BUSINESS TORTS and

PRODUCT LIABILITY
Chapter 7
Torts in the
Business Setting

There is no such thing as a

!usiness tort"#

B$ de%inition& this 'eans

torts that concern
!usinesses#

O%ten cases (ith !usinesses

are sett)ed out o% court#

There are usua))$ !ig

a(ards& as p)ainti%%s *ie(
!usinesses as deep
poc+ets"#
The T$pes and Costs o%
Business Torts
Costs o% Tort S$ste'
A*erage annua) cost o%
,-./ !i))ion per $ear 0 -12
o% that in*o)*es !usiness#
Businesses )o!!$ %or
statutor$ )i'its on tort
)ia!i)it$#

Pain 3 su%%ering and

puniti*e da'ages p)ace a
high stic+er price" on
certain !eha*ior#

T$pes o% Torts

Intentiona)

Neg)igence

Strict Lia!i)it$

Torts are traditiona))$

co''on )a(#

4ore and 'ore

statutes are p)a$ing
an i'portant ro)e in
this area o% the )a(#

See E5hi!it 7#6

Torts Particu)ar To Businesses
Intentiona) 4isrepresentation
or 7raud
Inter%erence 8ith Contractua)
Re)ations
Inter%erence 8ith
Prospecti*e Ad*antage
Product Lia!i)it$
Consu'er Products 3
Neg)igence
Strict Lia!i)it$ in Tort
Pri'ar$ Areas o% Product
Lia!i)it$ La(

U)traha9ardous Acti*it$
7raud
De)i!erate Deception
The tort 'a$ !e ca))ed fraud, misrepresentation,
fraudulent misrepresentation or deceit
Intentiona) 4isrepresentation or 7raud
Re)ationship o% parties is a %actor in creating )ega) duties
6: Representation has !een 'ade +no(ing)$
-: 8ithout !e)ie% in its truth& OR
2: Rec+)ess)$ and care)ess (hether it is true or %a)se
4a)ice& intent& +no()edge and other conditions o% a person;s
'ind 'a$ !e a))eged genera))$" <Ru)e =!& 7edera) Ru)es o% Ci*i)
Procedure:

O%ten added to a suit o% !reach o% contract

See Lightle v. Real Estate Commission
Intentiona)
4isrepresentation or 7raud
#1 Misstatement o% an i'portant or material %act
4isstate'ent induces another to enter into so'e sort o% !usiness
re)ationship
Unre)ated or uni'portant 'isstate'ent cannot !e a !asis o% %raud& i#e#
h$ping a product
>- Scienter or intent to de%raud
Intentiona))$ 'is)eading and decei*ing another
>2 Person +no(s or has reason to +no( that state'ent !eing 'ade is %a)se
>? Recipient o% %a)se in%or'ation @usti%ia!)$ re)ies on the in%or'ation and
'a+es a decision to enter into the dea)
>A Privity !et(een the parties 0 re)ationship e5ists
>. Proimate Cause 0 )ogica) )in+ !et(een re)iance on 'isstate'ent 3
)osses to the p)ainti%%
> 7 Da'ages
Light)e *# Rea) Estate
Co''ission
Light)e& A)as+a rea) estate agent& )isted house %or sa)e !$ Leighs#
8i))ia'sBs 'ade o%%er to !u$ conditioned on o!taining 'ortgage#
Another rea)tor had a c)ient& See)e$ 0 (as interested in the house#
Light)e said house (as a*ai)a!)e as the %irst o%%er (as dead#"
See)e$ 'ade an o%%erC Leighs accepted# See)e$ cance))ed her e5isting )ease&
s(itched uti)ities& prepared to 'o*e#
Un+no(n to See)e$& Light)e (rote on her o%%er it (as a !ac+Dup contract" i%
8i))ia'sBs cou)dn;t get their %inancing#
See)e$ %ound out& rescinded o%%er& de'anded her deposit !ac+#
See)e$ %i)ed a c)ai' against the A)as+a Rea) Estate Co''ission;s suret$ %und <to
co'pensate )osses in rea) estate due to %raud:#
Co''ission heard case 0 he)d that Light)e co''itted %raudu)ent 'isrepresentation#
A(arded See)e$ da'ages# Suspended Light)e;s rea) estate )icense#
Light)e appea)ed#
EELDF A%%ir'ed Co''ission;s ru)ing#
Light)e said that prior dea) (as dead"C that See)e$ o%%er had !een accepted& and
the house is $ours"#
Light)e 'ade partia) disc)osure !ut %ai)ed to disc)ose %acts that 'ight ha*e a%%ected
See)e$;s decision#
Inter%erence 8ith Contractua) Re)ations
and
Inter%erence 8ith Prospecti*e
Ad*antage <Putting A Cog in the 8hee)s":
!nterference "ith Contractual
Relations
Brea+ing the contract
!ene%its a 2rd part$
6# E5istence o% a contractua)
re)ationship
-# 2rd part$ +no(s a!out the
contract
2# 2rd part$ intentiona))$
inter%eres (ith the
contractua) re)ationship
See #SC Construction
E$uipment %S# v. City
Commercial Real Estate
See E5hi!it 7#-
!nterference &ith Prospective
Economic #dvantage
A !usiness atte'pts to
i'pro*e its p)ace in the 'ar+et
!$ inter%ering (ith another;s
!usiness
Unreasona!)e& i'proper
'anner o% inter%erence
Predatory 'ehavior& not
'ere)$ co'petiti*e"
See M(M )roup v. C*
Reinsurance Co.
See Test Yourse)%& p# 6G.
See Issue Spotter Eiring E'p)o$ees
%ro' Co'petitors"
#SC Construction E$uipment %S#
v. City Commercial Real Estate
ASC hired Cit$ to ser*e as ASC;s e5c)usi*e rea) estate agent in At)anta#
ASC (as )oo+ing %or )and to de*e)op - sho(roo's %or Ho)*o#
Cit$ %ound suita!)e )and#
Recei*ed AI co''ission %or ASC;s purchases
At ASC;s reJuest& Cit$ then ca))ed %or construction proposa)s#
In*ited de*e)opers to pitch construction a)ternati*es
Each de*e)oper pro'ised to pa$ Cit$ a co''ission i% it got the @o!#
One de*e)oper& See%ried& did not ha*e inDhouse construction ser*ices#
See%ried ca))ed upon Cata'ount Constructors to he)p (ith its !id#
See%ried 3 Cata'ount had no contract& !ut See%ried anticipated hiring Cata'ount i%
it (on the construction @o!#
ASC then decided to hand)e construction direct)$#
This 'eant Cit$ (ou)d get no co''ission %or arranging construction#
ASC to)d Cata'ount not to proceed %urther (ith Cit$ 3 hired Cata'ount to !ui)d one
o% the sho(roo's#
Cit$ got no co''ission # +Continued,
#SC Construction E$uipment %S# v.
City Commercial Real Estate, cont.
Cit$ sued ASC %or tortious inter%erence (ith !usiness re)ations#
Kur$ a(arded Cit$ ,?.7&.7? in co'pensator$ da'ages and ,6#-A 'i))ion in puniti*e
da'ages
ASC appea)ed#
EELDF A%%ir'ed in partC re*ersed in part and case re'anded#
To reco*er under tortious inter%erence& p)ainti%% 'ust sho( de%endant
6: acted i'proper)$ 3 (ithout pri*i)ege&
-: acted purpose)$ (ith 'a)ice and intent to in@ure
2: induced 2
rd
part$ not to enter into or continue re)ationship (ith p)ainti%%
?: caused %inancia) in@ur$
7irst e)e'ent reJuires proo% that inter'edd)er (as stranger" to the re)ationship
E*idence presented no !asis %or @ur$ to %ind ASC (as a stranger to Cit$;s !usiness
re)ationship (ith Cata'ount#
O!@ect o% ASC;s inter%erence <prospecti*e co''ission agree'ent !et(een Cit$ 3
Cata'ount: (as 'echanis' to e%%ect *er!a) agree'ent !et(een Cit$ 3 ASC
regarding Cit$;s co'pensation#
No tortious inter%erenceC puniti*e a(ard cannot stand#
4D4 Lroup Associates *# CM
Reinsurance Co'pan$& Ltd#
4D4 is insurance !ro+er 0 insures s+i resorts against ris+ that > o% s+i da$s during
s+i season (ou)d %a)) !e)o( a certain 'ini'u'#
CM and others agreed to (rite po)icies %or the'#
4D4 recei*ed a co''ission o% 6-#AI# Pre'iu's gre( to ,2 'i))ion& !ut poor sno(
in 6===D-/// created )ost s+i da$s#
S+i resorts 'ade insurance c)ai's# CM resisted& negotiated& 'ediated& )itigated
(ith ,-2 'i))ion in c)ai's pa$outs#
CM stopped issuing po)icies& (hich it had a right to do#
4D4 sued CM %or intentiona) inter%erence (ith prospecti*e !usiness re)ations %or
not rene(ing po)icies (ith s+i resorts resu)ting in 4D4 not recei*ing
co''issions#
Contended CM hand)ed the s+i resort c)ai's poor)$# Kur$ a(arded 4D4 ,.#7A
'i))ion in da'ages# CM appea)ed#
EELDF Re*ersed 3 re'anded (ith @udg'ent in %a*or o% CM#
There is no inter%erence (hen the de%endant <CM: decided not to rene( po)icies#
There is no inter%erence (hen 4D4 and CM ha*e a contract that is a%%ected !$ CM;s
decisions not to rene( other contracts <(ith s+i resorts: and cance))ation o%
contracts (ith s+i resorts 'eans )ac+ o% co''issions to 4D4#
4D4 cannot 'aintain an action against CM %or inter%erence (ith any contract o%
(hich CM is a part$#
Product Lia!i)it$
Lia!i)it$ o% producers and se))ers o% goods reF
de%ecti*e products
On one hand& (e (ant co'panies to ha*e
incenti*es to ensure their products are sa%e#
On the other hand& (e do not (ant co'panies
to pa$ %or in@uries consu'ers su%%er (hi)e
using products i'proper)$#
Lenera) ter' app)ied that dea)s pri'ari)$ in
tort )a(
In*o)*es so'e contract )a(
In*o)*es so'e statutor$ )a(
Is Kapan Rea))$ Di%%erentN"
It is usua))$ said that Kapan
has )ess )itigation and
%e(er )a($ers#
So'e ana)$sts sa$ %e(er
)a(suits 'a+e Kapan
'ore co'petiti*e#
In %act& the U#S# and
Kapanese tort s$ste's
are si'i)ar <e*en i% the
ru)es are di%%erent:#
Eistor$ o% Consu'er Products
and Neg)igence

In the 6=th centur$ courts& there (as the privity of

contract reJuire'ent 0 a contractua) re)ationship
(ith the 'anu%acturer (as needed

Burden on consu'er

I% there (as no re)ationship& caveat emptor app)ied 0

"Let the !u$er !e(are"

This changed (ith MacPherson v. -uic. Motor

Company
Neg)igence in Tort

4anu%acturer 'ust e5ercise reasona!)e care under

the circu'stances#

8ere the dangers %oreseea!)eN

Care 'ust !e ta+en to a*oid 'isrepresentation#

De%ects and dangers 'ust !e re*ea)ed#

Causa) connection 'ust !e present !et(een the

product or the design de%ect and the in@ur$#

B$ the 6=./s& courts !egan to app)$ strict lia'ility#

Producers are responsi!)e %or da'ages and puniti*e

da'ages 'a$ !e added#

This theor$ can !e used in con@unction (ith and as a

separate theor$ %ro' strict )ia!i)it$ in a )a(suit#
MacPherson v. -uic. Motor
Company <6=6. )and'ar+ case:
Buic+ se))s cars to dea)ers#
NY dea)er se))s car to 4acPherson#
8hee)s 'ade !$ another co'pan$C (hee) co))apses& causing
accident that resu)ts in in@ur$#
4acPherson %i)es a neg)igence suitC Buic+ sa$s it has no pri*it$
(ith 4acPhersonC tria) court ho)ds that pri*it$ is not reJuiredC
4acPherson (ins#
NY Ct# o% Appea)s ho)ds 'anu%acturer has pri'ar$ contro) o*er
product design 3 sa%et$#
De%ects cou)d ha*e !een disco*ered !$ reasona!)e inspection&
(hich (as o'itted#
Buic+ is responsi!)e %or the %inished product#
Kudg'ent a%%ir'ed#
You Can;t Be Too Care%u)F 8inning
8arning La!e)s"
On the underside o% a cerea) !o()F A)(a$s
use this product (ith adu)t super*ision#
On a (ashing 'achineF Do not put an$
person in this (asher#
On a !a!$ stro))erF Re'o*e chi)d !e%ore
%o)ding#
On a ce)) phoneF Don;t tr$ to dr$ $our phone
in a 'icro(a*e o*en#
On the Ye))o( PagesF P)ease do not use this
director$ (hi)e operating a 'o*ing *ehic)e#
On a (art re'o*a) product instruction
!oo+)etF Do not use i% $ou cannot see c)ear)$
to read the in%or'ation in the in%or'ation
!oo+)et#
On a gas tan+F Ne*er use a )it 'atch or open
%)a'e to chec+ %ue) )e*e)#
Strict Lia!i)it$ Created
Under Contract La(
!mplied &arranty o% sa%et$
4anu%actured Products
7ood Products
!mplied &arranty of
Merchanta'ility
Under the UCC !mplied
&arranty /or /itness /or #
Particular Purpose
I'p)ied AT LA8 0 (hether the
'anu%acturer (ants the
(arrant$ %or the product or not
See Issue SpotterF
Understanding Product
Pro!)e's"
Epress &arranty
Luarantee o% sa%et$ or
per%or'ance
B$ 'ode)
B$ state'ent
B$ contract
B$ ad*ertising
Misrepresentation theor$
is used as (e)) to create
strict )ia!i)it$
E5F -ater v. /ord Motor
Company
-ater v. /ord Motor
Company +1012 case,
Ba5ter !u$s 4ode) A#
Printed 'ateria) states
Trip)e ShatterDProo%
L)ass"DD""ill not fly or
shatter under the hardest
impact. . .it eliminates the
danger of flying glass.3
Roc+ hits (indshie)d 0
Ba5ter )oses )e%t e$e#
Tria) court did not a))o(
ad*ertising to !e ad'itted
into e*idenceC said there (as
no pri*it$ o% contract#
Ba5ter appea)s#
Ee)dF Tria) court erred in
ta+ing the case %ro' the
@ur$#
Representations o% 7ord
(ere %a)se and Ba5ter re)ied
on the'#
7ord %ai)ed to pro*ide the
sa%et$ g)ass as ad*ertised#
Breach o% e5press (arrant$#
Re*ersed and re'anded to
grant a ne( tria) a))o(ing
ad*ertise'ent to !e
ad'issi!)e e*idence#
Strict Lia!i)it$ In Tort

4anu%acturers are strict)$ )ia!)e %or de%ecti*e

products

The courts as+F

8as the product de%ecti*eN

Did the de%ect create an unreasona!)$

dangerous product or instru'enta)it$N

8as the de%ect a pro5i'ate cause or

su!stantia) %actor o% the in@ur$N

Did the in@ur$ cause da'agesN

Courts do not (orr$ a!out care%u)ness& due

care& reasona!)eness& etc#
Strict Lia!i)it$ in Tort La( 0
Ca)i%ornia Changes La(F )reenman
v. 4u'a Po"er
8i%e !u$s hus!and po(er too)#
T(o $ears )ater (ood %)ies out
o% 'achine& stri+ing
Lreen'an;s head#
Ee a))eges !reaches o%
(arranties and neg)igence#
Eo(e*erF S# Ct# o% Ca)i%#
a%%ir's tria) court decision in
%a*or o% Lreen'an and sa$s
that the 'anu%acturer is
strict)$ )ia!)e in tort#"
B$ 'idD6=7/s every state
supreme court had adopted
strict lia'ility rule.
I;' 7ro' the 7BIF I Ono( the
La("
7BI Specia) Agent C)$'er @u'ped
the cur! (ith his pic+up#
8as %ound passedDout drun+
<!)ood a)coho) /#2/.:#
Ee (as in his truc+& (ith an e'pt$
!ott)e o% ru'#
The truc+ caught %ire and po)ice
pu))ed hi' out#
C)ai'ed he stopped a)ong the
road to 'a+e a ca))& had the
pic+up in Par+"& then he
so'eho( )ost consciousness"
and truc+ so'eho( produced
hea*$ s'o+e that %i))ed the
passenger ca!#"
Ee sued Che*$ and the Che*$
dea)er %or se))ing hi' a de%ecti*e
*ehic)e#
Restate'ent <Third: o%
Torts on Products Lia!i)it$
The A'erican La( Institute;s <ALI: de%inition o% strict )ia!i)it$ in Section
?/-A o% the Restatement +Second of 5orts,.
This (as the )eading ru)e adopted !$ 'ost states to de%ine )ia!i)it$ %or
productDre)ated in@ur$#
ALI (rote a ne( standard %or product de%ect cases in ne(er Restatement
+5hird, of 5orts.
State supre'e courts consider the ne( concepts o% )a( and o%ten gradua))$
adopt it#
Oe$ part to the Restatement +5hird, of 5orts de%ine categories o% de%ect in
P- regarding <a: product departing %ro' intended design& <!: %oreseea!)e
ris+ o% har' cou)d !e reduced or a*oided !$ an a)ternati*e design and <c:
har' cou)d ha*e !een reduced !$ reasona!)e instructions or (arnings#
Restatement 5hird spea+s o% ris+Duti)it$ !a)ancing"#
Restatement 5hird encourages courts to 'o*e a(a$ %ro' the a distinction
!et(een neg)igence and strict )ia!i)it$#
Product de%ect )a( dea)s (ith design defects and manufacturing defects.
See Parish v. !C67 8 IssueF 7ai)ure to (arn under the standards o%
Restatement +5hird, of 5orts.
Parish *# ICON
Parish (as @u'ping on a !ac+$ard tra'po)ine 'ade !$ Ku'p+ing#
Surrounded !$ a sa%et$ net <%un ring: 'ade !$ ICON
Ee did a !ac+ so'ersau)t& )anded on his head& rendered a Juadrip)egic#
Sued ICON and Ku'p+ing %or %ai)ure to (arn o% dangers in using products#
District court granted su''ar$ @udg'ent %or 'anu%acturersC Parish
appea)ed#
EELDF A%%ir'ed# 8arnings (ere not inadeJuate#
Loo+ at reasona!)e instructions or (arnings i% %oreseea!)e ris+s o% using a
product#
Nu'erous (arnings pro*ided in this case#
2 (arnings p)aced per'anent)$ on pad o% tra'po)ine#
Inc)uded (arnings not to )and on head or nec+C para)$sis or death cou)d
resu)tC reduce chance o% )anding on head or nec+ !$ not doing
so'ersau)ts1%)ipsC on)$ 6 person on tra'po)ine at a ti'eC 'u)tip)e @u'pers
increase chances o% )oss o% contro)& co))ision& %a))ing o%%C resu)ts can !e
!ro+en head& nec+& !ac+ or )egC not reco''ended %or chi)dren under .
$ears o% age#
+Continued on net slide,
Parish *# ICON& cont#
Ead nationa))$ recogni9ed (arning s$'!o)s on the product#
6 (arning on each o% G )egs o% Ku'p+ing tra'po)ine 0 designed to asse'!)e so
that (arnings %ace out& *isi!)e to user#
Ku'p+ing 'anu%actures - printed nonDpictoria) (arnings se(n onto the
tra'po)ine !ed#
8arning p)acard %or the o(ner to a%%i5 to the tra'po)ine 0 !oth pictoria)
(arning and )anguage reF sa%e use o% tra'po)ine#
O(ner;s 'anua) contains (arnings %ound on tra'po)ine& p)us additiona)
(arning reF super*ision and educationa) instruction#
8arnings e5ceed the (arnings reJuired !$ the A'erican Societ$ %or Testing
and 4ateria) <AST4:#
8arnings are a)so pro*ided (ith %un ring& (hich has separate o(ner;s 'anua)
(ith added (arnings#
Restatement sa$s that users 'ust pa$ so'e attention %or their o(n sa%et$#
Users and consu'ers are reJuired to 'ear appropriate responsi'ility for
proper product use.3
9Prevents careless users and consumers from 'eing su'sidi:ed 'y more
careful users and consumers3 0 da'ages paid %ro' )a( suits are !ui)t into
higher product prices#
8arnings here (ere adeJuate#
Strict Lia!i)it$ and the 7ai)ure To
8arn Standard
+Manufacturer;s "onder ho" far la"s "ill go,
Lun '%gr# is )ia!)e %or %ai)ure to (arn o% possi!)e
da'age to users; hearing %ro' )ongDter' e5posure to
gun %ire#
DietD%ood producer is )ia!)e %or %ai)ure to (arn a!out
using adu)t diet %ood as !a!$ %ood#
Co''ercia) pi99a dough ro))er 'achine '%gr# )ia!)e
(hen (or+er stic+s hands in 'achine to c)ean it 3
'achine is on#
Kohnson 3 Kohnson pa$s ,G#GA 'i))ion to a )i*er
transp)ant patient due to the %act $ears o% drin+ing 3
ta+ing T$)eno) had destro$ed his )i*er# Co'pan$ +ne(
drin+ing 3 ta+ing regu)ar doses o% T$)eno) cou)d da'age
)i*er#
Strict Lia!i)it$ 3 Design
De%ects
8or+er recei*es ,7A/&///# CoD(or+er re'o*es
'eta) p)ate 3 co*ers 'achine (ith card!oard
<%ai)ing to put p)ate !ac+:# 8or+er %a))s into
'achine and )oses his )eg# It is a 'anu%acturing
design de%ect that 'achine can run (hen the
'eta) p)ate is re'o*ed#
Restaurant e'p)o$ee !ad)$ !urned# Ee tries to
retrie*e an ite' that %e)) %ro' his shirt poc+et
into 7rench 7r$ 'achine#
Chi)d pushed e'ergenc$ stop !utton on an
esca)ator& causing person to %a))& and !e in@ured#
It;s a design de%ect to 'a+e a !utton red 0
+iddies 'ight )i+e it and push itQQQ

Reason >? 8h$ 8est Hirginia
Is Considered a Litigation
Ee))ho)eN"
8est Hirginia Supre'e Court Kustice Richard Nee)$&
5he Product Lia'ility Mess& p# ?
As )ong as I a' a))o(ed to redistri!ute (ea)th %ro'
outDo%Dstate co'panies to in@ured inDstate p)ainti%%& I
sha)) continue to do so# Not on)$ is '$ s)eep
enhanced (hen I gi*e so'eone e)se;s 'one$ a(a$&
!ut so is '$ @o! securit$& !ecause the inDstate
p)ainti%%s& their %a'i)ies& and their %riends (i))
ree)ect 'e#"
5impte !ndustries, !nc. v. )ish
Lish& a )ong hau) truc+er& arri*ed at a p)ant to pic+ up )oad o% %erti)i9er#
Eis truc+ (as pu))ing a trai)er 'ade !$ Ti'pte Industries#
It is an openDtop& t(in hopper trai)er& )oaded %ro' a!o*e !$ a do(nspout that
pours %erti)i9er into the topper#
Do(nspout (asn;t going into positionC he c)i'!ed on top o% trai)erC (a)+ed
out a)ong the top rai) that is a!out A" (ide so he cou)d gra! do(nspout and
put it in position to pour in %erti)i9er#
8as on the rai)C gust o% (ind !)e(C he %e)) 3 (as se*ere)$ in@ured#
Lish <3 his (or+ers co'pensation insurance carrier: sued %or design de%ect#
Contended that trai)er shou)dn;t ha*e a )adder that a))o(ed hi' to c)i'! up
to the rai) <top rai) is too narro( to (a)+ on sa%e)$:#
Ti'pte arguedF Danger o% !eing on rai) (as open and o!*ious#"
District court granted su''ar$ @udg'ent %or Ti'pte#
Appea)s court re*ersed# Ti'pte appea)ed# +Continued,
5impte !ndustries, !nc. v. )ish,
cont.
EELDF Re*ersed Court o% Appea);s @udg'ent and reinstated tria) court;s
su''ar$ @udg'ent in %a*or o% Ti'pte#
No e*idence that the design de%ects rendered the trai)er unreasona!)$
dangerous#
Lish;s e5pert (itness proposed 2 design changes#
6: Re'o*e top - rungs o% )adder to 'a+e it i'possi!)e %or person to c)i'! atop
trai)erC
-: Pro*ide adeJuate %ootho)d and handho)d at top o% trai)erC
2: I% an adeJuate handho)d cannot !e pro*ided& (iden the side rai) to at )east 6-
to pro*ide adeJuate %ooting
Te5as courts app)$ ris+Duti)it$ ana)$sis#
Basis o% design de%ect c)ai' is (hether there is a reasona!)e a)ternati*e design
<at a reasona!)e cost: that (ou)d reduce a %oreseea!)e ris+ o% har'#
Ti'pte a)(a$s (arned users to 'aintain 2Dpoint contact (ith trai)er <this
can;t !e done i% a user standing on the top rai):#
Lish did not adhere to (arning# Loses )a(suit#
Strict Lia!i)it$ and Un+no(n
Ea9ards or Latent De%ects
Dangers not +no(n at the ti'e
o% the product;s 'anu%acture
Ea9ard associated (ith the
product is not )earned %or
'an$ $ears
See Issue SpotterF 9# &ay to
Reduce the (amage<3
Consumer Epectation
standard used !$ courts
8hat is the e5pectation o%
an ordinar$ custo'er
regarding sa%et$ o% a
productN

C)ai's are o%ten c)ass

action suits
As!estos Industr$ 0 has
paid !i))ions o% do))ars to
tens o% thousands o%
p)ainti%%s in c)ai's o*er a
2/D$ear period
In@uries caused !$ IUDs
ha*e !een in the courts %or
$ears
4anu%acturers 'ust ha*e
reca))s or (arnings (hen
ha9ard is detected
Koint and Se*era) Lia!i)it$
4ost states ha*e he)d p)ainti%%s 'a$
sue an$ or a)) 'anu%acturers to
share the )ia!i)it$ created#
4anu%acturers are a))o(ed to %ight it
out as to (hich shou)d pa$ %or
da'ages#
An$ o% the de%endantD'anu%acturers
'a$ !e he)d responsi!)e %or a))
da'ages
The resu)t has !een )i'its on
app)ication o% @oint 3 se*era) )ia!i)it$
in so'e areas <i#e# 'edica)
'a)practice: in so'e states

BustedQ"
4ichigan @udge Ro!ert Co)o'!o Juashed
thousands o% apparent)$ !ogus )a(suits %or
as!estosDre)ated in@uries#
Principa) e5a'ining doctor& 4ichae) Oe))$& had
diagnosed in@uries on 7&2-2 patients; 5Dra$s o*er
6A $ears <cost o% ,A// each:#
Eis detection rate o% a!nor'a)ities (as AG ti'es
the detection rate !$ independent radio)ogists#
Kudge %ound that Oe))$ (as neither radio)ogist
nor pu)'ono)ogist#
Ead %ai)ed the certi%ication test %or reading 5D
ra$s#
The da$ Kudge Co)o'!o co''enced the
in*estigation o% the 5Dra$ e*idence& p)ainti%%s;
attorne$s (ithdre( a)) )a(suits e5cept one#
As!estos Litigation in the United
States and United Oingdo'"
As!estos is carcinogen that causes )ung cancer 3 other de!i)itating conditions#
Da'ages o% as!estos (ere +no(n decades agoC )itt)e (as done a!out it#
B$ 'idD6=7/s& )itigation e5p)oded#
4ore than GA/&/// c)ai's had sued 0 G&?//R de%endants <se))ers& <'anu%acturers&
distri!utors 3 insta))ers o% as!estosDcontaining products:#
Eas resu)ted in !an+ruptc$ and reorgani9ations o% 'an$ de%endants#
In U#S# as!estos )itigationF the )ongest running 'ass tort in U#S# histor$"#
Leading 6=72 case (as -orel v. /i're'oard Paper Products3
B$ -//A RAND stud$ esti'ated ,7/ !i))ion spent on co'pensation 3 )itigation costs
through -//- a)one 3 reasona!)e esti'ates range %ro' ,-// to ,-.A !i))ion#
Cape !ndustries plc <UOD!ased co'pan$: (as sued and de%au)t @udg'ent entered !ut
had no assets in the U#S#
P)ainti%%s too+ their @udg'ent to the UO courts %or en%orce'ent#
UO )a( didn;t recogni9e -orel theor$ 3 court re%used to en%orce U#S# @udg'ent#
P)ainti%%s (ou)d ha*e to sue Cape under UO )a(#
In UO& )oser pa$s" ru)e in )a(suits
UO court he)d e*en though Cape created 'u)tinationa) corporate structure to
speci%ica))$ ensure no reco*er$ !$ U#S# p)ainti%%s& UO courts (ou)d not disregard the
)ega) structure to en%orce @udg'ent against the parent co'pan$#
De%enses To Neg)igence
and Strict Lia!i)it$
Product 4isuse or A!use
Assu'ption o% Ris+
To!acco and a)coho) use are contro*ersia) areasC so %ar courts
ha*en;t app)ied the de%ense to users#
Sophisticated User De%ense and Bu)+ Supp)ier Doctrine
Usua))$ app)$ to !usiness settings
Bu)+ supp)ier does not ha*e to po)ice detai)s o% (hat is done as
product continues do(n the chain& as !u)+ products go to
inter'ediar$ in !u)+ and on do(n#
Sophisticated user is one (ho reasona!)$ shou)d +no( o% the
product;s dangers" e#g# another 'anu%acturer#
E5F Air 7orce e'p)o$ees (ho hand)e certain che'ica)s 0 ha*e a
+no()edgea!)e sta%%#
So'e statutor$ )i'its e5ist#
U)traha9ardous Acti*it$

Co''on )a( ru)es de*e)oped

a!out unco''on acti*ities
(here ut'ost care is needed

i#e# use o% e5p)osi*es&

transport o% dangerous
che'ica)s& crop dusting& etc#
See 6ld !sland /umigation <in
te5t:
See Test Yourse)%& p# -/?
Perspecti*e On Tort U#S#
Litigation
Does a cost)$ tort s$ste' 'a+e A'erican %ir's )ess co'petiti*e than %oreign
%or'sN
Not )i+e)$& as an$ co'pan$ se))ing their products in the U#S# 'ust 'eet
sa'e )ia!i)it$ standard as U#S# co'panies#
Eigh standards o% products 'ar+eted a!road %orce i'pro*e'ent o%
standards (or)d(ide#
The tort crisis" in the U#S#F
has a!ated since Supre'e Court has crac+ed do(n on 'assi*e puniti*e
da'age a(ards and dou!t%u) e5pert testi'on$#
Tort re%or' )egis)ation %ro' Congress has 'ade c)ass actions suits 'ore
di%%icu)t#
State )a(s are (or+ing to cap )ia!i)it$ %or certain da'ages#
Tort pa$outs 'a$ ha*e sta!i)i9ed#
Bet(een -//? and -//.& gro(th see'ed to ha*e stopped#
EO8EHER& tort )itigation in*o)*ing co'panies (i)) continue to !e a
%)ashpoint" in the )a( 0 in@ured peop)e see+ re)ie% %ro' deep poc+ets and
heart)ess" co'panies#
On the other hand& %ir's su!@ect to du!ious suits are de*oting resources to
%ending o%% the deepDpoc+et and %ri*o)ous )itigators#