Subject: Finally, a Chance to Reform Product Liability Law Date: Published: 9/9/92 (130 lines) Source: Wall Street Journal. Copyright Dow Jones & Co. Inc. Rule of Law: Finally, a Chance to Reform Product Liability Law ---- By Victor E. Schwartz After a decade of struggling to be heard, a bill that will reform federal product liability laws is finally scheduled to reach the Senate floor tomorrow. For most of this century, the old common law system of product liability law, dating back to the 1700s, worked reasonably well. Although judges modified the law, they did so slowly. But beginning in the 1970s and accelerating in the 1980s, judges began to change the law in giant leaps. Fault principles were obliterated by strict liability. Manufacturers that had been held liable for the intended use of their products became liable for misuse. Huge punitive damage awards were assessed in situations that were unimaginable in earlier times. Traditionally, product liability law has imposed liability on wrongful actions and defective products. Now that has changed. The Brookings Institution, in a study entitled "The Product Liability Maze," has shown that the current system keeps good products off the market because manufacturers are afraid to take the legal risks. Studies also show that research on new products, such as an AIDS prevention vaccine, has been inhibited by the product liability system. Moreover, the product liability system generates unnecessary legal costs. As numerous studies show, more money ends up in the pockets of lawyers than in the pockets of the injured. Liability law traditionally falls to the states. But today more than 70% of goods move across state lines, which means that the interstate commerce aspects of product liability mandate a federal solution. Foreign countries have already recognized the need for uniformity in product liability law. Thirteen European countries under the aegis of the European Community have adopted a uniform Product Liability Directive. Australia, which has only six states and two territories, has a uniform product liability law. Three important themes underlie the bill that will be debated in the Senate this week: 1) It reduces unnecessary legal costs; 2) it places incentives for accident prevention on those who best can accomplish that goal; and 3) it eliminates some unfairness and arbitrariness in the current product liability law. How are these goals accomplished? First, the bill, which mandates a two-year statute of limitations on discovery, contains an important and fairer definition of "discovery" that will allow more injured parties to sue. Under the bill, the statute of limitations will begin to run only when claimants know they have suffered an injury and what the cause of that injury is. For example, from the time a person discovers he has cancer and knows that the cause of that illness is asbestos, he has two years in which to file a claim. This would supersede many state laws that set the statute of limitations running at the time of the injury, regardless of whether the claimant is aware of the injury or its cause. Such state laws arbitrarily cut off people's right to sue by making legal action impossible for a person with an injury, such as cancer, that takes a long time to appear. Second, the proposed law will reduce the length of trial and legal costs by encouraging settlement. If either party rejects a pre-trial offer of settlement, a penalty will be imposed on the party that rejects the offer if he does not do as well at trial. For example, if a plaintiff offers to settle a case for $10,000 and the defendant rejects the offer and then a jury finds the defendant liable for $10,000 or more, the defendant will have to pay the claimant's reasonable legal costs. If the claimant wrongfully rejects an offer, he will also be penalized, but not as much. A penalty will be imposed only if a claimant receives an award; in no case will the claimant's award be reduced beyond his net economic loss, money that he had to expend because of the injury. Third, the bill encourages both parties to use alternative dispute resolution procedures. These procedures are cheaper and quicker than trials. If either party unreasonably refuses to use such a procedure, a penalty will be imposed. Nevertheless, if either party rejects the award of the alternative dispute resolution procedure, his right to a jury trial will be preserved and no penalty will be imposed. Fourth, the bill will improve the law as it affects wholesalers and retailers, who now are dragged into almost every liability suit even though they end up actually paying damages in fewer than 5% of the cases. This is because wholesalers and retailers are treated as if they manufactured the product. Under the bill, wholesalers and retailers will be responsible only for their own fault, unless the manufacturer is out of business or cannot be sued. Fifth, the bill eliminates joint liability for "pain and suffering" damages. Joint liability makes one defendant pay for the acts of another, i.e., it can make a 5%-at-fault defendant responsible for 100% of the damages. By eliminating joint liability for pain and suffering damages, the bill will create greater fairness and encourage potential wrongdoers to insure and be responsible to the full extent of their true responsibility. It will help limit arbitrary "deep pocket" liability. Sixth, the bill recognizes that when products injure people in the workplace, it is sometimes due to employer fault -- e.g., employers failing to train employees or removing safety guards from machines. The bill will allow manufacturers to show that accidents are due to employer fault. If they are able to prove this, they will be able to avoid reimbursing employers for workers' compensation payments. Seventh, the bill makes changes in the confused and uncertain law on punitive damages. For example, it will encourage pharmaceutical and aircraft companies to make their products safe. If they comply with Food and Drug Administration or Federal Aviation Administration standards, it will be presumed that they will not be punished unless they withhold material information from the FDA or the FAA. Then, they will be subject to the full thrust of punitive damages. Eighth, the bill places a 25-year limit on the liability of manufacturers of capital goods used in the workplace. After 25 years, data suggests that problems are not due to original design fault. A similar provision in the EC Directive is for only 10 years. Finally, the bill limits liability on plaintiffs who cause accidents to themselves because they are drunk or under the influence of illegal drugs. The bill -- known as the Federal Product Liability Fairness Act -- has strong bipartisan support, led by Democratic Sen. Jay Rockefeller and Republican Sen. Bob Kasten. Because the opponents, led by Democratic Sen. Ernest Hollings, plan to filibuster, the bill will need 60 votes to pass. And pass it should. Both the consumers who are hurt by products and the manufacturers who make them need to know the rules. --- Mr. Schwartz is general counsel to the Product Liability Coordinating Committee and the Product Liability Alliance, the main umbrella groups lobbying for the Product Liability Fairness Act. [This article is made available here by Dow Jones Co. for the personal and non-commercial use of callers to this bbs, in the hope that it will be of some help to those who are suffering from the disease and others who are seeking to help them.]