Special Issue || REPORT OF THE PRODUCTS, GENERAL LIABILITY AND CONSUMER LAW COMMITTEE

REPORT OF THE PRODUCTS, GENERAL LIABILITY AND CONSUMER LAW COMMITTEEAuthor(s): Sheila L. Birnbaum and Nicholas E. CalioSource: The Forum (Section of Insurance, Negligence and Compensation Law, American BarAssociation), Vol. 17, No. 1, Special Issue (1981), pp. 110-116Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/25762608 .

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REPORT OF THE PRODUCTS, GENERAL LIABILITY AND CONSUMER LAW COMMITTEE

This has been another active year for the Products General Liability and Consumer Law Committee. We had a successful Midwinter Meeting at the Hotel del Coronado in San Diego, California. Nearly seventy mem bers of the committee attended the meeting which was coordinated by Jim Orr. The highlight of the meeting was a luncheon address by The Honorable Sherman G. Finesilver, Judge of the United States District Court for the District of Colorado. Stanley M. Chesely and Albert H. Parnell discussed the problems of coordinating mass product liability litigation both from the plaintiff's and defendant's viewpoint. Hugh

Moore commented on the problem of identity of drug manufacturers in the DES litigations and the effects of the Sindell decision. Malcolm Rosow reviewed the controversy involving insurance coverage litigation over the interpretation of the term "occurrence" in connection with in

sidious diseases. Malcolm E. Wheeler reviewed the constitutionality of

punitive damage awards in product liability cases, and Edward P. Fahey discussed the problems of the manufacturers' continuing duty to warn and replace defective products. In addition to the formal program, there was an extensive give and take between all of the members of the committee who attended.

The Annual Meeting of the committee was an informative and excit

ing one. The program for the Annual Meeting discussed products and issues for the 1980s. The breakfast speaker was Malcolm E. Wheeler

(Los Angeles, California), and the morning program speakers were Rob ert Dickson (Santa Monica, California), Thomas A. Harnett (Hartford, Connecticut), Francis B. Burch, Jr. (Baltimore, Maryland) and Scott Baldwin (Marshall, Texas).

Our committee has taken on the responsibility of preparing an anno tation to the Comprehensive General Liability Policy. Arthur Leiderman is the Chairman of this annotation subcommittee and is hopeful that this annotation will be completed by 1982. This reference work should be extremely useful to the members of the Section.

We have continued to monitor the pending federal and state legisla tion and a review of much of that legislation was contained in past reports of the committee. On page 112 of this report, Nicholas E. Calio has reviewed the significant pending legislation and case law for 1980-81.

110



Products Liability and Consumer Law 111

I would like to thank all of the members of the committee and espe cially the vice-chairmen for their cooperation in making this year an

exciting and worthwhile experience.

Respectfully submitted, Sheila L. Birnbaum Chairman



112 THE FORUM

Significant Recent Developments in

Products Liability Law

By Nicholas E. Calio

The introduction of tort reform legislation at the state and federal levels in the past fifteen months underscores the continuing instability of prod ucts liability law. Eleven states enacted products liability reform mea sures in the twenty-four months prior to May, 1980.1 Subsequently, Idaho, Louisiana, Minnesota, Nebraska, and Vermont enacted or re vised products liability-related measures.2 In addition, a number of other states, as well as the U.S. Congress, have tort reform proposals under consideration.3

Despite all the state legislative activity, the most significant tort re form developments occurred in the United States Congress. Hearings in the House of Representatives on the UPLA4 resulted in the introduction of two comprehensive federal reform measures, H.R. 5626 and H.R.

7000,5 which proposed to make adoption of a uniform law by the States

mandatory.6 The "best" of these two bills was combined in H.R. 7921, the "Prod

uct Liability Act of 1980."7 H.R. 7921 addresses most major areas of

uncertainty in products liability law: design defect; failure to warn; product modification; statutes of limitation and repose; relationships between workmen's compensation and products liability; punitive dam

ages; and unavoidably dangerous aspects of products. The heart of H.R. 7921 is the provision ehminating negligence, strict

liability, and breach of warranty as theories of liability. Instead, the bill establishes a unitary cause of action embodying aspects of all three

1. See Ariz. Rev. Stat. ? 12-542; Ark. Stat. Ann. ?? 34-2801; 1979 Conn. Pub. Acts 79-483; Ind. Code ? 33.1-1.5; Ky. Rev. Stat. Ann. ? 411; N. H. Rev. Stat. Ann. ? 5-7-D:l; N.C. Gen. Stat. ? 99B; N.D. Cent. Code ? 28-01.1-01; R.I. Gen. Laws ? 9-1-31; S.D. Comp. Laws Ann. ? 20.0-9; Tenn. Code Ann. ? 23-3201.

2. Idaho Rev. Code ?? 6-401-6-405; La. Rev. Stat. art. 2323; Minn. Rev. Stat. ? 544.41; Neb. Rev. Stat. ? 25-224, ? 25-1151; Vt. Stat. Ann. ? 12-1036. The Idaho statute, which is modeled after the Uniform Product Liability Act (UPLA) drafted by the U.S. Depart

ment of Commerce, 44 Fed. Reg. 62.714 (Oct. 31, 1979), is the most significant state effort of the last year.

3. Tort reform proposals were considered or are still being considered in California, Colorado, Illinois, Kansas, New York, Ohio, Pennsylvania, Virginia, Washington, and Wisconsin. The Kansas Legislature also passed legislation modeled after UPLA. How ever, the Governor vetoed the bill.

4. See note 2, supra. 5. H.R. 5626, 96th Cong., 1st Sess. (1979); H.R. 7000, 96th Cong., 2d Sess. (1980). 6. H.R. 5626 was modeled in part on the UPLA. H.R. 7000 essentially introduced it

as federal legislation. 7. H.R. 7921, 96th Cong., 2d Sess. (1980).




theories. Significantly, strict liability is expressly eliminated in design and warning cases.

Other key sections of H.R. 7921 create rebuttable presumptions that

products complying with governmental standards or causing injury more than ten years after their sale are not defective. In addition, the bill

provides a framework for determining whether and in what amount

punitive damages should be awarded. The 1980 elections and budgetary matters interfered with considera

tion of H.R. 7921 in the Ninety-sixth Congress and hopes for its quick reintroduction in the Ninety-seventh Congress disappeared when the House Subcommittee which drafted it was dissolved.8 Nonetheless, a Senate Subcommittee, using H.R. 7921 as a starting point, requested comments from interested parties on federally imposed reform this

spring and is presently drafting a uniform tort bill for introduction later this year.9 Moreover, the Reagan administration has indicated that it

may support federally imposed reform. While the intent of the legislative efforts has been to stabilize prod

ucts liability law, the case decisions continue to be characterized by inconsistent decision-making and further expansion of product sellers'

liability. The most significant developments are found in cases involving the

drug DES10 in which claimants are unable to identify the specific maker of the drug ingested by their mothers. In the seminal DES case, Sindell v. Abbott Laboratories,11 the claimants alleged that all DES manufactur ers were jointly liable because they collaborated in marketing it.

The California Supreme Court rejected plaintiffs' "concert of action" and "enterprise liability" theories. However, it combined and extended

the two theories and held that a manufacturer's liability would be mea sured by its share of the market. In addition, the Court shifted the bur den of proof to defendants to prove that they could not have manufac tured the drug.12

In Bichler v. Eli Lilly & Co13 and Abel v. Lilly & Co.14 claimants were permitted to maintain suits against unknown manufacturers on

"enterprise" and "alternative" liability theories. On appeal, the Bichler court noted that the "classic" concert of action theory requires a show

ing of express or tacit agreement among tortfeasors. Nonetheless, it held

liability was justified if the actions of the defendant drug companies "consciously paralleled" each other.15

A New Jersey court fashioned its own version of the Sindell ruling 8. The House Consumer Protection and Finance Subcommittee drafted the bill and

had jurisdiction over products liability reform. 9. The Senate Subcommittee on Consumer of the Committee on Commerce, Science

and Transportation has jurisdiction over products liability reform. Jurisdiction in the House of Representatives lies with the Subcommittee on Health and Environment.

10. DES, which was formerly administered to pregnant women to prevent miscar riages, has been linked to cancer in individuals exposed to it in utero.

11. 163 Cal. Rptr. 132, 607 P.2d 924 (1980). 12. The U.S. Supreme Court refused to grant a certiorari in Sindell. 13. Index 15600/74, (N.Y. Bronx County Supreme Ct., July 16, 1979). 14. 289 N.W. 2d 20 (Mich. App. 1979). 15. 436 N.Y.S.2d 625 (App. Div., 1st Dept. 1981).



114 THE FORUM

and adopted the "alternative" liability theory on the identification issue in Ferringo v. Eli Lilly Co.,16 A Pennsylvania court also adopted the alternative liability theory which shifts to each defendant the burden of

proving it did not cause the harm in Erlich v. Abbott Laboratories 11

The far-reaching impact of these decisions is obvious, especially in

light of the increasing awareness of the long latency periods of many injuries. Still, courts in three recent DES cases refused to extend tradi tional tort principles.

In Namm v. Charles E. Frost and Co.18 sl New Jersey Appellate Court ruled that extending alternative liability or establishing enterprise liability in DES cases constituted too radical a policy shift to be taken

by an intermediate state appellate court; it should be made, if at all, by the legislative branch or the state supreme court. Similarly, the U.S.

District Court in Pay ton v. Abbott Laboratories19 held that traditional tort principles do not apply to DES cases and refused to fashion "novel

legal theories." On facts substantially similar to Bichler, the Pay ton court ruled that evidence of parallel behavior was not sufficient to pre vail on a concerted action theory and that identification of the drug manufacturer was necessary for recovery. Another U.S. District Court reached the same conclusion in Ryan v. Eli Lilly & Co.20

In another development which bodes ill for manufacturers, courts and

juries are awarding punitive damages in increasing numbers of cases without a corresponding increase in the clarity and consistency of their

decision-making.21 In Sturm, Ruger and Co. v. Day22 the Supreme Court of Alaska initially ruled that the trial court erred in failing to allow jury consideration of the claimant's comparative fault. It also held that the

jury's $2.9 million punitive damage award resulted from passion and

prejudice and should be limited to $250,000 if such damages were awarded after a retrial.23

The Alaska court reversed itself on rehearing, however.24 In a con

ceptually inconsistent opinion, the court concluded that plaintiff's com

parative negligence was the only issue that should be retried and en tered a $500,000 punitive judgment against Sturm, Ruger. The court failed to perceive the conceptual difficulty of awarding punitive damages prior to determining compensatory damages or considering plaintiff's own recklessness.

In other cases, the Wisconsin Supreme Court upheld an award of

16. 420 A.2d 1305 (N.J. Super. 1980) (Liability predicated upon share of market and "alternative" liability adopted for identification issue).

17. Philadelphia Court of Common Pleas, No. 4331, July Term 1976 (Feb. 2, 1981). 18. N.J. Super. Ct., App. Div. No. A-89-78 (March 16, 1981). 19. Civil Action No. 76-1514-S (D.C. Mass. April 23, 1981). 20. Civil Action No. 77-246 (U.S.D.C.S.C. May 13, 1981). 21. Space limitations allow consideration of only a sampling of these decisions. 22. 594 P.2d 38 (Alaska 1979). 23. The court based its decision on "a careful review of all the evidence and all the

factors which should bear upon this determination" and held that "if punitive damages are awarded at a second trial on essentially the same evidence . . . , they should not exceed $250,000."

24. 615 P.2d 621 (1980).




punitive damages in Wussow v. Commercial Mechanisms, Inc.,25 where the punitive claim was added after the statute of limitations had run and the claim for compensatory damages had already been settled. The Min nesota Supreme Court sustained a $1 million punitive damage award

against a textile company in Riegel Textile Corporation v. Gryc.26 The court ruled that the company's compliance with federally mandated

flammability standards for wearing apparel did not prevent the imposi tion of punitive damages. The United States Supreme Court refused to review the case.27 In Maxey v. Freightliner Corp.28 however, a federal court found that a company which followed industry custom in design ing a fuel tank for its trucks had exercised at least "slight care" and could not be assessed punitive damages.

Illinois Appellate Courts considered the parameters of the term "prod uct" as used in Restatement, section 402A in a series of cases. In Elgin Airport Inn, Inc. v. Commonwealth Edison Co.,29 the court found that

electricity is a "product" which may be "unreasonably dangerous" for

purposes of strict liability.30 Another Illinois court considered whether strict liability applies to living things in a suit brought by a purchaser of female pigs. The court in Anderson v. Farmer Hybrid Co.,31 held that

living creatures are not "products" under section 402A. The same court ruled that an unfinished roadside guardrail was not a product for strict

liability purposes,32 while the Illinois Supreme Court held in Dubin v Michael Reese Hospital that x-rays are not a "product."33

An increasing number of jurisdictions are permitting evidence of alternate designs and subsequent modifications of allegedly defective

products in strict liability cases. The Alaska Supreme Court held in Cat

erpillar Tractor Co. v. Beck34 that evidence of the character of a product, as reflected in subsequent modifications, is probative and not excludable on relevancy grounds under strict liability. In reaching the same con

clusion, the courts in Caprara v. Chrysler Corporation35 and Brown v. Michael Business Machines36 added that admissibility of such evidence was justified to protect consumers in a sophisticated mass market. A

contrary conclusion was reached in Werner v. Upjohn Co.37 which con sidered subsequent improvements in warnings.

25. 293 N.W.2d 897 (Wis. 1980). 26. 297 N.W.2d 727 (Minn. 1980) (severe burn injuries resulted from pajamas catch

ing fire over stove). 27. In a related decision, the court in Dawson v. Chrysler Corp., 630 F.2d 950 (3d

Cir. 1980), ruled that an auto manufacturer's compliance with federal auto safety standards does not relieve the company of common law liability.

28. 623 F.2d 395 (5th Cir. 1980). 29. 410 N.E.2d 620 (111. App. 1980). 30. See also Ransome v. Wisconsin Elec. Power Co., 275 N.W.2d 641 (1979); Hedges v.

Public Util. Service Co. of Indiana, Inc., No. 1-479 A 122 (Ind. Ct. of App., First Div., 1979).

31. 87 111. App. 3d 493 (1980). 32. Maddan v. R.A. Cullinan and Son, Inc., 412 N.E.2d 139 (111. App. 1980). 33. 415 N.E.2d 350 (111. 1980). 34. 593 P.2d 871 (Alaska 1981). 35. 436 N.Y.S.2d 251 (1981). 36. 428 N.Y.S.2d 148 (1980). 37. 628 F.2d 848 (4th Cir. 1980).



116 THE FORUM

A federal court interpreting Illinois law38 and another interpreting Pennsylvania law39 held that a purchaser of a product may not recover for economic loss under strict liability. However, another federal court

interpreting Kentucky law found that economic loss is compensable under strict liability.40

38. Jones & Laughlin Steel Corp. v. Johns-Mansville Sales Corp., 626 F.2d 280 (3d Cir. 1980).

39. Pennsylvania Glass & Sand Corp. v. Caterpillar Tractor Co., 496 F. Supp. 712 (M.D. Pa. 1980).

40. Hardly Able Coal Co. v. Int'l Harvester Co., 494 F. Supp. 249 (N.D.E.D. 111. 1980).



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Special Issue || REPORT OF THE PRODUCTS, GENERAL LIABILITY AND CONSUMER LAW COMMITTEE