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

Surrogate Immunity: The Government Contract Defense and Products Liability

The government contract defense is an affirmative defense that shields a manufacturer from liability if the product causing injury complied strictly with design specifications set forth in a government procurement contract. The defense was first used by public works contractors to bar claims against them for damage to land and other property. However, in recent years, product manufacturers have invoked the government contract defense to avoid liability to third parties for defectively designed products supplied to the government. Despite widespread judicial acceptance of the government contract defense in products liability litigation, a number of issues are still being hotly debated. One controversy involves whether the government contract defense should be limited to military equipment or whether it might apply to other products such as vaccines supplied to the government under contract. Another question is whether the government contract defense should be allowed when the contractor participates extensively in the design of the product. In addition, the courts disagree about whether the government contract defense is controlled by state law or federal common law. This article takes the position that the real objective of the government contract defense is to protect governmental decision-making against collateral attacks in the courts. This concern is similar to the interest promoted by the discretionary function exception to the Federal Tort Claims Act. The discretionary function exception prevents litigants from bringing tort suits against the government in order to challenge the correctness of policy decisions by members of the executive branch; the government contract defense bars tort actions against suppliers in a similar manner when such litigation would threaten the exercise of discretion by government officials in the procurement area. Part I of this article introduces some of the principles that have influenced the modern government contract doctrine and provides an overview of significant recent decisions. Part II analyzes the policies which underlie the concept of strict products liability and examines the rationale for the government contract defense. Finally, Part III discusses some aspects of the government contract defense that have not been completely resolved by the courts

A Proposed Revision of Kentucky\u27s Water Rights Legislation

Kentucky\u27s present system of water law consists of a statutory water withdrawal permit system superimposed upon a body of common-law water rights doctrine. The rights of water users are often uncertain under this system, particularly in periods of water shortage. The proposed revision of Kentucky\u27s existing water rights legislation, would greatly reduce the significance of common-law water rights and would remedy some of the weaknesses in the present statute. Part 1 of the proposed statute establishes an administrative structure; Part 2 deals with water withdrawal permits; Part 3 retains the present statute\u27s provisions on the regulation of dams and impoundments, while Part 4 sets forth the powers and responsibilities of the Kentucky Water Resources Authority. Finally, Part 5, which deals with the regulation of water wells is included as an appendix

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