Product-Related Risk and Cognitive Biases: The Shortcomings of Enterprise Liability

Products liability law has witnessed a long debate over whether manufacturers should be held strictly liable for the injuries that products cause. Recently, some have argued that psychological research on human judgment supports adopting a regime of strict enterprise liability for injuries caused by product design. These new proponents of enterprise liability argue that the current system, in which manufacturer liability for product design turns on the manufacturer\u27s negligence, allows manufacturers to induce consumers into undertaking inefficiently dangerous levels or types of consumption. In this paper we argue that the new proponents of enterprise liability have: (1) not provided any more than anecdotal evidence for their thesis; (2) failed to account for the mechanisms the law already has available to counter manufacturer manipulation of consumers; and (3) made no effort to address the well-known problems enterprise liability creates. Furthermore, even on its own terms, the new arguments for enterprise liability fail to consider the tendency of some manufacturers to exacerbate the risks that some products pose - a tendency that enterprise liability would exacerbate. In short, the insights gleaned from psychological research on human judgment do not support adopting a system of strict enterprise liability for products

Product Liability and the Passage of Time: The Imprisonment of Corporate Rationality

In theory, the product liability system should induce manufacturers to invest in product safety at the socially optimal level, i.e., the level at which the marginal cost of the investment equals the marginal cost of product-related accidents thereby avoided. In reality, however, this inducement may be weakened by countervailing incentives, causing manufacturers in marginal cases to forgo investment that would appear to be cost-effective. Professor Henderson argues that in these cases corporate rationality has been imprisoned by two real-world phenomena. First, a manufacturer may postpone product improvements lest they be viewed by potential claimants and juries as a confession of fault with respect to accidents caused by products already on the market. Investment in product safety may not reach the optimal level because its marginal cost is inflated by a concomitant increase in liability exposure from old products. Second, this tendency to underinvest may be strengthened by conflicts of interest between the corporate manufacturer and the individuals who manage it. As in other areas of corporate life, the managers\u27 short term accountability may encourage them to defer long-term investment that may be in the best interests of the firm as a whole as well as of society. Professor Henderson concludes that the product liability system probably cannot free corporate managers from these restraints, but he suggests several ways to reduce the incentives that managers have, both as individuals and as representatives of their firms, to underinvest in product safety

Should a Process Defense Be Recognized in Product Design Cases?

Professor Henderson, addressing the suggestion that the focus in product design liability cases should be on the process by which design decisions are made rather than on the reasonableness of a particular design, analyzes a proposal that manufacturers be able to present evidence of good process as a defense. Although he applauds the attempt to resolve the difficulties of deciding product design cases, he questions the soundness of the process approach. Specifically, he argues that a process defense would be unworkable because judges would be unable to tell good process from bad, and that the proposal does not address polycentricity--the real source of difficulty in product design cases. Finally, he is unconvinced that a process defense will provide incentives that would lead to improved product designs

A Process Perspective on Judicial Review: The Rights of Party- Litigants to Meaningful Participation

Article published in the Michigan State Law Review