The Case for a Strong Regulatory Compliance Defense

Federal administrative agencies have established safety standards or licensing procedures for airplanes, motor vehicles, pesticides, drugs, medical devices, and a variety of other products. At the same time, product sellers are subject to tort liability even though their products comply with applicable federal safety standards. Product sellers maintain that compliance with federal safety standards ought to protect them from liability under state tort law and have relied upon several legal principles to support this claim. The first, and most successful, theory is federal preemption. Under this concept, Congress may expressly or impliedly assert the primacy of federal law under the Supremacy Clause of the U.S. Constitution, thereby displacing competing (or even complementary) state regulation. So far, product manufacturers have successfully invoked the doctrine of preemption to defeat damage claims by injured consumers in connection with cigarette labeling, pesticide labeling, motor vehicle design, and medical device labeling and design. The regulatory compliance defense is another concept that can limit tort liability. In its strong version, the regulatory compliance defense provides that a product is not defective if it meets applicable regulatory standards or requirements. However, very few jurisdictions recognize regulatory compliance as a complete defense to tort liability. Instead, most courts allow juries to take compliance with regulatory standards into account, but steadfastly refuse to treat federal safety standards as anything more than minimum standards. Part I of this Article provides a brief overview of significant federal product safety legislation. Part II sets forth the argument that administrative agencies can regulate product safety more cheaply and effectively than tort law. The concept of federal preemption is discussed and critiqued in part III. Part IV focuses on the conventional treatment of regulatory compliance in products liability law and proposes a strong regulatory compliance defense that will foreclose most damage claims against product manufacturers who comply with federal safety standards. Finally, part V analyzes the effect such a proposal would have on product safety and the compensation of injured consumers. The Article concludes that the administrative cost savings that a strong regulatory compliance defense would achieve should more than offset any negative effects that the defense might have on product safety and victim compensation

Replacing Strict Liability with a Contract-Based Products Liability Regime

When strict products liability first appeared on the scene some thirty-five years ago, it was heralded as a boon to consumers whose claims to compensation had hitherto been frustrated by the law of sales. Warranty law, it was said, worked fairly well in purely commercial transactions, but tort law did a better job in cases where ordinary consumers suffered personal injuries or property damage from defective products. To be sure, defenders of warranty law pointed out that the newly-drafted Uniform Commercial Code (the Code or U.C.C. ) was much more consumer friendly than the old Uniform Sales Act. Nevertheless, the proponents of strict liability prevailed, and to this day strict liability in tort remains the pre-eminent theory of products liability. However, as the present century draws to a close, academic support for the existing tort-based system of strict products liability appears to be receding. Indeed, some legal commentators have begun to suggest that the current products liability system be scrapped and replaced with something better. These fertile minds have been responsible for a number of novel and ingenious proposals but, surprisingly, almost no one has suggested sales law as a possible alternative to strict liability. I will attempt to remedy this oversight by taking a fresh look at the Uniform Commercial Code\u27s warranty provisions. This article is divided into five parts. Part I examines the shortcomings of the current tort-based system of products liability. In this portion of the article, I contend that strict liability does not necessarily promote product safety, nor does it distribute product-related risks fairly or efficiently. Finally, I conclude that the present system of products liability is outrageously expensive to administer, distributing less than fifty cents on the dollar to the victims of product-related injuries. In Part II, I argue that products liability should be viewed as a form of insurance. In addition, I contend that products liability law should abandon its traditional concern with product safety, broad risk-spreading, and corrective justice, and instead focus on providing consumers with warranty/insurance protection against product-related injuries at the lowest possible cost. Part III examines some of the basic features of the Uniform Commercial Code and identifies several assumptions that underlie the notion that a contract-based products liability system can adequately protect consumer interests. The first assumption is that a contract-based liability regime will rely primarily on express warranties, running directly from producer to consumer, to carry out this insurance function. The implied warranty of merchantability, even when modified or limited, requires buyers to purchase a socially-mandated level of warranty or insurance protection whether they desire it or not. Express warranties, on the other hand, allow the parties to allocate product-related risks in a way that maximizes their utility. The second assumption is that consumers have sufficient knowledge and bargaining power to avoid being swindled or coerced by producers. This assumption is supported by studies that focus on the behavior of markets, concluding that producers respond to consumer preferences with respect to warranty/insurance protection. Part IV examines some of the Code\u27s potential shortcomings. One concern is privity of contract. According to traditional doctrine, warranty protection extends only to the original buyer and not to other parties who may be injured by the product. Although the privity requirement has lost much of its force during the past thirty years, it still can be troublesome. Another problem is the Code\u27s notice provision, which requires buyers to notify sellers of breach of warranty within a reasonable time or lose their right to sue. If this requirement was rigorously enforced it could strip unsophisticated consumers of the warranty/insurance protection for which they bargained. Disclaimers and warranty limitations constitute another pitfall. While these concepts can serve a useful and benign purpose by allowing the parties to adjust the level of insurance coverage provided, they also can operate in an oppressive manner against ignorant or economically-disadvantaged buyers. The Code\u27s statute of limitations is another sticking point. Unlike the statute of limitations in tort cases, which begins to run when the plaintiff\u27s injury occurs, or in some cases, when the injury is discovered, a breach of warranty claim under the Code\u27s statute of limitation typically begins to run as soon as the goods are delivered. Because this limitation period is relatively short, it may run out before any injury occurs, thereby leaving the victim without a remedy. In Part V, I consider whether the problems described in part IV are serious enough to require correction. The first issue is privity. Because I envision a system of express warranties issuing directly from producers to consumers, I conclude that both vertical privity and horizontal privity requirements ought to be eliminated for consumer-related warranty claims. In the absence of privity requirements, the parties themselves can decide warranty coverage issues. A second concern is the notice requirement of U.C.C. section 2-607 (3)(a). Although this provision is useful and reasonable in commercial transactions, it may serve as a trap for the unwary consumer. Therefore, I recommend eliminating the notice requirement in transactions between producers and ordinary consumers. A third area of controversy involves disclaimers and limitations on remedies. These contractual devices are essential to the furnishing of efficient levels of insurance protection by producers. I assume that competitive forces within the market will discourage producers from scaling back their insurance coverage without a corresponding reduction in product prices. If this does not occur, however, the courts can invalidate exculpatory provisions by invoking the Code\u27s unconscionability provisions. The final, and most intractable, problem is the Code\u27s statute of limitations. The Code\u27s four-year date-of-sale rule may be too short where personal injury claims are involved. On the other hand, the date-of-injury and discovery doctrine approaches employed by tort law may keep the producer on the hook for too long. I conclude that the traditional date-of-sale rule be retained. With the exception of automobiles and major appliances, most consumer goods have relatively short useful lives and producers can offer express warranties for future performance under section 2-725 (2) for products that present long-term risks to their users. Therefore, I conclude that the Uniform Commercial Code, with certain minor changes, might indeed be preferable to the present tort-based system, particularly if we view products liability as an insurance mechanism rather than as an instrument of accident cost avoidance or unlimited risk distribution

Unavoidably Unsafe Products and Strict Products Liability: What Liability Rule Should be Applied to the Sellers of Pharmaceutical Products?

Injuries from adverse drug reactions have increased dramatically in recent years. This increase is largely attributable to the changing nature of pharmaceutical products. First of all, more pharmaceutical products are currently available to physicians than ever in history. Presently, there are more than ten thousand prescription drugs on the market, and each year four hundred to five hundred new ones are introduced. Second, modern drugs often are more potent than their older counterparts, thus increasing the likelihood of adverse reactions. It should come as no surprise that this rise in the number of drug-related injuries has led to a comparable increase in litigation. Unfortunately, the courts seem unable to agree on a consistent set of liability rules to apply in drug injury cases. Sellers of defective pharmaceutical products are theoretically subjects to strict liability, just like other product sellers. However, in the case of pharmaceutical products, the principle of strict liability is qualified by a special rule for “unavoidably unsafe” products. According to this rule, which is derived from comment k to section 402A of the Restatement (Second) of Torts, sellers of unavoidably unsafe products are not held strictly liable to injured consumers as long as they warn the consumers of reasonably discoverable risks. Because comment k is unclear in many respects, there is considerable disagreement about its nature and scope. For example, most courts have concluded that comment k essentially imposes a negligence standard on product sellers. Nevertheless, a few courts seem to retain some vestiges of strict liability in comment k cases. The courts also disagree about whether comment k applies to pharmaceutical products across the board or only on a case-by-case basis. The debate over comment k, however, is not limited to questions of interpretation. At a more basic level, it also involves a conflict over the proper liability standard to be imposed on sellers of pharmaceutical products. Critics of comment k argue that no group of product sellers should be subjected to a lesser standard of liability simply because of the products they sell. In their view, consumers of pharmaceutical products should be entitled to the same legal protection as consumers of any other products. However, advocates of limited liability maintain that strict liability rules are best suited to mechanical products and cannot be applied willy-nilly to chemical or biological products, such as pharmaceuticals. Proponents of comment k also contend that strict liability would have an undesirable adverse effect on the availability and price of pharmaceutical products. This Article discusses the role that comment k should play in the law of products liability. Part I reviews the fundamentals of strict products liability and examines the basic features of comment k. Part II identifies four types of product risks and discusses how each is treated under comment k’s liability rules. These risks include: (1) risks associated with the production process, (2) risks arising from a product’s inherent nature or chemical composition, (3) risks created by particular design choices, and (4) scientifically unknowable risks. Part III is concerned with the proper function of comment k in modern products liability law. The first section compares the liability of pharmaceutical product sellers under both strict liability and comment k. The next section reviews the various rationales that courts have relied upon to support the imposition of strict liability on product sellers. This leads to the conclusion that strict liability is appropriate when consumers are harmed by production flaws and perhaps by product design, but not when their injuries are caused by some aspect of a product’s inherent nature or chemical composition. The third section evaluates the merits of a hindsight rule in connection with the duty to warn. The final section proposes a version of comment k that is consistent with the policies underlying strict products liability

Non-Charitable Purpose Trusts: Past, Present, and Future

This Article focuses on non-charitable purpose trusts and how they enable estate planners to better carry out their clients’ objectives

The Impact of \u3cem\u3eWyeth v. Levine\u3c/em\u3e on FDA Regulation of Prescription Drugs

On March 4, 2009, the United States Supreme Court decided Wyeth v. Levine. In that case, the Court concluded that the plaintiff\u27s failure to warn claim against the makers of the drug Phenergan was not impliedly preempted by the Food, Drug and Cosmetic Act (FDCA). In doing so, the Court rejected the argument of the U.S. Food and Drug Administration (FDA) that tort claims of this nature stand as an obstacle to federal regulatory objectives. This article evaluates the Court\u27s opinion in Wyeth and examines that decision\u27s impact on subsequent litigation in the area of prescription drug labeling. In particular, the article considers two issues: 1) what effect will the Wyeth decision have on cases where FDA has concluded that there is insufficient scientific evidence to justify strengthening a warning and 2) are failure to warn claims against manufacturers of generic drugs preempted on actual conflict grounds because FDA does not permit them to change unilaterally change product labeling? A survey of FDA preemption cases decided in the past year indicates that the Wyeth decision has had a profound effect on lower federal courts and has led most of them to conclude that failure to warn claims against drug manufacturers are normally not preempted. Part II discusses the preemption doctrine and its application to state law tort claims against product manufacturers. Part III examines the history of implied preemption of tort claims against manufacturers of FDA-approved prescription drugs prior to Wyeth. Part IV discusses the Wyeth decisions in the Vermont Supreme Court and the United States Supreme Court. Part V evaluates some of the prescription drug preemption cases that have been decided in the lower federal courts since Wyeth and concludes that these courts are now reluctant to preempt failure to warn claims unless a manufacturer affirmatively seeks permission from FDA to change a drug\u27s labeling

The Application of Product Liability Principles to Publishers of Violent or Sexually Explicit Material

There have been a number of tragic incidents during the past few years in which mentally unstable teenagers have carried guns into school and shot teachers and fellow students. These schoolyard killings have generated an intense debate about the problem of violence in our society. Some social commentators have attributed teenage violence to the widespread availability of firearms, while others blame parental neglect, lack of discipline in the schools, or the declining influence of religion and morality in contemporary culture. However, another source of concern is the popular media, which stands accused of purveying sex and violence on a massive scale to impressionable American youths. Recently, victims of teenage violence have enlisted trial lawyers in their fight against sex and violence in the popular media. This Article examines the doctrinal and constitutional barriers that must be overcome by those who wish to recover from media defendants on a products liability theory. Part I provides an overview of cases. They are divided into two major categories: (1) claims arising from a publication\u27s information content and (2) claims arising from a publication\u27s point of view or idea content. This latter category can be further subdivided into cases where media defendants allegedly facilitate the commission of a crime, cases where publishers allegedly induce others to imitate violent acts that are portrayed in material disseminated to the public, and cases where they allegedly inspire readers or viewers to commit violent or illegal acts. Part II identifies existing doctrinal barriers to product liability claims against media defendants. For example, plaintiffs who base their claims on a product liability theory will have to persuade the courts that books, movies, video games and other information media are products which are placed in the stream of commerce by their producers. Plaintiffs must also argue that commercial transactions which enable material to reach the consuming public should be characterized as sales. Furthermore, plaintiffs must prove the existence of a defect which makes the product unreasonably dangerous to users or consumers. In addition, regardless of whether plaintiffs rely on negligence or strict liability principles, they must prove that the actions of the publisher or the condition of the product have caused the plaintiffs\u27 injuries. Finally, plaintiffs will have to overcome the argument that the actions of listeners, viewers, or third parties were not sufficient to break the chain of causation. Part III is concerned with whether media defendants should be allowed to invoke the protection of the First Amendment in order to shield them against product liability suits by injured parties. The first issue is whether the material disseminated by the media qualifies as speech or expression. Assuming that it does, the next issue is whether such material is protected speech or whether it falls into a category of unprotected speech, such as obscenity or incitement to violence. This Article concludes that both violent and sexually explicit portrayals are legitimate forms of expression and are, therefore, entitled to full constitutional protection. Part IV evaluates three liability standards. The first would subject media publishers to strict liability in tort and deny them First Amendment protection for sexually explicit expression or expression that inspires violence or other illegal conduct. The second liability standard would also foreclose media defendants from claiming First Amendment protection, but would also require plaintiffs to prove that a publisher was negligent. The third liability standard, which is similar to the current state of the law, would essentially prohibit tort actions against media publishers on the basis of content. The Article concludes by endorsing this last alternative. There are three reasons for taking this position. First, a rule that prohibits tort actions against media defendants would promote artistic expression and media coverage of mature or controversial subjects. Second, such a rule would discourage special interest groups from using the tort system as a vehicle to further their own social agendas. Third, removing media publishers from the pool of potential defendants will encourage moral leaders to place the blame where it really belongs—on those who do the actual killing—and not allow it to be shifted elsewhere

Sailing Under False Colors: The Continuing Presence of Negligence Principles in Strict Products Liability Law

Dean Prosser, in his celebrated article, The Assault Upon the Citadel, compared the assault on warranty law\u27s privity requirement to an attack on a stoutly defended fortress during the Middle Ages. Since that time, another conflict has arisen among students of products liability, namely whether product sellers should be subject to strict liability or whether certain aspects of this field should instead be controlled by negligence principles. However, unlike the assault some sixty years ago on the privity requirement, this present conflict bears a greater resemblance to the protracted trench warfare of World War I than it does to the siege of a medieval citadel. In a nutshell, here is the problem: For reasons that will be described in greater detail below, the law of products liability was cast solely in terms of strict liability in tort when the courts abandoned warranty law in the 1960s. The early pioneers, such as Prosser and Traynor, believed that defectiveness was the touchstone of liability under their proposed strict liability regime. Only later, did it become apparent that the existing defectiveness paradigm, which worked well with manufacturing defects, was not suitable in cases where a product\u27s design or warnings were at issue. Instead, courts and commentators developed various tests of defectiveness for product designs and warnings purportedly based on strict liability. In fact, these tests, which typically involved some form of risk-utility balancing, were based more on negligence than strict liability. I conclude that the time has come to repudiate concepts of defectiveness and strict liability in design and failure to warn cases, which constitute the bulk of products liability litigation, and instead adopt an approach that focuses more on manufacturer conduct. In other words, strict liability and the concept of defectiveness should be confined to manufacturing defects. Furthermore, negligence principles should be applied when design and failure to warn cases are involved and the concept of defectiveness can be dispensed with as unnecessary since the risk-utility balancing analysis of negligence can focus on the manufacturer\u27s conduct instead. Part II recounts the familiar story of how strict products liability triumphed over negligence and warranty law in the early 1960s. It also explores the role that policy rationales, such as risk distribution and accident cost avoidance, played in the development of products liability law during this period. Part III examines the use of defectiveness as a liability standard and also documents the lingering role of negligence in § 402A and its comments. It also describes the various tests for defectiveness that evolved in the 1970s and 1980s in response to the increasing recognition that design and warning cases needed to be evaluated differently than manufacturing flaws. Part IV analyzes the new Products Liability Restatement and points out its heavy reliance on negligence principles, particularly in § 2(b) and § 2(c). Finally, Part V proposes liability rules for design and warning cases that eliminate defectiveness as a basis for liability and, instead, focus on the conduct of the product manufacturer

Will More Aggressive Marketing Practices Lead to Greater Tort Liability for Prescription Drug Manufacturers?

Manufacturers of prescription drugs have begun to market their products more aggressively than they did in the past. These marketing efforts are not confined to health care professionals alone; pharmaceutical companies now engage in extensive direct-to-consumer advertising on radio and television, in the print media, and even on the Internet. While these promotional efforts no doubt increase sales, they may also lead to greater tort liability for drug-related injuries. The most likely theories of liability are failure to warn and negligent marketing. Liability for inadequate warnings will almost certainly increase if courts abandon the learned intermediary rule and require drug manufacturers to warn consumers instead of physicians when they engage in direct-to-consumer advertising. In addition, injured consumers may make negligent marketing claims in cases where there is evidence that pharmaceutical companies have pressured physicians to over-prescribe their products or where these companies have failed to exercise some control over doctors or pharmacists who facilitate abuse of prescription drugs