recent developments in products, general liability, and consumer law

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615

RECENT DEVELOPMENTS IN PRODUCTS, GENERALLIABILITY, AND CONSUMER LAW

Jennifer H. Davidow, Mark Callender, Carliss Chatman,Patrick M. Dennis, Justin A. Hodge, Persis Mehta, Holly O’Neal Rumbaugh, and L. Boyd Smith Jr.

I. Introduction .................................................................................. 616II. Products Liability .......................................................................... 617

A. Theories of Liability ............................................................... 6171. Design Defect ..................................................................... 6172. Failure to Warn .................................................................. 6173. Use of Product ................................................................... 6184. Defenses ............................................................................. 6195. Damages ............................................................................. 621

B. Particular Products.................................................................. 6221. Cigarettes ........................................................................... 6222. Tires and Vehicles .............................................................. 6233. Other Products ................................................................... 623

C. Entities .................................................................................... 6241. Professional Vendors .......................................................... 6242. Auctioneers ......................................................................... 6243. Manufacturers of Equivalent Product ............................... 6244. Successor Entities ............................................................... 625

D. Legislation ............................................................................... 626III. Preemption .................................................................................... 627

A. Medical Devices ...................................................................... 627

Jennifer H. Davidow, Mark Callender, Carliss Chatman, Patrick M. Dennis, Justin A. Hodge, Persis Mehta, and Holly O’Neal Rumbaugh are associates in the Houston officeof Vinson & Elkins LLP. L. Boyd Smith Jr. is a partner in the Houston office of Vinson & Elkins LLP. The authors thank Mindga Zhao, a law student at Georgetown University Law Center, for his research assistance.



616 Tort Trial & Insurance Practice Law Journal, Winter 2007 (42:2)

B. Pharmaceuticals ....................................................................... 628

C. Tobacco.................................................................................... 629IV. Product Liability Class Action Developments ............................. 629A. CAFA Does Not Shift Burden to Prove Federal

Jurisdiction Is Proper .............................................................. 629B. Party Seeking Remand Has Burden to Prove

CAFA’s Exceptions ................................................................... 6301. Local Controversy Exception ............................................ 6302. State Action Exception ....................................................... 631

V. Consumer Law Issues.................................................................... 632

A. State Lemon Laws ................................................................... 6321. Automobile Leases and Lemon Laws ................................ 632a. Lessee as a Qualifying Consumer ................................. 632b. Previously Leased Cars Are New Motor Vehicles ........ 633

2. Purchase Price of Vehicle Does Not IncludeInflated Value Under Installment Contract ....................... 633

3. Defect Need Not Exist at Time of Trial/Arbitration ........ 6344. Arbitration Is Prerequisite to Suit ...................................... 6355. Arbitration Does Not Limit Other Remedies ................... 635

6. Right to Appeal Cannot Be Conditioned onPaying Attorney Fees.......................................................... 636B. Arbitration Provisions in Automobile

Purchase Agreements .............................................................. 6361. Arbitration Provision Held Unenforceable ....................... 6362. Nonsignatory to Purchase Agreement Can Compel

Arbitration .......................................................................... 6363. Third-Party Beneficiaries Bound by Arbitration

Agreement .......................................................................... 637

VI. Restatement (Third) of Torts: Products Liability ................................ 638A. Section 1: Liability of Commercial Seller/Distributor .......... 638B. Section 2: Design, Warning, and Manufacturing Defect ....... 638C. Section 3: Inference of Causation ........................................... 639D. Section 5: Liability of Component Part Supplier

for Defects in Integrated Products.......................................... 640E. Section 6: Liability of Commercial Seller or

Distributor of Prescription Drugs or Medicine ..................... 642F. Section 19: Definition of Product ........................................... 642

i. introduction

This article reviews and summarizes the major developments and cases inthe areas of products liability, general liability, and consumer law betweenSeptember 2005 and September 2006.



Recent Developments in Products, General Liability, and Consumer Law 617

ii. products liability

A. Theories of Liability

1. Design Defect

In Tran v. Toyota Motor Corp.,1 the Eleventh Circuit confirmed that Floridaproducts liability law incorporates both the consumer expectations test andthe risk utility test.2 The plaintiff, a car accident survivor, brought negli-gence and strict liability claims against Toyota, alleging the car’s seat beltsystem was defectively designed. The plaintiff requested a jury instructionthat was drawn from the Florida Standard Jury Instruction PL 5:

A product is unreasonably dangerous because of its design if the product failsto perform as safely as an ordinary consumer would expect when used as in-tended or in a manner reasonably foreseeable by the manufacturer or the risk of danger in the design outweighs the benefits.3

The district court refused the instruction as “inappropriate” and insteadinstructed the jury based on § 2 of the Restatement (Third) of Torts: Products

Liability. The instruction centered on the risk utility test and, although itmentioned consumer expectations as a factor to consider, it did not makethe consumer expectations test an independent basis of liability, as theplaintiff had requested.4

The court of appeals reversed, relying on a Florida court of appeals opin-ion that was written after Tran’s trial,5 holding that the consumer expecta-tions test applied to cases involving seat belts in particular.6 The EleventhCircuit “[did] not hold that the consumer expectations test jury instructionis required in all product liability cases,” but rather held that “the instruc-tion is proper as an independent basis for liability under Florida law whenthe product in question is one about which an ordinary consumer couldform expectations.”7

2. Failure to Warn

A New York federal district court noted in Henry v. Rehab Plus , Inc.8 thatthe risk utility balancing test in failure to warn cases “is the same as the in-quiry in a traditional negligence action where the reasonableness of theactor’s conduct is considered in light of a number of situational and policy

1. 420 F.3d 1310 (11th Cir. 2005).

2. Id. at 1314.3. Id. at 1312.4. Id. at 1312–13.5. Force v. Ford Motor Co., 879 So. 2d 103 (Fla. Dist. Ct. App. 2004).6. Tran, 420 F.3d at 1314.7. Id.8. 404 F. Supp. 2d 435 (E.D.N.Y. 2005).




driven factors.”9 A Sears employee whose job included heavy lifting sued

the manufacturer of the back support belt he wore on the job after he injured his back while wearing the belt.10 There was evidence that the manu-facturer included no warnings with its support belts, despite studies fromthe mid-1990s finding use of a back support belt may falsely lead a workerto believe that he is protected. This belief may in turn cause him to liftmore weight than he would have without a belt, thereby subjecting him-self to even greater risk.11 The court held that a jury could find this to bea foreseeable risk of latent danger of which the manufacturer had a duty to warn. For that reason, the court denied summary judgment on both the

negligence and strict liability failure to warn claims.

12

Wisconsin law also draws no distinction between negligence and strictliability when it comes to claims complaining of an inadequate warning.

Michaels v. Mr. Heater 13 involved a propane gas heater that exploded andkilled the plaintiff’s husband. The plaintiff alleged that the heater was un-reasonably dangerous because, among other things, it lacked adequately placed warnings explaining the danger of potential gas leakage.14 The courtobserved, “Wisconsin permits plaintiffs to bring both strict liability andnegligence claims premised upon the inadequacy of a product’s warnings . . .

[but] has not distinguished between the liability standards that govern eachclaim.”15 The court ultimately denied summary judgment for the defen-dant, and its holding turned on causation—specifically, whether causationmay be inferred if a warning is found to be inadequate. Recognizing that Wisconsin appellate courts have decided the issue differently, the courtheld that once a plaintiff proves the warning was inadequate, the jury may infer that an adequate warning would have been heeded.16

3. Use of Product

The Indiana Supreme Court held in Vaughn v. Daniels Co. (West Virginia), Inc.17 “that ‘use’ of a product under the Indiana Products Liability Act18 doesnot include assembly and installation where the seller retains an obligation. . . to deliver a fully assembled and installed product.”19 Daniels agreed

9. Id. at 442–43 (internal quotations omitted).10. See id. at 441.11. Id. at 441–42.12. See id. at 442 (negligence), 443 (strict liability).13. 411 F. Supp. 2d 992 (W.D. Wis. 2006).14. Id. at 1003.

15. Id. at 1003–04.16. See id. at 1005–07.17. 841 N.E.2d 1133 (Ind. 2006).18. As discussed in part VI below, Indiana has not adopted the Restatement (Third) of Torts:

Products Liability, § 1, which eliminates the user/consumer requirement and allows any “per-son” injured by a defective product to be a proper plaintiff. See id. at 1140 n.6.

19. Id. at 1136.




“to design and install a heavy media coal sump” for Solar Sources. Daniels

contracted with Trimble to assemble and install the sump. The plaintiff,a Trimble employee, was assembling the sump when he fell and was injured.20 He sued Daniels for strict products liability, among other things.21 The plaintiff could not be a “user” or “consumer” of a product whose as-sembly was not complete and where the product was to be delivered andassembled.22 That is, “use and consumption may include assembly andinstallation of a product, but only if the product is ‘expected to reach theultimate user or consumer’ in an unassembled or uninstalled form.”23

Pennsylvania Department of General Services v. United States Mineral Prod-

ucts Co.24

involved governmental entities’ claims against chemical compa-nies regarding PCB contamination discovered after a fire. Testing duringthe cleanup phase following the fire revealed the presence of PCBs.25 Thechemical manufacturer requested a jury instruction that a manufactureris not liable for injuries resulting from the unintended use of its product,even if such unintended use was foreseeable, and that subjecting a productto a fire is an unintended use.26 The trial court refused the instruction,but the state supreme court held that the refusal was erroneous.27 Recog-nizing that it was reasonably foreseeable that building materials might be

subjected to a fire, the court nonetheless reasoned that foreseeability hasno place in the strict liability arena.28 Justice Newman dissented as to thisissue only, analogizing the legal principle in this case to the crashworthi-ness doctrine. That is, it may be true that the PCBs were not intended tobe subjected to a fire, but because it is foreseeable that they might be, themanufacturer has a duty to ensure reasonable safety in that situation.29

4. Defenses

In Hadar v. Avco Corp.,30 a Pennsylvania appellate court considered thescope of the assumption-of-the-risk defense. A farmer was using a cornpicker machine and noticed that the corncobs were getting stuck in themachine’s rollers. He tried using a three-foot cornstalk to push the corn-cobs through the rollers while the machine was still running, but therollers pulled both the stalk and the plaintiff’s hand into the corn picker.31

20. See id.21. Id.22. Id. at 1141–42.23. Id. at 1141.24. 898 A.2d 590 (Pa. 2006).

25. See id. at 593.26. See id. at 600.27. Id.28. Id. at 601.29. See id. at 617–18.30. 886 A.2d 225 (Pa. Super. Ct. 2005).31. Id. at 227.




The trial court decided that the plaintiff “voluntarily assumed the risk of

the specific injury he suffered when he attempted to unclog the corn pickerby using the 3-foot corn stalk and by . . . doing so while the tractor was stillin operation with the power takeoff engaged.”32

The appellate court disagreed, stating that although Hadar knew thatplacing his hands near the husking rollers was dangerous, he did not ap-preciate the specific risk of trying to clear the husking rollers with a three-foot-long cornstalk.33 “Whether or not he knew of the specific danger inlight of his experience and assumed the risk or whether he acted as a rea-sonable person under the facts of this case is a jury question.”34 The court

reversed the summary judgment granted to the defendant.

35

One justicedissented, agreeing with the trial court that the plaintiff “voluntarily andknowingly assumed the risk of the injury he sustained.”36

County of Santa Clara v. Atlantic Richfield Co.37 involved an interestingtwist on the statute of limitations defense: the court held that not only werethe plaintiffs’ claims not time-barred, they had not yet accrued.38 Gov-ernmental entities filed a class action against lead manufacturers allegingseveral causes of action in connection with the dangers of lead paint.39 Thedamages sought were

(1) costs that had been incurred to educate the public about the hazards of lead and the steps to take to minimize the risk; (2) costs incurred to inspectand test property and the environment for the presence of lead; (3) costs in-curred to train and fund staff to investigate and respond to lead-contaminatedproperties and lead-exposed children; and (4) costs incurred for “Property Damage,” which was identified as “abatement, removal, replacement, and/orremediation of Lead in private, county, and city owned, managed, leased, con-trolled, and/or maintained properties.”40

The defendants were granted summary judgment based on the statute of

limitations.41 The court of appeal analysis turned on the economic loss doctrine, under

which a plaintiff cannot recover in products liability for economic loss alone,but only for physical injury to people or property.42 The court reasoned

32. Id.33. Id. at 229.34. Id. at 230.35. Id.

36. Id. at 231 (Orie-Melvin, J., dissenting).37. 40 Cal. Rptr. 3d 313 (Ct. App. 2006).38. Id. at 335.39. Id. at 319.40. Id. at 321.41. Id. at 323.42. See id. at 335.




that because the plaintiffs had not alleged any physical damage to property,

i.e., damage to the homes or buildings caused by the lead paint, their claimshad not yet accrued.43 It would be different, the court said, if the plaintiffs were suing for personal injuries due to the lead:

While a human being who had suffered lead poisoning as a result of exposureto deteriorating lead paint in plaintiffs’ buildings might have a viable negli-gence or strict liability cause of action that is not vulnerable to a statute of limitations defense, plaintiffs, as the owners of structures simply containingdeteriorating lead paint, do not.44

Finding that the plaintiffs’ causes of action had not accrued, the court

reversed the summary judgment.45

5. Damages

The Supreme Court of New Hampshire considered the application of the economic loss doctrine in Kelleher v. Marvin Lumber & Cedar Co.46 Theplaintiff’s home windows rotted, so the homeowner sued the window man-ufacturer.47 The defendant asserted that the plaintiff’s strict liability claim was barred to the extent it sought damages for economic loss.48

In this case, the court observed, “economic losses encompass both dam-

age to the defective product itself and the diminution in value of the productbecause it is inferior in quality.”49 When a defective product accidentally causes harm to persons or property, the harm is treated as personal injury or property damage, not economic loss.50 The plaintiff had alleged thatthe water leakage from the defective windows caused substantial property damage to his home, and the court held that the plaintiff had producedsufficient evidence of these noneconomic losses to survive summary judg-ment.51 The court also noted that a plaintiff’s general duty to mitigatedamages coexists with the economic loss doctrine. A plaintiff may recover

reasonable mitigation expenses he incurred in order to retard the defec-tive product’s damage.52 The plaintiff purchased new windows to stop thedamage to his home. To the extent that the new windows were reasonably required to prevent further water leakage and related property damage, theplaintiff was entitled to recover the costs of the new windows.53

43. See id.44. Id. at 341.45. See id. at 342.46. 891 A.2d 477 (N.H. 2006).

47. Id. at 484.48. Id. at 495.49. Id.50. Id.51. Id.52. Id. at 496.53. Id. at 496–97.




The First Circuit predicted Puerto Rico would apply the economic loss

doctrine in a products liability case in Isla Nena Air Services, Inc. v. Cessna Aircraft Co.54 A commercial airline sued the aircraft and engine manufac-turers for damage to the aircraft arising out of an accident in which there were no injuries.55 The First Circuit noted that the Puerto Rico SupremeCourt consistently looks to California law for its strict liability jurispru-dence and in part because California follows the economic loss doctrine,Puerto Rico probably would as well.56

B. Particular Products

1. Cigarettes

In Estate of Schwarz v. Philip Morris ,57 the Oregon Court of Appeals heldthat a low tar cigarette manufacturer was not entitled to a directed ver-dict on the plaintiff’s products liability claim.58 The plaintiff alleged thatthe defendant’s cigarettes were “defective and unreasonably dangerous”in part because (1) “the cigarettes contained added ammonia to increasethe effects of nicotine,” and (2) “the cigarettes or their smoke containedaltered pH so as to increase the effects of nicotine.”59 Oregon’s productsliability statute60 incorporates § 402(a) of the Restatement (Second) of Torts ;

and the defendant argued that, under comment i to § 402(a), good tobaccois not defective just because the effects of smoking are dangerous.61 Thecourt agreed in principle, but found that the plaintiff had adduced evidencethat the defendant’s cigarettes were not unadulterated but rather containedadded ammonia; in other words, they did not contain the “good tobacco”contemplated by comment i.62

The defendant also argued that its cigarettes could not have caused theplaintiff/decedent’s injuries because the evidence was undisputed that the de-cedent was addicted to tobacco well before she started smoking the defen-

dant’s brand of cigarettes.63

The court rejected that argument because the jury could have found that the decedent switched to the defendant’s lowtar cigarettes as an intermediate step to quit smoking or that the dece-dent could have smoked more if she thought the low tar cigarettes weresafer.64

54. 449 F.3d 85, 92 (1st Cir. 2006).55. See id. at 86.56. See id. at 92.57. 135 P.3d 409 (Or. Ct. App. 2006).

58. Id. at 438.59. Id. at 437.60. Or. Rev. Stat. § 30.920 (1988).61. Estate of Schwarz, 135 P.3d at 436–37.62. Id. at 437.63. Id.64. See id.




2. Tires and Vehicles

The court in Benico v. Bridgestone/Firestone, Inc.65

held that a twelve-year-oldtire was beyond its presumptive useful sale life and granted summary judg-ment for the tire manufacturer. The holding was based on a rebuttablepresumption in the Washington statute of repose that “[i]f the harm wascaused more than twelve years after the time of delivery [of the product],a presumption arises that the harm was caused after the useful sale lifehad expired.”66 The presumption was rebuttable by evidence that the seller warranted the tire beyond its useful sale life, that the seller intentionally misrepresented facts about the tire, or that the harm was caused by exposure

to a defective product during the useful sale life of the tire even though theharm did not manifest itself until after the useful sale life had expired.67 Be-cause the plaintiff had not adduced any such evidence, the court dismissedthe plaintiff’s claims.68

The plaintiff in Scaffidi v. United Nissan69 brought strict products liability claims, among others, against a car dealer regarding a used car that theplaintiff claimed was defective. Shortly after buying the car, the plaintiff was involved in a major accident in which the car was totaled and later soldfor scrap.70 The defendant moved for summary judgment as there was no

car and, therefore, no evidence that the car was defective at the time of purchase. The court agreed and granted summary judgment.71

3. Other Products

In Souza v. Squaw Valley Ski Corp.,72 an eight-year-old skier collided witha snowmaking hydrant on a ski run and sued the ski resort and the hydrantdistributor for negligence and products liability. The plaintiff alleged thatthe snowmaking equipment, the hydrant, and its nozzle were defectivebecause of their defectively designed location, padding, and uphill direc-

tion.73

The trial court granted summary judgment for the defendants onthis claim because “a plainly visible and generally avoidable snowmakinghydrant is not made defective simply because a skier runs into it.”74 Thecourt of appeals affirmed, explaining thus:

[The plaintiff] neither used the hydrant and nozzle, nor was she a bystanderto its use. [The plaintiff] simply ran into the product, injuring herself. It is

65. No. CV-04-0292-LRS, 2005 WL 2757243 (E.D. Wash. Oct. 25, 2005).66. Id. at *2 (quoting Wash. Rev. Code § 7.72.060(2)).67. See id.

68. See id. at *3.69. 425 F. Supp. 2d 1172 (D. Nev. 2005).70. Id. at 1177–78.71. See id. at 1192.72. 41 Cal. Rptr. 3d 389 (Ct. App. 2006).73. Id. at 393.74. Id. at 396.




undisputed that the hydrant/nozzle was functioning properly as snowmakingequipment, and was not being used as a product at the time [the plaintiff]crashed into it.75

C. Entities

1. Professional Vendors

The question in Adams v. Owens-Corning Fiberglas Corp.76 was whether oneof the defendants was a manufacturer, a professional vendor of asbestos-containing gaskets, or just a nonmanufacturer seller of the gaskets. Thedefendant argued that the only element that might have made the gaskets

hazardous was the existence of asbestos in the gasket material from whichthey were cut and that because the defendant did not put the asbestos inthat material, it could not be strictly liable.77 The court found that thisargument ignored the possibility of professional vendor liability, by whichthe initial manufacturer as well as the seller can be strictly liable, even if theseller merely passes on the finished product without making a modifica-tion that renders the product defective.78 Although the court of appeals didnot hold that the defendant was a manufacturer or professional vendor asa matter of law, it did hold that the plaintiffs produced sufficient evidence

to withstand summary judgment.79

2. Auctioneers

In Gomez de Hernandez v. New Texas Auto Auction Services , a Texas appellatecourt held that an auctioneer could be held strictly liable for alleged defectsin the vehicle it auctioned.80 The court based its holding on the established Texas law that merely introducing a product into the stream of commercesubjects that person to strict liability.81 Finding that the auctioneer was notentitled to judgment as a matter of law, the court reversed the summary

judgment granted to the auctioneer.82

3. Manufacturers of Equivalent Product

The primary issue in Goldych v. Eli Lilly & Co.83 was whether a prescriptiondrug manufacturer could be liable for a death caused by another company’sgeneric equivalent of the drug. The plaintiff pleaded claims for fraud,

75. Id.76. 923 So. 2d 118 (La. Ct. App. 2005).

77. Id. at 124.78. Id.79. Id. at 125 & n.9.80. 193 S.W.3d 220 (Tex. App. 2006).81. Id. at 225–26.82. Id. at 226.83. No. 5:04-CV-1477, 2006 WL 2038436 (N.D.N.Y. July 19, 2006).




fraudulent concealment, negligence, and negligent misrepresentation.84

According to the defendant, the plaintiff’s real claims sounded in prod-ucts liability, but those claims would fail as a matter of law because it wasundisputed that the defendant did not manufacture the drug.85 With noNew York precedent, the court relied heavily on a May 2006 decision fromthe Eastern District of Pennsylvania, Colacicco v. Apotex,86 as well as an ear-lier Fourth Circuit opinion.87 Drawing from Colacicco, the court stated thatpublic policy did not support holding one manufacturer liable for anothermanufacturer’s products, even in the generic drug context.88 “When a ge-neric manufacturer blindly accepts the brand name manufacturer’s warnings

and representations, it does so at its own risk.”

89

4. Successor Entities

In Semenetz v. Sherling & Walden,90 New York joined the majority of statesin rejecting the product line exception, which allows a successor manufac-turer to be held liable for its predecessor’s torts if the successor continuesthe output of the predecessor’s line of products.91 The court reasoned that(1) the successor manufacturer, often a small business, may have difficulty obtaining insurance coverage if it will be held responsible for another man-ufacturer’s products; (2) the product line exception “threatens ‘economicannihilation’ for small businesses”; and (3) extending liability to the suc-cessor “places responsibility for a defective product on a party that did notput the product into the stream of commerce.”92

The Supreme Court of South Carolina answered a federal districtcourt’s certified questions in Simmons v. Mark Lift Industries 93 and statedthat a successor corporation that acquired the assets of its bankrupt prede-cessor may be held liable for one of the predecessor’s defective products,but only if “(1) there was an agreement to assume such [liability], (2) thecircumstances surrounding the transaction warrants [sic] a finding of aconsolidation or merger of the two corporations, (3) the successor . . . wasa mere continuation of the predecessor, or (4) the transaction was enteredinto fraudulently for the purpose of wrongfully defeating . . . claims.”94 These exceptions stem from the court’s 1924 decision in Brown v. American

84. Id. at *2.85. Id.86. 432 F. Supp. 2d 514 (E.D. Pa. 2006).87. Foster v. Am. Home Prods. Corp., 29 F.3d 165 (4th Cir. 1994).

88. See Goldych, 2006 WL 2038436, at *5 (citing Colacicco, 432 F. Supp. 2d at 541–42).89. Id. at *4 (citing Foster , 29 F.3d at 169).90. 818 N.Y.S.2d 819 (2006).91. See id. at 822 (citing Ray v. Alad Corp., 560 P.2d 3 (Cal. 1977)).92. See id. at 823–24.93. 622 S.E.2d 213 (S.C. 2005).94. See id. at 215.




Railway Express Co.95 Although Brown concerned the debts of a predecessor

company, the court found its analysis equally applicable in the tort claimscontext.96 The court also stated that the ability of a nonbankrupt code-fendant to answer in judgment is irrelevant to the question of a successorcompany’s liability.97 Justice Burnett dissented, advocating a broader inter-pretation of the “mere continuation” exception.98

D. Legislation

The Help Efficient, Accessible, Low-Cost, Timely Healthcare (“HEALTH”) Act of 200599 prohibits punitive damages in a product liability suit concern-ing a medical product if the product is approved by the Food and Drug Administration (“FDA”) or is generally recognized among qualified expertsas safe and efficient pursuant to the conditions established by the FDA.100 The punitive damages provision is part of a broader tort reform bill thatcaps noneconomic damages in medical malpractice cases at $250,000,101 establishes limitations on attorney fees,102 requires future damages to bereduced to present value, allows providers to annuitize awards in excessof $50,000,103 and revises statutes of limitations to three years from the dateof injury for minors and to the ninth birthday for those under six. 104 As of the writing of this article, the bill has passed in the House of Represent-atives and has been referred to the Senate Committee on the Judiciary.105

The Bioterror and Pandemic Preparedness Protection Act106 provides“liability protections for certain pandemics, epidemics, and security coun-termeasures.” If approved, the act will amend title 28 of the U.S. Codeto establish an exclusive federal cause of action against only the UnitedStates for all claims related to a qualified pandemic or epidemic product.107 The U.S. District Court for the District of Columbia would have exclu-sive jurisdiction over these claims, and no claims would be allowed againstmanufacturers, distributors, and/or health care providers.108

Effective September 1, 2005, chapter 90 of the Texas Civil Practice andRemedies Code sets new standards for claims involving asbestos and silica.

95. 123 S.E. 97 (S.C. 1924).96. See Simmons , 622 S.E.2d at 215.97. See id. at 215.98. See generally id. at 217–22 (Burnett, J., dissenting).99. H.R. 5, 109th Cong. (2005).

100. Id. § 7(c)(1).101. Id. § 4(b).

102. Id. § 4(c).103. Id. § 8.104. Id. § 3.105. See http://thomas.loc.gov/.106. H.R. 3970, 109th Cong. (2005).107. Id. § 2(a) (quoting what is to become 28 U.S.C. § 4101(a)).108. Id. § 1(B), (C).




A claimant asserting an asbestos- or silica-related injury is now required

to provide an expert medical report attesting to certain minimum levelsof diagnosis and impairment.109 The report must be served on the defen-dant within thirty days of the defendant’s answer or other appearancein the case.110 If the plaintiff fails to serve such a report or if the reportdoes not comply with the statutory requirements, the court may, uponthe defendant’s motion, dismiss the plaintiff’s claims without prejudice.111 Chapter 90 also provides for consolidation of existing asbestos and silicaclaims into multidistrict litigation.112

iii. preemption

A. Medical Devices

The Second Circuit joined the Third, Fifth, Sixth, Seventh, and EighthCircuits in applying federal preemption for medical devices that have under-gone the FDA’s premarket approval process.113 In Riegel v. Medtronic, Inc.,114 the court affirmed summary judgment for a catheter manufacturer, hold-ing that the Medical Device Amendment (“MDA”) to the Food, Drug, andCosmetic Act (“FDCA”) preempted the plaintiff’s negligence, strict liabil-

ity, and breach of implied warranty claims to the extent that the plaintiff alleged liability despite the manufacturer’s adherence to FDA premarketapproval standards for the catheter.115 In Missouri Board of Examiners for

Hearing Instrument Specialists v. Hearing Help Express, Inc.,116 the EighthCircuit held that the MDA expressly preempted a Missouri statute prohib-iting mail order sales of hearing aids without prior fitting and testing by a specialist, finding that the state statute imposed a requirement “in addi-tion to” federal requirements.117 In Gomez v. St. Jude Medical Daig Division

Inc.,118 the Fifth Circuit upheld summary judgment for the manufacturer of

a medical device designed to deposit a collagen plug on the outside wallof the patient’s artery to close a hole that developed following surgery,holding that the MDA preempted a patient’s state law claims for defective

109. See Tex. Civ. Prac. & Rem. Code §§ 90.003 (asbestos), 90.004 (silica) (Vernon 2005).110. Id. § 90.006.111. See id. § 90.007.112. See id. § 90.010.113. Horn v. Thoratec Corp., 276 F.3d 163 (3d Cir. 2004); Martin v. Medtronic, Inc., 254

F.3d 573 (5th Cir. 2001); Brooks v. Howmedica, Inc., 273 F.3d 785 (8th Cir. 2001); Kemp v.

Medtronic, Inc., 231 F.3d 216 (6th Cir. 2000); Mitchell v. Collagen Corp., 126 F.3d 902 (7thCir. 1997).

114. 451 F.3d 104 (2d Cir. 2006).115. Id. at 123.116. 447 F.3d 1033 (8th Cir. 2006).117. Id. at 1037.118. 442 F.3d 919 (5th Cir. 2006).




design, failure to warn and failure to train, breach of implied and express

warranties, and negligence per se.

119

B. Pharmaceuticals

The most significant development in preemption law as it applies topharmaceuticals appears to be the FDA’s adoption of its final rule on pre-scription drug labeling.120 The rule took effect June 30, 2006.121 The FDA wrote, “FDA believes that under existing preemption principles, FDA ap-proval of labeling under the act, whether it be in the old or new format,preempts conflicting or contrary state law.”122 The FDA expressed concern

with state law claims that “rely on and propagate interpretations of the actand FDA regulations that conflict with the agency’s own interpretations”123 because those claims “frustrate the agency’s implementation of its statutory mandate.”124 State law actions are also said to “threaten FDA’s statutorily prescribed role as the expert Federal agency responsible for evaluating andregulating drugs.”125

Despite this strong language, at least one court has explicitly discountedthe FDA’s apparent intent to preempt the field. The plaintiffs in Jackson v.Pfizer, Inc.126 alleged that their eleven-year-old son’s suicide resulted from

his use of the antidepressants Zoloft and Effexor. The court rejected thedefendants’ preemption arguments, stating without analysis that “[t]herecent notice issued by the FDA claiming preemption is not persuasive.”127

Other courts have relied on the FDA’s comments on the new drug labelingrule in holding plaintiffs’ state law drug claims to be preempted. In Penn-

sylvania Employee Benefit Trust Fund v. Zeneca, Inc.,128 the court held that theplaintiffs’ consumer fraud claims regarding advertising were preempted tothe extent that they complied with FDA labeling requirements.129 Simi-larly, in Colacicco v. Apotex, Inc.,130 a district court in Pennsylvania deferred

to the FDA’s interpretation of the FDCA and regulations it administersand held, in a detailed analysis, that the act impliedly preempted state lawfailure to warn claims.131

119. Id. at 930–32.120. Requirements on Content and Format for Human Prescription Drug and Biological

Products, 71 Fed. Reg. 3922 (Jan. 24, 2006) (to be codified at 21 C.F.R. pts. 201, 314, 601).121. Id. at 3922.122. Id. at 3934.123. Id.124. Id.

125. Id. at 3935.126. 432 F. Supp. 2d 964 (D. Neb. 2006).127. Id. at 968 (citing 71 Fed. Reg. 3922 (Jan. 24, 2006)).128. No. Civ. 05-075-SLR, 2005 WL 2993937 (D. Del. Nov. 8, 2005).129. Id. at *4.130. 432 F. Supp. 2d 514 (E.D. Pa. 2006).131. See generally id. at 523–38.




C. Tobacco

Rulings concerning preemption in tobacco litigation varied over the survey period. In Philip Morris USA, Inc. v. Arnitz,132 a Florida court held that theFederal Cigarette Labeling and Advertising Act did not preempt designdefect or manufacturing defect claims against a cigarette manufacturer.133 A New York appellate court also rejected the preemption defense, charac-terizing the duty underlying the plaintiff’s claim as a “state law duty notto deceive.”134 However, a Louisiana court held in Badon v. R.J. Reynolds Tobacco Co.135 that a smoker’s claim that cigarettes were unreasonably dan-gerous per se was preempted by a conflicting policy of Congress not to

remove tobacco products from the market.136

iv. product liability class action developments

Since the Class Action Fairness Act of 2005 (“CAFA”) became effective,the most significant developments in products liability class action lawhave involved the interpretation of the statute’s provisions. In particular,courts have focused on CAFA’s exceptions to federal jurisdiction over cer-tain class actions and whether CAFA shifts the traditional burdens regardingremoval.

A. CAFA Does Not Shift Burden to Prove Federal Jurisdiction Is Proper

In Abrego Abrego v. Dow Chemical Co.,137 the Ninth Circuit held that evenunder CAFA, the party who seeks to invoke federal jurisdiction retainsthe burden to prove jurisdiction is proper.138 Panamanian plantation work-ers sued Dow, claiming injuries from a chemical banned by the EPA inthe United States in 1979 but that Dow allegedly continued to distributeand use in Panama.139 Dow removed the case to federal court pursuant toCAFA, and the court ordered Dow to show cause as to whether CAFA’samount in controversy requirement was met.140 Dow argued that CAFA “shifted the burden of establishing . . . jurisdiction . . . from the remov-ing defendants to the plaintiffs seeking remand.”141 The district court dis-agreed, found Dow failed to meet its burden, and remanded.142

132. 933 So. 2d 693 (Fla. Dist. Ct. App. 2006).133. Id. at 698.134. Tomasino v. Am. Tobacco Co., 807 N.Y.S.2d 603, 605 (App. Div. 2005) (quoting

Miele v. Am. Tobacco Co., 770 N.Y.S.2d 386, 390 (App. Div. 2003)).135. 934 So. 2d 927 (La. Ct. App. 2006).

136. Id. at 934.137. 443 F.3d 676 (9th Cir. 2006) (per curiam).138. Id. at 678.139. Id.140. Id.141. Id.142. Id. at 679.




The Ninth Circuit affirmed the remand. 143 The court’s analysis turned on

the language of CAFA. First, “there is simply no such language in [CAFA]regarding the burden as to remand.”144 Because the statute was “entirely silent as to the burden of proof on removal,” the court presumed that“Congress [was] aware of the legal context in which it [was] legislating.”145 Second, CAFA contains other provisions that broaden federal jurisdic-tion.146 The court concluded that “these broadening provisions indicatethat Congress carefully inserted into the legislation the changes it intendedand did not mean otherwise to alter the jurisdictional terrain.”147

B. Party Seeking Remand Has Burden to Prove CAFA’s Exceptions

1. Local Controversy Exception

The Eleventh Circuit held in Evans v. Walter Industries, Inc.148 that the plain-tiffs seeking to remand their class action failed to satisfy their burden to provethat two-thirds of the plaintiff class were Alabama residents under CAFA’slocal controversy exception.149 The plaintiffs filed suit in Alabama state court,alleging personal injury and property damages from the defendants’ manu-facturing facilities, which released various waste substances over approxi-mately eighty-five years.150 The defendants removed the case under CAFA.

The plaintiffs sought remand, arguing that the case fell within the localcontroversy exception of CAFA.151 That exception instructs a district court todecline to exercise jurisdiction over a class action in which (1) two-thirds ormore of the class members are residents of the state in which the action wasoriginally filed, (2) a “significant” defendant is a resident of the same state,(3) the principal injuries were suffered in that state, and (4) no factually simi-lar class action has been brought in that state within the last three years.152

The court first held that “a party [that] seeks to avail itself of an expressstatutory exception to federal jurisdiction under CAFA . . . bears the burden

of proof with regard to that exception.”153

Next, the court considered

143. Dow appealed under § 1453(c)(1) of CAFA, which provides that

a court of appeals may accept an appeal from an order of a district court granting ordenying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.

28 U.S.C. § 1453(c)(1). See 443 F.3d at 677 & n.1.144. Id. at 683.145. Id. at 683–84.146. Id. at 684.147. Id. at 684–85.148. 449 F.3d 1159 (11th Cir. 2006).149. Id. at 1166.150. Id. at 1161.151. Id.152. See 28 U.S.C. § 1332(d)(4)(A). The other part of the local controversy exception is

contained in § 1332(d)(4)(B), but it was not at issue in Evans. 449 F.3d at 1163 n.2.153. Id. at 1164, 1165.




whether the plaintiffs had satisfied their burden as to the local controversy

exception. As evidence of the citizenship of the potential class, the plain-tiffs relied on an affidavit from their attorney affirming that 93.8 percentof the known class members are Alabama residents, and thus two-thirds of the entire plaintiff class are Alabama citizens.154 The court held that thisevidence was insufficient because there was no evidence to show how theknown class members were chosen, nor was there evidence of any effortto locate potential class members outside Alabama.155 The plaintiffs alsofailed to meet the burden of the significant defendant test. A class seekssignificant relief against a defendant when the relief sought is a significant

portion of the entire relief sought by the class.

156

Although the plaintiffsalleged U.S. Pipe was a significant defendant, the court held that withouta comparison of the relief sought among all defendants and each defen-dant’s ability to pay the judgment, the plaintiffs had not proved U.S. Pipe was a significant defendant.157

2. State Action Exception

In Frazier v. Pioneer Americas, L.L.C.,158 Louisiana residents sued Pioneer Americas, a Canadian company operating in Louisiana, and the LouisianaDepartment of Environmental Quality (“DEQ”) in state court, allegingthey had been harmed by excessive mercury that Pioneer released into theenvironment. They claimed DEQ neglected its statutory duty to moni-tor Pioneer and to warn citizens of dangerous emissions.159 Without theconsent of DEQ, Pioneer removed to federal court based on CAFA as wellas improper joinder of DEQ.160 The district court denied the plaintiffs’motion to remand.161

On appeal, the Fifth Circuit held that the plaintiffs had the burden toprove one of CAFA’s exceptions.162 The court held that the plaintiffs failedto meet the requirements of CAFA’s state action exception, which excludesfrom CAFA jurisdiction “any class action in which . . . the primary defen-dants are States, State officials, or other governmental entities. . . .”163 The plural term defendants means all primary defendants must be states orstate entities for the exception to apply.164 Because Pioneer was a primary defendant but not a state entity, the exception did not apply.165

154. See id. at 1166.155. See id.156. See id. at 1166–67 (quoting 28 U.S.C. § 1332(d)(4)(A)(i)(II)).

157. See id. at 1167–68.158. 455 F.3d 542 (5th Cir. 2006).159. Id. at 544.160. Id.161. Id.162. Id. at 546.163. Id. (quoting 28 U.S.C. § 1332(d)(5)(A)).164. Id. at 546.165. Id.




Finally, the court held that the plaintiffs failed to satisfy the local

controversy exception. Under that exception, at least one defendant mustbe a citizen of the state in which the action was originally filed. The Loui-siana DEQ did not qualify because a state has no citizenship for diversity purposes.166

v. consumer law issues

A. State Lemon Laws

1. Automobile Leases and Lemon Laws

a. Lessee as a Qualifying Consumer —In a case of first impression, the Su-preme Court of Arizona held in Parrot v. Chrysler Corp.167 that the Arizonalemon law168 does not allow the lessee of an automobile to sue the automo-bile manufacturer for defects in the automobile. The court first consideredthe plaintiff’s claims under the federal Magnuson-Moss Warranty Act.169 To bring suit under the warranty act, a person must be a consumer of aconsumer product and have a written warranty, implied warranty, or servicecontract.170 The warranty act also requires a qualifying sale, i.e., a sale in which a person buys a consumer product for purposes other than resale.171 The court held that because the dealership from which the plaintiff leasedthe vehicle purchased the vehicle for purposes of resale and because there was no other qualifying sale in the record, the lessee was not a consumerand could not recover under the warranty act.172

Next, the court turned to the Arizona lemon law. Without deciding whether the plaintiff qualified as a consumer under the lemon law, thecourt found that the only remedies available under the lemon law, i.e., re-turn or replacement of the vehicle, “assume the consumer has a right totransfer title back to the manufacturer.”173 In this case, the plaintiff/lesseeconceded he had no right of title, so the court held he could not recoverunder the lemon law.174

Two other courts reached the opposite conclusion. In Mattuck v. Daim-lerChrysler Corp.,175 an Illinois appellate court held that a lessee qualified as

166. Id. at 547.167. 130 P.3d 530 (Ariz. 2006).168. Ariz. Motor Vehicle Warranties Act, Ariz. Rev. Stat. §§ 44-1261 to -1267 (2003 &

Supp. 2005).

169. 15 U.S.C. §§ 2301–12 (2000).170. Parrot , 130 P.3d at 532.171. Id.172. Id. at 536.173. Id. at 537.174. Id.175. 852 N.E.2d 485 (Ill. App. Ct. 2006).




a consumer under the Magnuson-Moss Warranty Act.176 A consumer under

the warranty act includes “any person to whom [a consumer] product istransferred during the duration of an implied or written warranty (or ser- vice contract) applicable to the product. . . .”177 Illinois courts had previ-ously held that a lessee qualifies as a consumer under that definition eventhough there was no qualifying sale.178 In Ryan v. American Honda Motor,

Inc.,179 the New Jersey Supreme Court held that a lessee satisfies the third,catch-all definition of consumer under the warranty act: “any other person who is entitled by the terms of the warranty or under applicable state lawto enforce the warranty.”180

b. Previously Leased Cars Are New Motor Vehicles —In Curl v. Volkswagenof America, Inc.,181 an Ohio appellate court held that for purposes of the statelemon law,182 the delivery date of a car purchased from a dealer was thedate the plaintiff took delivery, not the date the dealership acquired the car. The dealer had leased the car to others for eleven months before the saleto the plaintiff. Ohio’s lemon law does not define a “new” or “used” motor vehicle. However, a “new motor vehicle” is defined elsewhere as “a motor vehicle, the legal title to which has never been transferred by a manufac-turer, remanufacturer, distributor, or dealer to an ultimate purchaser.”183

Ultimate purchaser , in turn, means, “with respect to any new motor vehicle,the first person, other than a dealer purchasing in the capacity of a dealer, who in good faith purchases such new motor vehicle for purposes otherthan resale.”184 Based in part on these definitions, the court held that thecar’s first ultimate purchaser was the plaintiff, and so the delivery date wasthe date the vehicle was first delivered to the plaintiff.185

2. Purchase Price of Vehicle Does Not Include Inflated ValueUnder Installment Contract

In DaimlerChrysler Corp. v. Victoria,186

the Supreme Court of New Hamp-shire held that an award to a consumer under the state’s lemon law187 forthe purchase price of a vehicle must be based upon the actual purchase

176. Id. at 492.177. Id. at 491 (quoting 15 U.S.C. § 2301(3) (2000)).178. Id. 179. 896 A.2d 454 (N.J. 2006) (per curiam).180. Id. at 456 (quoting 15 U.S.C. § 2301(3)).181. No. 2004-T-0112, 2005 WL 3274992 (Ohio Ct. App. Dec. 2, 2005).182. Ohio Nonconformity New Motor Vehicle Law, Ohio Rev. Code Ann. §§ 1345.71–.78

(West 2004).183. Curl , 2005 WL 3274992, at *8 (citing Ohio Rev. Code Ann. § 4517.01(C)).184. Id. (citing Ohio Rev. Code Ann. § 4517.01(D)).185. Id. at *9.186. No. 2005-357, 2006 WL 1626989 (N.H. June 14, 2006).187. New Motor Vehicle Arbitration, N.H. Rev. Stat. Ann. § 357-D:1 to -D:12 (West

1995 & 2006 Supp.).




price and not an inflated value of the vehicle as stated in a retail installment

contract that was calculated based upon the buyer’s “negative equity”trade-in.188 The new motor vehicle arbitration board had found that theplaintiff’s vehicle was defective and awarded him $19,002.04 as “purchaseprice of vehicle.” This amount was the price listed on the retail installmentcontract between the plaintiff and the dealer, but it factored in roughly $4,000 in negative equity in the plaintiff’s trade-in vehicle.189

The dealer appealed, arguing that the purchase price of the vehicle, forlemon law purposes, should be the actual price (here, $15,600), not aninflated price specific to the buyer.190 The trial court upheld the arbitra-

tion board’s award,

191

but the supreme court agreed with the dealer andreversed the lower court’s judgment. The court explained thus:

There is nothing in the plain language of [the lemon law] that suggests thatthe legislature intended for a prevailing consumer to enjoy a windfall there-under. . . . [The board’s] interpretation here, permitting a Lemon Law refundto be based upon the admittedly inflated figures in the retail installment con-tract, would be contrary to legislative intent as discerned from the statutory scheme, as it could place the consumer in a significantly better position thanhe or she was in prior to buying the vehicle.192

3. Defect Need Not Exist at Time of Trial/ArbitrationIn DaimlerChrysler Corp. v. Spitzer 193 and In re General Motors Corp.,194 both decided on December 1, 2005, a New York appellate court held thatthe repair presumption under the new car lemon law arises after four re-pair attempts, regardless of whether the defect still exists at the time of trial or arbitration.195 The court based its rulings on the plain languageof the lemon law, which requires that the defect continue to exist aftera fourth repair.196 The court followed its sister court’s observation that the“phrase has nothing to do with the condition of the vehicle at the time of

the hearing or trial.”197 Further, “had the Legislature intended to requirethe existence of a defect at the trial, hearing, or arbitration for a con-sumer to recover under a statutory scheme, it could have easily providedfor same.”198

188. DaimlerChrysler , 2006 WL 1626989, at *4.189. Id. at *1.190. Id. 191. Id.

192. Id. at *3.193. 804 N.Y.S.2d 506 (App. Div. 2005).194. 806 N.Y.S.2d 257 (App. Div. 2005).195. DaimlerChrysler , 804 N.Y.S.2d at 508; General Motors , 806 N.Y.S.2d at 257.196. DaimlerChrysler , 804 N.Y.S.2d at 508 (citing N.Y. Gen. Bus. Law § 198-a(d)(1)).197. Id. (quoting Kucher v. DaimerChrysler Corp., 802 N.Y.S.2d 298 (App. Div. 2005)).198. Id. at 509.




4. Arbitration Is Prerequisite to Suit

Several courts have held that arbitration under a state’s lemon law is aprerequisite to suit. The U.S. District Court for the Eastern District of New York rejected the plaintiff’s argument that there must be an agree-ment to arbitrate, finding that arbitration is mandatory even though theconsumer would not be bound by the result.199 Noting that “the Texas leg-islature has clearly expressed its intention that the Texas Motor VehicleCommission exercise exclusive original jurisdiction over Texas LemonLaw claims,”200 the Eastern District of Texas dismissed the plaintiff’sclaim without prejudice to proceed before the commission.201 The Ohio

Court of Appeals found that although the plaintiff was required to exhaustadministrative remedies, his failure to do so was an affirmative defensethat the defendant waived by failing to properly raise it in its answer.202 Finally, the Eastern District of Michigan found that the defendant waivedits right to have the plaintiff arbitrate its lemon law claims by failing toassert that defense in its answer, actively conducting discovery, filing a wit-ness list in anticipation of trial, and moving for summary judgment.203

5. Arbitration Does Not Limit Other Remedies

Under New York law, if a consumer unsuccessfully seeks recovery throughthe attorney general’s Used Car Lemon Law Arbitration Program, the con-sumer is not precluded from commencing an action provided that the samerelief is not sought in such litigation.204 The court’s holding was based onthe language in the lemon law that “nothing in this section shall in any way limit the rights or remedies which are otherwise available to a consumerunder any other law.”205 Similarly, the Georgia lemon law does not limita person from pursuing other rights or remedies under any other law, suchas a claim for breach of warranty under Georgia’s Uniform Commercial

Code.206 A Florida appellate court likewise held that arbitration under theFlorida lemon law does not preclude a later lawsuit “unrelated to refund orreplacement of the vehicle. . . .”207

199. Diaz v. Paragon Motors of Woodside, Inc., 424 F. Supp. 2d 519, 538–39 (E.D.N.Y.2006).

200. Irwin v. Country Coach Inc., No. 4:05CV145, 2006 WL 278267 (E.D. Tex. Feb. 3,2006).

201. Id. at *3.

202. Harris v. Ford Motor Co., 852 N.E. 2d 750 (Ohio Ct. App. 2006).203. Peters v. AM Gen. LLC, No. 05-72177, 2005 WL 3502268 (E.D. Mich. Dec. 22,

2005).204. Felton v. World Class Cars, 818 N.Y.S.2d 891 (App. Div. 2006).205. Id. at 892 (quoting N.Y. Gen. Bus. Law § 198-b[d][2]).206. Rodgers v. Gen. Motors Corp., 627 S.E.2d 151, 153–54 (Ga. Ct. App. 2006).207. Gelinas v. Forest River, Inc., 931 So. 2d 970, 975 (Fla. Dist. Ct. App. 2006).




6. Right to Appeal Cannot Be Conditioned on Paying Attorney Fees

In T.A. Enterprises, Inc. v. Olarte, Inc.,208

a Florida appellate court held thatthe Florida lemon law209 was unconstitutional to the extent that it alloweda trial court to condition a car manufacturer’s appeal of the final judgmenton the manufacturer’s payment of the consumer’s attorney fees.210 The courtfound that provision violated two clauses of the Florida Constitution: (1) ar-ticle V, § 4(b)(2), which grants litigants an appeal “as a matter of right, fromfinal judgments or orders of trial courts”;211 and (2) article I, § 21, whichprovides that “[t]he courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay.”212

B. Arbitration Provisions in Automobile Purchase Agreements

1. Arbitration Provision Held Unenforceable

In Olah v. Ganley Chevrolet, Inc.,213 an Ohio appellate court held an arbi-tration provision in an automobile purchase agreement unenforceablebecause the provision was unconscionable. The court followed a sistercourt’s earlier reasoning that “[t]ransactions involving modern day neces-sities such as transportation deserve especially close scrutiny before anarbitration clause is enforced by the courts.”214 Such an agreement “should

only be enforceable when it was freely entered into, and the circumstancesshould be scrutinized where a consumer is confronted with a sophisticatedlending institution, and waives the constitutional right of trial.”215 Thecourt held that the arbitration provision in this case was “substantively unconscionable” because it failed to provide crucial information, it wasconfusing and misleading, and the plaintiffs could not have known fromthat provision what it meant to be “bound to arbitration.”216 Further, thetrial court should have held a hearing to determine if the arbitration provi-sion was also procedurally unconscionable.217

2. Nonsignatory to Purchase Agreement Can Compel Arbitration

The Supreme Court of Alabama held in Smith v. Mark Dodge, Inc.218 thata nonsignatory manufacturer could compel arbitration because the plaintiff’s

208. 931 So. 2d 1016 (Fla. Dist. Ct. App. 2006).209. Florida Motor Vehicle Warranty Enforcement Act, Fla. Stat. Ann. §§ 681.10–.118

(West 2001).210. T.A. Enters., 931 So. 2d at 1017.211. Fla. Const. art. V, § 4(b)(2).212. Id. art I, § 21.

213. No. 86132, 2006 WL 350204 (Ohio Ct. App. Feb. 16, 2006).214. Id. at *2 (quoting Battle v. Bill Swad Chevrolet, Inc., 746 N.E. 2d 1167, 1172 (Ohio

Ct. App. 2000)).215. Id.216. Id. at *5.217. Id. at *6.218. 934 So. 2d 375 (Ala. 2006).




claims against the manufacturer were “intimately . . . intertwined with” his

claims against the dealer, with whom the plaintiff had signed an arbitrationagreement.219 The doctrine of equitable estoppel allows a nonsignatory toenforce an arbitration provision when the claims against the nonsignatory are “intimately founded in and intertwined with” the underlying contractobligations.220

In order for the equitable estoppel exception to apply, the arbitrationprovision must be broad enough to indicate that the nonsignatory wascontemplated as a party, such as when the provision covers all claims orcontroversies arising from or related to a contract.221 If, by contrast, the

arbitration provision is party specific, then a nonsignatory lacks standingand cannot enforce the agreement to arbitrate.222 The arbitration provisionin this case provided thus: “This Agreement is binding upon, and inuresto the benefit of [Smith] and [Mark Dodge] and the officers, employees,agents and affiliated entities of each of them. . . .”223 The court focused onaffiliated entities and found that the manufacturer was an affiliated entity of the dealership and therefore could invoke the equitable estoppel exceptionand enforce the arbitration agreement.224

3. Third-Party Beneficiaries Bound by Arbitration AgreementIn Holman Dealerships, Inc. v. Davis ,225 a Mississippi court of appeals heldthat third-party beneficiaries to an automobile purchase agreement werebound by the arbitration provision contained within the agreement.226 Plaintiff Vera Davis entered into an automobile purchase agreement tobuy a car for her son and daughter-in-law, plaintiffs Paul and CatherineDavis.227 The arbitration clause in the agreement provided in part as fol-lows: “This agreement is binding upon, and inures to the benefit of buyer/lessee and dealer and the officers, employees, agents and affiliated entities

of each of them. . . .”228

The dealership moved to compel arbitration as tothe claims of Paul and Catherine.229 The court held that Paul and Cathe-rine, as third-party beneficiaries to the purchase agreement, were affiliatedentities under and thus bound by the mandatory arbitration provision.230

219. Id. at 380.220. Id. (internal quotations omitted).221. Id.222. Id. at 381.223. Id. (italics removed from original).

224. Id. at 382.225. 934 So. 2d 356 (Miss. Ct. App. 2006).226. Id. at 359.227. Id. at 356.228. Id. at 359.229. Id. at 358.230. Id. at 359.




vi. restatement (third) of torts: products liability

A. Section 1: Liability of Commercial Seller/Distributor

A New Jersey appellate court was asked to decide whether an individual who sold a glue-mixing machine was a “seller” under the state’s productliability statute.231 In its analysis, the court considered the exception under§ 1 of the Restatement for “occasional” or “casual” sellers. The court heldthat occasional as used in the Restatement does not mean “once in a while,”but rather means “that the selling of the goods at issue is not part of the‘purpose’ of the seller’s business under [the New Jersey product liability

statute].”

232

In Vaughn,233 the Supreme Court of Indiana noted that Indiana still fol-lows § 402A of the Restatement (Second) of Torts , which allows a “user orconsumer” of a product to recover for injuries caused by the product.234 Indiana has not adopted § 1 of the Restatement (Third), § 402A’s successor, which eliminates the user/consumer language and instead speaks of “per-sons” harmed by a defective product.235

B. Section 2: Design, Warning, and Manufacturing Defect

A New York appellate court held that the consumer expectations test is not

dispositive in a design defect case.236 The defendant, a cigarette manufac-turer, moved for summary judgment on the basis that its cigarettes “werein a condition reasonably contemplated by the ultimate consumer.”237 Thecourt rejected that argument, relying on comment g of § 2 as support:

[C]onsumer expectations do not constitute an independent standard for judging the defectiveness of product designs. . . . [W]hile disappointment of consumer expectations may not serve as an independent basis for allowingrecovery under [the design defect theory], neither may conformance withconsumer expectations serve as an independent basis for denying recovery.

Such expectations may be relevant in both contexts, but in neither are they controlling.238

In Potter v. Ford Motor Co.,239 a Tennessee court of appeals rejected theapplication of § 2 to the extent that it requires a plaintiff in a design defect

231. Agurto v. Guhr, 887 A.2d 159 (N.J. Super. Ct. App. Div. 2005).232. Id. at 163. The court did not decide whether the defendant qualified as an occasional

seller, finding the record too “murky and contradictory” at this summary judgment stage. Id. at 164.

233. Vaughn v. Daniels Co. (West Virginia), Inc., 841 N.E.2d 1133 (Ind. 2006); see discus-sion supra part II.A.3.234. Id. at 1140 & n.5.235. Id. at 1140 n.6.236. Tomasino v. Am. Tobacco Co., 807 N.Y.S.2d 603 (App. Div. 2005).237. Id. at 605.238. Id. (quoting Miele v. Am. Tobacco Co., 770 N.Y.S.2d 386, 391 (App. Div. 2003) (quot-

ing Restatement (Third) of Torts, Products Liability § 2 (1998))).239. No. E2005-01578-COA-R3-CV, 2006 WL 1698971 (Tenn. Ct. App. June 21, 2006).




case to prove a practical, feasible alternative design was available. Although

evidence of such an alternative design “will always be highly relevant,” thecourt reasoned, it is not always necessary for a plaintiff to recover.240

By contrast, an Iowa federal district court relied on § 2’s two-pronginquiry (foreseeability of risk and reasonably alternative design) in a caseinvolving a lifting device.241 The court found that one of the defendants was aware of an alternative design but held that fact issues on the foresee-ability question prevented summary judgment for the defendant.242

C. Section 3: Inference of Causation

In Cooper Tire & Rubber Co. v. Mendez,243 the Texas Supreme Courtreaffirmed that the mere fact of a product-related accident cannot lead toan inference of defect. Car accident victims and their relatives sued a tiremanufacturer, claiming a manufacturing defect caused the treads on their vehicle’s tire to separate and led too an accident. The court first held thatthe plaintiffs offered legally insufficient evidence of a manufacturing defectbecause the testimony of their three experts should have been excluded.244 The court then considered whether the fact of the accident could, standingalone, be evidence of a manufacturing defect. Quoting § 3 of the Restate-ment (Third) of Torts , the court reasoned that causation could be inferred without proof of a specific defect only when the incident is of a “kind thatordinarily occurs as a result of a product defect” and when the incidentis not the result of other causes “existing at the time of sale or distribu-tion.”245 Although the court declined to decide whether § 3 reflects Texaslaw, the court stated that an inference of defect, as contemplated by § 3, would generally apply only to new products.246

Similarly, in Snell v. Bostrom Products Co.,247 the court refused to finda manufacturing defect in the driver’s seat of a truck simply because theseat failed. Before § 3 could apply, the plaintiff had to prove both thatthe incident was of a kind that ordinarily occurs as a result of a productdefect and that the incident was not solely the result of causes other thanthe alleged product defect existing at the time of sale or distribution.248 The court granted summary judgment for the defendant because the plain-tiff did not satisfy the second prong—“he presented no evidence to rule out

240. Id. at *3–4.241. Conveyor Co. v. SunSource Tech. Servs., Inc., 398 F. Supp. 2d 992 (N.D. Iowa

2005).242. Id. at 1004–05.243. 204 S.W.3d 797 (Tex. 2006).244. Id. at 801–07.245. Id. at 807–08 (quoting Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004)).246. See id. at 808 (quoting Ridgway, 135 S.W.3d at 601).247. No. L-5865-00, 2005 WL 2654303 (N.J. Super. Ct. App. Div. Oct. 19, 2005) (per

curiam).248. Id. at *4.




that the malfunctioning of the seat . . . was the product of wear and tear

upon it, given its prior use and lack of maintenance.”

249

At least two courts relied on § 3 to hold that the plaintiff may estab-lish product liability even in the absence of the offending product. Theplaintiffs in Moores v. Sunbeam Products, Inc.250 sued the manufacturer of a heating pad, claiming the pad malfunctioned and caused a fire that de-stroyed their home. The heating pad was destroyed in the fire. The courtdenied the defendant’s motion for summary judgment, concluding under§ 3 that the plaintiffs had presented sufficient “circumstantial evidence of malfunction and a lack of evidence of other causes.”251 Although the defen-

dant contended that a cigarette could have caused the fire, the court statedthat it was required to view in the “light most favorable” to the plaintiff the plaintiff’s testimony that she did not smoke in the area where the fireoriginated.252 The court in Drooger v. Carlisle Tire & Wheel Co.253 cited § 3for the proposition that a plaintiff may establish product liability in the ab-sence of the offending product on the basis of expert testimony and othercircumstantial evidence.254 The court “affirmatively reject[ed] a ‘no tire, nocase’ rule in this case.”255

D. Section 5: Liability of Component Part Supplier for

Defects in Integrated Products In Bearint v. Johnson Controls, Inc.,256 the Florida federal district court didnot decide whether § 5 or the consumer expectations standard applied ina case in which the driver’s seat back collapsed in an accident, falling onthe head of a baby in the backseat. Rather, the court held that summary judgment in favor of the seat manufacturer was inappropriate, regard-less of which standard applied, because a “seat should be capable of daily wear without suffering a catastrophic seat failure during an accident.”257 Itreached this conclusion despite its recognition that the defendant’s acts of working with the car manufacturer to integrate the seats did not constitute“integration” within the meaning of § 5(b)(1).258

The court in In re Parker Drilling & Offshore USA, L.L.C.259 incorporated§ 5 in its analysis of strict liability design defect claims brought against

249. Id. at *5.250. 425 F. Supp. 2d 151 (D. Me. 2006).251. Id. at 157.252. See id. at 153 n.2.

253. No. 1:05-CV-73, 2006 WL 1008719 (W.D. Mich. Apr. 18, 2006).254. Id. at *4.255. Id.256. No. 8:04-CV-1714-T-17MAP, 2006 WL 1890186 (M.D. Fla. July 10, 2006).257. Id. at *6.258. See id. at *5.259. No. Civ. A. 03-2611, 2006 WL 285602 (E.D. La. Feb. 3, 2006).




a component parts manufacturer.260 The plaintiff sued over the failure of a

rig and alleged a gear in the jacking system of the rig was at fault due to itsdefective design. The court concluded that summary judgment was inap-propriate for the manufacturer where there was evidence that the gear wasdefective.261

An intermediate appellate court in Texas relied on § 5 in a marketingdefect case brought by journeyman linemen against the manufacturer of a recloser, a component part installed in an electrical distribution systemutilized by the plaintiffs’ employer.262 The plaintiffs, who were electrocuted while performing a construction project, claimed that the recloser manu-

facturer failed to warn of the risks associated with use of its product.

263

But the plaintiffs also claimed that Entergy, the company they were work-ing for as independent contractors, was negligent in using the recloser inmore situations than those for which it was intended.264 The court grantedsummary judgment for the recloser manufacturer. It held that under com-ment b to § 5, the manufacturer’s duty to warn ran to Entergy, the sophis-ticated buyer of the distribution system.265 The court then reasoned thatif Entergy inappropriately used the product, as the plaintiffs alleged, themanufacturer had no duty to warn Entergy that the product was inappro-

priate for that special, inappropriate purpose.266

In Messer Griesheim Industries, Inc. v. Eastman Chemical Co.,267 a Tennes-see appellate court applied § 5 in denying summary judgment for a chemi-cal manufacturer. It held that a genuine issue of material fact existed as to whether the manufacturer had “substantially participated in the integra-tion of” its nonfood-grade product, which it knew contained cyanide, intothe final product, which was intended for human consumption.268 And in

AMP Plus, Inc. v. Texas Instruments , Inc.,269 the court explained that a com-ponent part manufacturer is not liable under § 5 if the manufacturer did

not take part in the integration of the component into the finished productand if there is no evidence that the component itself is defective.270

260. Federal maritime law, which generally applies common law principles of productsliability, governed Parker Drilling . Id. at *2.

261. See id. at *5–6.262. Brocken v. Entergy Gulf States, Inc., 197 S.W.3d 429, 436 (Tex. App. 2006).263. Id. at 433.264. Id. at 434.265. Id. at 436. Comment b provides thus: “[W]hen a sophisticated buyer integrates

a component into another product, the component seller owes no duty to warn either theimmediate buyer or ultimate consumers of dangers arising because the component is unsuited

for the special purpose to which the buyer puts it.” Restatement (Third) of Torts, ProductsLiability § 5 cmt. b (1998).

266. Brocken, 197 S.W.3d at 436.267. 194 S.W.3d 466 (Tenn. Ct. App. 2005).268. Id. at 480.269. No. Civ. A.3:04:CV2636-R, 2006 WL 522108 (N.D. Tex. Mar. 3, 2006).270. Id. at *3.




E. Section 6: Liability of Commercial Seller or Distributor of

Prescription Drugs or Medicine The Maryland high court limited the applicability of the learned interme-diary doctrine (discussed in comment b to § 6) in holding that a pharmacy may be held liable for injuries resulting from a patient package insert. In

Rite Aid Corp. v. Levy-Gray,271 the plaintiff was prescribed doxycycline totreat Lyme disease.272 When the plaintiff filled the prescription, accompa-nying the medication was a pamphlet entitled Rite Advice, which Rite Aiddescribed as “everything you need to know about your prescription.”273 The pamphlet told the patient to “[t]ake [the medicine] with food or milk

if stomach upset occurs unless your doctor directs you otherwise.”274

Theplaintiff took the pills with milk and other dairy products and was sub-sequently diagnosed with post-Lyme syndrome, which she alleged shedeveloped because the milk reduced the absorption of the doxycycline.275 The court first held that Rite Advice constituted an express warranty,despite some general disclaimer language.276 Then the court rejected thelearned intermediary defense, “declin[ing] to hold as a matter of law thatthe ‘learned intermediary doctrine’ precludes a pharmacy from being heldliable for breach of express warranty when it provides a package insert that

could provide the basis for such a warranty.”277

F. Section 19: Definition of Product

A Connecticut trial court relied on § 19 to suggest that an aortic valvetransplanted from a human cadaver into a living human is not a product forpurposes of a products liability claim.278 Section 19(c) specifically excludeshuman blood and tissue from the definition of product , so the court hinted,although did not decide, that a human valve is not a product either.279

271. 894 A.2d 563 (Md. 2006).272. Id. at 565–66.273. Id. at 566.

274. Id.275. Id. at 567.276. Id. at 573.277. Id. at 579.278. Miller v. Hartford Hosp., No. X04MMXCV044003261S, 2005 WL 3667347 (Conn.

Super. Ct. Dec. 22, 2005).279 Id at *2 3

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