978-0077733711 Chapter 20 Lecture Note

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Chapter 20 – Product Liability

CHAPTER 20

PRODUCT LIABILITY

I. OBJECTIVES:

This chapter is designed to acquaint students with the main theories of product liability recovery

and the various collateral problems those theories present. After finishing with the material in

this chapter, the student should: 1) understand the basic theories of product liability recovery; and

2) know how related problems such as damages, the no-privity defense, disclaimers, and defenses

are handled under each theory. The chapter organization reflects this statement of aims. First, the

theories of recovery and their elements are discussed in a buyer–seller context without the

introduction of extraneous issues. Then, the problems that cut across each theory are discussed

one-by-one. (See also the Learning Objectives that appear near the beginning of the chapter.)

II. ANSWERS TO INTRODUCTORY PROBLEM:

A. Negligence and strict liability.

B. Negligence elements: duty; breach of duty; and causation of injury. Strict liability

elements: seller engaged in business of selling product; product both defective and

unreasonably dangerous; injury to user of product. Note that in the second Vioxx

case to go to trial (in the fall of 2005), the jury ruled in favor of Merck and against a

plaintiff who had used Vioxx for only a short period of time. Merck also prevailed in

a number of the next several cases. Eventually, however, as the introductory problem

points out, Merck rethought its strategy and decided to set up a settlement fund rather

than litigating case after case.

C. Punitive damages aren’t routinely awarded on top of compensatory damages in

product liability cases. When punitive damages are awarded, however, they

sometimes help make the case more likely to be reported on by the media. In order

for punitive damages to have been assessed against Merck in the Ernst case, the

plaintiff would have had to prove that Merck displayed a conscious disregard for the

safety of Vioxx users (i.e., a different and greater showing than would have been

necessary to sustain an award of compensatory damages on negligence or strict

liability grounds).

D. Perhaps utilitarians, with their focus on the greatest good for the greatest number,

would be less inclined than a rights theorist to say that the manufacturer has an

ethical duty to warn in the circumstances asked about in the introductory problem.

III. SUGGESTIONS FOR LECTURE PREPARATION:

A. Introduction

1. The chapter’s introductory paragraph is intended to show that product liability can be a

controversial area and that one’s views about the subject often depend on where one sits.

It also shows that product liability is not just a consumer matter.

2. Make sure that students understand what this chapter is about: civil recoveries for

defective goods (and not direct state or federal product safety regulation).

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Chapter 20 – Product Liability

3. The text’s description of how social and economic conditions help account for the great

changes that have occurred in the product liability area might be discussed in a

broad-brush fashion, or even assigned as reading. Emphasize, however, that these

changes didn’t just happen. Also, emphasize the modern socialization-of-risk strategy

and the problems it has come to create. Note that some observers attribute the “crisis” to

the product liability explosion, whereas others primarily blame it on the insurance

industry.

4. Note that in response to the perceived crisis, some states have begun to limit product

liability recoveries in various ways. The main examples discussed later are caps on

noneconomic losses, limits on punitive damages, statutes of repose, and useful safe life

defenses. Note also the continued failure of reform efforts at the federal level. You

might speculate about the political reasons for this failure, and about recent indications

that the prevailing political winds may be showing signs of shifting.

5. Emphasize how the chapter is organized. The main reason for this organization is to

facilitate theory-by-theory comparisons regarding subjects such as damages, privity,

disclaimers, and the like.

B. Express Warranty

1. Before getting into express warranties, you probably should define the term “warranty,”

state that warranties may be express or implied, and emphasize that in warranty cases the

buyer sues for breach of the seller’s express or implied contractual promise.

2. Describe the three ways that a seller–any seller, merchant or not–may create an express

warranty. Give examples of each of the three. (Note that the first and second categories

almost certainly overlap.) Briefly observe that technical words are no longer required,

and no specific intention to make a warranty is needed. You also might note that of the

warranty theories, the express warranty most resembles our ordinary notion of contractual

liability. Here, though, the definition of the term “express” extends beyond promises

made in words, because § 2-313 allows an express warranty to be created by giving a

sample or model. Problems #1 and #2 deal with express warranty creation issues.

3. Discuss the general rule that statements of value, opinion, or sales talk are not express

warranties. Why does this rule exist? The possibilities include: 1) that no reasonable

buyer should rely on such utterances; 2) that such statements make it difficult to

determine whether a breach has occurred or what damages should be awarded; 3) that the

rule is just a concession to the interests of sellers, who use such statements to induce sales

but have no desire to be bound on them; and 4) the flood of litigation that might ensue if

such statements create express warranties. Also, emphasize that the line between such

statements and express warranties is unclear, and discuss the factors courts use to resolve

close cases.

4. Discuss the ambiguous “basis of the bargain” test. Note that by now some courts have

said that it imposes no causation requirement. The other two versions of the test probably

disagree only about the degree of causation they require. The test matters principally in

cases where the buyer read or heard an advertisement or other express statement well

before the sale, and it is thus unclear whether the warranty was a factor in inducing the

sale. Also, the test blocks at least some claims based on warranties made after the sale.

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5. The material on multiple express warranties can be deleted by instructors with time

problems. In addition to §§ 2-317(a) and (b), the content of which receive discussion in

the text, § 2-317(c) says that express warranties displace inconsistent implied warranties

other than the implied warranty of fitness for a particular purpose. We have omitted this

part of §2-317 because of the confusion it generates. In particular, it is unclear how this

provision interacts with the implied warranty disclaimer provisions in § 2-316.

6. Royal Indemnity Co. v. Tyco Fire Products, LP (p. 553): The Supreme Court of Virginia

holds that a description of a product in a technical data sheet did not constitute an express

warranty as to future performance.

Points for Discussion: Why was the plaintiff so eager to have the court conclude that

there was an express warranty as to future performance? (Because there was a statute of

limitations problem unless any express warranty in the case extended to future

performance.) Why didn’t the technical data sheet create an express warranty as to future

performance? (Because all it did was describe the sprinkler head and how it worked. It

said nothing about performance into the future. Plus, the court noted that it was not clear

that anything in the data sheet became part of the basis of the bargain. Finally, the court

noted that a separate provision set forth a one-year express warranty against defects in

materials and workmanship. It would be illogical, therefore, to conclude that the data

sheet somehow created a broader future performance warranty of an unlimited duration. )

Could the data sheet have created some sort of express warranty? (Sure. For instance, an

express warranty that the sprinkler heads would have the parts represented, etc. But that’s

different from a warranty of future performance, which wasn’t present here.)

C. Implied Warranty of Merchantability

1. Emphasize that implied warranties are created by operation of law, are not based on the

seller’s genuine assent, and are not especially “contractual” in the traditional sense of the

term. Rather, they are imposed to protect buyers, and reflect the decline of nineteenth

century notions of contract.

2. Emphasize that our first implied warranty, the implied warranty of merchantability,

applies only when the seller is a merchant. Also, as the hardware store owner example in

the text suggests, the defendant must be a merchant with respect to goods of the kind at

issue in the case.

3. In defining merchantability, emphasize the key requirement: that the goods be fit for the

ordinary purposes for which such goods are used. This generally boils down to a

“reasonable consumer expectations” test. Stress that such a broad and flexible test is

inevitable given the wide range of products sold today and the wide range of defects they

can present.

4. Emphasize that the goods need not be perfect to be merchantable. Examples: Problem #3

and the Crowe case (commented on below). See also Problem #5.

5. Provide examples of the merchantability standard’s application, using scenarios similar to

those in the text. Note that courts sometimes compare the product at issue to other

products in the trade or consider state and federal product safety regulations when trying

to pump some content into the merchantability standard. Problems #4 and #14 involve the

warranty’s application in the contaminated food context. For still other implied warranty

of merchantability examples not already noted, see Problems #9 and #10.

Margaret Oakes v. Carrabba’s Italian Grill, LLC, 10 WL 2696631 (D. Nev. 2010)

(p.555). Plaintiff sustained an injury while eating mussels at Carrabba’s in May of 2007.

Plaintiff, while eating the mussels, swallowed a shell fragment and sustained injuries that

required two separate surgeries to remediate. She filed suit for (i) negligence (ii) breach

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of the implied warranty of merchantability and (iii) strict liability. Carrabba’s moved for a

summary judgment; the court denied the motion on all three causes of action.

Points for Discussion: The court discussed the summary judgment motion in terms of

each cause of action.

For the negligence claim, the court stated that whether or Carrabba’s was

negligent in removing the shell fragment was a factual question, thereby denying the

summary judgment motion.

The breach of implied warranty of merchantability was analyzed under three

potential tests: (a) the foreign natural test, (b) the consumer’s expectation test, and (c) the

hybrid test. The foreign natural test determines what is “merchantable” by holding a

restaurant liable for serving food that contains a substance foreign to the type of food. For

the consumer’s expectation test, if it is unreasonable for the consumer to expect the

substance to be in the dish, the restaurant will be held liable. Lastly, the hybrid test

incorporates both the foreign natural and consumer’s expectation tests: if the substance is

foreign to the food served, then the trier of fact must subsequently decide whether the

presence of the substance (i) could be reasonably expected by the average consumer and

(ii) the substance rendered the food unfit for human consumption. The court held that,

regardless of the test used, the presence of a shell fragment which allegedly made the dish

unmerchantable is an issue of fact, thereby denying the summary judgment motion.

The prima facie case for strict liability is that the injuries were sustained due to a

defect in the product and that defect existed when the product left the defendant’s control.

The tests for “defect” were identical to the three proposed for the implied warranty of

merchantability. Therefore, the question was that of fact, which vitiated the summary

judgment motion.

D. Implied Warranty of Fitness for a Particular Purpose

1. Discuss §2-315’s requirements. Examples: Problems #5 and #10.

2. Unlike the implied warranty of merchantability, any seller may make this implied

warranty if the necessary requirements are met. Also, note that the two implied

warranties can overlap in situations where the goods are fit neither for the buyer’s

particular purpose nor for their ordinary purpose. Sleeping bags (buyer requests bag be

good down to minus 20 degrees) and hiking boots (novice mountain climber requests

suitable boots) are other possible examples to complement the hammock example in the

text.

3. Moss v. Batesville Casket Co. (p. 557): The Mississippi Supreme Court affirmed the

lower court’s judgment that the partial decomposition of an interred casket did not violate

the implied warranties of merchantability and fitness for a particular purpose.

Points for Discussion: Suppose that the bottom of the casket had fallen out as it was

being exhumed, and that plaintiffs had seen the decomposed body hit the ground. Would

that give rise to a better claim? No. The parties still would not have established any

particular purpose to be fulfilled, and the ordinary purpose would still be for the casket to

hold together up to the point of burial. As there was no contractual obligation to keep the

casket together when it was exhumed two years later, the additional emotional trauma to

plaintiffs would have been beside the point. Suppose, though, plaintiffs had sued on a

negligent design theory. The result is probably the same, but why? One argument, which

tracks the warranty argument pretty closely, is that the exhumation of the casket was

unforeseeable, and that the casket company therefore no longer owed a duty at that point.

But given that exhumations are not so uncommon, non-foreseeability is arguable.

Another argument for Batesville Casket is that even if the exhumation were foreseeable,

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Chapter 20 – Product Liability

the benefits of a less-expensive design would have outweighed the risks of decomposition

upon exhumation. Finally, Batesville Casket could argue that the injury to plaintiffs was

merely emotional, and that the requisite “impact” required for an emotional distress claim

had not occurred (to which plaintiffs could argue, spuriously, that they had been

“bystanders” to the “injury” of a third party; see Atlantic Coast Airlines v. Cook, a

Chapter 7 text case).

E. Negligence

1. Begin by listing all the possible ways in which there may have been a breach of duty for

purposes of a product liability claim based on negligence. Negligence per se is also a

possibility if the seller violates, for instance, a product safety or pure food statute or

regulation.

2. Regarding the manufacturer’s improper construction or inspection, you might note that

the product’s failure to conform to the manufacturer’s own specifications will often be

useful to plaintiffs.

3. Go through the general rules regarding the middleman’s duty to inspect. Note how

burdensome to retailers a tougher duty standard might be in this context. Note the more

stringent duty standard to which those who prepare, install, or repair goods are subject.

Often, the relevant duty is a duty to spot those defects that would be reasonably apparent

given the preparation, installation, or repair work the seller actually does. Example: a

new car dealer might be expected to spot a brake problem that is reasonably apparent

from the “dealer prep” dealers supposedly perform, but not to spot a serious latent defect

in the brakes. (By the way, those who sell used goods are usually subject to a tougher

test–often, a general duty to spot reasonably apparent defects. For an example, see Wilke

v. Woodhouse Ford, Inc., a text case discussed in the later section dealing with

disclaimers. )

4. Failure-to-warn cases present many and various issues, issues that can only be discussed

summarily in a text such as this one. Tell students that: 1) the area is complex; 2) it is

important to distinguish between the question of whether a warning is required and the

question regarding the kind of warning necessary; 3) courts consider various factors in

these cases; and 4) this discussion generally carries over into the 402A context. Discuss

the factors considered in failure-to-warn cases.

5. Most of what was said above regarding failure-to-warn cases also applies to design defect

cases. Note that such cases often involve a more or less conscious cost-benefit analysis.

Problems #7, #8, and #10 are examples. For a case in which the plaintiff unsuccessfully

brought negligent failure-to-warn and negligent design claims, see Problem #6. In

addressing that case, ask whether the court’s analysis might have been different if the

injured party had been a small child. You might note, also, that the safety feature whose

absence gave rise to the plaintiff’s unsuccessful complaint in that case is now a common

feature in automobiles. Finally, see the later discussion of Green, a text case that appears

in the section on comparative fault in the product liability setting. That case includes

consideration of “crashworthiness” issues in regard to motor vehicle design.

6. Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th Cir. 2012) (p. 560). Through a myriad

of amended complaints within the district court and appellate court, the Plaintiffs filed a

class action lawsuit alleging that HP concealed a design defect in its laptops that occurred

after the expiration of the warranty and violated California’s Consumers Legal Remedies

Act (“CLRA”) and Unfair Competition Law (“UCL”). The district court denied the

claims due to Plaintiff’s failure to sufficiently allege HP’s knowledge. The appellate court

affirmed.

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Points for Discussion: The UCL makes it unlawful for a person to engage in “unfair

competition,” which is defined as “any unlawful, unfair, or fraudulent business practice . .

. .” Plaintiffs argue that HP’s omission [i.e., failure to warn] of the potentiality of laptop

failure was common law fraud. Although Plaintiffs did not address the unfair or

fraudulent prongs, the court went on to address them. The CLRA prohibits persons from

misrepresenting the quality or standard of the products.

The court applied the duty to disclose in the context of both the UCL and CLRA.

The court stated that there is a general reluctance to require employer’s to disclose

beyond the statements made in the express warranty’s and stated that the policies

underlying this tendency uphold the viability of express warranty’s. That, if courts

required broad disclosure by company’s, express warranty’s would no longer have any

effect, saying “[u]nder a contrary rule . . . the ‘[f]ailure of a product to last forever would

become a “defect” . . . .’”

The court stated that because Plaintiffs were alleging a concealed defect, that

they were required to allege that the defect caused an unreasonable hazard. The court held

that the claim lacked a requisite causal nexus between the alleged defect and the

unreasonable hazard. Furthermore, the plaintiffs failed to prove that HP had knowledge of

the defect. Therefore, the appellate court affirmed the judgment of the district court.

7. See Problems #8 and #9, which address both negligent design and strict liability issues.

F. Strict Liability

1. Although there are other versions of strict liability in the product liability area, our

discussion is mainly limited to § 402A.

2. Discuss the policies underlying the rise of strict liability in the product liability context.

You might refer back to the general discussion at the beginning of the chapter.

3. Emphasize the obvious point that § 402A is a strict liability theory and what this means:

no need to prove a breach of duty or some other kind of fault.

4. Stress that 402A applies only to merchant-like sellers regularly selling goods of the kind

at issue in the case.

5. Note that 402A’s “defective condition” requirement resembles the general test for

non-merchantability. Also note how 402A’s requirement of unreasonably dangerousness

narrows 402A liability (as compared with, for example, implied warranty of

merchantability liability).

6. Note the text’s brief discussion of comment k to §402A. Add that a warning provided by

a “learned intermediary” such as a physician normally will satisfy comment k.

7. Mention the problem 402A poses for middlemen, referring back to the negligence rules

governing the middleman’s duty to inspect, and also note that some states have addressed

the problem. One possibility is to let the middleman off the hook in cases where the

manufacturer is subject to service of process in the plaintiff’s home state and any

judgment against the manufacturer would be reasonably certain of being satisfied.

8. Emphasize that failure-to-warn and design defect cases can be brought under 402A and

that the factors considered in those cases often resemble those considered in negligence

cases (despite 402A’s technical status as a strict liability provision). Examples: Problems

#8, #9, and #10.

9. Note the European Union’s use of a strict liability approach in appropriate cases. See the

Global Business Environment box at p. 565.

G. The Restatement (Third)

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1. How widely has the new Restatement been adopted? Our perception is that even though

it is quoted quite a bit and courts often decide in accordance with its provisions, relatively

few courts have come out and said (in effect): “we really like this new Restatement

(Third) rule and we specifically adopt it in this state, just as we did for 402A.” It seems

fairly likely that courts will increasingly fold Restatement (Third) concepts into the

existing negligence and strict liability models, rather than announce a formal scrapping of

the old labels. The Branham case, discussed below, furnishes an example. What should

you do with the new Restatement? You may want to assign it as reading material, with

little in-class coverage, or you may wish to treat it in class just as you would negligence

and 402A.

3. The Restatement (Third) can’t be regarded as solely a “strict liability” body of rules. For

example, its focus on reasonableness and foreseeability in design defect and failure-to-

warn cases comes close to calling for the use of negligence principles (even though the

Restatement (Third)’s rules do not use the term “negligence”).

4. Go through the new Restatement‘s basic rule (section 1). Note that it applies only to

merchant-type sellers and that it drops 402A’s requirement of unreasonable

dangerousness. The latter change, however, probably only matters in manufacturing

defect cases.

5. Section 2 of the new Restatement fleshes out section 1 by defining three different kinds

of defects. Section 2’s rules for manufacturing defects seem to contemplate what is

basically a strict liability approach, but without the requirement of unreasonable

dangerousness. In failure-to-warn cases, foreseeable risks of harm must be taken into

account when liability (or lack thereof) is determined. Such cases therefore may, under

section 2, resemble negligence cases. Section 2 requires that in design defect cases, the

plaintiff must show that a reasonable alternative design was possible at the time of the

sale. What is a reasonable design? This question (and the question of the product’s

safety without such a design) requires consideration of many of the same factors

discussed earlier.

6. Branham v. Ford Motor Co. (p. 567): The Supreme Court of South Carolina holds that

the risk-utility test is the controlling one in defective design cases, whether brought on

negligence grounds or on strict liability (402A) grounds. In so holding, the court borrows

from the approach set forth in the Restatement (Third). The court also holds that post-

distribution evidence should not have been admitted at the trial, because the focus in

design defect cases is on information known as of the time the product was released into

the stream of commerce.

Points for Discussion: Have a student summarize the basic facts of this dispute over the

design of the Bronco II. Note that the edited version of the court’s opinion includes

extensive discussion of the expert testimony that was offered. A considerable amount of

detail was included in the edited version in order to give students a feel for what is

actually presented at trial in product liability cases. In concluding that the risk-utility test

controls in defective design cases, what test did the court reject? (The reasonable

expectations of the consumer test, which the court finds far less helpful than the risk-

utility test.) Why does the court adopt the risk-utility test? (Its balancing of relevant

considerations and its requirement that a reasonable alternative design be shown do a

better job of getting to the heart of design defect cases.) What else influences the court in

that regard? (The Restatement(Third) approach, from which the court borrows even

though it is deciding the case under 402A and under negligence principles. Thus, the

court doesn’t reject 402A in favor of the Restatement (Third). Rather, the court uses the

Restatement (Third) as a way of informing the 402A analysis.) Finally, ask the students

why the court concludes that post-distribution evidence should not have been allowed.

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7. The Ethics in Action box at p. 572 addresses various legal issues that arise in lawsuits

against tobacco companies, as well as ethical issues that may attend the production and

sale of products that may harm users’ health. The questions set forth in that box should

provide fodder for spirited class discussion.

H. Other Theories of Recovery. The material in this section is optional and can probably be

omitted by instructors with limited time. Note that except for one reference to Magnuson-

Moss, these theories are not mentioned in the remainder of the chapter. Other aspects of

Magnuson-Moss are discussed in Chapter 48. The misrepresentation material comes from the

Restatement (Third). Because of the subject’s inherent complexity, uncertainty, and

susceptibility to change, the “industry-wide liability” discussion was deliberately left very

general.

I. Timing Problems.

1. Briefly explain the Code and tort statutes of limitations and how they operate. State why

the tort statute of limitations is likely to be more advantageous for the plaintiff. Also,

UCC § 2-725 states that the statute begins to run when the defect is discovered or should

have been discovered if the warranty explicitly extends to future performance of the

goods, and discovery of the breach must await the time of such performance. It isn’t clear

just when this provision applies; perhaps the giving of a “lifetime” warranty is an

example.

2. Briefly run through the various other timing limitations noted in the text. For instructors

with time problems, this is an obvious place to cut.

J. Damages

1. In its discussion of Code damages, this section necessarily anticipates the privity

discussion that follows shortly. Of course, privity was introduced at a general level

earlier in the chapter.

2. Basis of the Bargain Damages

a. Note that these involve the “lost value” the plaintiff did not receive because of the

defect, and that their aim is to put the plaintiff in the economic position he would

have occupied had the product not been defective. Which product liability theories

do and don’t permit recovery for such economic losses? That question lies at the

decision in Giddings & Lewis, a text case discussed below.

b. Identify the theories under which such damages are recoverable. Note that they

usually are not obtainable in Code cases outside privity, but also note the express

warranty exception stated in the text. Note also that damages questions will recur in

the next section’s discussion of UCC § 2-318.

c. Giddings & Lewis, Inc. v. Industrial Risk Insurers (p. 574): The Supreme Court of

Kentucky holds that the economic loss rule bars recovery of damages for harm to the

defective product itself if the plaintiff is using on a tort (negligence or strict liability)

theory. Such damages are recoverable only on a breach of warranty theory. In

product liability cases brought on a tort theory, the relevant damages are for personal

injury and property damage (meaning damage to other property, as opposed to

damage to the malfunctioning goods themselves).

Points for Discussion: Have a student summarize the basic facts. Note what we have

here: a defective product (the system) that damages itself when it malfunctions,

making costly repairs necessary. As what damages the plaintiff seeks and doesn’t

seek (economic loss damages to allow for the fact that the precut was defective, as

opposed to personal injury damages or damages for harm to other property). Why

does the plaintiff hope to convince the court that economic loss damages should be

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allowed even when the case is brought on a tort theory? (Because the statute of

limitations on breach of warranty claims has expired. If restricted to warranty claims,

the plaintiff will therefore lose.) Why does the court adopt the economic loss rule,

which holds that such damages aren’t recoverable under tort theories? (Because tort

theories are designed for other sorts of damages; because economic loss damages

typically arise out of a contract; because the warranty theories are contract-based

theories designed to deal with economic loss; because allowing economic loss

recoveries under tort theories would undermine contract/warranty principles; and

because most jurisdictions have adopted the economic loss rule.

3. Consequential Damages

a. Describe the various kinds of consequential damages, all of which are somewhat

more remote consequences of the defect than basis of the bargain damages. Note that

noneconomic loss is here considered an aspect of personal injury. Note also that

some states are limiting noneconomic loss recoveries by capping them.

b. Following the text, state the theories under which each kind of consequential

damages is recoverable. Note that under the Code the nonprivity plaintiff is likely to

recover for personal injury, fairly likely to recover for property damage, and very

unlikely to recover for indirect economic loss. Also note, however, the possibility

that a plaintiff lacking privity may not be able to recover anything under the UCC,

even if she suffered personal injury. This possibility exists because of the language

of § 2-318 and the factors stated in the next section. Indirect economic loss

recoveries are also unlikely in negligence and strict liability, although personal injury

and property damage normally are recoverable under these theories.

4. Punitive Damages

a. Describe punitive damages and note their two main rationales: deterrence and the

simple desire to enact retributive punishment on defendants whose behavior was

especially outrageous. Note the general tests used to determine their availability.

The states, of course, have been busy regulating punitive damages over the past two

decades. The details are largely beyond the scope of this text.

b. Identify the theories under which punitive damages are awarded–mainly, of course,

tort theories.

5. You might conclude by noting that potentially all the types of damages discussed could

be present in one claim. For example: after buying some defective chemicals for use in

his business, the owner of the business is injured and suffers pain and suffering after the

chemicals explode, watches the explosion cause damage to property used in the business,

and loses profits because the business is shut down for a time. Of course, punitive

damages might also be recoverable under the conditions stated in the text.

K. The No-Privity Defense

1. In discussing this material, it is probably useful to refer to an illustrative distributional

chain. Be sure to include both vertical and horizontal parties.

2. Begin by restating the traditional defense and noting its gradual demise. You also may

want to refer back to the beginning of the chapter and suggest the social and economic

factors that help account for the demise.

3. Note that the traditional defense has no vitality in 402A and (because reasonable

foreseeability tends to be broadly construed) negligence cases. The Restatement (Third)

seems not to have a privity provision, and its causation rule just kicks us to general tort

principles, which probably means reasonable foreseeability.

4. Privity, however, continues to be a problem under the UCC.

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a. Note that § 2-318 is supposedly the controlling provision and (if you have time) work

through its three versions.

b. Emphasize, however, that for the reasons stated in the text, it is doubtful how often

the literal language of 2-318 controls.

c. Next, suggest that out of the confusion generated by the many decisions on the

subject, three factors help explain the courts’ results: (1) the foreseeability that harm

will result from the particular defect (2-318 says much the same thing); (2) the status

of the plaintiff (consumers tend to be protected and alternatives A and B only protect

natural persons); and (3) the type of damages sought. Regarding the last factor, the

hierarchy is: (1) personal injury, (2) property damage, (3) basis of the bargain

damages, and (4) indirect economic loss. As noted above, however, the other two

factors may prevent any recovery at all in some cases.

Then, you might use some simple examples of polar cases to illustrate how these

factors can work: e.g., large corporation suffering unforeseeable indirect economic

loss versus consumer suffering highly foreseeable personal injury. See Problem #15.

d. Finally, you might note that as the damages discussion suggests, the plaintiff may be

more likely to recover outside privity in express warranty cases of the types described

in the text. But this whole area is sufficiently confusing to make this additional detail

of questionable usefulness.

e. Jamison v. Summer Infant (USA), INC, 778 F.Supp.2d 900 (N.D. Ill. 2011) (p. 578).

Plaintiffs alleged a violation of the Magnuson–Moss Warranty Act through a breach

of implied warranty of merchantability due to the fact that her baby monitor was

broadcasting live video from her child’s bedroom.

Points for Discussion: The Plaintiffs first argued that the monitors were not fit for

their ordinary purpose, thereby rendering them unmerchantable. To be merchantable,

the goods must “ ‘pass without objection in the trade under the contract description’;

‘[be] fit for the ordinary purposes for which such goods are used’; and ‘conform to

the promises or affirmations of fact made on the container or label if any.’” The court

held that plaintiffs’ claim was sufficient, thereby vitiating a 12(b)(6) motion.

The Defendants correctly argued that the plaintiffs lacked the requisite

privity. Although state law is applied under the Magnuson–Moss Act, and although

Illinois allows broad application of privity concepts, the court held that the plaintiffs

were not privy to Summer Infant. The court held that although Summer Infant made

an express warranty, it was not the immediate seller to the plaintiffs. Furthermore, the

court rejected an agency argument, which attempted to create privity through an

agency relationship between Toys R’ Us and Summer Infant.

L. Disclaimers and Remedy Limitations

1. First, distinguish between disclaimers and remedy limitations. Note that this distinction

may make a difference in Code cases because different Code sections govern each type of

limitation. The court in Problem #11, however, wasn’t much concerned with this

distinction in making its unconscionability determination.

2. Discuss the policies for and against the enforcement of disclaimers and remedy

limitations. The point that products sold with such clauses are apt to be cheaper than

other goods can be made by saying that the choice is between products sold with or

without an “insurance policy” (the recovery right the disclaimer could block). Suggest

that the arguments for enforcing disclaimers and limitations are stronger where genuine

bargaining and genuine buyer choice occur, and that these are generally absent in

consumer cases. Ask the class how often they try to read disclaimers or bargain over

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Chapter 20 – Product Liability

them. Does anybody do this?

3. Implied Warranty Disclaimers

a. Spend some time on the basic (and usually fairly mechanical) tests set by UCC §§

2-316(2),(3), and (4). Note that §§ 2-316(3) and (4) basically supplement §2-316(2)

by providing additional ways to disclaim.

b. Then note that, taken as a whole, these tests seem to make it fairly easy for sellers to

disclaim implied warranty liability. But then emphasize that this picture is

misleading, because: 1) courts sometimes declare implied warranty disclaimers

unconscionable (especially in consumer cases involving personal injury), and 2) the

Magnuson-Moss Act generally restricts implied warranty disclaimers in consumer

cases where the seller has given a written warranty. On the unconscionability point,

everything depends on the facts of the case, but the generalizations in the text should

hold up much of the time. (Chapter 15 provides a bit more detail on the factors courts

consider.) See, however, Wilke (a text case discussed below).

c. The Magnuson-Moss Act severely limits the enforceability of implied warranty

disclaimers where the seller of consumer goods to a consumer gives a written

warranty on a consumer product.

d. Problem #11 provides a general review of much of the material regarding implied

warranty disclaimers.

e. Wilke v. Woodhouse Ford, Inc. (p. 581): The Supreme Court of Nebraska holds that

an implied warranty of merchantability disclaimer that is consistent with the statutory

language set forth in the UCC is enforceable does not offend public policy, even in a

case involving a safety defect and personal injury to a plaintiff. However, the court

also holds that used car dealers have a duty to conduct a reasonable inspection of

used vehicles they offer for sale (even on an “as-is” basis) and that such dealers may

face negligent inspection liability in appropriate cases

Points for Discussion: Ask a student to summarize the basic facts of this case in

which one of the plaintiffs sustains significant physical injuries very shortly after the

plaintiffs purchased a used car that, unbeknownst to them, had a defective gearshift.

What are the legal theories on which the plaintiffs seek to rely? What is the key

obstacle to their ability to win a breach of implied warranty of merchantability claim

against the used car dealer? (The disclaimer.) Did the disclaimer satisfy the relevant

UCC language? (Yes. ) How so? (Said “as is” and did so conspicuously. Also said

no implied warranties and specifically mentioned merchantability.) What do the

plaintiffs argue in response? (That disclaimer offends public policy in case involving

safety defect and personal injury—effectively an argument that it is unconscionable.)

Why does the court reject this argument? Statutory language clear. Disclaimer here

complied with it. No safety exception in the statutory language. Recognizing

plaintiffs’ argument could make statutory language meaningless in too many cases.)

Was the court also thinking it had something else in its back pocket to give to the

plaintiffs? (Maybe so—the duty to inspect and the possibility of a negligent

inspection cause of action.) Why does the court conclude that used car dealers have a

duty to conduct a reasonable inspection of the vehicles they sell, even on an “as-is”

basis? (Public safety concerns; dealer in better position than buyer to assess many

defects; buyers may logically assume dealer has at least looked vehicle over for

safety problems, etc.) What does the duty to inspect contemplate? (Reasonable

inspection for patent defects that should be apparent in the exercise of reasonable

care.) What doesn’t the duty require? (Discovery of latent defects or ones that would

require disassembly of vehicle.)

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Chapter 20 – Product Liability

4. Discuss the rules for disclaimers of express warranty, negligence, 402A, and Restatement

(Third) liability. In each case, disclaimers frequently are ineffective. Wilke so indicates.

In addition, Wilke makes clear that an effective disclaimer of the implied warranty of

merchantability has no effect on any negligence claim that might be available.

5. Regarding remedy limitations:

a. Note that in negligence and 402A cases, remedy limitations should be effective only

when a disclaimer would be effective.

b. Discuss UCC § 2-719(3), which applies in express and implied warranty cases. Note

that some courts have incorrectly used 2-719(3) as a basis for knocking out an

implied warranty disclaimer in personal injury cases involving ordinary consumers.

The reasons for this “mistake” apparently are sympathy for the consumer and a belief

(now largely rejected by the courts) that § 2-302 can’t apply to a valid 2-316

disclaimer. Stress that courts now are increasingly prone to deal with such situations

by simply declaring the disclaimer unconscionable under section 2-302.

c. Because Problem #11 involves a remedy limitation, you might want to discuss it here

rather than earlier, even though the court didn’t discuss § 2-719(3). In this context,

though, the omission probably made little or no difference. Is there any reason to

treat these two kinds of clauses differently for unconscionability purposes?

d. For discussion of disclaimers and remedy limitations in “shrinkwrap” and

“clickwrap” contexts, see the Cyberlaw in Action box at p. 586.

M. Defenses

1. Begin by noting that many of the doctrines discussed earlier can be regarded as defenses

to a product liability claim. Here, though, we are primarily concerned with defenses that

involve the plaintiff’s behavior. Note also that with the introduction of comparative

negligence and comparative fault, this area of the law has changed considerably during

recent decades. Note that we don’t try to discuss state laws apportioning fault among

more than two parties, or the Restatement (Third) rule on that subject.

2. The Traditional Scheme

a. Discuss product misuse, assumption of risk, and contributory negligence, and give

examples of each.

b. Note that these defenses overlap in that the same behavior can give rise to all three

defenses. Contributory negligence and assumption of risk can overlap where the

plaintiff knowingly and voluntarily assumes an unreasonable risk.

c. Point out that assumption of risk and product misuse are across-the-board defenses,

whereas contributory negligence has the more limited application described in the

text.

3. The Emergence of Comparative Principles

a. Probably the best way to introduce this subject is to note the problems caused by the

all-or-nothing scheme of recovery the traditional defenses create, and the way

comparative negligence arose for similar reasons in the negligence context. Then,

describe how comparative principles operate.

b. Note the uncertainties that attend this area. First, do all the states that have adopted

comparative negligence really adopt a true comparative fault approach in the sense

that they make all forms of plaintiff fault part of the percentage calculation? Some

state statutes are explicit about this, but some aren’t. In any event, a significant

number of states have adopted a statute specifically referring to comparative fault or

comparative responsibility. Second, comparative principles may operate in either the

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Chapter 20 – Product Liability

“pure” or the “mixed” fashions described in Chapter 7. Third, it is not always clear

whether comparative principles apply to all theories of recovery or all types of

damage claims.

c. Comparative fault examples: Green (discussed below); Problem #13.

d. Green v. Ford Motor Co. (p. 587): The Supreme Court of Indiana holds that in a case

in which the plaintiff alleges that the defendant motor vehicle manufacturer

negligently failed to provide a “crashworthy” vehicle, Indiana’s comparative fault

law requires that evidence of the plaintiff’s own fault, which allegedly contributed to

either the causation of the accident or to the severity of his injuries, is to be compared

against the defendant’s degree of fault.

Points for Discussion: Ask what the crashworthiness doctrine contemplates and why

many jurisdictions have recognized it. (Because it is foreseeable that the vehicles

they produce may become involved in accidents, manufacturers should be expected

to take reasonable design steps to lessen the severity of injuries in those foreseeable

crashes.) Note that crashworthiness claims are really enhanced injury claims because

the plaintiffs who bring them are not arguing that the manufacturer’s defective design

caused the accident. Rather, the plaintiffs are arguing that once the accident

occurred, they experienced more severe injuries than they otherwise would have

suffered if the manufacturer had adopted a crashworthy design. In this case, how dis

the plaintiff’s own behavior enter in? (He may have been negligent in operating the

vehicle. Thus, he may have caused, or helped to cause, the accident. Obviously, he

would not have been injured at all, let alone more severely than he supposedly should

have been, if the accident hadn’t occurred.) Why does the court reject the plaintiff’s

argument that his behavior shouldn’t be compared against that of the defendant?

(Because the Indiana statute set forth a clear policy of comparing degrees of fault as

between plaintiffs and defendants, and was broad enough to contemplate, in

crashworthiness cases, plaintiffs’ behavior that either helped to cause the collision or

otherwise helped to increase the severity of the injuries experienced.)

4. Preemption and Regulatory Compliance

a. This was a new section added for the 14th edition. The 15th and 16th editions then

expanded the section with discussion of other relevant Supreme Court decisions (Riegel,

Wyeth, and Pliva; see below). the comparative merits of the preemption and regulatory

compliance defenses. Preemption, importantly, is conclusive: a plaintiff’s claim ends

completely if it is preempted. But whether preemption applies depends on the relevant

statute and its history. The regulatory compliance defense, meanwhile, is always

available to a compliant manufacturer. However, it is less likely to end a claim, and more

likely simply to weigh against it.

b. Note the text’s discussion of Levine, in which the Supreme Court held that FDA approval

of a drug does not automatically bar negligence claims based on defective design.

Emphasize how the statutory sections at issue in Riegel, the text case discussed below,

differed from those at issue in Levine. (There was a preemption provision in the former,

but not in the latter.) But then, as the text notes, the Court decided Pliva. Was Pliva, as

critics have alleged, simply an attempt to cut back on the effect of Levine?

c. Riegel v. Medtronic, Inc. (p. 590): The Supreme Court affirmed the lower courts’

holdings that the preemption provisions in the Medical Device Amendments (MDA) to

the Food, Drug, and Cosmetic Act barred state common-law product liability claims

regarding medical devices.

Points for Discussion: Justice Scalia says Congress would not have given a state jury

greater power than a state legislature or regulatory authority. But is that really where the

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Chapter 20 – Product Liability

power lies when a jury grants common-law relief? Isn’t the jury just the fact-finder?

After all, the jury doesn’t make rules—courts do, assuming the common law controls the

case. And is it really true that common law disrupts the federal regulatory scheme in the

same way that state regulation would? Common law behaves differently from state

regulations. State regulations can establish highly specific “across-the-board”

requirements for market clearance; common law, on the other hand, merely applies a set

of highly generalized concepts borrowed from general tort law—foreseeability,

unreasonableness, and so on. It is easy to imagine the state of New York adopting its own

FDA and effectively making policy for the whole country, but harder to imagine New

York hijacking the country by means of its common law.

IV. RECOMMENDED REFERENCES:

A. PROSSER AND KEETON ON THE LAW OF TORTS.

B. J. WHITE & R. SUMMERS, UNIFORM COMMERCIAL CODE: SALES.

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