June 2009

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH products liability and safety publications.

If you have any comments or suggestions concerning the information provided or the format used, we'd like to hear from you. Please send your comments to pamela.maloney@wolterskluwer.

Products Liability

President Limits Agency Preemption of State Law
In a memo issued on May 20 for the heads of executive departments and agencies, President Barack Obama addressed the issue of preemption, announcing that the policy of his Administration will be that preemption of state law by executive agencies and departments "should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption." He said that executive departments and agencies should be mindful that the citizens of the several states "have distinctive circumstances and values, and that in many instances it is appropriate for them to apply to themselves rules and principles that reflect these circumstances and values." Obama set forth three rules to ensure that departments and agencies include statements of preemption in regulations "only when such statements have a sufficient legal basis." First, he said that department and agency heads should not include in regulatory preambles any statements that the department or agency intends to preempt state law through the regulation except where preemption provisions are also included in the codified regulation. Second, department and agency heads should not include preemption provisions in codified regulations except where those provisions would be justified under legal principles governing preemption, including the principles outlined in Executive Order 13132 on federalism, issued August 10, 1999. Third, he said that the heads of departments and agencies should review regulations issued within the past 10 years that contain statements in regulatory preambles or codified provisions that were intended by the department or agency to preempt state law, to determine whether those statements or provisions are justified under applicable legal principles governing preemption. Where an agency or department had finds that a regulatory statement of preemption or codified regulatory provision cannot be appropriately justified, "appropriate action" should be initiated by the head of that department or agency, which could include amendment of the relevant regulation. (74 Federal Register 24693, May 22, 2009)

High Court Denies Automaker's Request to Review $13M Punitive Award
The U.S. Supreme Court denied a request (DaimlerChrysler Corp. v. Flax, Dkt. No. 08-1010, cert. den. 5/26/2009) by an automaker found liable for $13 million in punitive damages for the death of a child in a rear-end collision involving one of its minivans to review the Tennessee Supreme Court's decision in Flax v. DaimlerChrysler, Corp. [CCH Products Liability Reporter ¶18,055 (ip access user)]. The Tennessee Supreme Court upheld the punitive award finding that there was sufficient record evidence to support the jury's conclusion that the minivan's seat was defectively designed and that the amount of the award was not excessive. The U.S. Supreme Court was asked to determine first whether Tennessee law deprives defendants of "fair notice" in violation of the due process clause if it permitted the imposition of liability for punitive damages without regard to any objective indicators of reasonable conduct, including governmental safety standards, industry custom, and the existence of a genuine debate about what the law requires. The high court also was asked whether the Tennessee Supreme Court's reinstatement of the $13 million punitive damage award violated the due process clause because, the petition argued, the court ignored the automaker's compliance with objective indicia of reasonable conduct; expressly recognized, but treated as meaningless, the fact that a comparable penalty guidepost set by the Supreme Court compelled a lower amount; and disregarded the Supreme Court's constitutional maximum 1:1 ratio for substantial compensatory awards. Finally, the automaker asked the U.S. Supreme Court whether the procedural bar used by the Tennessee Supreme Court to preclude review of the prejudicial impact of nonparty harm evidence and argument was an independent and adequate state ground for a decision.

Bystander Rule Adopted by 3rd Circuit for Pennsylvania
Predicting that the Pennsylvania Supreme Court would adopt the Restatement (Third) of Torts rule affording bystanders a cause of action in strict liability, the U.S. Court of Appeals for the Third Circuit reversed a district court's summary judgment in favor of a manufacturer of a riding lawn mower in a claim brought by the parents of a child who lost her left foot to amputation after the mower, which her grandfather was operating, backed-over her left leg. The appeals court also reversed the district court's summary judgment for the manufacturer on the parents' negligent design claims. Both claims were remanded. The court of appeals found that Pennsylvania's strict liability law could extend to the injured child, and that her parents' claim against the riding mower's manufacturer for strict products liability based on the allegedly defective design of the mower should have been allowed to proceed to the trier of fact. The appellate court said that the lower court was in error in relying on the "intended user" doctrine when it granted summary judgment in favor of the mower's manufacturer. The Third Circuit based its prediction on its review of Pennsylvania case law, and further stated that it did not think the policy behind strict products liability was served by declaring that a design is defective only if it injures the user, as such a policy artificially restricts strict products liability to "intended users" based on concerns of "contaminating" a strict liability claim with considerations of foreseeability. The court said that it believed that it was in keeping with Pennsylvania's first strict products liability law case to require placing the risk of loss on the manufacturer, whether it is the product's operator or a bystander. In addition, with respect to the parents' negligent design claim, the appeals court concluded that the question of whether the absence of a back-over protection device on a riding lawn mower constituted negligent design was a question of fact for the jury. (Berrier v. Simplicity Manufacturing, Inc. (3rd Cir.) CCH Products Liability Reporter ¶18,217 (ip access user))

Used Machine Seller Not "Regular Seller," Nor Strictly Liable
Under New York law, a company that sold one of its used folding/gluing machines to another company was not a "regular seller" of used folding/gluing machines, and so could not be held strictly liable for a workplace accident, which involved the machine and occurred 16 years after the machine was purchased, the New York Court of Appeals ruled in answering a certified question from the U.S. Court of Appeals for the Second Circuit [CCH Products Liability Reporter ¶18,048 (ip access user)]. An action against the company that sold the machine was brought by a worker whose hand was injured when it became caught between two rollers of the machine which he was operating. The worker asserted that the company which sold the used machine to his employer was strictly liable for his injuries because the seller failed to add safety features that would have prevented his injury, thus rendering the machine defective. The selling company claimed it was a "casual" or "occasional" seller of the used machinery and, therefore, was not strictly liable for any defects under New York law. The New York court found that the burden of strict liability was one imposed on only certain sellers because of two policy goals: (1) continuing relationships with manufacturers and (2) a special responsibility to the public, which expects sellers to stand behind their goods. While the selling company may have had a closer relationship with folding/gluing machine manufacturers than a customer would have with other equipment suppliers, the court determined that the relationship was still general in nature and even more attenuated with respect to the machines that the selling company sold as surplus. In fact, the court said, the machine involved in the employee's accident was bought used by the selling company from a third party rather than new from the manufacturer. The court further found that the second policy goal was absent because buyers of used equipment at irregularly-scheduled "as is, where is" surplus sales reasonably could not expect the selling company to stand behind another company's goods. According to the New York court, there was no reason to believe that imposing strict liability on the selling company's sales of its used folding/gluing machines would create any measurable pressure for improved safety of products on folding/gluing machine manufacturers. Rather, the most likely effect would be for the selling company to stop selling its used machinery, thereby depriving small businesses of the ability to purchase otherwise unaffordable equipment. (Jaramillo v. Weyerhaeuser Co. and Tech. Licensing Associates, Inc. (NY Ct. App.) CCH Products Liability Reporter ¶18,218 (ip access user))

No Preemption for Hormone Therapy Drug Warning Claim
A patient's failure-to-warn claims against the manufacturer of a hormone replacement therapy (HRT) prescription drug which combined estrogen with progestin were not preempted by Food and Drug Administration (FDA) labeling regulations, the Texas Court of Appeals held. The patient alleged that she developed breast cancer as a result of taking the HRT drug, and that if the manufacturer of the drug had properly tested it as did the Women's Health Initiative (WHI) of the National Institutes of Health, which conducted a large clinical trial studying the use of the HRT drug, then the drug maker would have refrained from introducing the drug to the market or would have adopted far earlier the changed, FDA-approved drug label, which was revised after the WHI test results indicated a high risk of breast cancer and cardiovascular events. Either way, the patient alleged, it was more likely than not that she would have remained cancer-free. An argument by the HRT drug maker that a direct conflict existed because it would have been impossible for it to comply with both the FDA's labeling requirements and the stronger warnings the patient advocated was rejected by the court. Because the manufacturer was responsible for the content of its label at all times, and the HRT drug manufacturer failed to present evidence that the FDA would have rejected a stronger warning concerning the risk of breast cancer, the court reversed the dismissal of the patient's failure-to-warn claim based on federal conflict preemption. However, the court also ruled that the patient failed to present any evidence of a safer alternative design to support her design-defect claims. The patient had to prove that there was a safer alternative design for the drug in order to recover under a design-defect theory—absent a safer alternative, the drug would not be unreasonably dangerous as a matter of law. The patient argued that a safer alternative design to estrogen in combination with progestin was estrogen alone, and she acknowledged that this alleged alternative design already existed. The HRT drug manufacturer argued that the estrogen-only alternative was not an alternative design, but rather a completely different prescription drug intended for a different population of women. The court ruled that although the patient presented opinion testimony by a medical oncologist that estrogen alone was a safer product than estrogen with progestin, and that the addition of progestin to estrogen made hormone therapy unreasonably dangerous by substantially increasing the risk of breast cancer, a design defect could not be proven by a claim that the manufacturer should have sold an entirely different product. The patient did not explain how the HRT drug could have been modified or improved, but instead argued that progestin should not have been added to estrogen, essentially arguing that the product she ingested should have been a different one. (Brockert v. Wyeth Pharmaceuticals, Inc. (Tex. Ct. App.) CCH Products Liability Reporter ¶18,221 (ip access user))

President Signs Historic Tobacco Legislation
Legislation giving the Food and Drug Administration (FDA) sweeping powers to control tobacco products in the United States was signed into law by President Barack Obama on June 22. Under the new law, the FDA can authorize the removal of hazardous ingredients from tobacco products, such as cigarettes and cigars, and prohibit tobacco advertising campaigns that target children or mislead the public. Also, the agency can reduce sales of tobacco products to minors by limiting sales to face-to-face transactions, in which the age of a purchaser is verifiable. Stronger warning labels on packages, FDA analysis of presumably "reduced risk" products, and more government control over industry representations are also part of the law. Both Houses of Congress passed the Family Smoking Prevention and Tobacco Control Act, P.L. No. 111-31, by large margins.

Product Safety

Stay of Enforcement Issued for Youth Motorized Vehicles
The Consumer Product Safety Commission (CPSC) announced a stay of enforcement of section 101(a) of the Consumer Product Safety Improvement Act of 2008 (CPSIA) [CCH Consumer Product Safety Guide ¶10,884], to the extent it sets lead levels applicable to certain parts of youth all-terrain vehicles, youth off-road motorcycles, and youth snowmobiles. The parts covered by the enforcement stay include battery terminals containing up to 100 percent lead, components made with metal alloys, including steel containing up to 0.35 percent lead, aluminum with up to 0.4 percent lead, and copper with up to 4.0 percent lead, and the vehicles that contain these parts. The stay will remain in effect until May 1, 2011, unless prior to that time the Commission, based upon evidence submitted to it, decides to continue the stay for an additional period of time with regard to all or some of the vehicles. The stay of enforcement was effective May 12, 2009. (CCH Consumer Product Safety Guide ¶57,126 (ip access user))

CPSC Announces New Testing Facility
The CPSC will expand and modernize its testing facilities in a new location off of the “I-270 Technology Corridor” in Rockville, Maryland. The Commission noted that the new testing facility would bring scientists and engineers together in one location. It is targeted to open in phases within one year. The CPSC stated that this new facility would provide additional space for its laboratory and engineering sciences teams to test and evaluate consumer products, support standards development, and also support compliance, investigatory and recall-related work. (CPSC News Release, #09-216, May 12, 2009, CCH Consumer Product Safety Guide, Report No. 939, May 26, 2009)

Report on Child Drownings Announced by CPSC
The Consumer Product Safety Commission (CPSC) released a report providing updated figures on child drowning deaths and injuries in pools and spas. The recent data found that nearly 300 children younger than 5 drown in pools and spas each year, and about 3,000 suffer pool or spa-related injuries requiring attention at hospital emergency rooms. The report also indicated that about 80 percent of the drowning fatalities occurred in residential settings, such as the victim’s home, a family or friend’s house or at a neighbor’s residence. (CPSC News Release, #09-229, May 21, 2009, CCH Consumer Product Safety Guide, Report No. 940, June 8, 2009)

Roof crush resistance standards reflected
As previously reported [CCH CONSUMER PRODUCT SAFETY GUIDE, Report No. 938, May 11, 2009], NHTSA issued a final rule upgrading the agency's safety standard on roof crush resistance as part of a comprehensive plan for reducing the risk of rollover crashes and the risk of death and serious injury in those crashes. First, the rule doubles the amount of force the vehicle's roof structure must withstand in the specified test, from 1.5 times the vehicle's unloaded weight to 3.0 times the vehicle's unloaded weight for vehicles currently subject to the standard, passenger cars and multipurpose vehicles, trucks and buses with a gross vehicle weight rating (GVWR) of 2,722 kilograms (6,000 pounds) or less. Second, the rule extends the applicability of the standard so that it will also apply to vehicles with a GVWR greater than 2,722 kilograms (6,000 pounds), but not greater than 4,536 kilograms (10,000 pounds). The rule establishes a force requirement of 1.5 times the vehicle's unloaded weight for newly included vehicles. Third, the rule requires all of the above vehicles to meet the specified force requirements in a two-sided test, instead of a single-sided test, i.e., the same vehicle must meet the force requirements when tested first on one side and then on the other side of the vehicle. Fourth, the rule establishes a new requirement for maintenance of headroom, i.e., survival space, during testing in addition to the existing limit on the amount of roof crush. The rule also includes a number of special provisions, including ones related to leadtime, to address the needs of multi-stage manufacturers, alterers, and small volume manufacturers. The final rule is effective July 13, 2009. See ¶42,003 (ip access user).