LAW & ETHICS IN THE BUSINESS ENVIRONMENT 8e
Instructor Manual
CHAPTER EIGHT
ALLOCATING RISK AND RESPONSIBILITIES IN THE GLOBAL
MARKETPLACE: PRODUCTS LIABILITY
MAIN CONCEPTS
Government regulation of product safety
The Consumer Product Safety Commission
National Highway Traffic Safety Administration
Evolution of products liability law
Contract law
Contract law and tort law
An alternative approach
INTRODUCTORY TIPS
Begin with a series of hypotheticals based on some of the cases brought against BIC, maker of
the handy, disposable pocket cigarette lighter. When microscopic brass tailings are left in the
lighter during the manufacturing process, they can cause “afterburning” and explosions when
butane continues to leak after the lighter is shut. There have been numerous suits against BIC,
some resulting in large punitive damages awards.
Use the BIC hypos to outline the major themes of this chapter:
Determining whether the product is safe (risk/utility or consumer expectations); foreseeable
misuse; the need for warnings and punitive damages.
–A man with .35 alcohol content in his blood is killed in a kitchen fire. He is
found with a ruptured BIC lighter in his shirt. Glover v. BIC Corp., 981 F.2d 1429
(3d Cir. 1992). (Jury awards plaintiff $1,300,000 in punitive damages.)
–A woman is injured in a boat fire when her friend attempts to light a cigarette
within seconds after fueling the boat from a dockside pump. Willard v. BIC Corp.
788 F.Supp.1059 (W.D. Mo. 1991).
BIC carried a warning to KEEP OUT OF HANDS OF CHILDREN, but plaintiffs questioned the
adequacy of the warning to prevent the inevitable attraction of children to fire. Add fact: In 1992,
BIC redesigned its lighters to make them childproof.
–An unsupervised four-year-old starts a house fire while playing with a BIC
lighter left on the table by a parent. Todd v. Societe BIC, S.A., 21 F.3d 1402 (7th
Cir. 1994).
–A six-year-old suffers neck and torso burns when lighter ignites his shirt; Court
grants summary judgment to BIC on design defect, because child guard safety
latch met CPSC standards, but allows trial on possible manufacturing defect.
Colon v. BIC, 2001 WL 1631402 (S.D.N.Y.)
For other cases involving malfunctioning lighters see: Williams v. BIC Corp., 1996 WL 132984
(N.D. Ill. 1996); Shipes v. BIC Corp., 154 F.R.D. 301 (M.D. Ga. 1994); Mensch v. BIC Corp.,
1992 WL 236965 (E.D. Pa. 1992); Smith v. BIC Corp., 869 F.2d 194 (3d Cir. 1989); Sedlock v.
BIC Corp. 741 F. Supp. 175 (W.D. Mo. 1990).
On misuse of the product: McNitt v. BIC Corp., 846 F.Supp. 1049 (D.N.H. 1994); Bondie v. BIC
Corp., 947 F. 2d 1531 (6th Cir. 1991).
Wyeth v. Levine, Questions, p. 293
1. Where does Justice Stevens place responsibility for drug safety? Why? What policy
does he mention? What is “distinct compensatory function?” How does Steven’s view
compare to that of dissenting Justice Alito? What policy arguments does the dissent
mention? What do you think the dissent means by “tragic facts make bad law”?
Justice Stevens places responsibility for the drug safety directly on the shoulders of the
The distinct compensatory function mentioned by Justice Stevens refers to the incentive to
injured parties to hold manufacturers accountable. If the FDA decisions preempt state law, then
Justice Alito’s opinion is highly deferential to the administrative agency. It is his suggestion that
2. How would you advise a company labeling a new drug?
3. Should a patient be allowed to sue the brand-name company when a generic drug is
unreasonably dangerous? See Fullington v. Pfizer, Inc.
Student answers should vary.
In Fullington, the appeals court affirmed the district court’s grant of summary judgment in favor
GOVERNMENT REGULATION OF PRODUCT SAFETY
Food and Drug Administration
The Global Food Supply: Genetically Modified Organisms
The Brussels Effect, Anu Bradford, Questions, p. 299
1. Do you think standards to guide agency decisions on whether a GMO should be
permitted to be released into the environment are needed? Why/ why not?
2. Research: Did the FDA allow AquaBounty Technologies to sell the first GM animal
(salmon)? If so, has the FDA allowed sellers of unaltered salmon to distinguish
themselves from the GMO?
The issue is still unresolved as of March 2014. See the following article for more information:
3. What are the pros and cons of “double-labeling”? Should a similar rule be applied to
labeling of non-GMO foods?
4. What would be the factors in favor of becoming a non-GMO certified supplier to Whole
Foods?
Answers will vary. Students may consider that as more GMO products reach the market,
THE CONSUMER PRODUCT SAFETY COMISSION
Dangerous Imports: Chinese Dry Wall, Questions, p. 301
1. Should producers in foreign countries be forced to answer for the safety of their
products through lawsuits brought in American courts? Research: Find out how the
court ruled on the Tashain challenges to the Chinese-Manufactured Drywall suits.
2. Suppose an American company manufactures a product in Indonesia, under dangerous
or oppressive working conditions. Should foreign workers have access to American
courts to hold the company accountable?
NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION
Weimer v. Toyota Motor North America, Inc., Questions, p. 305
1. What is a class action lawsuit? Why was this suit brought as a class action? What are
the benefits and harms of a class action suit?
A class action lawsuit is a suit filed by an individual on behalf of the individual and others who
are similarly situated. This action likely was brought as a class action for a couple of reasons: 1)
the defendant has a tremendous amount of resources and no individual plaintiff would have the
resources to compete in a legal battle; and 2) the individual injuries were small enough that the
2. What theories do the plaintiffs use to hold Toyota liable? What remedies do they seek?
3. What impact do you expect of the finding of the NTSHA about lack of brake use?
Answers will vary by student. From a public affairs point of view, the finding that brakes were
not applied in 60% of the cases investigated will be very helpful to Toyota. This information will
4. In February 2011 the National Academy of Science reported they could find no
electronic flaws in the vehicles. What would be the likely impact of this report?
5. Research: Find out what has happened in the Toyota cases since January 2013.
Early Products Liability Law: Breach of Warranty
The Tort of Negligence
The Tort of Strict Products Liability
Punitive Damages
CONTRACT LAW
Breach of Warranty and the Uniform Commercial Code
Transport Corporation of America v. IBM, Questions, p. 312
1. Why was the plaintiff not entitled to money damages?
There are several steps in the court’s reasoning. First, Transport’s claims were limited to breach
of contract, on the grounds that the economic loss doctrine barred a tort suit for negligence or
2. Fair to distinguish consumer/commercial transactions?
The UCC makes several distinctions between commercial transactions among merchants, and
sales to consumers, on the assumption that businesses normally deal with each other at arm’s
CONTRACT LAW AND TORT LAW
Denny v. Ford Motor Company, Questions, p. 316
1. What did Nancy Denny think she was buying? What did she buy?
2. Does this impose absolute liability on Ford?
As the majority sees it, Ford created its own problems by its advertising campaign: had it not
tried to sell the Bronco to soccer moms, it would not be liable when one of them rolled over. In
3. Compare to the Norplant case in Chapter 7. What similarities/differences do you see in
the marketing campaigns? In the lawsuits?
Plaintiffs in both cases won their product liability suits largely because of the way in which the
Ford would not have been liable under New York’s tort law for sale of a defective product
4. Tuna fish and Lee P.
(a) What legal remedies are available to Lee P.?
(b) What arguments can you make on behalf of potential defendants?
Answers will vary. The potential defendants may argue that the product is safe when
(c) Do an ethical analysis of Bumblebee’s marketing practices.
Free market ethics would support Bumblebee’s marketing as long as it was not illegal and
Utilitarianism would suggest that, by not mentioning mercury, Bumblebee may have failed
Deontology would have similar concerns – failing to disclosure the small amounts of
(d) How would you display tuna fish as a manager of an “organic” grocery?
(e) Research: Find out what happened in Porrazzo v. Bumble Bee Foods