Management Chapter 10 The Court noted that when Congress enacted

Chapter Ten

Product Liability

A MANAGER’S DILEMMA: PUTTING IT INTO PRACTICE

SHOULD A MEDICAL DEVICE MANUFACTURER PAY FOR PRECAUTIONARY HIP IMPLANT

REPLACEMENTS?

Issue Presented: How should Johnson & Johnson best handle its recall?

Johnson & Johnson seems to face a dilemma in handling its current recall. On one hand,

the company has an obligation to adhere to its credo in placing the health and safety of its

patients above the interests of others. In order to accomplish this, preemptive steps to resolve

hip implant complications before they arise, such as covering the cost of replacement surgery in

QUESTIONS AND CASE PROBLEMS

Question 1

Issue Presented: Is a state-law claim asserting that a manufacturer made misrepresentations in

saying that a tobacco product was “light” and had “lowered tar and nicotine” pre-empted by

federal law?

The Supreme Court in Altria Group, Inc. v. Good, 555 U.S. 70 (2008), ultimately held that

Good’s state-law claim was neither pre-empted expressly by the Federal Cigarette Labeling and

Advertising Act (FCLAA) nor impliedly by actions of the Federal Trade Commission (FTC).

The Court noted that when Congress enacted the FCLAA, it did so for two purposes: (1)

to adequately inform the public that cigarette smoking may be hazardous to health by including

To resolve this issue, the Court first looked to previous decisions where it had addressed

the text of Section 5(b). In Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992), a plurality of the

Court had concluded that Section 5(b) does not preclude all common-law claims that have some

relationship to smoking and health. To determine whether a particular common-law claim is

pre–empted, the plurality inquired whether the action constituted a “requirement or prohibition

Altria Group next pointed to prior decisions where the Supreme Court struck down

state laws pursuant to a federal law’s pre-emption provision. The Court dismissed Altria

Group’s reliance on those cases as misplaced. In both cases, explained the Court, the pre-

Altria Group alternatively argued that although Good’s state-law fraud claim was not

expressly pre-empted, it was impliedly pre-empted because it presented an “obstacle to a

longstanding policy of the FTC.” Namely, that for decades the FTC had promoted the

development and consumption of low tar cigarettes and had encouraged consumers to rely on

Question 2

Issue Presented: Can a company be held liable for illness allegedly incurred by an expert

user as a result of chemical exposure forewarned in a safety manual?

Throughout plaintiff’s twenty-eight years as an HVAC technician, it was widely known

in the business that, when heated, R-22 could decompose into toxic by-products, including

phosgene. Because expert testimony indicated that this danger was well known among HVAC

technicians, the court reasoned that the plaintiff’s case was without merit. The court also

Question 3

Issue Presented: Can a corporation be held liable for manufacturing an uncrashworthy car if

the accident was allegedly caused by the owner’s intoxication while driving?

Unforeseeable misuse of a product is a defense to a strict product liability claim. It is

foreseeable that automobiles will be involved in collisions although it is not their intended

purpose. As a result, an automobile manufacturer is under an obligation to use reasonable care

in the design of the vehicle to avoid putting the driver at an unreasonable risk of injury in the

Question 4

Issue Presented: What risks are present in the acquisition of a multidivisional company?

How can such liability exposure be eliminated or limited?

Under the traditional rules of successor liability, asset purchasers are not liable as

successors for the liabilities of the predecessor corporation unless one of the following four

exceptions applies:

(1) The purchasing corporation expressly or impliedly agrees to assume the liability;

In Tolo v. Wexco, 993 F.2d 884 (9th Cir. 1993), Tolo survived as a separate viable company

capable of satisfying judgments against it. The plaintiffs’ remedies against the original

manufacturer were therefore not destroyed, so the first requirement of the exception to

successor non-liability was not satisfied. Thus, Wexco was not strictly liable as a successor to

Tolo for product liability claims arising out of occurrences after the closing date.

Question 5

Issue Presented: In order to prevail on a market-share liability theory, must all of the

products that allegedly caused the damage carry equivalent degrees of risks?

Market share liability is based on the fact that a group of corporations have produced

virtually identical defective products that pose equivalent risks of danger to consumers. Under

the market share theory, if these conditions have been met, liability may be apportioned based

upon the percentage of products each corporation contributed to the market. Under this theory,

Question 6

Issue Presented: Can a company be held liable for failing to place a warning on a shirt that it

is flammable and should not come into contact with a hot stove, or is this danger “open and

obvious”?

In order to establish that a product is defective due to a failure to warn under Michigan

state law, a plaintiff must demonstrate that a manufacturer (1) had actual or constructive

knowledge of the alleged danger, (2) had no reason to believe that consumers would know of

this danger, and (3) failed to exercise reasonable care to inform consumers of the danger. The

Question 7

Issue Presented: From which parties in the chain of manufacture and sale of a jar of peanuts

may a plaintiff who was injured by a shattered peanut jar recover? What defenses may be

successfully raised by defendants against such a plaintiff?

Because the plaintiff used no more than the normal force that one exerts in snapping a

plastic lid onto a jar, the court concluded that the jar must have been defective. Welge v. Planters

Lifesavers Co., 17 F.3d 209 (7th Cir. 1994) (“No expert testimony and no fancy doctrine are

required for such a conclusion.”). The question then became when the defect was introduced. It

The defendants also pointed out that it is always possible that the jar was damaged

while it was sitting unattended on the top of the refrigerator, in which event they are not

responsible. The court rejected their argument, commenting:

Only if it had been securely under lock and key when not being used could the

plaintiff and Karen Godfrey be certain that nothing happened to damage [the jar]

The court concluded that “the plaintiff in a products liability suit is not required to

exclude every possibility, however fantastic or remote, that the defect which led to the accident

was caused by someone other than one of the defendants.” The court also noted that an

accident can itself be evidence of liability. “If it is the kind of accident that would not have

occurred but for a defect in the product, and if it is reasonably plain that the defect was not

introduced after the product was sold, the accident is evidence of the defect.”

Question 8

Issue Presented: What effect, if any, does the plaintiff’s failure to preserve an allegedly

defective car have on the suit for product liability?

In this case, Ford was able to prevail with the jury, largely because it was able to admit

testimony and proof that the accident’s evidence had been spoiled. The verdict was upheld on

appeal. Johnson v. Ford Motor Co., 988 F.2d 573 (9th Cir. 1993).

After the accident in November 1985, the allegedly defective Escort was moved

numerous times and stored under various conditions. First, the vehicle was towed to a garage,

Further compounding the difficulties of Johnson’s case was the fact that the trial judge

ruled inadmissible evidence that Ford was facing five other suits involving wheel failure. The

trial judge held (and the appellate court affirmed) that the probative value of such evidence