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POST-SALE DUTIES TO WARN

By: William A. Dreier and Haekyoung Suh

Imagine you represent a manufacturer of cleaning products which include household and commercial cleaners for decks and wood products, and even perhaps for asphalt and cement. Your products were all well tested before they were put on the market, and were determined to be non-toxic if the directions were followed. Imagine further that five or ten years later, one of your researchers reads in a medical journal of a significant correlation between exposure to a solvent common to all your cleaners and certain abnormalities or possibly cancers developing in those organs exposed. The data did not exist when the product was initially distributed, nor were the testing procedures then available. Your client comes to you with this information, and informs you the company has replaced the solvents in an “improved” version of its products and that they have been placed on the market in a new advertising campaign. The client asks, however, what should be done about the old product which is still actively inventoried throughout the country and, more importantly, whether the manufacturer has any duty to warn the consuming public about the decade-long exposure to the original formula. In short, your client wants to know whether there is a duty to recall or a duty to warn of what was an unknown danger until then.

Unfortunately, the answer to at least some of these questions depends upon where your client may be sued. Unless or until there is some measure of uniform product liability and toxic tort legislation, a state-by-state analysis is required. In some areas such as drugs, medical devices, aircrafts, pesticides and fungicides, as well as some facets of tobacco litigation, there are federal standards that permit us to answer our clients with more authority. But the vast majority of manufactured products that are the subject of toxic tort or product defect claims are subject solely to state control.

The first analysis is whether the product was defectively designed and therefore could be the basis of a traditional product liability/design defect claim. In most jurisdictions, a manufacturer is protected by a state-of-the-art defense. In a few states, however, such as Hawaii and Pennsylvania, it makes no difference if the discovery of the defect was beyond the scientific and technical capabilities of the manufacturer at the time the product was put on the market. There is no state-of-the-art defense. If the defect existed and was not corrected, the defendant is liable for the harm caused thereby.

Where a state-of-the-art defense does exist, it can take three forms. First, it can protect the manufacturer if it conformed to the standard of its industry. See Beech v. Outboard Marine Corp., 584 So.2d 447; Gosewich v. American Honda Motor Co., 737 P.2d 365; Raschke v. Carrier Corp., 703 P.2d 556. At the other end of the spectrum, the defense can be found to provide protection only if the manufacturer conformed to the cutting-edge technology at the very forefront of the development in its field. See Fireboard Corp. v. Fenton, 845 P.2d 1168; Rix v. General Motors Corp., 723 P.2d 195; Heath v. Sears, Roebuck & Co., 464 A.2d 288; Wood v. Ford Motor Co., 691 P.2d 495. A middle-of-the-road approach requires the manufacturer to act reasonably in keeping up with the scientific and technological advances in its field and act reasonably to include safe components and install safety devices. See Vassallo v. Baxter Healthcare Corp., 696 N.E. 2d 909. This is the position taken by the Restatement (Third) of Torts: Products Liability (1998) § 2(b), covering design defects, and § 2(c), covering warning defects. These sections provide that a product:

(b) is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe;

(c) is defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe.

The comments and the reporters’ notes to both sections clearly state that the manufacturer is subject to a standard of reasonableness. The industry does not define state-of-the-art because an entire industry can produce defective products by not acting reasonably to keep up with scientific advances. On the other hand, the approach denying the state-of-the-art defense, which unfortunately has its roots in a New Jersey case, Beshada v. Johns-Manville Prods. Corp., 90 N.J. 191, found some fertile ground elsewhere, even though it has now been limited in New Jersey to compensatory damages in asbestos cases only.

But if we assume that when our hypothetical cleaning products were put on the market they satisfied the state-of-the-art standard, at least in all states but Hawaii and Pennsylvania, no design defect or time of sale warning defect claim can be made against them. What then are the standards to be applied? The new products liability Restatement imposes a duty present in the common law of many states to provide a post-sale warning, even though the state-of-the-art might not have required the warning as of the time of the original sale. Section 10 provides:

(a) One engaged in the business of selling or otherwise distributing products is subject to liability for harm to persons or property caused by the seller’s failure to provide a warning after the time of sale or distribution of a product if a reasonable person in the seller’s position would provide such a warning.

(b) A reasonable person in a seller’s position would provide a warning after the time of sale if:

(1) the seller knows or reasonably should know that the product poses a substantial risk of harm to persons or property; and

(2) those to whom a warning might be provided can be identified and can reasonably be assumed to be unaware of the risk of harm; and

(3) a warning can be effectively communicated to and acted on by those to whom a warning might be provided; and

(4) the risk of harm is sufficiently great to justify the burden of providing a warning.

As can be seen, this section provides a risk-utility balancing based upon a negligence standard, that is, an objective test of reasonableness. This test is neither radical, nor is it of recent origin. For decades, commentators and courts have recognized this duty.

The Reporters further note, however, that a few states have rejected the imposition of any post-sale duty to warn if the product met the standards of reasonableness when it was sold. See, e.g., Romero v. International Harvester Co., 979 F.2d 1444; Downing v. Overhead Door Corp., 707 P.2d 1027; Birchler v. Gehl Co., 88 F.3d 518; Carrizales v. Rheem Mfg. Co., 589 N.E. 2d 569; Syrie v. Knoll Int’l, 748 F.2d 304. The reporters also point out that in other states, such as Virginia, the case law is mixed. Compare Estate of Kimmel v. Clark Equip. Co., 773 F. Supp. 828 with McAlpin v. Leeds & Northrup Co.

Recently, the law in Massachusetts has changed. Prior to Vassallo v. Baxter Healthcare Corp., Massachusetts adopted the New Jersey Beshada rule, rejecting the state-of-the-art defense, and held consistent with Hayes v. Ariens Co., 462 N.E. 2d. 273, that there was a duty at the time of manufacture to warn of all risks posed by the unreasonably dangerous product, irrespective of whether the risks were then knowable. Any post-sale duty analysis therefore apparently became irrelevant. However, a federal court in Massachusetts distinguished Hayes, determining that while there may be a post-sale duty to warn of risks, there is no post-sale duty to inform about safety improvements that would reduce risk in products that were reasonably safe at the time of sale. Williams v. Monarch Mach. Tool Co., 26 F.3d 228. Most recently, the Massachusetts Supreme Court in Vassallo, overruled Hayes and adopted the duty to warn provisions established in § 2 of the Restatement.

In Kansas, while there may be a post-sale duty to warn about risks, the Supreme Court drew the same dichotomy as in the pre-Vassallo federal opinion in Williams, finding that there is no duty to inform customers concerning product improvements which may merely reduce the risk. See Patton v. Hutchinson Wil-Rich Mfg. Co. Note that the Restatement rule in § 10 does not make a similar distinction between the presence of risk and the reduction of risk, thus rejecting the Kansas approach.

A difficult provision to interpret is the requirement under § 10(b)(1) that the seller must know or reasonably should have known the product poses a substantial risk of harm. This section leaves open whether a seller must monitor the product. There is no question that neither the Restatement nor case law requires a seller constantly to monitor each product it has sold. On the other hand, the section obviously means more than that the seller is only liable if it actually knows that the product is posing some new danger. Comment c states,

As a practical matter, most post-sale duties to warn arise when new information is brought to the attention of the seller, after the time of sale, concerning risks accompanying the product’s use or consumption. When risks are not actually brought to the attention of sellers, the burden of constantly monitoring product performance in the field is usually too burdensome to support a post-sale duty to warn. However, when reasonable grounds exist for the seller to suspect that a hitherto unknown risk exists, especially when the risk involved is great, the duty of reasonable care may require investigation.

(Emphasis added).

Although the reporters obviously knew the text of the section, this interpretation practically reads out the “should have known” language. Yet in the reporters’ note, they again state that “[i]n non-drug cases there appears to be no practical post-sale duty to investigate or test a product not defective within the meaning of § 2 unless information comes to the attention of the product seller that there is a problem attendant to its use.” The duty to monitor according to the Reporters is triggered only by some information which would lead the manufacturer to the conclusion there is a problem with the product.

The “should have known” language of § 10(b)(1), however, appears to impose a more significant duty on a manufacturer. At the very least, a manufacturer should be deemed to know that which is readily available in trade journals and other popular literature in its field. To that extent, the comments which state that there is no duty to monitor the product may not go far enough. Given the presence in most manufacturing companies of complaint or consumer relation departments and the ready feedback concerning product difficulties through well-publicized fax and E-mail addresses, the difference may not be significant. It would be the unusual situation where companies are not put on actual notice of significant post-sale problems.

The Restatement’s suggestion that there is no pervasive duty to monitor should be viewed in this context. Of course, in the case of pharmaceuticals, medical devices and other regulated products, where there is a statutory duty to monitor, the regulatory schemes will supersede the general common law rules just discussed.

Two additional elements of § 10 are virtually self-explanatory. The recipients of the warning must be reasonably identifiable. If the manufacturer has sold millions of the product with unrecorded consumer sales, individual contact would be impossible. The Restatement comments recognize the use of the public media, however, depending upon the seriousness of the risk. Also, if it is reasonable to assume that the consumers are aware of the risk, there need be no warning by the manufacturer. The risk may be apparent from the product itself, or it may be apparent through publicity. An interesting ramification inherent in § 10(b)(3) and described in Comment h requires that the recipient of the warning “must be in a position to reduce or prevent product-caused harm.” Thus a warning would not be given to a retailer concurring unrecorded sales made many years before, where public notice might be a more effective remedy. However, a warning might well be given to an industrial purchaser who could issue warnings to workers that protective masks may be needed to work near the product.

Lastly, § 10(b)(4) and Comment i note that there must be a balancing of the cost of the warning against the extent of the risk. The comment shows clearly that this is an objective balancing to which a negligence rule applies. Nowhere in the section or comment, however, is there any thought that the manufacturer may throw on these scales the adverse public relations effect of giving the warning. A manufacturer may not weigh its good will against consumers’ injuries. Thus the costs described in the comment are the “expenditures” for public or individual notice, not any lessening of the product’s goodwill.

The Restatement’s definition of a seller’s post-sale duty does not end with the provisions of § 10. The post-sale duty to warn must be read in conjunction with the seller’s concordant duty to recall a defective product. One might argue that a recall is merely an extended warning. On closer analysis, however, it is apparent that the duty to recall grows out of a defective design under § 2(b), not the duty to warn under § 2(c). If a warning will not prevent the harm, the defective product also might be recalled for replacement, return or retrofitting. If a design is defective, and the defect is discoverable only after the product has been distributed (applying the local state-of-art rule except in Hawaii and Pennsylvania and perhaps in Kansas), there can no longer be a claim for an initial design defect, but only the violation of the post-sale duty to warn of the newly-discovered defect.

There is, therefore, no general common law duty to recall a product. The reporters, however, in searching the cases, determined that liability has been imposed in two situations which they have included in § 11:

“One engaged in the business of selling or otherwise distributing products is subject to liability for harm to persons or property caused by the seller’s failure to recall a product after the time of sale or distribution if:

(a)(1) a governmental directive issued pursuant to a statute or administrative regulation specifically requires the seller or distributor to recall the product; or

(2) the seller or distributor, in the absence of a recall requirement under Subsection (a)(1), undertakes to recall the product; and

(b) the seller or distributor fails to act as a reasonable person in recalling the product.”

This duty is imposed not by the common law, but either by governmental directive or the seller’s own undertaking when it chose to recall the product. The seller is held to an objective standard of reasonableness.

Comment d to this section reiterates that once the manufacturer has chosen to recall the product, the owner’s actions in failing to abide by a reasonable notice to return the product is open to consideration in any subsequent claim in which the user’s conduct might be measured against the seller’s actions. As the reporters’ notes indicate, however, there are few reported cases on this subject, but one can readily see the proximate cause issues that might arise. For instance, a seller might distribute a product, such as our cleaners, with a design defect and then send or publish repeated notices requesting its return for replacement. When the owner is thereafter injured because of the defect in the product, his or her inaction might well be determinative of a subsequent claim. But what if a third party is injured? Does the owner’s conduct absolve the seller? Is the owner’s conduct an intervening efficient cause, or do the seller and the owner become joint tortfeasors? The reporters’ note to Comment d explains that § 11 deals solely with independent liability for the unreasonable action of the seller in affecting the recall. The comparative faults of the parties after the attempted recall is a question to be determined under the comparative fault laws of each state.

As an example (outside of the toxic tort area) of how one state treats such possibility of “redemption” after the offer of a retrofit to a machine, see Stephenson v. R. A. Jones & Co., 103 N.J. 194. There a manufacturer had found that there had been a missing pinchpoint guard in a press and had sent retrofitting guards to its customers with instructions to insert them. Plaintiff’s employer inserted the guards in all but one machine. During an inspection trip, the manufacturer’s representative noted that the guard had not been inserted in one of the presses and informed the employer. The manufacturer offered to send another guard, and even wrote a follow-up letter to this effect, asking that the defect be corrected. For some reason the employer refused, and plaintiff was injured as a result of the missing guard. The jury found the employer 95 percent responsible and the manufacturer 5 percent responsible. But, under the worker’s compensation bar, the full judgment was assessed against the manufacturer who, under New Jersey law, also had to satisfy the compensation lien. This underscores the difficulty of any post-sale correction of a defect where the manufacturer has no control over the product situated in the hands of a third party. Whether a recall is for retrofitting, refund or exchange, the difficulty of protecting a third party’s rights is obvious.

The Restatement, of course, is not binding law, but its influence should not be underestimated. Perhaps at some point manufacturers will not be plagued by divergent substantive rules governing their responsibility for their products as they are shipped from state to state. Until then, however, the Restatement is to be commended as providing a reasoned standard, especially in the area of a manufacturer’s post-sale duties.

This article is reprinted with permission from the June 21, 1999 issue of the New Jersey Lawyer.