Lawsuit!: Reducing the Risk of Product Liability for Manufacturers

Preface xiii

Acknowledgments xv

1. An Introduction to Products Liability 1

1.1 Courts and Jury Perceptions 4

1.2 Judicial Hellholes 5

1.3 Legal Reform 7

1.4 Impact on Manufacturers 8

1.5 Public Perception of Corporations 10

1.6 Product Liability from the Insurance Perspective 15

1.7 Insurance Companies Supporting PLP Programs 18

1.8 Recommendations that Can Be Used on Products Liability Accounts Related to Design, Advertising, Instructions, and Product Recall 20

1.9 Tougher Requirements from the CPSC 22

1.10 #1 Verdict of 1999: $4.9 Billion Against GM for Gas-Tank Explosion—Live Defense Demonstration Backfires and Turns the Tide 26

2. Product Liability Around the World 35

2.1 United States 38

2.2 Australia 50

2.3 Canada 59

2.4 China 67

2.5 Europe: Part 1 71

2.6 Europe: Part 2 76

2.7 Japan 83

3. Product Liability Law 93

3.1 Restatement Third of Torts 94

3.2 Commonly Used Terms and Definitions 98

4. New Product Introduction: More Effective Design Reviews 115

4.1 The Different Stages or Types of Design Reviews 122

4.2 Creating the Design Review Team 123

4.3 Making Design Reviews the Policy 125

4.4 Developing the Design Review Procedure 127

4.5 Minutes of the Design Review 131

4.6 Policies and Procedures—Assets and Liabilities 131

4.7 Engineering Change Control 132

4.8 Traceability and Recall Preparedness 133

4.9 Measuring the Effectiveness of the Design Review Team 134

4.10 In Conclusion 134

5. New Product Introduction: Product Safety Reviews Hazards Analysis, and Risk Assessment 135

5.1 Creating the Product Safety Team 136

5.2 Elements of the Hazards Analysis 137

5.3 Design Review—a Viewpoint of the Consumer Product Safety Commission (CPSC) 138

5.4 Failure Mode and Effects Analysis (FMEA) 139

5.5 Cause-and-Effect Diagram 142

5.6 MIL-STD 882 143

5.7 Hazards Analysis Software 148

6. Product Testing 149

6.1 The Initial Design Process 150

6.2 Conducting Product Tests 150

6.3 Building a Testing Lab 151

6.4 Complying with Domestic or International Standards 154

6.5 Testing Products and Reacting to Test Results 154

7. Warnings and Instructions 157

7.1 The Legal Duty to Warn 158

7.2 Presumption 159

7.3 No Need to Warn Sophisticated Users 160

7.4 The 2007 ANSI Z535.4 Standard for Product Safety Signs and Labels 161

7.5 The New Standard: ANSI Z535.6 173

8. Product Warranties 179

8.1 Examples of Warranty, Warranty Disclaimer, and Exclusive Remedy 180

8.2 Limitation of Liability 180

8.3 A Businessperson’s Guide to Federal Warranty Law (http://www.ftc.gov) 181

8.4 Offering Service Contracts 199

8.5 Statement of Terms and Conditions 200

8.6 Disclaimer or Limitation of Implied Warranties 200

9. Product Marketing 201

9.1 Deceptive Advertising v. Defects in Marketing 204

10. Contracts, Purchase Orders, and Agreements 207

10.1 Lack of Supplier Control 208

10.2 Guilty by Association 209

10.3 Purchase Orders 210

10.4 Recall Considerations 212

10.5 Distribution of the Purchase Order Terms and Conditions 212

10.6 Customer Contracts 213

10.7 The China Syndrome 215

10.8 Restructuring Import Contracts When Importing Goods from China 216

11. Records Retention and Dangerous Documents 227

11.1 Records Retention Programs 228

11.2 Hard Copy Storage 229

11.3 Records can be Key for Defense 231

11.4 Document Management and Recognizing “Dangerous Documents” 233

11.5 Electronic Documents and Discovery 239

11.6 The New e-Discovery Burden 240

11.7 Employee Education 242

12. The Administrative Team 243

12.1 Selecting a Primary Driver 244

12.2 Creating the Administrative Team 245

12.3 Gaining the Necessary Knowledge 246

12.4 Announcements to the Rest of the Organization 246

12.5 Selecting an Outside Attorney 247

12.6 Auditing the Operation 247

12.7 Developing an Implementation Plan 252

12.8 Administrative Team Meetings 253

12.9 Executive Action—a View from the CPSC 254

13. Post Sale Duties to Warn and Recalls 257

13.1 Estimating the Economic Impact of Product Recalls 260

13.2 “Made in China” Recalls of 2007 260

13.3 Implementing a Recall 262

13.4 Developing a Procedure 263

13.5 The Tylenol Recall 266

13.6 Government Agencies Involved with Certain Product Recalls 267

13.7 EU Recall Planning Guide 288

13.8 Some Final Thoughts on Recall Prevention 297

14. The Quality System: Incorporating Safeguards into the Procedures 299

14.1 The Legal Focus on Quality 301

14.2 How Quality Can Become a Liability 301

14.3 The PLP Problem with Quality Programs 302

14.4 Evaluating the Quality Program 304

14.5 Incorporating PSLP into the Quality Program 305

14.6 Product Safety and Quality Guidelines by the CPSC 307

14.7 Product Safety Policy 307

14.8 Organization 307

14.9 Training 307

14.10 Technical Guidance 308

15. Claims and Investigating Incidents 315

15.1 How The Company Learns About Problems 316

15.2 In-House Awareness Training 317

15.3 Preparing for an Investigation 319

15.4 Gathering the Facts 321

15.5 Inspecting the Evidence 322

15.6 Writing a Report 324

16. Entering into Litigation 327

16.1 Selecting the Defense Attorney 328

16.2 Product Liability (Civil Case) Trial Procedure 329

16.3 Appellate Procedure 330

16.4 Discovery: Interrogatories 331

16.5 Discovery: Requests for Documents 332

16.6 Discovery: Depositions 333

16.7 Preparing for Trial: Testifying Expert v. Non-Testifying Expert 334

16.8 Pretrial Stage: Mandatory Settlement Conference 335

16.9 Pretrial Defense Strategies: Motion in Limine 335

16.10 Discovery: Defense Strategies 335

16.11 Assessing Damages and Punitive Awards 343

16.12 Product Liability Case Studies from Appellate Courts 344

Index 353