This module looks at the liability of manufacturers and sellers of products that cause injury (personal or economic) or property damage to a purchaser, user or bystander under tort, contract and strict liability theories.  Historically prior to the Industrial Revolution, buyers were expected to inspect products before purchase and assumed the risk that the product was defective or failed to meet the buyer’s expectations.  This was called the doctrine of caveat emptor.  The industrial revolution introduced manufactured products, many of which are too complex and sophisticated for buyers to be able to identify defects by simply examining them.  As a consequence, the courts have replaced caveat emptor with the doctrine of caveat venditor, or let the seller beware that assures buyers that consumer goods will work for their intended purpose (if used properly), unless sold “as is” or “with all faults.”

Product liability cases can be premised on tort law (e.g., negligence in the design or manufacture of a product or in warning users of potential dangers or fraud for misrepresenting product attributes), contract law (breach of warranty when a product fails to perform adequately or as promised), and strict liability for product defects that cause injury.   As you work through the module, consider the advantages and disadvantages of each theory, both from the perspective of the plaintiff (the injured party) and the defendant (the company that manufactured and/or sold the defective product).  Which theory is easier to establish and hence benefits the plaintiff?

As recent cases demonstrate, high profile product liability lawsuits, class action lawsuits, product recalls, and ongoing adverse publicity and media attention can destroy a brand’s reputation.  In addition, jury awards and out-of-court settlements can have a significant effect on a company’s financial future and its stock value.  Since 2104, a number of large corporations have faced these consequences:  (1) General Motors has faced wrongful death and personal injury claims, as well as recalls over its defective ignition switch, (2) Honda and other car manufacturers face similar claims over their use of defective air bags manufactured by Takata that can explode on impact, sending fatal shards of the air bag into drivers, (3) Johnson and Johnson faces a class-action lawsuit alleging a failure to warn that its talcum powder (sold since 1892) can cause ovarian cancer when used for personal hygiene for long periods of time, and (4) Volkswagen faces more than 500 class action lawsuits, as well as criminal and civil investigations (with potential fines totaling $45 billion) for fraudulently claiming low emissions from its diesel and gas-powered engines that were fitted with a “defeat device” to falsely report low emissions during stationary road tests that don’t actually occur when the vehicle is being driven.

Large jury awards can also grab headlines.  In 2014, for example, a jury in Pensacola, Florida awarded $23.6 billion to a family of a smoker who died at age 36, while a jury awarded $9 billion to a New Yorker who claimed his bladder cancer was caused by his diabetes medication Actos (manufactured by Takeda Pharmaceuticals and Eli Lilly).  Few large punitive verdicts against corporations survive post-trial motions and appeals.  The trial judge reduced the $23.6 billion tobacco verdict to $16.9 million, the same amount the jury had awarded on the plaintiff’s compensatory damages claim.  The judge also gave the defendant RJ Reynolds the option of paying that lesser amount or a new trial and the tobacco giant chose to re-litigate the issue.  Similarly, the trial court reduced the $9 billion award against Takeda Parmaceutical and Eli Lilly for Actos to $36.9 million.  While such large awards are rare, one insurance industry group reported that the average product liability award in 2015 was $3.5 million, with the median award about $1.5 million.