Revista Chilena de Derecho ISSN: Pontificia Universidad Católica de Chile Chile - PDF

Revista Chilena de Derecho ISSN: Pontificia Universidad Católica de Chile Chile González Castillo, Joel PRODUCTS LIABILITY IN EUROPE AND THE UNITED STATES Revista Chilena

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Revista Chilena de Derecho ISSN: Pontificia Universidad Católica de Chile Chile González Castillo, Joel PRODUCTS LIABILITY IN EUROPE AND THE UNITED STATES Revista Chilena de Derecho, vol. 39, núm. 2, agosto, 2012, pp Pontificia Universidad Católica de Chile Santiago, Chile Available in: How to cite Complete issue More information about this article Journal's homepage in Scientific Information System Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Non-profit academic project, developed under the open access initiative 277 PRODUCTS LIABILITY IN EUROPE AND THE UNITED STATES* RESPONSABILIDAD POR PRODUCTOS DEFECTUOSOS EN EUROPA Y ESTADOS UNIDOS Joel González Castillo** ABSTRAC: This article examines three linked questions which are considered key elements for the configuration of a products liability system. First, defect categories, i.e., manufacturing defects, design defects, and insufficient warnings. Second, how to determine whether the design of a product is defective. Two possibilities become available at this point: consumer expectations test or risk-utility analysis. And, finally, whether to apply negligence or strict liability in cases of damages caused by defective products. Key words: products liability, defective products, strict liability, damages. RESUMEN: Este artículo trata tres cuestiones vinculadas entre sí que son consideradas esenciales para la configuración de un sistema de responsabilidad por productos defectuosos. Primero, categoría de defectos: defectos de fabricación, defectos de diseño y defectos de información. Segundo, cómo determinar si el diseño de un producto es defectuoso habiendo al respecto dos posibilidades: expectativas del consumidor o el análisis riesgo-utilidad. Y, finalmente, si aplicar responsabilidad por culpa u objetiva en casos de daños causados por productos defectuosos. Palabras clave: responsabilidad por productos, productos defectuosos, responsabilidad estricta u objetiva, daños 1. INTRODUCTION Products liability is a highly controversial issue in the United States due to the striking nature of some cases, the enormous sums awarded by the juries and the difficulty that ordinary citizens encounter when attempting to understand the rationale of rulings in such cases 1. They not only capture the attention of lawyers, judges, scholars, and specialists, but * This paper was prepared by the author in the framework of the Project: Products Liability in Latin America in his attendance as Visiting Researcher at the Hauser Global Law School Program of New York University. ** Civil Law Professor, Pontificia Universidad Católica de Chile. 1 Liebeck v. McDonald s Restaurants, also known as the McDonald s coffee case, is an emblematic one. It s a 1994 product liability lawsuit that became a flashpoint in the debate in the U.S. over tort reform after a jury awarded $2.86 million to a woman who burned herself with hot coffee. The trial judge reduced the total award to $640,000, and the parties settled for a confidential amount before an appeal was decided. The case entered popular understanding as an example of frivolous litigation; ABC News calls the case the poster child of excessive lawsuits. On February 27, 1992, Stella Liebeck, a 79-year-old woman from Albuquerque, New Mexico, ordered a 49 cup of coffee from the drive-through window of a local McDonald s restaurant. Liebeck was in the passenger s seat of her Ford Probe, and her grandson Chris parked the car so that Liebeck could add cream and sugar to her coffee. She placed the coffee cup between her knees and pulled the far side of the lid toward her to remove it. In the process, she spilled the entire cup of coffee on her lap. Liebeck was wearing 278 González Castillo, Joel Products liability in Europe and the United States also that of the media in general. Latin America has an extraordinary opportunity to legislate about this matter, avoiding the excesses of the American experience and making the best of the long and rich case law of the United States and Europe in this field. The central objective of this article is to make a comparative analysis of three fundamental questions concerning this matter in Europe and the United States 2. First, defect types. On the one hand, we have the model of the Restatement (Third) of Torts by the American Law Institute (ALI), which distinguishes between manufacturing defects, design defects, and insuffi cient warnings. On the other hand, we have the European model, whose Products Liability Directive does not establish distinctions between defect types. Second, criteria for determining whether a product is defective from the point of view of its design. Broadly speaking, there are two possible approaches: consumer expectations test or risk-utility analysis. Third, standard of liability: negligence (to impose liability only in cases in which there is fault) or strict liability (to impose liability without regard to fault). In very general terms, strict liability is applied in Europe and no distinctions are made among defect types. In the United States, the Restatement Second also imposes strict liability without making a distinction, whereas the Restatement Third distinguishes defect categories, and applies strict liability only in case of manufacturing defects and negligence in the other two defect categories. In Europe, the consumer expectations test is prevalent, whereas the United States favors either the risk-utility test, the consumer expectations test, or a combination of both. The legislative choice on each of these three aspects is important for the configuration of a liability system and its consequences. For instance, concerning the empirical effects of products liability policy, the debate between professors Whitford and Priest is well-known. In Professor Whitford s opinion, the policy adopted by courts over the 1960s and 1970s the expansion of manufacturer liability beyond that undertaken in warranties, that is to say, the application of strict liability is likely to have reduced the rate of product defects. According to Priest`s investment theory, on the other hand, the expansion of manufacturer liability is likely to have increased the rate of defects and the rate of consumer injuries 3. Professor Epstein acknowledges that the rapid increase in the overall level of products litigation has been matched by a long and steady decline in accidents level, but he observes that the relationship between the improved accident picture and the changes in tort liability area seems weak at best. The decline in accident rates started before the expansion cotton sweatpants; they absorbed the coffee and held it against her skin as she sat in the puddle of hot liquid for over 90 seconds, scalding her thighs, buttocks, and groin. Liebeck was taken to the hospital, where it was determined that she had suffered third-degree burns on six percent of her skin and lesser burns over sixteen percent. She remained in the hospital for eight days while she underwent skin grafting. Two years of treatment followed. 2 For a comparative discussion of American law and the European Products Liability Directive, see, e.g., Culhane (1995); Howells (2000); Howells & Mildred (1998); Reimann (2003); Thieffry, Van Doorn & Lowe (1989). 3 The arguments of each author can be viewed in Priest (1981); Priest (1982); Whitford (1982). González Castillo, Joel Products liability in Europe and the United States 279 in tort liability and continued uniformly even as the doctrinal expansion in the field halted around 1990 The simplest explanation appears to be that technological improvements in safety are desired for their own sake, wholly apart from the choice of products liability regimes TYPES OF DEFECTS In the United States, the Restatement Second of Torts (1965) did not distinguish types of product defects. It was the Restatement Third of Torts (1998) which made the well-known tri-partite distinction. In fact, Section 2 of the latter states that: Categories of Product Defects. A product is defective when, at the time of sale or distribution, it contains a manufacturing defect, is defective in design, or is defective because of inadequate instructions or warnings. A product: (a) contains a manufacturing defect when the product departs from its intended design even though all possible care was exercised in the preparation and marketing of the product; (b) is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe; (c) is defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe 5. To illustrate, the example of a car can be used. If a specific car is manufactured with defective tires, it is a manufacturing defect; by contrast, if all automobiles of the same brand and model have the same defect, it is a design defect, and, finally, if the damages were caused by an inadequate warning about the usage and characteristics of said tires, it is a case of insufficient warning. Manufacturing defects are considered relatively minor because they involve individual products only. Design defects and inadequate warnings cases are economically more important because they affect entire product lines. In Europe, on the other hand, the European Products Liability Directive 6 does not establish distinctions between defect types and applies the same rules to all of them. 4 Epstein (2008) p American Law Institute, Restatement (Third) of Torts (1998) 2 [Hereinafter Restatement (Third)]. 6 Council Directive 85/374 of 25 July 1985 on the Approximation of the Laws, Regulations, and Administrative Provisions of the Members States Concerning Liability for Defective Products. Offi cial 280 González Castillo, Joel Products liability in Europe and the United States 3. CRITERIA FOR DETERMINING WHETHER THE DESIGN OF A PRODUCT IS DEFECTIVE A. Consumer Expectations and Risk-Utility The definition of defect in the case of a manufacturing problem is not usually difficult; the product is not what it was intended to be. Most of the problems have been encountered in connection with design defects. Roughly speaking, there are two tests: consumer expectations and risk-utility. The consumer expectations doctrine states that manufacturers are liable for productinduced harm whenever the product is considered dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics 7. Typically, [w]hether a product is unreasonably dangerous is a question of fact [about which jury members]... can draw[ ] their own reasonable conclusions as to the expectations of the ordinary consumer and the knowledge common in the community at large 8. With regard to the risk-utility test courts have employed two primary versions of it: one in which the aggregate costs and benefits of the marketed product design are assessed, and one in which only the marginal costs and benefits of a proposed alternative design are assessed. The former macro-balancing approach examines the safety and utility tradeoffs of the product as a whole, while the latter micro-balancing approach examines only the tradeoffs posed by a suggested safety improvement or design alteration to the product 9. According to Reimann consumer expectations test prevails in the majority of jurisdictions and it is codified in art. 6 (2) of the EC Directive 10 and consequently applies in all EU member states as well as in most other European countries. Risk-utility analysis tends to dominate in the United States 11 and looks like the trend of the future. Yet, as Reimann aptly says it would be wrong neatly to divide the world into separate geographic spheres governed by different tests. The consumer expectation paradigm is also used in the United States, often in combination with the risk-utility analysis, and the risk-utility analysis is occasionally used in other countries as well, albeit mostly to define negligence in general tort law. Thus the difference is really one of emphasis: on the risk-utility approach in the United States, on the consumer expectation test in the rest of the world 12. Journal L 210, 07/08/1985 (Hereinafter European Directive). Available at 7 American Law Institute, Restatement (Second) of Torts (1965) 402A comment i [Hereinafter Restatement (Second)]. 8 Giglio v. Conn. Light & Power Co., 429 A.2d 486, 489 (Conn. 1980). 9 See Owen (1997) pp. 1661, 1664, I do not agree with this statement, since said article only provides that A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation. As a result, some authors hold that in fact the Directive is silent on these consumer-expectation or risk-utility standards. 11 Restatement (Third), supra note 5, 2, especially subsec. (a) and (b) and comment a. See also Louisiana Products Liability Act (for design defects). 12 See Reimann (2003) pp The previous quotation in this paragraph comes from this source. González Castillo, Joel Products liability in Europe and the United States 281 The predominance of the consumer expectation test on a worldwide level is not necessarily due to its superior merits. More likely, as Reimann writes, it is mainly a result of timing. In the 1960s and 1970s, it was the state of the art in the United States. Thus, when the Europeans imported American product liability ideas in the 1970s and 1980s, they also imported the consumer expectation test. In the 1980s and 1990s, many other countries around the world adopted the European model in turn and took the consumer expectation test as part of the package, thus helping it to prevail on a worldwide level. Ironically however, the Europeans and others apparently overlooked the fact that by the time they adopted the consumer expectation test, the Americans had come to doubt its adequacy: by the late 1970s, they had either replaced or at least supplemented it with a risk-utility analysis. This sequence of events may have long-term consequences. If the United States continues to move further towards the risk-utility paradigm while other countries stick to the consumer expectation test (which is likely at least where it has been codified), the respective regimes will continue to diverge 13. In the case of the USA, Conk points out that in the Restatement (Third) of Torts, the American Law Institute (ALI) announced a general rule to resolve the problem of the meaning of the word defect, a problem that has haunted the law of torts since section 402A of the ALI s 1965 Restatement (Second) marked the beginning of the era of strict liability for defective products. The new rule 14 rejects consumer expectations as a reliable measure of defect and proposes that the key question is whether there existed a feasible alternative safer design, the omission of which was unreasonable Conk adds that courts had long grappled with the problem of defining defect, drawing on concepts such as warranty and the consumer s reasonable expectations. But they drew most successfully on risk-utility analysis, a negligence-based approach championed by John Wade, the successor to William Prosser as Reporter for the Restatement (Second) of Torts. Wade offered a list of factors he deemed significant in applying the unreasonably dangerous standard of the Restatement (Second) 17 : (1) The usefulness and desirability of the product -its utility to the user and to the public as a whole. 13 Reimann (2003) p. 769, n Section 2 of the Restatement (Third) states that a product: (b) is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design, and the omission of the alternative design renders the product not reasonably safe (emphasis added). 15 See Restatement (Third) 2 cmt. d: Assessment of a product design in most instances requires a comparison between an alternative design and the product design that caused the injury, undertaken from the viewpoint of a reasonable person. That approach is also used in administering the traditional reasonableness standard in negligence The policy reasons that support use of a reasonable-person perspective in connection with the general negligence standard also support its use in the products liability contexts. 16 See Conk (2000) p Section 402A of the Restatement (Second) says: (1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability (emphasis added). 282 González Castillo, Joel Products liability in Europe and the United States (2) The safety aspects of the product -the likelihood that it will cause injury, and the probable seriousness of the injury. (3) The availability of a substitute product which would meet the same need and not be as unsafe. (4) The manufacturer s ability to eliminate the unsafe character of the product without impairing its usefulness or making it too expensive to maintain its utility. (5) The user s ability to avoid danger by the exercise of care in the use of the product. (6) The user s anticipated awareness of the dangers inherent in the product and their avoidability, because of general public knowledge of the obvious condition of the product, or of the existence of suitable warnings or instructions. (7) The feasibility, on the part of the manufacturer, of spreading the loss by setting the price of the product or carrying liability insurance 18. In Conk s opinion the alternative-safer-design rule of the Restatement (Third) is the vindication of Wade s view that design-defect litigation should turn on whether the product could have and should have been made safer before it was sold 19. B. Criticism of consumer expectationst and risk-utility Both tests have been praised and criticized for their advantages and disadvantages. The most obvious downsides of the consumer expectation test are that it leads to the acceptance of products that are so dangerous that no reasonable person can overlook it, and that it fails when there are no reasonable expectations at all, e.g., because consumers do not know what to expect for lack of experience or expertise 20. As Professor Wade has said in many situations, particularly involving design matters, the consumer would not know what to expect, because he would have no idea how safe the product could be made 21. The test was rejected by the Model Uniform Product Liability Act, which states that the consumer expectations test takes subjectivity to its most extreme end. Each trier of fact is likely to have a different understanding of abstract consumer expectations 22. In Kysar s wo rds the consumer expectations test for design defectiveness has become products liability s version of the rule against perpetuities: a doctrine nearly uni- 18 See Wade (1973) pp Many courts, including those in New Jersey and California, have derived their risk-utility tests from Wade. See, e.g., Barker v. Lull Eng g Co., 573 P.2d 443, 455 (Cal. 1978) (adopting the following five factors in its design-defect analysis: the gravity of the danger posed by the challenged design, the likelihood that such danger would occur, the mechanical feasibility of a safer alternative design, the financial cost of an
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