Category: Product Liability

The Hot Coffee Case Revisited: Has Proximate Cause Changed in the 25 Years Since Liebeck v. McDonald’s Restaurants?

Two cases decided 25 years apart, but there were some facts in common: a hot drink, a consumer alleging that she was burned by the drink, and a lawsuit. These are the facts of the 1994 case Liebeck v. McDonald’s Restaurants that resulted in an award of millions to the consumer, but also the facts from Shih v. Starbucks, a case decided last year. In Shih, however, the court found in favor of the product supplier. What’s different about these cases? The answer: how the courts interpreted proximate cause.

In 1994, Liebeck v. McDonald’s Restaurants sparked a nationwide tort reform debate after a jury found McDonald’s liable for a consumer’s injuries after she spilled McDonald’s coffee on herself. At the time, many commentators predicted a wave of frivolous lawsuits and large judgments against businesses. But 25 years later, those predictions have not materialized. While consumers continue to sue, the doctrine of proximate cause limits the liability that businesses face from claims for injuries related to hot drinks.

Liebeck v. McDonald’s Restaurants

In 1992, Stella Liebeck bought a cup of hot coffee from a McDonald’s drive-through in New Mexico. While parked, she placed the cup of coffee between her legs and attempted to peel the cap off. The coffee spilled and Ms. Liebeck sustained second- and third-degree burns.

Liebeck sued McDonald’s, alleging that the hot coffee was defectively manufactured, that it violated the implied warranties of merchantability and fitness for a particular purpose, and that the defect caused her injuries. At trial, Liebeck’s attorneys offered evidence that McDonald’s asked franchisees to brew coffee at 180-190 degrees Fahrenheit. Additionally, the attorneys offered evidence that McDonald’s had received more than 700 reports of burns resulting from coffee spills out of billions of hot coffees sold during the time period.

The jury ruled in favor of Liebeck and awarded her compensatory damages of $200,000 and punitive damages of $2.7 million. But the jury determined that Liebeck was 20 percent at fault for her own injuries, and the court reduced the punitive award significantly, resulting in compensatory damages of $160,000 and punitive damages of $480,000.

Shih v. Starbucks

Shih v. Starbucks presents a similar set of facts, but with a different outcome. In June 2016, Tina Shih went to Starbucks with a friend, and each ordered a hot tea. Each tea was given to Shih in a double-cup – one full cup placed within an empty cup. Neither cup had a sleeve. Shih carried both teas to her table and sat down.

Shih claimed that because the cup of tea was filled to the top and was very hot, she did not want to lift it. Instead, she pulled the lid off the cup and moved her chair back to sip from the cup while it was on the table. Shih pushed her chair back to lean over the cup, lost her balance, and put her hand on the table to steady herself – causing the hot tea to spill in her lap. Shih sustained second-degree burns from the incident.

Shih sued Starbucks. She alleged that the double-cup without a sleeve was a manufacturing defect, which – combined with the cup being filled to the brim with hot tea – caused her injuries. Starbucks moved for summary judgment on Shih’s claims, arguing that Shih could not prove the alleged manufacturing defect proximately caused her injuries. The court agreed, granted Starbucks’s motion, and entered judgment in favor of Starbucks. In 2020, the appeals court affirmed.

Proximate Cause is Key the Difference

The differences between Liebeck and Shih are the litigants’ defect claims and their respective theories of proximate causation. The proximate cause inquiry examines the relationship between the defendant’s alleged conduct and the plaintiff’s injury: if the defendant’s conduct is too attenuated from the consumer’s injuries, the defendant cannot be held liable for those injuries. Proximate cause exists when the defect in question increased the risk of harm to the consumer, and the consumer sustained injuries resulting from the increased risk. Courts generally test proximate cause by looking at whether the harm was a foreseeable result of the defect – meaning the business could reasonably have predicted the harm.

Liebeck’s attorneys successfully argued that the coffee was defective because it was served too hot and that the excessively hot temperature put Liebeck at an increased risk of burns. Liebeck established proximate cause by showing that her burn injuries were a foreseeable result of the alleged defect – the coffee being served very hot.

Shih could not establish proximate cause because the court held that the alleged defect was too attenuated from her injuries. Shih’s attorneys argued that the lack of a cup sleeve and the fact that the hot tea was full made it defective. Specifically, Shih would not have removed the tea lid, leaned forward, moved her chair, lost her balance and grabbed the table – causing it to wobble and spill the tea on her – if Starbucks had given her a cup sleeve or not filled the cup to the brim.

The court held that the alleged defect did not increase the risk of Shih being burned or otherwise injured by the hot tea; therefore, the defect was not the proximate cause of her injuries. The lack of a sleeve and the fullness of the tea did not increase Shih’s risk of losing her balance “while attempting to execute [this] kind of unorthodox drinking maneuver,” and spilling the tea on herself. The court’s use of “unorthodox” illustrates that, in the court’s view, Shih’s injuries were not a foreseeable result of the alleged defect. The court noted that while it is foreseeable that consumers could lose their balance and spill their drinks, losing one’s balance is not “within the scope of the risk” created by Starbucks’ decision to use a double cup and to fill the cup to the brim. Thus, Shih could not prove Starbucks’ actions proximately caused her injuries.

Twenty-five years after Liebeck sparked a national conversation about hot coffee and corporate liability, Shih demonstrates that courts continue to follow public policy limitations like proximate cause to protect businesses from unforeseeable consumer injuries.

© 2021 Schiff Hardin LLP

Article by Emilie McGuire and Jeffrey Skinner with Schiff Hardin LLP.

For more articles on class action lawsuits, visit the NLR Litigation section.

CPSC Staff Addresses IoT 2018 Hearing Feedback, IoT Project Plans in New Report

Connected products can make the world a safer place: electronic sensors in the home can detect problems and send smartphone notifications to the homeowner; smart alert devices can notify family members or home help companies that an elderly person has fallen and needs assistance. But with over 64 billion connected products in the marketplace, there is a concern that connected devices could introduce hazards that might lead to a risk of injury due to problems with software updates or customization, faulty connections, and even consumer modifications.

As the body charged with overseeing consumer product safety in the U.S., over the last few years, the Consumer Product Safety Commission (CPSC) has shown an increasing interest in defining its role with regard to connected products. In May 2018, the CPSC held a public hearing on IoT, obtaining feedback from a range of stakeholders on potential risks of connected consumer products and the agency’s role. In late September, CPSC staff submitted to the Commission a status report outlining the CPSC’s work on consumer product IoT issues since the public hearing. The report also outlines how CPSC staff understands the agency’s role, which is safeguarding consumers from potential physical product risks, as well as how its work intersects with the jurisdiction of other agencies as they oversee connected products.

The report notes that this is an ongoing process, stating that CPSC staff is working on “how to define consumer product safety in terms of the IoT, the intersection of, and interdependencies among, consumer product safety, data security and privacy, and how our traditional risk management approaches apply to connected products.” The report acknowledges that privacy and data security are not within CPSC’s jurisdiction, but noted that at least one participant in CPSC’s 2018 hearing warned that “CPSC should pay attention to certain cybersecurity threats that create opportunities for physical harm, a risk not previously considered, and resist creating any prescriptive rules for IoT devices.”

To increase institutional knowledge of IoT benefits and challenges, CPSC has dedicated resources to develop its staff’s expertise. CPSC has also participated in developing voluntary standards, has taken a leadership role in establishing an interagency IoT working group, and has been developing its capability to simulate home networks at its laboratory.

The staff report outlines three ongoing internal projects relating to IoT. The first involves developing a methodology for assessing safety-related implications arising out of software and firmware updates to connected products. This project is at what CPSC views as the intersection of product safety and data security and potential “hazardization” of connected products as a result of data vulnerabilities. CPSC is also looking at connected heating appliances and the risks associated with their remote activation. Finally, CPSC is studying smart toys “in an effort to identify physical safety hazards.” It is surprising that CPSC staff would dedicate resources to toys as opposed to other products, like in-home safety devices, since the physical safety of toys is strictly regulated by the mandatory toy safety standard, ASTM F-963. The likelihood of physical hazardization of toys is far lower than, for example, connected home security devices and sensors. In those categories, connectivity, and thus security breaches that affect the operation of those devices, may be directly related to both safety risks and advantages. Indeed, home safety devices is a category where we have actually seen CPSC recall activity.

The report notes that CSPC is engaging in product safety assessments of connected& shared e-scooters. This is likely in response to reports of e-scooters that were vulnerable to hacking. The emerging hazards of micro-mobility devices such as shared e-scooters are also a focus of CPSC’s Operating Plan for Fiscal Year 2020 and represent another product category that appears to be more vulnerable to hazardization than connected toys.

CPSC staff intended to develop a best practices guide for industry and consumers on connected products, which was an enumerated project in the proposed Operating Plan for Fiscal Year 2020. However, an amendment introduced by Commissioner Feldman focuses CPSC’s resources on IoT intergovernmental work instead. Given the report’s acknowledgment that the agency is still working to develop staff expertise in IoT, attempting to create such a guide appears premature at this juncture.

The sharp increase in the number of connected devices in the market means it is necessary and appropriate for CPSC to continue to build expertise on IoT issues, even though very few examples of actual product safety hazards attributable to some type of connectivity failures exist. It would be useful for CPSC to focus its efforts and resources on product categories that pose a higher potential risk to the physical safety of consumers through hazardization or failure as a result of connectivity, without overstating potential risks. It is encouraging that through the intergovernmental initiatives a variety of federal agencies are working collaboratively to better understand the various consumer protection issues potentially raised by connected products that fit within their respective jurisdictions.

© 2019 Keller and Heckman LLP

For more CSPC regulation, see the National Law Review Consumer Protection law page.

Vaping Businesses Catch a Bad Rap: The Recent Ban of ALL Vaping Products in Massachusetts Unfairly Prejudices the Vape Industry and Vape Consumers

Massachusetts has taken a drastic and abrupt step by banning the sale of all vaping products, nicotine and THC, within its state borders for the next four months. This drastic and sweeping prohibition against vaping products will have far-reaching economic consequences for many small businesses that make up the bulk of this new and burgeoning industry. The root cause of the recent vaping-related illnesses appears to be the result of illicit and unregulated THC cartridges from the black market.

Reports and Causes

Dr. Michael Siegal, a professor at Boston University’s School of Public Health, recently stated: “Given the fact that close to 90% of the cases and 100% of the deaths for which products have been reported are associated with marijuana vaping, it is inexcusable that the CDC [Centers for Disease Control and Prevention] fails to distinguish between the products being vaped.” The communications from CDC also have failed to distinguish between vaping oil-based e-liquids − which were used in the illicit THC cartridges that have given rise to multiple arrests in Arizona and Wisconsin and cause lipoid pneumonia − and the water/alcohol-based e-liquids that are used in virtually all e-cigarettes. More troubling is the fact that the media largely has overlooked that the manufacturers of nicotine-containing e-liquids filed their ingredient lists with the FDA years ago.

On September 27, 2019, the CDC released the following information:

  • There are 805 lung injury cases reported from 46 states and 1 U.S. territory. Twelve deaths have been confirmed in 10 states.
  • CDC has received sex and age data on 771 patients.
    • About 69% of patients are male.
    • Nearly two thirds (62%) of patients are 18 to 34 years old; with 22% of patients between 18 and 21.
    • Sixteen percent of patients are under 18 years of age.
  • All reported patients have a history of e-cigarette product use or vaping.
  • The latest findings from the investigation into lung injuries associated with e-cigarette use or vaping suggest products containing THC play a role in the outbreak.
    • CDC has received data on substances used in e-cigarettes or vaping products in the 30 days prior to symptom onset among 514 patients:
      • About 77% reported using THC-containing products; 36% reported exclusive use of THC-containing products.
      • About 57% reported using nicotine-containing products; 16% reported exclusive use of nicotine-containing products.

While some policy makers appear to be confused over the cause of the recent reports of lung disease, there is no coincidence that the recent use of vitamin E acetate and possibly other unapproved thickening agents by the illicit THC manufacturers caused the public health crisis that prompted Massachusetts’s ban of all vapor products. One should ask whether it makes sense that vaping nicotine e-liquids, which have been available since at least 2007, would suddenly cause lipoid pneumonia lung disease (which is a rare condition that occurs when fat particles enter the lung) disproportionately in white males with an average age of 19.

Impact of the Ban

The abrupt action of Massachusetts resembles the witch hunts of that former colony’s past. With a single stroke of a pen on an emergency order from Governor Charlie Baker, Massachusetts has foreclosed the right of its citizens to their freedom of choice, denying them the right to an arguably safer alternative to smoking cigarettes, and caused far-reaching economic harm to many small businesses that manufacture and sell vaping products. Such an action will surely cause many bankruptcies, as these legal businesses can no longer afford to pay rent or buy products made and/or sold by other U.S. companies, pay salaries to employees, or pay taxes to Massachusetts and the federal government.

The economic impact of the vaping industry in the United States in 2018 was almost $24 billion, which means that the impromptu actions of Massachusetts will likely cause a reversing trend and cast a negative shadow over a legitimate and safe industry. The broad scope of the ban smacks of an unconstitutional taking of property without due process. Many affected businesses will have difficulty surviving without four months of revenue, which is why national trade organizations such as The Vapor Technology Association and others are considering legal options.

Call for International Forum on Safety and Health Benefits

Unfortunately, as the witch hunts continue, consumers will not be safer. Any person who was vaping legal nicotine containing e-liquids rather than smoking combustible cigarettes will have to make the choice to return to smoking combustible cigarettes or buy a black market e-liquid product. Citizens of Massachusetts who legally use THC through vaping for medicinal purposes also will be affected by the ban. Since all the data shows the lung disease breakouts were overwhelmingly caused by illicit THC cartridges made with vitamin E acetate or other unregulated thickening agents, the public health ban on legitimate products only increases the black market demand and the risk of illicit THC cartridges finding their way back into the hands of consumers, in addition to creating a black market for nicotine e-liquids while the CDC warns consumers not to buy these products off the street

The manufacturers of both nicotine-containing e-liquids and THC-containing products support meaningful regulation so health problems caused by illicit manufacturers can be prevented. A sensible public health strategy devised by the federal government likely could have prevented many of these illnesses and deaths by stopping unregulated illicit-market THC vape products from getting into the hands of consumers. But the voices of science and good public policy are falling on deaf ears while legitimate small businesses are being harmed and consumer choices for legitimate products are being eliminated.

One can only hope that Massachusetts reconsiders this ban and that other states do not follow this type of overreaching prohibition. Public policy regulators should discuss these issues in an international forum such as The E-Cigarette Summit, where the public health benefits experienced by the UK and other countries as well as the detailed facts of the recent cases of lung disease can be debated before businesses are closed. Until then, the black market profits while legal small businesses are “vaporized.”

© 2019 Wilson Elser

For more on vaping regulation, see the National Law Review Products Liability page.

Mode of Operation Potentially Creates New Theory of Liability Against Retailers for Premises Liability

This article will address the use of “mode of operation” theory in so-called negligent stacking cases against retailers for premises liability. Adding mode of operation analysis into the mix creates new considerations for retailers in defense of cases of falling merchandise. While many courts look solely to the method of stacking standing on its own in making this determination, some have introduced the concept of mode of operation into the analysis. By introducing this consideration, courts invite inquiry into the reasonably foreseeable interference of customers. Being on the lookout for this issue is important early in the pleading process as well as during the presentation of evidence at trial.

Typically, in premises liability cases, including those involving falling merchandise, a retailer is not the insurer of the safety of its customers. See, e.g. Garvin v. Bi-Lo, Inc., 343 S.C. 625 (2001); Mounsey v. Ellard, 363 Mass. 693 (1973); Meek v. Wal-Mart Stores, Inc., 72 Conn. App. 467, 806 A.2d 546 (2002). However, a plaintiff may recover if she can show that the manner of stacking a shelf was dangerous. “The merchant must use reasonable care in placing goods on the store shelves. Merchandise must not be stacked or placed at such heights, widths, depths, or in such locations which would make it susceptible to falling.” See e.g. Pullia v. Builders Square, Inc., 265 Ill.App.3d 933, 937, appeal denied, 158 Ill.2d 565, 645 N.E.2d 1368 (1994); Dougherty v. Great Atlantic & Pacific Tea Co., 221 Pa.Super. 221, 289 A.2d 747 (1972). The jury also may consider the method of stacking, the presence or absence of lateral support, and the stacked item’s dimensions and center of gravity. Meek v. Wal-Mart Stores, Inc., 72 Conn. App. 467 (2002); Wal-Mart Stores, Inc. v. Sholl, 990 S.W.2d 412 (Tex. App. 1999); Fleming v. Wal-Mart, Inc., 268 Ark. 241 (1980).

These cases, relying on a simple formulation of negligent stacking present clear areas for the defense to emphasize. Any deficiency in the plaintiff’s presentation as to orientation, heights, and weights must be highlighted for the finder of fact. Unless the case is brought in a jurisdiction that sanctions res ipsa loquitur liability in these situations, the plaintiff cannot simply rely on the occurrence of the accident to support a case. In addition to highlighting deficiencies in the plaintiff’s case, the defense may also benefit from the right expert. Testimony from a structural engineer or other qualified expert to affirmatively establish the stability of the retailer’s chosen display and compliance with industry standards.

In some jurisdictions, courts have employed a mode of operation analysis to allow a plaintiff to establish liability for falling merchandise. For example, in Meek v. Walmart, 72 Conn. App. 467, 806 A.2d 546 (2002), the Connecticut Appellate Court held that “the store’s mode of operation may be taken into account by the fact finder when it considers whether the method of display was unsafe.” Consequently, “one of the factors to be considered in establishing and maintaining a display in a department store is that the merchandise is going to be inspected by the customers.” This ruling extended the mode of operation analysis to Connecticut in line with the more than twenty other states. See Kelly v. Stop and Shop, Inc., 281 Conn. 768 (2007).

Adding mode of operation analysis into the mix creates new considerations for retailers in defense of cases of falling merchandise. Although the jurisdictions that allow mode of operation liability employ different tests, generally speaking, there needs to be a business model that encourages customers to handle merchandise making a “particular resultant hazard readily foreseeable.” See e.g. Fisher v. Big Y Foods, Inc., 298 Conn. 414, 428, 3 A.3d 919, 928 (2010). Such modes of operation typically concern a particular method of operation within the self-service context, rather than the self-service model itself. See Jasko v. F.W. Woolworth Co.,supra, 177 Colo. at 420, 494 P.2d 839 (“defendant’s method of selling pizza” created dangerous condition); Gump v. Wal-Mart Stores, Inc., supra, 93 Hawai’i at 418, 5 P.3d 407 (specifically limiting application of rule to circumstances of case, i.e., when “a commercial establishment, because of its mode of operation, has knowingly allowed the consumption of ready-to-eat food within its general shopping area”). The fact that customers are allowed to select merchandise off of a shelf typically will not satisfy a mode of operation analysis. See e.g. Fisher v. Big Y Foods, Inc., 298 Conn. 414, 428, 3 A.3d 919, 928 (2010).

Therefore, when confronted with a claim of mode of operation case for falling merchandise, the defense should initially consider a motion to contest the sufficiency of the allegation if the mode of operation alleged is merely that customers are allowed to select and carry away their own merchandise. Without identifying a specific practice within a self-service context, the plaintiff’s allegation may be legally insufficient.

If unable to dispense of such an allegation through a pre-trial motion, it will be incumbent upon the defense to present evidence at trial negating the mode of operation claim. A well-prepared defense witness on compliance with internal standards and practices showing proper stacking methods and inspections will go a long way towards a successful defense. Further, evidence showing lack of injury from the merchandise display method at issue will bolster the defense. This can be done through presenting evidence as to industry practice as well as demonstrating an absence of regularly occurring falling merchandise. Retailers can best achieve this by regularly documenting any claims and having in place a system for monitoring such accidents. By showing that the practice at question was not peculiar to a particular aspect of the retailer’s operation or that the hazard was not so regularly occurring as to be foreseeable, a defendant should be able to avoid liability.

© 2019 by Raymond Law Group LLC.

For more on legal liability, see the National Law Review Products Liability law page.

Juul Gives $7.5 Million for Research as Sales Continue to Climb

Just like the traditional tobacco industry, Juul has started to issue grants to study the effects of e-cigarettes on users. Back in the bad, old tobacco days, almost all research was funded by tobacco companies through the Council for Tobacco Research (CTR) and the Center for Indoor Air Research (CIAR). Both companies were included in fraud cases against the industry. After a settlement in 1998, the tobacco industry started funding private groups. Much of that funding was undisclosed in study results, suggesting there might be a conflict of interest.

So…is Juul, a company heavily funded by big tobacco, the same? Or is this highly successful, private interest, for-profit company an altruistic anomaly?

Juul’s grant program seems to be part of a new advertising campaign to reverse its bad reputation for targeting youth. Juul is now focused on creating a socially-responsible reputation for health-conscious product marketing, including:

  • Its unproven claim that the product works for smoking cessation;
  • An adults-only website landing page and public statement campaign; and, now,
  • An investment in e-cigarette research.

However, Juul’s concern for its product users only arose after coming under fire for the rising use of Juul products by underage users. By the time Juul launched its new advertising campaigns, it had already completed its big tobacco investment with Altria. According to reports, underage use of e-cigarettes had further increased another 40%. These facts throw shade on the selfless reputation Juul is trying to create with its new grant program. While you might applaud them for listening to their new tobacco investor, you should probably question their motives for the same reason.

If you look at this grant you will see Juul is giving $7.5 million tax-deductible dollars to a school. This is about 0.3% of its estimated annual sales. It’s a pretty meager investment with a high-value publicity gain. That is smart marketing–Juul’s key skill. Smart marketing is how Juul swept up 75% of the e-cigarette market, largely composed of underage users. Juul’s youth-focused advertising (which has decreased as of this date) smacks of historic big tobacco advertising which was eventually and belatedly banned. Juul’s similar approach has generated exponential market growth, and, more recently, FDA and congressional investigations into its operations. Regrettably, the initial investigations only seem to address the prevention of advertising to underage users. Although this satisfies an immediate and important need, it largely ignores the health dangers inherent in e-cigarette use; health dangers that affect the adult population as well.

E-cigarette product development is still unregulated due to former FDA chief, Scott Gottlieb’s, failure to impose immediate FDA oversight of the industry back in 2016 and 2017. There have been many e-cigarette explosions that have caused devastating, permanent, injuries to youth and adults alike. There is also the danger of developing life-altering lung conditions, terminal cancers, and other health risks related to inhaling e-cigarette chemicals into the body. These dangers are exacerbated by a higher rate of nicotine addiction—alleged to be worsened by Juul’s nicotine delivery system—because addicted users vape more often and for extended periods.

To ignore the health risks of vaping and nicotine addiction is to repeat history. The tobacco industry depended on nicotine addiction for recurring sales and to capture new markets. The vaping industry, including Juul, appear to be banking on the same.

 

COPYRIGHT © 2019, STARK & STARK
Article written by Domenic B. Sanginiti, Jr of Stark & Stark.
For more on product safety, see the National Law Review Products Liability page.

Product Liability in the Internet of Things

When California enacted SB 327 last year, it became the first state to regulate Internet of Things (IoT) devices, which refer to physical devices that are connected to the internet. Beginning next January, the new law will require manufacturers of IoT devices sold in California to implement reasonable security features that protect the software, data, and information contained within them. While the law regulates only the minimum security standards for IoT devices, its definition of a “connected device” (i.e., an IoT device) may impact product liability claims because “connected devices” are physical objects and not technology. SB 327’s definition suggests that manufacturers of the software in IoT devices may not be held strictly liable for software defects, because the law aligns with and reinforces the view of most courts that software is not a product, but a service.

A broad concept, the IoT comprises billions of devices worldwide. It includes everything from cell phones and tablets to smart speakers that respond to voice commands, smart refrigerators that help keep track of the food inside them, and even smart collars that track a dog’s fitness levels. There are wearable health monitors that send a patient’s real-time medical information directly to a health care professional, and smart pills that help keep track of the time when a patient last took one. If a product can be connected to the internet, it can become an IoT device.

Among other things, SB 327 requires manufacturers of “connected devices” to equip them with “reasonable security features.” The law defines a “connected device” to include only “physical objects,” which is significant because IoT devices combine a physical object with technology that changes the nature of the device. For example, a regular lamp is not part of the IoT. But when a manufacturer installs technology that connects the lamp to the internet and allows it to be turned on or off or dimmed by a tablet or smart phone, then the lamp becomes an IoT device. As written, SB 327 may exclude manufacturers of the intangible technology – such as software – from its requirements.

Combining a physical object and an intangible technology also creates a novel issue when it comes to strict product liability principles, which typically hold that a product manufacturer may be strictly liable for a product’s defect. The first task in a strict product liability case is to identify the product. In the context of a device that has no internet connectivity, the answer is straightforward. If a ladder is defective and causes an injury, the ladder’s manufacturer may be held strictly liable because a ladder is the product. But when it comes to IoT devices, the line may be blurred. Almost always, the software part of the IoT device is “manufactured” by a separate entity from the entity that manufactures the physical object. If the IoT device proves to be defective, the question becomes which entity may be held strictly liable.

A real-world example illustrates the issue. Medical professionals today are beginning to use implantable cardiac devices that transmit data directly from the device to the health care provider, which allow the medical professional to directly monitor the patient and device (For more information on these medical devices and other issues that surround them, see our previous blog post here). The benefits of this technology are obvious. It allows for real-time observation by medical professionals, which makes patients safer and reduces the need for long visits to the doctor’s office. But internet-based monitoring also may come with some risks that the statute attempts to address. For example, as the device is connected to the internet, it may be vulnerable to unauthorized access. Additionally, a software defect could potentially misread data, corrupt information, or even cause the device to malfunction.

If the defect is in the physical object of the device, then the entity that manufactured the device may risk being held strictly liable. But if the defect is in the software, the answer is less apparent because courts have not clearly indicated whether software is a product for purposes of strict product liability. Most observers expect courts to treat software in IoT devices as a service rather than a product, because for UCC purposes courts typically treat custom-made software (like that in IoT devices) as a service rather than a good. SB 327 aligns with this view and provides additional fuel for the argument that software is not a product.

The California Legislature may have placed the burden on an IoT device’s physical manufacturer to ensure safety when it comes to data stored inside the device. But physical device manufacturers may yet argue that the software was a component product when it comes to strict liability issues. Time will tell how courts will address that argument.

 

© 2019 Schiff Hardin LLP
This post was written by Gregory Dickinson and Jeffrey Skinner of Schiff Hardin LLP.

How Manufacturers Can Work With Social Media Influencers

It’s a typical marketing story: Not too long ago, manufacturers marketed coconut oil as a heat-tolerant alternative to other cooking oils. They further promoted it by noting that it was more sustainably harvested than palm oil and could replace butter for people avoiding dairy.

But then coconut oil marketing took a turn. People—not the manufacturers but social media influencers—started to talk about coconut oil in a different way. Influencers claimed that coconut oil was a “miracle cure” for a variety of health and other problems.

Then the influencers’ claims were challenged. In August 2018, Harvard public health professor Karin Michels called coconut oil “pure poison.” Professor Michels blamed the oil for raising levels of LDL cholesterol and increasing the risk of heart disease.

This situation raises an important question: How can manufacturers work with social media influencers to enjoy the benefits of viral promotion while maintaining control of messaging and avoiding the consequences of influencers going rogue?

Going Viral Through Virtual Influencers

Social media influencers use their perceived authority to convince followers to buy the products they endorse. Some influencers partner with manufacturers, which pay them to market a product. In 2017, 12.9 million posts on Instagram were brand-sponsored.

Other influencers, however, make unsolicited claims about products, many of which the company doesn’t approve. Their followers may overlook this fact and buy the product because they trust the influencer as they would a friend. In fact, 92 percent of consumers use products recommended by people they know – or feel that they know through social media.

What can manufacturers do to leverage the social media explosion but still control product marketing? First, they can establish partnerships with influencers, who then promote the product as the manufacturer intends in exchange for a “#sponsored” hashtag. Data show that consumers see sponsored posts as more like typical user content than like marketing. That makes the posts more effective than traditional advertisements.

Some manufacturers have also chosen to use “brand ambassadors,” recruiting some of the first fans of a new product to grow both the brand’s and the promoter’s social presence organically – and on the manufacturer’s terms. Brand ambassador jobs have cropped up on job search engines, and sometimes the brand’s websites will include links encouraging people who already love the products to apply.

When Influencers Go Rogue

Where influencers “go rogue” and promote a manufacturer’s products on their own terms, their messaging may morph into “miracle cure” claims that do not reflect the manufacturer’s claims. The small blue check mark by influencers’ usernames denotes them as “verified” public figures, which means that an account is the authentic presence of the public figure, celebrity, or brand it purports to represent. Followers of verified accounts may treat this advice with as much weight as a medical doctor’s signature on a prescription. Manufacturers are left picking up the pieces of a problem they did not create.

But manufacturers can offset potential challenges of influencer-led advertising, even without working directly with influencers. First, manufacturers can proactively include disclaimers – in the form of warning labels or in advertisements – addressing known potential risks of use or misuse of a product. Social media influencers have recently hailed activated charcoal, for example, for its toxin-removing qualities if ingested. Partly because of the media attention, activated charcoal has moved from poison control wards into juice shops as a “detox” drink. But since activated charcoal’s absorptive qualities may counteract the effects of certain prescription medications, some manufacturers may consider warning people taking birth control pills or antidepressants to consult with a doctor before using it.

Second, manufacturers can partner with influencers who have already promoted their products to continue reaching the influencers’ audience while modulating the messaging. Recently, for example, influencers have promoted the use of adaptogens – non-toxic plants used for stress relief – in their morning drink elixirs. Manufacturers had previously been promoting the stress-relieving qualities of adaptogens, but it was not until recently that these messages started cropping up on social media pages – which made the product turn up in more stores and cafes. By partnering with influencers who have already promoted adaptogens, manufacturers can help shape their messaging and avoid the risk that influencers will tout products as something they are not.

Manufacturers can help dispel myths by engaging with their consumers – especially social media influencers – who talk about them. Manufacturers involved in messaging at the ground level have a much better chance of stopping unrealistic claims before they spread. By working with customers to share proper use and benefits of their products, manufacturers can manage expectations and keep their consumer base happy.

 

© 2019 Schiff Hardin LLP
This post was written by Derin Kiykioglu and Jill Berry of Schiff Hardin LLP.
Read more Products Liability legal news at the National Law Review’s Product Liability page.

Three Questions Raised by Decision Expanding Failure to Warn Manufacturer Liability

Manufacturer LiabilityIn Taylor v. Intuitive Surgical, Inc., the Washington Supreme Court held that a patient-plaintiff may now recover for a medical device manufacturer’s failure to provide adequate warning to a purchasing hospital—despite the manufacturer’s provision of adequate warning to the patient-plaintiff’s treating physician. This post addresses three key questions:

  1. How did the court come to this decision?

Taylor relies on three unobjectionable steps to justify its bold holding. First, under the Washington Product Liability Act (WPLA), manufacturers have a statutory duty to provide adequate warnings to purchasers and patients who use their product. Second, the learned intermediary doctrine is an exception to this statutory duty, which allows a manufacturer to satisfy its duty to adequately warn patients by providing proper warnings to the treating physician. Third, the learned intermediary doctrine does not excuse manufacturers from their duty to provide adequate warnings to purchasers, even where the product is a medical device.

  1. How will this decision operate in practice?

Patients can recover for a manufacturer’s failure to provide adequate warnings to the purchaser, even if the manufacturer provided adequate warnings to the patient’s treating physician. Thus, Taylor empowers plaintiffs to recover damages for breach of a duty owed to another. It also leaves an important question unanswered: what happens when both the plaintiff and purchaser bring an action for the same breach of duty?

And that is not the only situation where unjust outcomes are likely to result. Consider the following scenario: A surgeon performs the same surgery on Patient A and Patient B. Patient A’s surgery is performed at Hospital A, while Patient B’s surgery is performed at Hospital B. Both hospitals purchased identical surgical devices from the manufacturer, but somehow the manufacturer only provides proper warnings with its surgical device to Hospital A. The manufacturer does, however, provide proper warnings to the surgeon, who promptly disregards them. As a result, Patient A and Patient B are both gravely injured. Under the law as stated in Taylor, Patient A cannot recover from the manufacturer but Patient B can. Even worse, Taylor penalizes the manufacturer for an act that did not cause Patient B’s injury.

  1. What immediate steps should be considered?

Outside of leaving or avoiding Washington, a medical device manufacturer should think about incorporating Taylor into its risk management policies. First, manufacturers may consider assessing their exposure given the new state of law: determine how many products are being sold into or used in Washington, which hospitals and other facilities are using the products and which doctors are using their products. After determining the extent of potential liabilities, manufacturers should think about whether additional legal advice is required. And of course, until the law in this area crystalizes—tread carefully.

ARTICLE BY Zachary Heller of Barnes & Thornburg LLP

© 2017 BARNES & THORNBURG LLP

Samsung Recalls Expanding to China After Consumer and Media Complaints

smartphone Samsung recallSamsung’s much-publicized recall of the new Samsung Galaxy Note7 phones due to alleged fire hazards of lithium-ion batteries started in North America. Within weeks, after a media and social media outcry in China, the company expanded the recall to cover consumers in China. Samsung’s decision to expand the recall to cover consumers in China echoes the recent experience of other major international brands involved in high-profile consumer product recalls, and illustrates a longstanding challenge and two emerging trends. First, it has long been difficult to identify what, if any, defect a consumer product poses when presented with experience data suggesting a hazard may exist. Second, in the “no good deed goes unpunished” category, is the increasing risk that swift direct communications to U.S. consumers about a potential risk – which is not prohibited in any way by the U.S. Consumer Product Safety Act (CPSA) – will result in a public backlash by regulators complaining about a “go it alone” strategy when a company acts unilaterally. Third is the growing power of the consumer movement in China. All of these factors illustrate the need to consider a holistic global notification and recall strategy. Accordingly, today’s product recall landscape has become far more complex.

The path to the Samsung recall of the Galaxy Note7 began shortly after the devices were made available for sale on August 19, 2016. Reports quickly began coming in concerning overheating of the phone’s battery, including reports of injuries and fires. By September 2, Samsung had received enough reports in North American and other markets to publicly announce a unilateral partial recall of Galaxy Note7s sold in those markets. This initial announcement was not issued in the usual form of a joint press release in cooperation with the U.S. Consumer Product Safety Commission (CPSC) or other safety agencies. Although recalling a product without CPSC agreement is entirely legal, the CPSC strongly prefers to negotiate with companies over the terms of their voluntary recalls, and can force mandatory recalls if it deems companies’ actions insufficient. The sale of products covered by a recall – including products recalled voluntarily – is also a violation of the law, and CPSC immediately criticized Samsung for the unilateral action.

A traditional formal recall announcement of covering some Galaxy Note7 units was subsequently issued by Samsung, CPSC, Health Canada, and Profeco (Mexico’s Procuraduría Federal del Consumidor) on September 15. Reports of overheating and fires associated with additional units not included in the recall continued to come in, however, as well as reports associated with replacement units. This led the company to expand its recall to cover all Galaxy Note7s on October 13.

Meanwhile, in China, Samsung announced only a limited recall of 1,858 units on September 14. The company justified the narrow recall by pointing to the different batteries used in Chinese units, asserting that the only affected units were pre-sale samples offered to a limited universe of consumers. Reports spread in the Chinese news and social media about the breadth of recalls in North America, and Chinese users posted photos and videos in social media showing the phones failing (“exploding,” as the consumers described them) in China. Samsung disputed some of those reports. The official state-run broadcaster, China Central Television (CCTV), however, castigated the company, asking “[i]f Samsung continues to violate the legitimate rights and interests of Chinese consumers and continues to refuse to make public the samples used in its testing process as well as the process itself, who would be able to help Chinese consumers find the truth?” Critiques also came in from other government-associated media sources. After the Chinese consumer product agency, General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) received about 20 reports of overheating, Samsung recalled its Chinese units on October 11, just before recalling all units worldwide and cancelling the Galaxy Note7.

When user reports of batteries overheating began coming in after the Galaxy Note7 was launched, Samsung reportedly began an immediate investigation. Conducting a sound product-safety root-cause analysis is hard. Samsung appears to have opted to make a public announcement about the potential battery issue based on its initial assessment of the cause of the issue. Its actions in publicly notifying consumers were clearly motivated by an interest in advancing consumer safety by a swift public notice. But further reports involving replacement batteries and criticism by CPSC for the firm’s unilateral action in notifying the public illustrate the conundrum that consumer product firms face every day: It is hard to balance the need to precisely identify potential safety issues (and notify regulators about them) with a desire to quickly advise the public about potential safety concerns.

Global interconnectedness, including through the internet and social media, complicate the situation further. National recalls can easily become international recalls. Although there is little evidence, to date, that pushing recalls on social media meaningfully improves recall response, there is no question that Chinese consumers are turning to social media to pressure global businesses to recall products in China when those products are recalled elsewhere. Ironically, after years of Chinese exports being called into question by recalls in the U.S., Europe, and elsewhere, Chinese consumers are insisting that the products sold in the Chinese market must be held to safety standards applicable elsewhere, and that Chinese consumers be offered equivalent remedies.

In today’s fast-paced social medial environment, consumer product companies must carefully consider not only the facts on the ground and the legal framework, but also the potential social media scrutiny and resulting implications of regionally limited recalls for globally distributed products. There may well be excellent safety arguments that justify not recalling products everywhere, but in today’s environment, decisions to limit recalls to specific jurisdictions require a strong basis of support and considerable on-the-ground effort to work with regulators and understand the market dynamics.

ARTICLE BY David J. Ettinger, Sheila A. Millar & Jean-Cyril Walker of Keller and Heckman LLP

© 2016 Keller and Heckman LLP

Voluntary Product Registry: Dietary Supplement Update

Leading dietary supplement trade association makes strides in developing product registry.

  • As previously covered, a leading dietary supplement trade association — the Council for Responsible Nutrition (CRN) — has been pursuing the goal of creating a Voluntary Product Registry for Dietary Supplements.  According to CRN, the goal of the registry is to increase transparency and give regulators greater access to information about the composition of supplement products currently on the market.

  • At a recent conference, CRN announced that it had retained the global science safety firm, UL, to develop and administer the product registry.  The current plan is to implement a two-tiered database.  Tier one will permit companies to add basic information about their products at no cost, and the information will be accessibdietary supplementle to any interested party.  Tier two will provide companies with a fee-based opportunity to add more detail about their products, and access will be restricted to specific audiences (e.g., regulatory authorities, retailers).

  • CRN anticipates that the registry will be operational by the end of 2016, and member companies will be required as a condition of membership to input all their product labels into the registry by July 2017.

ARTICLE BY Food and Drug Law at Keller and Heckman LLP
© 2016 Keller and Heckman LLP