Presenting a live 90-minute webinar with interactive Q&A Post-sale Duties: How to Comply and How to Defend Product Liability Litigation after Recalls TUESDAY, APRIL 4, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Kenneth Ross, Of Counsel, Bowman and Brooke LLP , Midway, Utah George W. Soule, Partner, Soule & Stull , Minneapolis The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Post-Sale Duties: How to Comply and How to Defend Product Liability Litigation after Recalls Kenneth Ross and George W. Soule April 4, 2017 5
RECALLS: Common Law and Regulatory Law Kenneth Ross Bowman and Brooke LLP kenrossesq@gmail.com 6
Why discuss post-sale issues? • “…post -sale warnings are probably the most expansive area in the law of products liability” • “timeless” • “monster duty” Henderson and Twerski 7
Why discuss post-sale issues? • Potential penalties from government have increased • In recent study, over 70% of punitive damage awards based on failure of manufacturer to take adequate post-sale remedial actions • Legal requirements to report and undertake remedial programs have increased in U.S. and elsewhere • Plaintiff’s attorneys are beginning to understand and will attack manufacturer for failure to comply 8
Legal Requirements • U.S. Regulatory – Consumer Product Safety Commission – National Highway Traffic Safety Admin. – Food and Drug Administration • U.S. common law • Foreign regulatory – EU, Canada, Australia, Japan, South Africa, Taiwan, China, Brazil, etc . 9
U.S. Common Law 10
Post-Sale Duty To Warn “Although a product [may] be reasonably safe when manufactured and sold and involve no then known risks of which warning need be given, risks thereafter revealed by user operation and brought to the attention of the manufacturer or vendor may impose upon one or both a duty to warn.”* *Cover v. Cohen, New York Court of Appeals (1984). 11
Balancing test – Common law and Restatement 3d • Post-sale warning is to be provided if: – substantial risk of harm – users can be identified and can reasonably be assumed to be unaware of risk – can be effectively communicated to those at risk and acted upon; and – risk of harm is sufficiently great to justify burden 12
Independent claims • Most states have adopted some form of post- sale duty to warn. • Plaintiff may sue on two theories: selling a defective product (strict liability and negligence) and post-sale failure to warn (negligence). • Seller cannot absolve itself of liability for selling a defective product by issuing a post-sale warning. Seller can negate negligence in the post-sale allegation. 13
Common Law • No duty to recall; however can be liable for negligent voluntary recall or if government orders a recall • Actions by government agencies (orders, civil penalties, documentation) can get into litigation • Foreign actions can also get into U.S. cases 14
What is adequate? • Based on negligence • Whatever the jury thinks is adequate • Could manufacturer have done more, should they have done more (generally no common law duty to recall) • Compliance with regulatory requirements may not provide a defense 15
U.S. Regulatory Law 16
Report to CPSC • fails to meet a consumer product safety standard or banning regulation, • fails to comply with any other rule, regulation, standard or ban under the CPSA or any other Act enforced by the Commission, • contains a defect which could create a substantial product hazard to consumers, or • creates an unreasonable risk of serious injury or death (no defect required) Fines for failure to report or late reporting 17
CPSC Criteria for Substantial Product Hazard (Reporting and Recall) • Pattern of defect • Number of products in use • Severity of risk • Likelihood of injury • Applies to hazards anywhere in world • Non-U.S. recall is a factor to consider • Litigation and settlements are a factor 18
Report to NHTSA • Report to NHTSA required if vehicle or accessory contains a “safety - related defect.” • Recall necessary if that defect presents an “unreasonable risk” to “motor vehicle safety” 19
Report to FDA • Malfunction • Serious injury or illness • Death 20
International Regulatory Law 21
Canada 22
EU GPSD Safety Obligation …any product which, under normal or reasonably foreseeable conditions of use … does not present any risk or only the minimum risks compatible with the product's use, considered to be acceptable and consistent with a high level of protection for the safety and health of persons… 23
Reporting in Australia • Actual death, serious injury or illness (anywhere in the world) • Recall undertaken (anywhere in the world) • Level of risk not applicable • Need actual knowledge by Australian supplier 24
Other countries • Japan • Korea • South Africa • Brazil • China 25
Preparing Pre-sale and Post-sale 26
Pre-Sale Advance Planning • Design issues • Contracts • Traceability and marking • Ability to identify customers, including social media efforts • Public communications • Determine legal reporting responsibilities • Checklists, personnel and committees 27
Pre-Sale Advance Planning • Finance and accounting • Early warning systems • Record creation and retention • Training/mock recalls • Reintroduction • Audit 28
Information Gathering • Claims, accidents and lawsuits • Complaints from consumers and users directly and via social media • Warranty returns • Observations by service personnel • Parts sales 29
Information Gathering • Information from government • Information from competitors and trade associations • Information from vendors • Information from Internet (i.e. blogs and social media) 30
Decision Points • Post-sale duty? • Duty to report to government? – Which ones? • Duty to perform corrective action? – What to do – recall, repair, replacement? • Only on future products • Only on products in field • On future products and products in field – Where? 31
Managing the Recall 32
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Recall Checklist • Identify defect/safety issue • Stop production • Isolate inventory to be recalled • Determine appropriate remedy • Test replacement/repair 35
Recall Checklist (cont.) • Repair/Dispose units on hand and units returned under the recall • Discuss all aspects with CPSC Compliance staff • Redesign future production to eliminate hazard • Change model/serial number for redesigned product • Where product changes are made to existing products, label so as to distinguish from recalled products 36
High-tech Developments • Communicate by email to customers, distributors, retailers, etc. • Video and text messages on website. • Web based registration for returns • Increase ID of customers • Increase response rate 37
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