Author Updates
Chapter 27
Warranties and Other Product Liability Theories


Update: September 13, 2004

There is a new product liability trend: warnings on even the most basic of substances. Sand, wood, water and soil are just of few of the products that have faced class-action litigation for injuries resulting from their products. For sand, the suits are based on silicosis, a lung condition that comes from inhaling the dust from sand. For wood? Splinters. Bugs. Potting soil? DO not use for professional growing, only household plants. One law professor has referred to the warnings on these products, such as "DO not put sand in your ears," as creating a sensory overload. That is, the warnings become so extensive that product users ignore them.

What are the standards for recovery for inadequate labeling?

FOR MORE INFORMATION

Leigh Jones, "Warning: It's now a fact of life," National Law Journal, Sept. 6, 2004, pp. 1 and 17.


Update: August 2, 2004

In 2002, Philip Morris was poised to introduce a new cigarette that was designed to save lives. If left unattended, the cigarette would extinguish itself, thus eliminating the tremendous fire risk that results from smokers falling asleep with their cigarettes still burning. The non-extinguished cigarette is the leading cause of fire fatalities in the United States. The cigarette was to be released under the company's Merit brand.

However, a scientist at the company, Michael Lee Watkins, told his superiors at the company that the cigarettes were, in fact, a higher risk for fire than the conventional cigarettes. He was fired, and Philip Morris released the Merit cigarette with special advertising emphasizing its safety. The Justice Department got wind, as it were, of the problem from Dr. Watkins, and has filed suit against Morris and other tobacco companies for deception as well as for the safety issues related to the cigarettes. Dr. Watkins has agreed to serve as a witness for the government.

Philip Morris indicates that Dr. Watkins was fired for his failure to attend meetings, his speaking negatively of his colleagues and his failure to document his research.

Philip Morris says that Dr. Watkins was correct in that chunks of the Merit safety cigarette did tend to fall off and thereby create a different fire hazard, but it fixed that problem by using a different paper prior to the time Merit was released to the market.

The suit is but one part of the legal and regulatory quagmire the tobacco companies once again find themselves in. New York passed a statute that soon takes effect that requires that cigarettes sold in the state be "self-extinguishing" according to rules and guidelines that are part of the statute. At least 7 other states have similar legislation pending. Canadian health authorities are also working on a fore-safe cigarette requirement.

Customers have complained about burns when chunks of the new cigarettes fall off onto them and their clothing. The test cigarettes appeared in New York in June 2004 and the problems continue with them. The Justice Department litigation also continues with depositions and document production.

Is there product liability here? What federal or state laws would be violated by the release of Merit and other allegedly fire-safe cigarettes?

FOR MORE INFORMATION

Vanessa O'Connell, "U.S. Suit Alleges Philip Morris Hid Cigarette-Fire Risk," Wall Street Journal, April 23, 2004, A1, A8.


Update: June 7, 2004
Jody Gorran, a resident of Palm Beach County, Florida, has filed suit against the promoters of the Atkin diet and the estate of the late Dr. Robert Atkins. Mr. Gorran who had gone on the Atkins Diet to lose 8 pounds (from 148 to 140) found that his cholesterol went from 146 in May 2001 to 230 by October 2003, requiring him to have angioplasty to clear the blockage in the arteries of his heart. The Atkins diet focuses on cheese, eggs, and meat, all high fat foods, and urges dieters to shun breads, carbohydrates and fruit. Two-thirds of the Atkins diet comes from fat calories, an amount that is double the recommended daily intake for fat.

Refer to Chapters 9 and 27.

Is this suit a product liability case or a negligence case? What about warnings? What if Mr. Gorran knew about cholesterol and the amount in the diet?

FOR MORE INFORMATION

Jill Barton, "Man sues Atkins over heart problems," The Tribune, May 28, 2004, A12.


Update: May 17, 2004
Marvin Windows and Doors, a small family-run company in Minnesota, has a motto on its Website, "At Marvin, . . . a handshake is as good as a signature." Bill Marvin, the CEO of Marvin, agreed to buy from a PPG sales representative, a personal friend, $2 million worth of a PPG product that preserves wood.

The sales transaction went through, but the windows Marvin treated with the PPG product began to rot. The Marvin Company replaced the windows for its customers and then turned to PPG for fraud on the preservative. PPG asked for a dismissal of the claims in court because there was no written contract and one was required under the Statute of Frauds. The trial court dismissed the claim. A PPG lawyer explained, "Experienced merchants should use contracts to outline who's responsible for what if the product they are buying doesn't work properly. Marvin didn't do that."

Following an appeal, a court agreed that Marvin could file a claim for breach of warranty and a jury awarded Marvin $136 million in damages, a verdict that is now on appeal. Mr. Marvin's daughter, Susan, who is now the CEO was asked whether she still believed in the handshake deal. She explained that Marvin still does believe in the handshake deal and that the company didn't learn not to trust from the experience, but, rather, learned to be careful whom to trust.

Refer to Chapters 17, 27, and 28.

Was this contract required to be in writing? What provision governed it? What warranty was breached?

FOR MORE INFORMATION

Richard Todd, "Let's Shake On It," Inc. Magazine, June 2004, p. 98.


Update: February 16, 2004
A new round of class action suits has begun against the alcohol industry. The suits, filed by the son of David Boies, the attorney who argued the government's case against Microsoft, represented Shawn Fanning in the Napster copyright suits, and argued Al Gore's case for the Florida vote recounts in the 2000 presidential election, allege that Anheuser-Busch and Miller Brewing Company "deliberately engaged in a multifaceted campaign to encourage underage drinking." The lead plaintiffs in the case are the parents of an 18-year-old who was killed when a drunk 20-year-old driver struck and killed her.

Anheuser-Busch responded to the suits by noting that it has spent $465 million over the past 20 years on stopping alcohol abuse. "We are deeply committed to fighting underage drinking and alcohol abuse," read a release from the company. Miller issued a statement calling the suits "completely without merit."

Also named in the suits are Bacardi and Diageo.

Mr. Boies, III, cites the development of "alcopops," flavored malt beverages, as an example of the companies' appeal to young drinkers.

The tobacco industry began its spiral into litigation when the Joe Camel ads were launched, a campaign that many said was designed to target and bring in youthful customers to tobacco.

Refer to Chapter 27.

What basis in contract or tort could the class action suits use for their legal foundation?

FOR MORE INFORMATION

Christopher Lawton, "Lawsuits Allege Alcohol Makers Target Youths," Wall Street Journal, Feb. 5, 2004, B1, B7.


Update: February 16, 2004
Procter & Gamble has had a series of lawsuits filed against it by its competitors for alleged false claims made by the consumer products giant when comparing its products to those of its competition. For example, P&G paid Playtex $2.96 million to settle a false claims suit that company had made in an ad that compared Tampax Pearl brand tampons with Playtex tampons.

Georgia-Pacific has filed suit against P&G for ads that show Brawny paper towels leaking when P&G's Bounty paper towels do not. The federal district court case has now gone into arbitration.

Kimberly-Clark won an injunction against P&G for an ad showing a toddler running through a dinner party after he had managed to tear off his Huggies Pull-Ups, a Kimberly-Clark product. P&G ran a similar ad again and Kimberly-Clark threatened litigation again until P&G agreed to negotiate over the ad.

An ad in which Colgate's 'Simple White Night" tooth-whitening product appears to dissipate with water is the subject of another suit because the ad goes on to tout P&G's Crest Night Effects as superior. The suit by Colgate alleges that the comparative ad is simply false.

Refer to Chapters 5 and 27.

What regulations exist to allow the comparative ad suits? What laws would apply to deceptive ads?

FOR MORE INFORMATION

Sarah Ellison and Brian Steinberg, " P&G Is Settling Disputes on Ads As Suits Pile Up," Wall Street Journal, Nov. 26, 2003, B1.


Update: October 6, 2003
The auto industry has been fighting off litigation over power windows. However, Ford settled one of its suits over the 2001 death of a two-year-old child. The girl stepped on the power window button as she put her head out the window to wave to her father who was nearby loading animals into the back of the family pick-up truck.

Power windows kill or injure 500 Americans per year. Only five deaths occurred in 2001 and 2002 as a result of power windows in cars. There is available for power windows an auto reverse function that is installed in some U.S. models and in most European cars where the demand is higher.

Refer to Chapter 27.

What theory of product liability are the plaintiffs using? What role does the availability of auto reverse play in the cases?

FOR MORE INFORMATION

Leonard Post, "Power window: danger in the door," National Law Journal, October 13, 2003, A1.


Update: September 15, 2003
Bermuda has featured pictures of Hawaii in its latest advertising campaign. One ad executive has said, "It's misrepresentation." Another has said, "If this were a pharmaceutical ad, that would be one thing. But this isn't harmful." One magazine carrying the ads noted, "We don't have a policy that's strict and hard for advertising, though our editorial-side policies are strict."

Refer to Chapters 3 and 27.

Are the ads legal? Are they ethical?

FOR MORE INFORMATION

Vanessa O'Connell, "Fantasy Island? Bermuda Ad Shows Hawaii," Wall Street Journal, March 6, 2003, B1 and B3.


Update: June 23, 2003
Kimberly-Clark filed suit against Procter & Gamble for the following claim made in its ads for its Pampers disposable diapers:

You are two years old and it's not that you're a showoff. It's just those Pull-Ups pull apart like diapers. You want Pampers Easy Ups. They go up easy and stay on, like real underwear.

Following the suit, P & G changed the ad to the following:

You are two years old and you're a little surprised. You just found you can pull open those Pull-Ups like a diaper. You're old enough for Easy Ups. They're designed like real underwear.

However, Kimberly-Clark went back to court, not satisfied with the modifications. The judge did not issue a temporary stay, but there will be a hearing on the ads in September.

Refer to Chapters 5, 6 and 27.

What allows competitors to bring suit against each other for competitors' ads?

FOR MORE INFORMATION

Sarah Ellison, "Rivals Take P & G to Court to Challenge Ads, "Wall Street Journal, June 17, 2003, B1, B11.


Update: April 14th, 2003
Professor Ivan Preston, of the University of Wisconsin, has proposed a change to the Uniform Commercial Code that requires companies that "puff" about themselves and their products to have some factual backing. The change is to be considered by the American Law Institute and most agree that his proposal to curb puffing will be defeated.

Professor Preston once worked in advertising and calls puffing nothing but "lies." Examples of puffing he finds to be untrue:

Refer to Chapter 27.

Explain the difference between puffing and express warranties.

FOR MORE INFORMATION

Barry Newman, "An Ad Professor Huffs Against Puffs, but It's a Quixotic Enterprise," Wall Street Journal, Jan. 24, 2003, A1, A9.


Update: April 7th, 2003
A jury in SW Legal Palm Beach, Florida, awarded $24 million to the widow of teacher Barry Grunow. He was shot by a 13-year-old student at a Lake Worth middle school. The jury assessed the blame for the teacher's death as follows:

Interestingly, neither the school district nor the relatives were parties in the case. The widow of the teacher, Pam Grunow, had only filed suit against the gun distributor. Valor has 14,000 licensed firearms dealers in the United States. The manufacturer of the Raven is no longer in business. Its business collapsed following the public outcry over the so-called "Saturday night special." Backlash arose against this gun and other cheap firearms like it, which became weapons of choice for criminals.

Refer to Chapter 27.

What type of product liability theory might have been applied in this case? What types of defenses?

FOR MORE INFORMATION

"Jury in gun suit assigns 5% of fault to distributor," USA Today, Nov. 15, 2002, 5A.


Update: March 31, 2003
Bayer AG, manufacturer of Baycol, an anti-cholesterol drug, has 8,000 claims pending against it. There have been revelations that patients using the drug have a higher rate of rhabdomyolysis, a potentially fatal muscle disorder. Bayer has paid $140 million so far to settle 500 claims made against it by users of the drug. The average settlement is $280,000 per patient with the range being $200,000 to $1.2 million.

However, Bayer won the first case that went to trial. Hollis Haltom, 82, had filed suit against the company asking for $560 million in damages. Mr. Haltom alleged in his complaint that Bayer had failed to provide adequate warnings about the nature of the drug and its side effects.

Bayer provided proof at trial that it had forwarded to the FDA all reports on patients who had side effects from use of the drug. Bayer also showed that, when these reports were received by it, it increased the warnings on the drug and added to the language on the label.

However, attorneys for Mr. Haltom introduced e-mails from executives in the company. The e-mails contained expressions of fear about how many other patients with side effects there might be, questions about whether the information could be contained, and pushes for stronger sales and larger doses even as the reports from patients experiencing the muscle disease were coming into the company.

Baycol was Bayer's #3 selling drug, bringing in $700 million in sales, when it was pulled from the market in 2001 because of increasing numbers of complaints from patients. Bayer's stock price has suffered with the rise and fate of the litigation. When Bayer won the Texas case, its stock jumped 37% to $15.40.

Refer to Chapter 27.

Discuss the product liability theories and defenses used in this case.

FOR MORE INFORMATION

Vanessa Fuhrmans, "Jury Rules Bayer Isn't Liable In Closely Watched Drug Case," Wall Street Journal, March 19, 2003, B2.

Melody Petersen, "Bayer Cleared Of Liability In a Lawsuit Over a Drug," New York Times, March 19, 2003, C1, C3.


Update: March 23, 2003
A literary study, published in Pediatrics, indicates that the instructions for installing an infant car seat are written at a tenth-grade reading level. Such a level is too high for most adults, with reading levels in the United States as follows:

  • 25% at a fifth-grade level
  • 25% at an eighth-grade level

80% of all car seats are improperly installed.

Refer to Chapter 27.

What liability can car seat manufacturers incur on the basis of this study?

FOR MORE INFORMATION

"Child safety seat instructions too difficult," USA Today, March 4, 2003, 3D.


Update: Feb 17, 2003
Consider and resolve the issues in the following contracts case:

In May 2002, Delia purchased a 2001 F250 Ford Truck from Second City Ford, a dealership located in Phoenix, Arizona. The salesperson explained to her that, because the truck had low mileage, the Manufacturer's Warranty was still in effect. An exception was the suspension system because the owner had added a lift kit to the truck. The salesperson also suggested that Delia buy an extended warranty to cover the excluded lift and also to obtain more overall warranty protection. Delia purchased the truck as well as an Extended Care Warranty. The cost of the additional warranty was $1,655.

By November 2002, Delia was having difficulty with the truck. It was stalling during deceleration and at stops. When she took the car in for service, the service manager explained that the problem was a cam sensor. She also learned from the service manager, for the first time, that the truck had a Power Performance Chip. The chip had been added to the Power Control module after the truck had been purchased by the original owner. The service manager explained that, because of this change, no warranty protection would apply. Neither the original warranty nor the extended warranty provided coverage for "components that have been modified or alterations made against factory recommendations."

Delia's car needed to be fixed. She would have liked to have it restored to its original factory condition. The dealership refused to apply the warranty and demanded that Delia pay. Delia responded, "But I didn't know about the performance chip being added, no one told me, and it's not the kind of thing I could find out about just by looking at or driving the car!"

Refer to chapters 27-29.


Update: January 27, 2003
Judge Robert Sweet dismissed a class action lawsuit brought by Jazlyn Bradley and Ashley Pelman against McDonald's because they ate so many meals at the restaurant chain that they had become obese. Ms. Bradley (19) was 5'6" tall and 270 pounds and Ms. Pelman (14) was 4'10" and 170 pounds at the time they filed their suit in late 2002. These plaintiffs and another teen boy (15), who was 400 pounds and ate a McDonald's meal every day, said that they took some responsibility for their weight. But they also felt McDonald's should take some responsibility as well.

Judge Sweet noted that the plaintiffs failed to establish that there was a lack of knowledge on the part of the plaintiffs about the high-fat, high-calorie nature of McDonald's food. He also noted that Chicken McNuggets were a "McFrankenstein creation" of elements not used by home cooks. The plaintiffs might be able to establish through this type of product that they did not know what they were eating or that the harm was more significant given the nature of the product. The judge grappled with drawing the line between personal responsibility and society's responsibility to protect individuals. He expressed concerns the case could "spawn thousands of similar 'McLawsuits'" against more than just McDonald's, noting that the fast food business is a $110 billion-per-year business in the U.S.

Judge Sweet's words were:

"This opinion is guided by the principle that legal consequences should not attach to the consumption of hamburgers and other fast-food fare unless consumers are unaware of the dangers of eating such food," Sweet said.

"If consumers know ... the potential ill health effect of eating at McDonald's, they cannot blame McDonald's if they, nonetheless, choose to satiate their appetite with a surfeit of supersized McDonald's products."

Refer to Chapter 27.

What are the theories for liability for food consumed in a restaurant? What laws apply?

FOR MORE INFORMATION

Refer to www.findlaw.com. Check under "Current News" or "Class action"


Update: October 21, 2002
The debate regarding the safety of cell phones continues. Some anecdotal evidence of concerns about their safety arises when observing frequent cell phone users - nearly half use headset wires to keep the phones away from their brains. Their reasons? Worries about increased brain cancer rates among frequent cell phone users (analog, not digital).

Two new studies, one in the European Journal of Cancer Prevention and the other nonpublished from the Finish lab of Dariusz Leszczynski, indicate higher rates of brain cancer among cell phone users. Their conclusions about reasons for the higher rates differ, but their data point to increased brain cancer rates.

About one billion people now use cell phones and there are several suits pending. Experts advise using the inconvenient headsets because the issue of cell phone safety remains "an open question."

Refer to Chapter 27.

What would it take to establish liability of cell phone manufacturers?

FOR MORE INFORMATION

David Kirkpatrick, "Two New Reasons to Fear the Phone," Fortune, September 30, 2002, p. 46.

http://www.uku.fi/lavita

http://www.eurjcancerprev.com


Update: August 26, 2002
In a survey, 51% of Americans said that product liability suits pending against a company for its product make them less likely to buy products from that company. Forty-three percent indicated pending product liability litigation has not influence over their decision to buy a product. Six percent didn't know or were not sure.

Refer to Chapter 27.

What are the elements required to establish product liability?

FOR MORE INFORMATION

Shannon Reilly and Frank Pompa, "Lawsuits Influence Consumers," USA Today, Aug. 19, 2002, at 1B.


Update: August 26, 2002
Findlaw.com conducted a survey of 1,000 adults during June 2002 and discovered the the top legal issues that Americans faced during the period from 2001-2002 were:

  • Real estate, including buying or selling property, landlord/tenant disputes, and disputes over property use and ownership (21% faced these types of problems)
  • Family law, including divorce and child custody (17%)
  • Estate planning, including drafting a will or trust or settling estates (12%)
  • Personal injury (11%)

Refer to Chapters 2, 9, 12, 27, 35, 37, 51, and 54.

Refer to your textbook table of contents and make a list of other issues that would necessarily be involved in dealing with these issues.

FOR MORE INFORMATION

Go to http://www.findlaw.com.


Update: August 19, 2002
In an interesting case involving snowmobilers, the Wyoming Supreme Court has made a decision regarding the rules of the road and their application to off-road vehicles.

The case involves an accident in the Greys River area on the Wyoming Range in western Wyoming, a popular recreational area. Greys River Road in the Bridger-Teton National Forest is a national forest service road (No. 10138) that is accessible for wheeled traffic in the summer but closed to that traffic during winter. Although Greys River Road is not plowed during winter, it is groomed for a snowmobile trail and frequently used by snowmobilers.

On February 7, 1998, two different parties of snowmobilers departed east from Alpine, Wyoming, to snowmobile on Greys River Road. The Randall party, a group of five men, left Alpine about ten o'clock that morning and began returning towards Alpine that afternoon. The Roberts party left Alpine later that day and traveled away from Alpine. The Roberts party included Roberts, his wife and their two children, Shane Brown, Brown's wife, and Brown's two children. Each person had his or her own snowmobile. Roberts cautioned everyone in his party that, because they were getting a late start, other riders would be coming out and, because the weather was not ideal, other riders would not be expecting people coming up the trail that late in the day. The wives and children departed first, and Roberts and Brown followed them up the trail.

Soon, however, Roberts and Brown took the lead and raced each other. At the time of the accident, Randall and Roberts were traveling towards each other. Roberts was closely following Brown, who was positioned to the right of the trail. Roberts testified that he was positioned fifty feet behind and to the left of Brown's snowmobile because it was spraying snow in a roostertail behind it. Brown testified that at the crest of a hill an oncoming Randall passed dangerously close to him. Roberts testified that he saw Randall on Roberts' side of the trail and Roberts swerved to his own left; however, Randall also veered in that direction, and the two snowmobiles collided. Each was thrown off, and the two collided in mid-air. Randall was killed; Roberts was seriously injured.

The trial focused on disputed evidence of each snowmobile's position immediately before the collision with each claiming that the other had not safely stayed to the right of the center of the trail. Roberts claimed that although he was close to the trail's center, he was proceeding to his right of the trail's center until Randall's position on his left of center forced Roberts to swerve to his left. He explained that he moved left instead of right because he had just noted on his right a steep drop-off down an embankment to a river. The Estate claimed that Roberts was left of center the entire time despite cresting a hill and this position caused him to collide with Randall. Evidence at trial established that an ungroomed turnout was immediately to Roberts' right, but Roberts failed to see it.

Refer to Chapters 9 and 27.

If the court applies the rules of the road, those that apply to motor vehicles, what happens in the case? Should the court apply the rules of the road to determine negligence and liability in the case?

FOR MORE INFORMATION

Roberts v. Estate of Randall 2002 WL 1729896 (Wyo. 2002) _______ P.3d __________ (Wyo. 2002).


Update: July 8, 2002
The Consumer Product Safety Commission has imposed its first penalty against a company for its failure to report accidents involving one of its products. The CPSC's press release from its website provides as follows:

The U.S. Consumer Product Safety Commission (CPSC) announced today a court ruling imposing a $300,000 civil penalty against a firm for not reporting a serious product hazard - the first time such a penalty ever has been awarded by a court for a company's failure to report. The ruling was made in a civil penalty action brought on CPSC's behalf by the Department of Justice's Office of Consumer Litigation against Mirama Enterprises Inc., which does business as Aroma Housewares Co., in San Diego, Calif., a small importer and distributor of juice extractors (juicers) and other household appliances.

"Whenever a company fails to report its knowledge of a hazardous product to CPSC, it will pay a civil penalty that hurts," said CPSC Acting Chairman Thomas Moore. "If the company refuses to settle, we'll get the penalty in court."

U.S. District Court Judge Judith N. Keep, of the Southern District of California, also stressed the deterrent value of civil penalties, saying that there "has to be teeth to the [Consumer Product Safety] Act." Judge Keep noted that not knowing about the statutory requirement, not understanding the defect, or blaming the problem on consumer misuse do not excuse a company from the requirement to report a hazardous product.

Aroma received telephone calls and letters beginning early in 1998 that the juicers were breaking apart and injuring consumers. By the time Aroma reported to CPSC in November 1998, the firm had at least 23 reports of incidents of juicers breaking apart, including reports of injuries to at least 22 consumers. Five of these injuries required stitches and one required surgery for lacerated arteries.

In January 2002, Judge Keep held the company liable before trial, based on the existing evidence and legal arguments. The judge imposed the fine following a separate three-day hearing on an appropriate amount. She heard evidence on several factors including the severity of the risk of injury, Aroma's ability to pay, and Aroma's behavior.

This was the first time ever that a federal court found that a company had violated the reporting statute and ordered a civil penalty. CPSC civil penalties previously collected from companies that failed to report product hazards were paid as a result of voluntary settlements.

Aroma Housewares Co. conducted a joint recall with CPSC of about 40,000 of these juice extractors in June 1999.

Refer to Chapters 6 and 27.

Can an agency impose fines for the failure of a company to comply with reporting regulations? What does the company's failure to report do to any pending product liability cases?

FOR MORE INFORMATION

Go to http://www.cpsc.gov.


Update: July 8, 2002
The Consumer Product Safety Commission (CPSC) is pursuing new types of dangerous products - those products that are imported and do not meet federal safety standards. The CPSC has pursued three cases in the past four months against importers who bring in toys that have been banned or that contain contaminated or hazardous substances. These importers then distribute their toys in the United States through street vendors, neighborhood stores, and discount types of retail outlets.

The cases are being pursued in the Los Angeles area because 70 percent of all of the illegal toys come through the ports of Los Angeles and Long Beach. The commission has settled 3 cases for civil and/or criminal penalties against companies for toys such as racing trucks and cars and flying airplanes. Other toys are legal but do not have the proper labeling, such as "NOT INTENDED FOR CHILDREN UNDER THE AGE OF THREE."

The following is an excerpt from the CPSC's Web site on the most recent settlement with an importer:

The U.S. Consumer Product Safety Commission (CPSC) announced today that Ameri-China International Inc., of Los Angeles, Calif., and the company's president, Austin Wu, have agreed to pay a $140,000 civil penalty to settle allegations that they knowingly imported children's toys that violated federal safety standards. The settlement also imposes an injunction on the company and Wu, mandating that they abide by the Federal Hazardous Substances Act (FHSA), including FHSA provisions that call for age-appropriate labeling and no small parts on toys for children under three years of age.

CPSC claimed that Ameri-China imported more than 755,000 illegal children's toys, including toy cars, helicopters, phones, and bubble blowing plastic hammers that violated the federal safety standard for small parts. Toys with small parts are a choking hazard for children under three and are banned hazardous substances. CPSC further claimed that the company imported or purchased for re-sale bouncing balls, mini pool table sets, art sets and balloon helicopters that contained labeling violations and were misbranded hazardous substances. CPSC also found a crazy ribbon party spray imported by the company to be flammable and therefore a banned hazardous substance. CPSC obtained samples of Ameri-China's imported toys during inspections of imported goods conducted in cooperation with the U.S. Customs Service.

This is the third case over the past three months in which CPSC and the Department of Justice have obtained civil or criminal penalties against Los Angeles-based toy importers.

"We will aggressively pursue companies that import and endanger children with unsafe toys," said CPSC's Acting Chairman Thomas Moore. "CPSC and the Justice Department have shown that we will take strong action to stop companies from profiting at the expense of children's safety."

Refer to Chapters 6 and 27.

Discuss the process and authority for an agent to impose fines. Does it matter that an importer is incorporated in another country? Must it still comply with U.S. laws?

FOR MORE INFORMATION

Go to the CPSC website at http://www.cpsc.gov.

Sherri Day, "Toy Importer Settles Suit On Violating Safety Rules," New York Times, July 4, 2002, C3.


Update: April 15, 2002

The issue of whether warnings on products provide a defense for product manufacturers in product liability cases is experiencing some new attention in judicial review of these cases. Under the Restatement of Product Liability (2d), the provision on product warnings was the following:

Where warning is given, the seller may reasonably assume that it will be read and heeded; and a product bearing such warning, which is safe for use if it is followed, is not in a defective condition, nor is it unreasonably dangerous.

This section of the Restatement 2d has long been a topic of debate because many legal experts felt that there should be an obligation on the part of the company to fix any defects in the product, rather than escape liability simply through a warning. As a result, the Restatement of Product Liability (3d) provides:

When a safer design can reasonably be implemented and risks can reasonably be designed out of a product, adoption of the safer design is required over a warning that leaves a significant residuum of such risks.

Warnings may no longer be a complete defense under the Restatement 3d. The following cases offer some insight into how the courts are proceeding with the new doctrine.

Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328 (Tex. 1998); cert. Denied, 526 U.S. 1040 (1999) - in this case, the plaintiff had ignored numerous conspicuous warnings about the risks of placing a 16-inch tire on a 16.5-inch rim and the result was a tire explosion in which he was injured. His failure to heed the warnings was not a defense because the court held that the company could design a safer product.

Rogers v. Ingersoll-Rand Co., 144 F.3d 844 (D.C. Cir. 1998) - the court held that a manufacturer could not simply "slap a warning onto a product" and eliminate liability. The warning, the court held, is simply one factor in determining liability.

Kampen v. American Isuzu Motors, Inc., 157 F.3d 306 (5ht Cir. 1998), the court held that the auto manufacturer was not liable to the plaintiff who was injured when his car, which he had lifted up on a jack, collapsed on him. The court held that there had been sufficient warnings to car owners not to crawl under a vehicle hoisted by a jack. It may be significant that there is no way to design a jack that would be fool-proof in terms of the car falling off.

Keene v. Sturm, Ruger & Co., 121 F. Supp. 2d 1063 (E.D. Texas 2000), the court held that the gun manufacturer was not liable for the death of a 10-year-old child at the hands of a 12-year-old because a gun's use cannot be made safer and the presence of a trigger lock as part of the design was not required.

Smith v. Louisville Ladder Co., 237 F.3d 521 (5th Cir. 2001) - The court held that there was no way to design a commercial ladder that did not have the risk of the two tiers of the ladder collapsing and that there was no duty to warn of such collapse because such knowledge was common among commercial ladder users, including cable TV installers, which was the plaintiff's line of work.

As you can see, the courts are in different camps on the application of the new Restatement in terms of warnings and liability and correction of defects.

Refer to Chapter 27.

FOR MORE INFORMATION

See cases

Warren Lutz, "Liability May Arise Despite Warnings," National Law Journal, April 1, 2002, B1, B17, B18.


Update: April 8, 2002
David A. Vise is a Putlitzer Prize winner who is a reporter for the Washington Post and wrote a book entitled, The Bureau and the Mole. When the book hit the market, Mr. Vise purchased 20,000 copies via Barnes & Noble.com, taking advantage of both free shipping offered by the publisher and a discounted initial price. Mr. Vise's book had already hit the New York Times' bestseller list in the week before the purchases.

He used the books he purchased to conduct online sales of autographed copies of the books, but he did return 17,500 books and asked for his money back. However, the return of the 17,500 books represents more books than a publisher generally runs for a book.

Mr. Vise said that he did not intend to manipulate the market or profit from the transactions. He said his only intent was to increase awareness of The Bureau and the Mole.

Mr. Vise's editor offered to pay Barnes & Noble for any expenses it incurred.

Refer to Chapters 3, 27, and 28.

Was it ethical to do what Mr. Vise did? Was he within his rights to return the books? What are his remedies? Does Barnes & Noble have any rights?

FOR MORE INFORMATION

David D. Kirkpatrick, "Author's Attempt to Promote Book Backfires," The New York Times, March 6, 2002, C2.


Update: March 25, 2002

The Consumer Product Safety Commission is reconsidering a rule it had first proposed in 1997, one that would require child-resistant caps on household products, including cosmetics. When the rule was first proposed in 1997, it was resisted by the cosmetics industry and abandoned. However, in May 2001, a 16-month-old baby died after drinking baby oil from a bottle with a pull-tab cap.

The proposed rule would cover products such as baby oil and suntan lotion and any other products containing hydrocarbons such as cleansers and spot removers. The danger for children, according to the commission, is simply inhalation, not necessarily the actual ingestion of the products. Five children have died since inhaling such fumes since 1993 and 6,400 children under the age of 5 were brought into emergency rooms and/or hospitalized for treatment after breathing in hydrocarbons.

There is no medical treatment for the inhalation of hydrocarbons. Several companies in the suntan oil/lotion industry have supported the new regulations. The head of a consumer group has said, "We know these products cause death and injury. That is all we need to know."

Refer to Chapters 5 and 27.

Who is liable for the deaths and injuries of the children? What process must the CPSC follow to promulgate the rules?

FOR MORE INFORMATION

Julian E. Barnes, "Safety Caps Are Considered for Cosmetics," The New York Times, October 10, 2001, C1, C8.


Update: March 11, 2002
The American Academy of Pediatrics has issued guidelines for the use of skateboards and scooters by children under 10. The guidelines include the following:

  • Children under 10 should not use skateboards unless supervised by an adult
  • Children under 8 should not use scooters
  • Children under 5 should not use skateboards at all

The AAP notes that children do not have good judgment when it comes to their own skills and strength. Also, they do not have good perceptions in terms of traffic, either pedestrian or vehicle.

The Consumer Product Safety Commission reports an increase to 84,000 in the number of nonmotorized scooter injuries in 2001 from 40,500 for 2000. Most involved children under 15 and either head injuries or fractures.

Refer to Chapter 9 and 27.

What liability do the manufacturers of scooters and skateboards have for these injuries?

FOR MORE INFORMATION

"Skateboard and Scooter Guidelines Issues," New York Times, March 4, 2002, A17.


Update: December 3, 2001
The Daisy Red Ryder BB Gun has been a staple of children's Christmas gifts for 115 years. Daisy has been providing training programs for 4H Clubs, Boy Scouts, and other youth groups around the country for the past 40 years. However, a series of injuries and lawsuits has resulted in a suit by the Consumer Product Safety Commission seeking a recall of 7.5 million of Daisy's Powerline airguns for replacement or repair.

According to the complaint filed by the CPSC, various models of the guns (Powerline 856 and 880) have been linked to 28 deaths and 210 injuries since 1972. There was a BB gun recall in 1979, too.

The suit that prompted the CPSC action was brought by the family of Tucker Mahoney, a teenager from Pennsylvania, who has been in a vegetative state because a BB entered his skull and severed an artery. Tucker had been playing with the gun along with a friend and they had pulled the trigger a number of times with nothing happening. They believed that the gun was not loaded. However, when Tucker fired the gun, a BB was released and he experienced his resulting injuries. The Mahoneys settled the lawsuit for a reported $18 million.

Daisy has indicated that there are no defects in any of its BB guns and that anyone who has been hurt with the guns has been hurt because of not reading the directions, not being over the age of 15 (as the packaging recommends), or not being supervised by an adult (also recommended on the packaging).

However, the Mahoney's lawyer indicated that, when there is an accidental shooting involving a Daisy BB gun, the parties involved say, "I didn't know it was loaded." This inability to tell whether the gun is loaded was alleged as a defect in the product.

The National Rifle Association has expressed concern about the recall of BB guns on the basis of consumers not knowing they are loaded. The NRA's fear is that such liability will cross over and affect all guns and that there will be an infringement of Second Amendment rights as well as increased liability for gun manufacturers.

Refer to Chapters 6 and 27.

What authority does the CPSC have to issue a recall? What process must it follow? If the issue is repeated mistakes regarding whether the gun is loaded, is there still product liability?

FOR MORE INFORMATION

  • Jayne O'Donnell, "CPSC may sue Daisy to recall BB guns," USA Today, October 30, 2001, 1B.
  • Alan Fisk, "BB Airgun Case Leads to Federal Recall Suit," National Law Journal, November 19, 2001 - November 25, 2001, A4.
  • Visit Daisy's Website: http://www.daisy.com where you find these gun safety tips included with every Daisy product:

Safety Tips
Airguns are real guns, not toys. You or others can be killed or seriously injured if these rules are not followed.

  1. Always keep the muzzle pointed in a safe direction.
    There are several safe "carries" depending on the situation. NEVER ALLOW THE MUZZLE TO POINT IN THE DIRECTION OF A PERSON.
  2. Treat every gun as if it were loaded.
    You can never be positive that you were the last person to handle the gun. Never take anyone's word about whether or not a gun is loaded. Always check a gun to see if it is loaded when removed from storage or received from another person. ALWAYS TREAT A GUN AS IF IT IS LOADED EVEN IF YOU KNOW IT ISN'T.
  3. Only load or cock a gun when you are shooting.
    A loaded gun has no place in your home or other place.
  4. Check your target and beyond your target.
    Be sure all persons are well clear of the target area before you shoot. Check behind and beyond your target to be certain you have a safe backstop and that no person or property could be endangered.
  5. Anyone shooting or near a shooter should wear shooting glasses.
    Also, all other persons should remain behind the shooter.
  6. Never climb or jump with a gun.
    You can't control the direction of the muzzle if you stumble or fall. You should safely lay the gun down or hand it to a companion while you climb or jump over anything.
  7. Avoid ricochet.
    Never shoot at a flat hard surface or at the surface of water. Ammunition can ricochet off of water just like a skipped rock.
  8. Keep the muzzle clear.
    Never let anything obstruct the muzzle of a gun. Don't allow the muzzle to come in contact with the ground.
  9. Guns not in use should always be unloaded.
    Keeping guns unloaded when not in use is critical to the safety of you and others. When you are finished shooting, put the trigger safety in the "on" position and unload the gun. Store guns so that they are inaccessible to untrained shooters and store ammunition separately from the gun.
  10. Respect other people's property.
    Whether you're target shooting or hunting, if you're a guest on others' land, you should leave it exactly as you found it.

Do these tips provide sufficient warning?

Visit the Consumer Product Safety Commission Website and read about this recall and others: http://www.cpsc.gov.


Update: October 15 , 2001
Kmart has lost a lawsuit brought against it by the parents of a teen for wrongful death. The jury awarded $1.5 million in damages and another $1.5 million in punitive damages in the wrongful death suit.

Ryan Eslinger, who was 19 at the time, bought a shotgun at a Kmart in Kimball Junction, Utah. Mr. Eslinger had been declared mentally incompetent by a court. But, when he filled out the questionnaire for the Bureau of Alcohol, Tobacco, and Firearms (ATF) that is required prior to gun purchases, he offered a "no" answer to the form's question on mental illness.

The Kmart clerk accepted Eslinger's passport as identification because Eslinger did not have a driver's license. However, the passport did not have Eslinger's current address.

Eslinger returned the next day to the Kmart with the gun that had been completely disassembled. He asked for assistance in putting the gun back together. At that point Kmart's store security pulled the ATF application that Eslinger had completed. When he saw that the application noted that there was no proof of current address, the security guard called Kmart's legal department, but no one returned the call. The security guard refused to give the gun back to Eslinger, but he was overruled by the store manager.

The gun was reassembled and Mr. Eslinger took the gun home and shot and killed himself.

The lawyer for Mr. Eslinger argued that Kmart had not adequately trained its personnel on the sale of guns. Kmart's video for training on gun sales indicates that the most important sale is the "one you don't make." At the time Mr. Eslinger purchased the gun there was testimony that indicated he was drooling and that he had self-inflicted injuries. Kmart argued that he looked clean cut.

Refer to Chapters 9 and 27.

On what theory would Kmart be held liable?

FOR MORE INFORMATION

Margaret Cronin Fisk, "Kmart to pay $3 million for selling gun to suicidal teen," National Law Journal, October 1, 2001, B1.


Copyright © 2002 SW Legal Studies in Business. All Rights Reserved.