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The “Two Hats” You Wear When Dealing with Product Liability

The “Two Hats” You Wear When Dealing with Product Liability
In this segment we’re going to focus on perspectives on product liability. And we’ll also introduce the three key theories of product liability that we’ll be looking at in later segments. Product liability is a very difficult topic to discuss, because it affects us in different ways. You and I are consumers of products. And so if we’re injured by those products, then naturally we assume that we should be able to recover damages on the basis of those injuries. But on the other hand, we’re also employees of companies that produce the products. And companies have been very hard hit by product liability.
You’ve probably read the headlines about how product liability affects certain industries like the automobile Industry, the drug industry, the tobacco industry. Here’s an example of one industry that’s been especially hard hit, and that’s asbestos. This is data from a Rand Report from a few years ago, in the United States and worldwide, over 6000 companies have been named as defendants in asbestos injury lawsuits. Ranging across 75 out of 83 different types of industries in the United States. That’s 90% of industries in the United States have been involved in asbestos litigation. A total of $54 billion has already been spent on asbestos litigation. And it’s estimated the total costs of all claims range up to 265 billion.
And as a result of asbestos product liability, there has been reduced investment by asbestos defendants. This reduces the number of jobs. So, product liability is something that effects us as consumers. It affects our economy and the job market, from the perspective of companies. But, it also involves a very important public policy issue relating to the development of new products. A friend of mine served on the board of directors of one of the largest chemical companies in the world, in fact, the second-largest chemical company in the world. And he once shared with me this message from the CEO to the board. This is part of the memo to the board of directors.
One of the most formidable problems in the future of companies like ours is potential product liability costs. In the long term the increased costs of product liability judgments are going to make a lot of companies very cautious about innovation because they will decide that the rewards aren’t worth the risks. So beyond the perspective of us as consumers of the product. Beyond the perspective of the impact on the companies. There’s an important public policy at issue here that relates to innovation and moving forward with new product development.
All of us, in effect, wear two hats when it comes to product liability. We wear the hat of people who are concerned about company success, but we also wear the hat of consumers who might be injured by products. And here’s an example of the two hats that we wear. We’ve got a Texas attorney, who spends his life, his profession career, defending companies in product liability cases. So one day he goes hunting with his son and two judges. After they conclude the hunt one of the judges asks the son if his gun, which was a Remington Mohawk, is unloaded. Now, in those days, to unload the gun you had to release the safety. So the son released the safety.
The gun discharged, wounds the father and leaves him paralyzed for life from the waist down. So here we have somebody who’s spent his life defending companies in product liability cases, who all of a sudden is injured by a product. He hires a leading plaintiff’s attorney, Joe Jamail, who he was opposing in another case. And as a result, Remington, the manufacturer of the Remington Mohawk, settled the case for $6.8 million. So, please keep in mind these general perspectives as we dive into the theories of product liability. These are the three theories of product liability that I could almost guarantee will appear in any case against your company around the world.
First of all, there is a contract theory based on warranties that you give to the buyers of your products. And second, two out of the three tort theories that we’ve just discussed. Strict liability and negligence will also come into play. Let me give you an example of a typical product liability complaint. This complaint was brought to me by one of my executive MBA students. Now, this case involves a company called Victoria’s Secret. And a woman in Los Angeles bought a Victoria Secret thong. And as she was putting the thong on, a piece of metal from the garment flew off, struck her in the eye and injured her. So now we have a classic product liability scenario.
She brings suit against Victoria Secret. This is what the complaint looks like, and of course the print is probably too small to read, so let me walk you through the complaint. At the beginning of the complaint, the complaint basically says that the plaintiff is bringing suit against Victoria Secret,
on the basis of what it sold to her, which is called, quote, a sexy little thing. That was the name of the product, a low-rise v-string. And then second, the complaint goes on to say that the plaintiff used the thong in a manner intended by Victoria Secret. And Victoria Secret gave no warnings that there might be a possible defect in the product. And then finally, the complaint goes on to list the three theories of liability on which the complaint is based. First of all, the complaint says that Victoria’s Secret should be liable on the theory of strict liability.
Second, the complain says that Victoria’s Secret owed a duty of care to the plaintiff and therefore was liable on the theory of negligence. And finally, the complaint says that Victoria’s Secret is liable on the basis of contract warranties of two types, express warranty and implied warranty. And in the next module, we’re going to take a look in closer detail at both expressed and implied warranties.
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