that have undergone the FDA’s premarket approval process.113 In Riegel v. Medtronic, Inc.,114 the court affirmed summary judgment for a catheter manufacturer, holding that the Medical Device Amendment (“MDA”) to the Food, Drug, and Cosmetic Act (“FDCA”) preempted the plaintiff’s negligence, strict liability, and breach of implied warranty claims to the extent that the plaintiff alleged liability despite the manufacturer’s adherence to FDA premarket approval standards for the catheter.115 In Missouri Board of Examiners for Hearing Instrument Specialists v. Hearing Help Express, Inc.,116 the Eighth Circuit held that the MDA expressly preempted a Missouri statute prohibiting mail order sales of hearing aids without prior fitting and testing by a specialist, finding that the state statute imposed a requirement “in addition to” federal requirements.117 In Gomez v. St. Jude Medical Daig Division Inc.,118 the Fifth Circuit upheld summary judgment for the manufacturer of a medical device designed to deposit a collagen plug on the outside wall of the patient’s artery to close a hole that developed following surgery, holding that the MDA preempted a patient’s state law claims for defective
109. See Tex. Civ. Prac. & Rem. Code §§ 90.003 (asbestos), 90.004 (silica) (Vernon 2005). 110. Id. § 90.006. 111. See id. § 90.007. 112. See id. § 90.010. 113. Horn v. Thoratec Corp., 276 F.3d 163 (3d Cir. 2004); Martin v. Medtronic, Inc., 254 F.3d 573 (5th Cir. 2001); Brooks v. Howmedica, Inc., 273 F.3d 785 (8th Cir. 2001); Kemp v. Medtronic, Inc., 231 F.3d 216 (6th Cir. 2000); Mitchell v. Collagen Corp., 126 F.3d 902 (7th Cir. 1997). 114. 451 F.3d 104 (2d Cir. 2006). 115. Id. at 123. 116. 447 F.3d 1033 (8th Cir. 2006). 117. Id. at 1037. 118. 442 F.3d 919 (5th Cir. 2006).


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

design, failure to warn and failure to train, breach of implied and express warranties, and negligence per se.119 B. Pharmaceuticals The most significant development in preemption law as it applies to pharmaceuticals appears to be the FDA’s adoption of its final rule on prescription drug labeling.120 The rule took effect June 30, 2006.121 The FDA wrote, “FDA believes that under existing preemption principles, FDA approval of labeling under the act, whether it be in the old or new format, preempts conflicting or contrary state law.”122 The FDA expressed concern with state law claims that “rely on and propagate interpretations of the act and FDA regulations that conflict with the agency’s own interpretations”123 because those claims “frustrate the agency’s implementation of its statutory mandate.”124 State law actions are also said to “threaten FDA’s statutorily prescribed role as the expert Federal agency responsible for evaluating and regulating drugs.”125 Despite this strong language, at least one court has explicitly discounted the FDA’s apparent intent to preempt the field. The plaintiffs in Jackson v. Pfizer, Inc.126 alleged that their eleven-year-old son’s suicide resulted from his use of the antidepressants Zoloft and Effexor. The court rejected the defendants’ preemption arguments, stating without analysis that “[t]he recent notice issued by the FDA claiming preemption is not persuasive.”127 Other courts have relied on the FDA’s comments on the new drug labeling rule in holding plaintiffs’ state law drug claims to be preempted. In Pennsylvania Employee Benefit Trust Fund v. Zeneca, Inc.,128 the court held that the plaintiffs’ consumer fraud claims regarding advertising were preempted to the extent that they complied with FDA labeling requirements.129 Similarly, in Colacicco v. Apotex, Inc.,130 a district court in Pennsylvania deferred to the FDA’s interpretation of the FDCA and regulations it administers and held, in a detailed analysis, that the act impliedly preempted state law failure to warn claims.131
119. Id. at 930–32. 120. Requirements on Content and Format for Human Prescription Drug and Biological Products, 71 Fed. Reg. 3922 (Jan. 24, 2006) (to be codified at 21 C.F.R. pts. 201, 314, 601). 121. Id. at 3922. 122. Id. at 3934. 123. Id. 124. Id. 125. Id. at 3935. 126. 432 F. Supp. 2d 964 (D. Neb. 2006). 127. Id. at 968 (citing 71 Fed. Reg. 3922 (Jan. 24, 2006)). 128. No. Civ. 05-075-SLR, 2005 WL 2993937 (D. Del. Nov. 8, 2005). 129. Id. at *4. 130. 432 F. Supp. 2d 514 (E.D. Pa. 2006). 131. See generally id. at 523–38.

Recent Developments in Products, General Liability, and Consumer Law


C. Tobacco Rulings concerning preemption in tobacco litigation varied over the survey period. In Philip Morris USA, Inc. v. Arnitz,132 a Florida court held that the Federal Cigarette Labeling and Advertising Act did not preempt design defect or manufacturing defect claims against a cigarette manufacturer.133 A New York appellate court also rejected the preemption defense, characterizing the duty underlying the plaintiff’s claim as a “state law duty not to deceive.”134 However, a Louisiana court held in Badon v. R.J. Reynolds Tobacco Co.135 that a smoker’s claim that cigarettes were unreasonably dangerous per se was preempted by a conflicting policy of Congress not to remove tobacco products from the market.136

iv. product liability class action developments
Since the Class Action Fairness Act of 2005 (“CAFA”) became effective, the most significant developments in products liability class action law have involved the interpretation of the statute’s provisions. In particular, courts have focused on CAFA’s exceptions to federal jurisdiction over certain class actions and whether CAFA shifts the traditional burdens regarding removal. A. CAFA Does Not Shift Burden to Prove Federal Jurisdiction Is Proper In Abrego Abrego v. Dow Chemical Co.,137 the Ninth Circuit held that even under CAFA, the party who seeks to invoke federal jurisdiction retains the burden to prove jurisdiction is proper.138 Panamanian plantation workers sued Dow, claiming injuries from a chemical banned by the EPA in the United States in 1979 but that Dow allegedly continued to distribute and use in Panama.139 Dow removed the case to federal court pursuant to CAFA, and the court ordered Dow to show cause as to whether CAFA’s amount in controversy requirement was met.140 Dow argued that CAFA “shifted the burden of establishing . . . jurisdiction . . . from the removing defendants to the plaintiffs seeking remand.”141 The district court disagreed, found Dow failed to meet its burden, and remanded.142
132. 933 So. 2d 693 (Fla. Dist. Ct. App. 2006). 133. Id. at 698. 134. Tomasino v. Am. Tobacco Co., 807 N.Y.S.2d 603, 605 (App. Div. 2005) (quoting Miele v. Am. Tobacco Co., 770 N.Y.S.2d 386, 390 (App. Div. 2003)). 135. 934 So. 2d 927 (La. Ct. App. 2006). 136. Id. at 934. 137. 443 F.3d 676 (9th Cir. 2006) (per curiam). 138. Id. at 678. 139. Id. 140. Id. 141. Id. 142. Id. at 679.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

The Ninth Circuit affirmed the remand.143 The court’s analysis turned on the language of CAFA. First, “there is simply no such language in [CAFA] regarding the burden as to remand.”144 Because the statute was “entirely silent as to the burden of proof on removal,” the court presumed that “Congress [was] aware of the legal context in which it [was] legislating.”145 Second, CAFA contains other provisions that broaden federal jurisdiction.146 The court concluded that “these broadening provisions indicate that Congress carefully inserted into the legislation the changes it intended and did not mean otherwise to alter the jurisdictional terrain.”147 B. Party Seeking Remand Has Burden to Prove CAFA’s Exceptions 1. Local Controversy Exception The Eleventh Circuit held in Evans v. Walter Industries, Inc.148 that the plaintiffs seeking to remand their class action failed to satisfy their burden to prove that two-thirds of the plaintiff class were Alabama residents under CAFA’s local controversy exception.149 The plaintiffs filed suit in Alabama state court, alleging personal injury and property damages from the defendants’ manufacturing facilities, which released various waste substances over approximately eighty-five years.150 The defendants removed the case under CAFA. The plaintiffs sought remand, arguing that the case fell within the local controversy exception of CAFA.151 That exception instructs a district court to decline to exercise jurisdiction over a class action in which (1) two-thirds or more of the class members are residents of the state in which the action was originally filed, (2) a “significant” defendant is a resident of the same state, (3) the principal injuries were suffered in that state, and (4) no factually similar class action has been brought in that state within the last three years.152 The court first held that “a party [that] seeks to avail itself of an express statutory exception to federal jurisdiction under CAFA . . . bears the burden of proof with regard to that exception.”153 Next, the court considered

143. Dow appealed under § 1453(c)(1) of CAFA, which provides that a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order. 28 U.S.C. § 1453(c)(1). See 443 F.3d at 677 & n.1. 144. Id. at 683. 145. Id. at 683–84. 146. Id. at 684. 147. Id. at 684–85. 148. 449 F.3d 1159 (11th Cir. 2006). 149. Id. at 1166. 150. Id. at 1161. 151. Id. 152. See 28 U.S.C. § 1332(d)(4)(A). The other part of the local controversy exception is contained in § 1332(d)(4)(B), but it was not at issue in Evans. 449 F.3d at 1163 n.2. 153. Id. at 1164, 1165.

Recent Developments in Products, General Liability, and Consumer Law


whether the plaintiffs had satisfied their burden as to the local controversy exception. As evidence of the citizenship of the potential class, the plaintiffs relied on an affidavit from their attorney affirming that 93.8 percent of the known class members are Alabama residents, and thus two-thirds of the entire plaintiff class are Alabama citizens.154 The court held that this evidence was insufficient because there was no evidence to show how the known class members were chosen, nor was there evidence of any effort to locate potential class members outside Alabama.155 The plaintiffs also failed to meet the burden of the significant defendant test. A class seeks significant relief against a defendant when the relief sought is a significant portion of the entire relief sought by the class.156 Although the plaintiffs alleged U.S. Pipe was a significant defendant, the court held that without a comparison of the relief sought among all defendants and each defendant’s ability to pay the judgment, the plaintiffs had not proved U.S. Pipe was a significant defendant.157 2. State Action Exception In Frazier v. Pioneer Americas, L.L.C.,158 Louisiana residents sued Pioneer Americas, a Canadian company operating in Louisiana, and the Louisiana Department of Environmental Quality (“DEQ”) in state court, alleging they had been harmed by excessive mercury that Pioneer released into the environment. They claimed DEQ neglected its statutory duty to monitor Pioneer and to warn citizens of dangerous emissions.159 Without the consent of DEQ, Pioneer removed to federal court based on CAFA as well as improper joinder of DEQ.160 The district court denied the plaintiffs’ motion to remand.161 On appeal, the Fifth Circuit held that the plaintiffs had the burden to prove one of CAFA’s exceptions.162 The court held that the plaintiffs failed to meet the requirements of CAFA’s state action exception, which excludes from CAFA jurisdiction “any class action in which . . . the primary defendants are States, State officials, or other governmental entities. . . .”163 The plural term defendants means all primary defendants must be states or state entities for the exception to apply.164 Because Pioneer was a primary defendant but not a state entity, the exception did not apply.165
154. 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165. See id. at 1166. See id. See id. at 1166–67 (quoting 28 U.S.C. § 1332(d)(4)(A)(i)(II)). See id. at 1167–68. 455 F.3d 542 (5th Cir. 2006). Id. at 544. Id. Id. Id. at 546. Id. (quoting 28 U.S.C. § 1332(d)(5)(A)). Id. at 546. Id.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

Finally, the court held that the plaintiffs failed to satisfy the local controversy exception. Under that exception, at least one defendant must be a citizen of the state in which the action was originally filed. The Louisiana DEQ did not qualify because a state has no citizenship for diversity purposes.166

v. consumer law issues
A. State Lemon Laws 1. Automobile Leases and Lemon Laws a. Lessee as a Qualifying Consumer—In a case of first impression, the Supreme Court of Arizona held in Parrot v. Chrysler Corp.167 that the Arizona lemon law168 does not allow the lessee of an automobile to sue the automobile manufacturer for defects in the automobile. The court first considered the plaintiff’s claims under the federal Magnuson-Moss Warranty Act.169 To bring suit under the warranty act, a person must be a consumer of a consumer product and have a written warranty, implied warranty, or service contract.170 The warranty act also requires a qualifying sale, i.e., a sale in which a person buys a consumer product for purposes other than resale.171 The court held that because the dealership from which the plaintiff leased the vehicle purchased the vehicle for purposes of resale and because there was no other qualifying sale in the record, the lessee was not a consumer and could not recover under the warranty act.172 Next, the court turned to the Arizona lemon law. Without deciding whether the plaintiff qualified as a consumer under the lemon law, the court found that the only remedies available under the lemon law, i.e., return or replacement of the vehicle, “assume the consumer has a right to transfer title back to the manufacturer.”173 In this case, the plaintiff/lessee conceded he had no right of title, so the court held he could not recover under the lemon law.174 Two other courts reached the opposite conclusion. In Mattuck v. DaimlerChrysler Corp.,175 an Illinois appellate court held that a lessee qualified as
166. Id. at 547. 167. 130 P.3d 530 (Ariz. 2006). 168. Ariz. Motor Vehicle Warranties Act, Ariz. Rev. Stat. §§ 44-1261 to -1267 (2003 & Supp. 2005). 169. 15 U.S.C. §§ 2301–12 (2000). 170. Parrot, 130 P.3d at 532. 171. Id. 172. Id. at 536. 173. Id. at 537. 174. Id. 175. 852 N.E.2d 485 (Ill. App. Ct. 2006).

Recent Developments in Products, General Liability, and Consumer Law


a consumer under the Magnuson-Moss Warranty Act.176 A consumer under the warranty act includes “any person to whom [a consumer] product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product. . . .”177 Illinois courts had previously held that a lessee qualifies as a consumer under that definition even though there was no qualifying sale.178 In Ryan v. American Honda Motor, Inc.,179 the New Jersey Supreme Court held that a lessee satisfies the third, catch-all definition of consumer under the warranty act: “any other person who is entitled by the terms of the warranty or under applicable state law to enforce the warranty.”180 b. Previously Leased Cars Are New Motor Vehicles—In Curl v. Volkswagen of America, Inc.,181 an Ohio appellate court held that for purposes of the state lemon law,182 the delivery date of a car purchased from a dealer was the date the plaintiff took delivery, not the date the dealership acquired the car. The dealer had leased the car to others for eleven months before the sale to the plaintiff. Ohio’s lemon law does not define a “new” or “used” motor vehicle. However, a “new motor vehicle” is defined elsewhere as “a motor vehicle, the legal title to which has never been transferred by a manufacturer, remanufacturer, distributor, or dealer to an ultimate purchaser.”183 Ultimate purchaser, in turn, means, “with respect to any new motor vehicle, the first person, other than a dealer purchasing in the capacity of a dealer, who in good faith purchases such new motor vehicle for purposes other than resale.”184 Based in part on these definitions, the court held that the car’s first ultimate purchaser was the plaintiff, and so the delivery date was the date the vehicle was first delivered to the plaintiff.185 2. Purchase Price of Vehicle Does Not Include Inflated Value Under Installment Contract In DaimlerChrysler Corp. v. Victoria,186 the Supreme Court of New Hampshire held that an award to a consumer under the state’s lemon law187 for the purchase price of a vehicle must be based upon the actual purchase
176. Id. at 492. 177. Id. at 491 (quoting 15 U.S.C. § 2301(3) (2000)). 178. Id. 179. 896 A.2d 454 (N.J. 2006) (per curiam). 180. Id. at 456 (quoting 15 U.S.C. § 2301(3)). 181. No. 2004-T-0112, 2005 WL 3274992 (Ohio Ct. App. Dec. 2, 2005). 182. Ohio Nonconformity New Motor Vehicle Law, Ohio Rev. Code Ann. §§ 1345.71–.78 (West 2004). 183. Curl, 2005 WL 3274992, at *8 (citing Ohio Rev. Code Ann. § 4517.01(C)). 184. Id. (citing Ohio Rev. Code Ann. § 4517.01(D)). 185. Id. at *9. 186. No. 2005-357, 2006 WL 1626989 (N.H. June 14, 2006). 187. New Motor Vehicle Arbitration, N.H. Rev. Stat. Ann. § 357-D:1 to -D:12 (West 1995 & 2006 Supp.).


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

price and not an inflated value of the vehicle as stated in a retail installment contract that was calculated based upon the buyer’s “negative equity” trade-in.188 The new motor vehicle arbitration board had found that the plaintiff’s vehicle was defective and awarded him $19,002.04 as “purchase price of vehicle.” This amount was the price listed on the retail installment contract between the plaintiff and the dealer, but it factored in roughly $4,000 in negative equity in the plaintiff’s trade-in vehicle.189 The dealer appealed, arguing that the purchase price of the vehicle, for lemon law purposes, should be the actual price (here, $15,600), not an inflated price specific to the buyer.190 The trial court upheld the arbitration board’s award,191 but the supreme court agreed with the dealer and reversed the lower court’s judgment. The court explained thus:
There is nothing in the plain language of [the lemon law] that suggests that the legislature intended for a prevailing consumer to enjoy a windfall thereunder. . . . [The board’s] interpretation here, permitting a Lemon Law refund to be based upon the admittedly inflated figures in the retail installment contract, would be contrary to legislative intent as discerned from the statutory scheme, as it could place the consumer in a significantly better position than he or she was in prior to buying the vehicle.192

3. Defect Need Not Exist at Time of Trial/Arbitration In DaimlerChrysler Corp. v. Spitzer193 and In re General Motors Corp.,194 both decided on December 1, 2005, a New York appellate court held that the repair presumption under the new car lemon law arises after four repair attempts, regardless of whether the defect still exists at the time of trial or arbitration.195 The court based its rulings on the plain language of the lemon law, which requires that the defect continue to exist after a fourth repair.196 The court followed its sister court’s observation that the “phrase has nothing to do with the condition of the vehicle at the time of the hearing or trial.”197 Further, “had the Legislature intended to require the existence of a defect at the trial, hearing, or arbitration for a consumer to recover under a statutory scheme, it could have easily provided for same.”198

188. 189. 190. 191. 192. 193. 194. 195. 196. 197. 198.

DaimlerChrysler, 2006 WL 1626989, at *4. Id. at *1. Id. Id. Id. at *3. 804 N.Y.S.2d 506 (App. Div. 2005). 806 N.Y.S.2d 257 (App. Div. 2005). DaimlerChrysler, 804 N.Y.S.2d at 508; General Motors, 806 N.Y.S.2d at 257. DaimlerChrysler, 804 N.Y.S.2d at 508 (citing N.Y. Gen. Bus. Law § 198-a(d)(1)). Id. (quoting Kucher v. DaimerChrysler Corp., 802 N.Y.S.2d 298 (App. Div. 2005)). Id. at 509.

Recent Developments in Products, General Liability, and Consumer Law


4. Arbitration Is Prerequisite to Suit Several courts have held that arbitration under a state’s lemon law is a prerequisite to suit. The U.S. District Court for the Eastern District of New York rejected the plaintiff’s argument that there must be an agreement to arbitrate, finding that arbitration is mandatory even though the consumer would not be bound by the result.199 Noting that “the Texas legislature has clearly expressed its intention that the Texas Motor Vehicle Commission exercise exclusive original jurisdiction over Texas Lemon Law claims,”200 the Eastern District of Texas dismissed the plaintiff’s claim without prejudice to proceed before the commission.201 The Ohio Court of Appeals found that although the plaintiff was required to exhaust administrative remedies, his failure to do so was an affirmative defense that the defendant waived by failing to properly raise it in its answer.202 Finally, the Eastern District of Michigan found that the defendant waived its right to have the plaintiff arbitrate its lemon law claims by failing to assert that defense in its answer, actively conducting discovery, filing a witness list in anticipation of trial, and moving for summary judgment.203 5. Arbitration Does Not Limit Other Remedies Under New York law, if a consumer unsuccessfully seeks recovery through the attorney general’s Used Car Lemon Law Arbitration Program, the consumer is not precluded from commencing an action provided that the same relief is not sought in such litigation.204 The court’s holding was based on the language in the lemon law that “nothing in this section shall in any way limit the rights or remedies which are otherwise available to a consumer under any other law.”205 Similarly, the Georgia lemon law does not limit a person from pursuing other rights or remedies under any other law, such as a claim for breach of warranty under Georgia’s Uniform Commercial Code.206 A Florida appellate court likewise held that arbitration under the Florida lemon law does not preclude a later lawsuit “unrelated to refund or replacement of the vehicle. . . .”207

199. 2006). 200. 2006). 201. 202. 203. 2005). 204. 205. 206. 207.

Diaz v. Paragon Motors of Woodside, Inc., 424 F. Supp. 2d 519, 538–39 (E.D.N.Y. Irwin v. Country Coach Inc., No. 4:05CV145, 2006 WL 278267 (E.D. Tex. Feb. 3, Id. at *3. Harris v. Ford Motor Co., 852 N.E. 2d 750 (Ohio Ct. App. 2006). Peters v. AM Gen. LLC, No. 05-72177, 2005 WL 3502268 (E.D. Mich. Dec. 22, Felton v. World Class Cars, 818 N.Y.S.2d 891 (App. Div. 2006). Id. at 892 (quoting N.Y. Gen. Bus. Law § 198-b[d][2]). Rodgers v. Gen. Motors Corp., 627 S.E.2d 151, 153–54 (Ga. Ct. App. 2006). Gelinas v. Forest River, Inc., 931 So. 2d 970, 975 (Fla. Dist. Ct. App. 2006).


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

6. Right to Appeal Cannot Be Conditioned on Paying Attorney Fees In T.A. Enterprises, Inc. v. Olarte, Inc.,208 a Florida appellate court held that the Florida lemon law209 was unconstitutional to the extent that it allowed a trial court to condition a car manufacturer’s appeal of the final judgment on the manufacturer’s payment of the consumer’s attorney fees.210 The court found that provision violated two clauses of the Florida Constitution: (1) article V, § 4(b)(2), which grants litigants an appeal “as a matter of right, from final judgments or orders of trial courts”;211 and (2) article I, § 21, which provides that “[t]he courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay.”212 B. Arbitration Provisions in Automobile Purchase Agreements 1. Arbitration Provision Held Unenforceable In Olah v. Ganley Chevrolet, Inc.,213 an Ohio appellate court held an arbitration provision in an automobile purchase agreement unenforceable because the provision was unconscionable. The court followed a sister court’s earlier reasoning that “[t]ransactions involving modern day necessities such as transportation deserve especially close scrutiny before an arbitration clause is enforced by the courts.”214 Such an agreement “should only be enforceable when it was freely entered into, and the circumstances should be scrutinized where a consumer is confronted with a sophisticated lending institution, and waives the constitutional right of trial.”215 The court held that the arbitration provision in this case was “substantively unconscionable” because it failed to provide crucial information, it was confusing and misleading, and the plaintiffs could not have known from that provision what it meant to be “bound to arbitration.”216 Further, the trial court should have held a hearing to determine if the arbitration provision was also procedurally unconscionable.217 2. Nonsignatory to Purchase Agreement Can Compel Arbitration The Supreme Court of Alabama held in Smith v. Mark Dodge, Inc.218 that a nonsignatory manufacturer could compel arbitration because the plaintiff’s
208. 931 So. 2d 1016 (Fla. Dist. Ct. App. 2006). 209. Florida Motor Vehicle Warranty Enforcement Act, Fla. Stat. Ann. §§ 681.10–.118 (West 2001). 210. T.A. Enters., 931 So. 2d at 1017. 211. Fla. Const. art. V, § 4(b)(2). 212. Id. art I, § 21. 213. No. 86132, 2006 WL 350204 (Ohio Ct. App. Feb. 16, 2006). 214. Id. at *2 (quoting Battle v. Bill Swad Chevrolet, Inc., 746 N.E. 2d 1167, 1172 (Ohio Ct. App. 2000)). 215. Id. 216. Id. at *5. 217. Id. at *6. 218. 934 So. 2d 375 (Ala. 2006).

Recent Developments in Products, General Liability, and Consumer Law


claims against the manufacturer were “intimately . . . intertwined with” his claims against the dealer, with whom the plaintiff had signed an arbitration agreement.219 The doctrine of equitable estoppel allows a nonsignatory to enforce an arbitration provision when the claims against the nonsignatory are “intimately founded in and intertwined with” the underlying contract obligations.220 In order for the equitable estoppel exception to apply, the arbitration provision must be broad enough to indicate that the nonsignatory was contemplated as a party, such as when the provision covers all claims or controversies arising from or related to a contract.221 If, by contrast, the arbitration provision is party specific, then a nonsignatory lacks standing and cannot enforce the agreement to arbitrate.222 The arbitration provision in this case provided thus: “This Agreement is binding upon, and inures to the benefit of [Smith] and [Mark Dodge] and the officers, employees, agents and affiliated entities of each of them. . . .”223 The court focused on affiliated entities and found that the manufacturer was an affiliated entity of the dealership and therefore could invoke the equitable estoppel exception and enforce the arbitration agreement.224 3. Third-Party Beneficiaries Bound by Arbitration Agreement In Holman Dealerships, Inc. v. Davis,225 a Mississippi court of appeals held that third-party beneficiaries to an automobile purchase agreement were bound by the arbitration provision contained within the agreement.226 Plaintiff Vera Davis entered into an automobile purchase agreement to buy a car for her son and daughter-in-law, plaintiffs Paul and Catherine Davis.227 The arbitration clause in the agreement provided in part as follows: “This agreement is binding upon, and inures to the benefit of buyer/ lessee and dealer and the officers, employees, agents and affiliated entities of each of them. . . .”228 The dealership moved to compel arbitration as to the claims of Paul and Catherine.229 The court held that Paul and Catherine, as third-party beneficiaries to the purchase agreement, were affiliated entities under and thus bound by the mandatory arbitration provision.230
219. 220. 221. 222. 223. 224. 225. 226. 227. 228. 229. 230. Id. at 380. Id. (internal quotations omitted). Id. Id. at 381. Id. (italics removed from original). Id. at 382. 934 So. 2d 356 (Miss. Ct. App. 2006). Id. at 359. Id. at 356. Id. at 359. Id. at 358. Id. at 359.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

vi. restatement (third) of torts: products liability
A. Section 1: Liability of Commercial Seller/Distributor A New Jersey appellate court was asked to decide whether an individual who sold a glue-mixing machine was a “seller” under the state’s product liability statute.231 In its analysis, the court considered the exception under § 1 of the Restatement for “occasional” or “casual” sellers. The court held that occasional as used in the Restatement does not mean “once in a while,” but rather means “that the selling of the goods at issue is not part of the ‘purpose’ of the seller’s business under [the New Jersey product liability statute].”232 In Vaughn,233 the Supreme Court of Indiana noted that Indiana still follows § 402A of the Restatement (Second) of Torts, which allows a “user or consumer” of a product to recover for injuries caused by the product.234 Indiana has not adopted § 1 of the Restatement (Third), § 402A’s successor, which eliminates the user/consumer language and instead speaks of “persons” harmed by a defective product.235 B. Section 2: Design, Warning, and Manufacturing Defect A New York appellate court held that the consumer expectations test is not dispositive in a design defect case.236 The defendant, a cigarette manufacturer, moved for summary judgment on the basis that its cigarettes “were in a condition reasonably contemplated by the ultimate consumer.”237 The court rejected that argument, relying on comment g of § 2 as support:
[C]onsumer expectations do not constitute an independent standard for judging the defectiveness of product designs. . . . [W]hile disappointment of consumer expectations may not serve as an independent basis for allowing recovery under [the design defect theory], neither may conformance with consumer expectations serve as an independent basis for denying recovery. Such expectations may be relevant in both contexts, but in neither are they controlling.238

In Potter v. Ford Motor Co.,239 a Tennessee court of appeals rejected the application of § 2 to the extent that it requires a plaintiff in a design defect
231. Agurto v. Guhr, 887 A.2d 159 (N.J. Super. Ct. App. Div. 2005). 232. Id. at 163. The court did not decide whether the defendant qualified as an occasional seller, finding the record too “murky and contradictory” at this summary judgment stage. Id. at 164. 233. Vaughn v. Daniels Co. (West Virginia), Inc., 841 N.E.2d 1133 (Ind. 2006); see discussion supra part II.A.3. 234. Id. at 1140 & n.5. 235. Id. at 1140 n.6. 236. Tomasino v. Am. Tobacco Co., 807 N.Y.S.2d 603 (App. Div. 2005). 237. Id. at 605. 238. Id. (quoting Miele v. Am. Tobacco Co., 770 N.Y.S.2d 386, 391 (App. Div. 2003) (quoting Restatement (Third) of Torts, Products Liability § 2 (1998))). 239. No. E2005-01578-COA-R3-CV, 2006 WL 1698971 (Tenn. Ct. App. June 21, 2006).

Recent Developments in Products, General Liability, and Consumer Law


case to prove a practical, feasible alternative design was available. Although evidence of such an alternative design “will always be highly relevant,” the court reasoned, it is not always necessary for a plaintiff to recover.240 By contrast, an Iowa federal district court relied on § 2’s two-prong inquiry (foreseeability of risk and reasonably alternative design) in a case involving a lifting device.241 The court found that one of the defendants was aware of an alternative design but held that fact issues on the foreseeability question prevented summary judgment for the defendant.242 C. Section 3: Inference of Causation In Cooper Tire & Rubber Co. v. Mendez,243 the Texas Supreme Court reaffirmed that the mere fact of a product-related accident cannot lead to an inference of defect. Car accident victims and their relatives sued a tire manufacturer, claiming a manufacturing defect caused the treads on their vehicle’s tire to separate and led too an accident. The court first held that the plaintiffs offered legally insufficient evidence of a manufacturing defect because the testimony of their three experts should have been excluded.244 The court then considered whether the fact of the accident could, standing alone, be evidence of a manufacturing defect. Quoting § 3 of the Restatement (Third) of Torts, the court reasoned that causation could be inferred without proof of a specific defect only when the incident is of a “kind that ordinarily occurs as a result of a product defect” and when the incident is not the result of other causes “existing at the time of sale or distribution.”245 Although the court declined to decide whether § 3 reflects Texas law, the court stated that an inference of defect, as contemplated by § 3, would generally apply only to new products.246 Similarly, in Snell v. Bostrom Products Co.,247 the court refused to find a manufacturing defect in the driver’s seat of a truck simply because the seat failed. Before § 3 could apply, the plaintiff had to prove both that the incident was of a kind that ordinarily occurs as a result of a product defect and that the incident was not solely the result of causes other than the alleged product defect existing at the time of sale or distribution.248 The court granted summary judgment for the defendant because the plaintiff did not satisfy the second prong—“he presented no evidence to rule out
240. Id. at *3–4. 241. Conveyor Co. v. SunSource Tech. Servs., Inc., 398 F. Supp. 2d 992 (N.D. Iowa 2005). 242. Id. at 1004–05. 243. 204 S.W.3d 797 (Tex. 2006). 244. Id. at 801–07. 245. Id. at 807–08 (quoting Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004)). 246. See id. at 808 (quoting Ridgway, 135 S.W.3d at 601). 247. No. L-5865-00, 2005 WL 2654303 (N.J. Super. Ct. App. Div. Oct. 19, 2005) (per curiam). 248. Id. at *4.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

that the malfunctioning of the seat . . . was the product of wear and tear upon it, given its prior use and lack of maintenance.”249 At least two courts relied on § 3 to hold that the plaintiff may establish product liability even in the absence of the offending product. The plaintiffs in Moores v. Sunbeam Products, Inc.250 sued the manufacturer of a heating pad, claiming the pad malfunctioned and caused a fire that destroyed their home. The heating pad was destroyed in the fire. The court denied the defendant’s motion for summary judgment, concluding under § 3 that the plaintiffs had presented sufficient “circumstantial evidence of malfunction and a lack of evidence of other causes.”251 Although the defendant contended that a cigarette could have caused the fire, the court stated that it was required to view in the “light most favorable” to the plaintiff the plaintiff’s testimony that she did not smoke in the area where the fire originated.252 The court in Drooger v. Carlisle Tire & Wheel Co.253 cited § 3 for the proposition that a plaintiff may establish product liability in the absence of the offending product on the basis of expert testimony and other circumstantial evidence.254 The court “affirmatively reject[ed] a ‘no tire, no case’ rule in this case.”255 D. Section 5: Liability of Component Part Supplier for Defects in Integrated Products In Bearint v. Johnson Controls, Inc.,256 the Florida federal district court did not decide whether § 5 or the consumer expectations standard applied in a case in which the driver’s seat back collapsed in an accident, falling on the head of a baby in the backseat. Rather, the court held that summary judgment in favor of the seat manufacturer was inappropriate, regardless of which standard applied, because a “seat should be capable of daily wear without suffering a catastrophic seat failure during an accident.”257 It reached this conclusion despite its recognition that the defendant’s acts of working with the car manufacturer to integrate the seats did not constitute “integration” within the meaning of § 5(b)(1).258 The court in In re Parker Drilling & Offshore USA, L.L.C.259 incorporated § 5 in its analysis of strict liability design defect claims brought against
249. 250. 251. 252. 253. 254. 255. 256. 257. 258. 259. Id. at *5. 425 F. Supp. 2d 151 (D. Me. 2006). Id. at 157. See id. at 153 n.2. No. 1:05-CV-73, 2006 WL 1008719 (W.D. Mich. Apr. 18, 2006). Id. at *4. Id. No. 8:04-CV-1714-T-17MAP, 2006 WL 1890186 (M.D. Fla. July 10, 2006). Id. at *6. See id. at *5. No. Civ. A. 03-2611, 2006 WL 285602 (E.D. La. Feb. 3, 2006).

Recent Developments in Products, General Liability, and Consumer Law


a component parts manufacturer.260 The plaintiff sued over the failure of a rig and alleged a gear in the jacking system of the rig was at fault due to its defective design. The court concluded that summary judgment was inappropriate for the manufacturer where there was evidence that the gear was defective.261 An intermediate appellate court in Texas relied on § 5 in a marketing defect case brought by journeyman linemen against the manufacturer of a recloser, a component part installed in an electrical distribution system utilized by the plaintiffs’ employer.262 The plaintiffs, who were electrocuted while performing a construction project, claimed that the recloser manufacturer failed to warn of the risks associated with use of its product.263 But the plaintiffs also claimed that Entergy, the company they were working for as independent contractors, was negligent in using the recloser in more situations than those for which it was intended.264 The court granted summary judgment for the recloser manufacturer. It held that under comment b to § 5, the manufacturer’s duty to warn ran to Entergy, the sophisticated buyer of the distribution system.265 The court then reasoned that if Entergy inappropriately used the product, as the plaintiffs alleged, the manufacturer had no duty to warn Entergy that the product was inappropriate for that special, inappropriate purpose.266 In Messer Griesheim Industries, Inc. v. Eastman Chemical Co.,267 a Tennessee appellate court applied § 5 in denying summary judgment for a chemical manufacturer. It held that a genuine issue of material fact existed as to whether the manufacturer had “substantially participated in the integration of” its nonfood-grade product, which it knew contained cyanide, into the final product, which was intended for human consumption.268 And in AMP Plus, Inc. v. Texas Instruments, Inc.,269 the court explained that a component part manufacturer is not liable under § 5 if the manufacturer did not take part in the integration of the component into the finished product and if there is no evidence that the component itself is defective.270
260. Federal maritime law, which generally applies common law principles of products liability, governed Parker Drilling. Id. at *2. 261. See id. at *5–6. 262. Brocken v. Entergy Gulf States, Inc., 197 S.W.3d 429, 436 (Tex. App. 2006). 263. Id. at 433. 264. Id. at 434. 265. Id. at 436. Comment b provides thus: “[W]hen a sophisticated buyer integrates a component into another product, the component seller owes no duty to warn either the immediate buyer or ultimate consumers of dangers arising because the component is unsuited for the special purpose to which the buyer puts it.” Restatement (Third) of Torts, Products Liability § 5 cmt. b (1998). 266. Brocken, 197 S.W.3d at 436. 267. 194 S.W.3d 466 (Tenn. Ct. App. 2005). 268. Id. at 480. 269. No. Civ. A.3:04:CV2636-R, 2006 WL 522108 (N.D. Tex. Mar. 3, 2006). 270. Id. at *3.


Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

E. Section 6: Liability of Commercial Seller or Distributor of Prescription Drugs or Medicine The Maryland high court limited the applicability of the learned intermediary doctrine (discussed in comment b to § 6) in holding that a pharmacy may be held liable for injuries resulting from a patient package insert. In Rite Aid Corp. v. Levy-Gray,271 the plaintiff was prescribed doxycycline to treat Lyme disease.272 When the plaintiff filled the prescription, accompanying the medication was a pamphlet entitled Rite Advice, which Rite Aid described as “everything you need to know about your prescription.”273 The pamphlet told the patient to “[t]ake [the medicine] with food or milk if stomach upset occurs unless your doctor directs you otherwise.”274 The plaintiff took the pills with milk and other dairy products and was subsequently diagnosed with post-Lyme syndrome, which she alleged she developed because the milk reduced the absorption of the doxycycline.275 The court first held that Rite Advice constituted an express warranty, despite some general disclaimer language.276 Then the court rejected the learned intermediary defense, “declin[ing] to hold as a matter of law that the ‘learned intermediary doctrine’ precludes a pharmacy from being held liable for breach of express warranty when it provides a package insert that could provide the basis for such a warranty.”277 F. Section 19: Definition of Product A Connecticut trial court relied on § 19 to suggest that an aortic valve transplanted from a human cadaver into a living human is not a product for purposes of a products liability claim.278 Section 19(c) specifically excludes human blood and tissue from the definition of product, so the court hinted, although did not decide, that a human valve is not a product either.279

271. 894 A.2d 563 (Md. 2006). 272. Id. at 565–66. 273. Id. at 566. 274. Id. 275. Id. at 567. 276. Id. at 573. 277. Id. at 579. 278. Miller v. Hartford Hosp., No. X04MMXCV044003261S, 2005 WL 3667347 (Conn. Super. Ct. Dec. 22, 2005). 279. Id. at *2–3.

Sign up to vote on this title
UsefulNot useful