Tuesday, December 11, 2012

Liability is Not So Strict... Arizona's Strange Twist on Defective Product Law

Laird Law Firm - Tucson, Arizona - Visit our website: www.blaird.com

Arizona product liability law has a twist that lawyers from other jurisdictions often have trouble accepting. Traditionally all companies in the chain of distribution are jointly and severally liable for harm caused to a consumer by a defective dangerous product. This means that in most states if a product was made in China, shipped by a German company to the United States, distributed by a Nevada company to all 50 states, and sold by a local Arizona store, each and every one of those companies would be liable for the entire amount of damages suffered by a consumer who was hurt by the defective product. The idea was that companies were in the best position to pay for the risk of harm to consumers from defective products, and consumers would find it difficult and sometimes impossible to drag foreign companies into court in any given state. To read the appellate court decision cited by law professors and others as laying out the legal premise for the traditional "strict product liability" rule see MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916).

However, Arizona's system of product liability laws is provided by statutes (a set of laws passed by the Legislature and signed into law by the Governor) not by common law (cases decided by judges and passed down in decisions). Arizona's product liability statutes are found in ARS 12-681 through 12-689. The Arizona product liability statutes were added as laws in 1978.

In 1987 Arizona adopted a related set of statutes requiring that a jury determine the "comparative fault" of everyone involved in most cases. This related statutory scheme, the Uniform Contribution Among Tortfeasors Act (UCATA) means that in Arizona anyone who is a named defendant in a lawsuit will have their degree of fault assessed by the jury as a percentage of the total fault. And each defendant will only be responsible for their percentage of the damages awarded by the jury. See ARS 12-2506.

The UCATA also includes a provision for defendants to blame others who have not been named as parties to the lawsuit. See ARS 12-2506. If a defense attorney timely provides notice of "non-parties at fault" then the non-parties will be included among the names provided to the jury to assess percentages of fault. (Non-parties are people or companies that are neither defendants nor plaintiffs in the case -- they are not parties to the lawsuit.) So, under the UCATA, if there is one defendant, and a defense attorney properly gives notice of two non-parties at fault, then the jury will get all three names and will be able to assess a percentage of fault among all three -- even though two of them have never appeared at trial. For instance, assume that you sued one company for your injury, and the jury determined that the total amount to compensate your for your injury was one-million dollars. You might think that would be a very good outcome (although it would mean that you had suffered horrible, permanent injuries). However, if a defense attorney properly named two non-parties at fault, and the jury determined that the non-parties were each 50% at fault while the company you sued was 0% at fault, then you would end up with a judgment of zero dollars. This is because the jury determined that the defendant was responsible for 0% of your injuries, even though your injuries were very severe. The system of allocating the percentages of fault among all parties and properly named non-parties at fault, with each person or company only responsible for their own percentage of fault, is generally referred to as Arizona's comparative fault system. (There are exceptions -- for instance, liability for all of the damages suffered is joint and several if people or companies were "acting in concert." ARS 12-2506(D)(1).)

Traditionally, this result would not apply in a product liability case. Rather, in a product liability case, the defendants traditionally would be jointly and severally liable for the plaintiff's damages - ie, each defendant would be liable for the entire amount of the plaintiff's injuries. See, O.S. Stapley Co. v. Miller.

However, in State Farm Ins. Cos. v. Premier Manufactured Systems, Inc.  the Arizona Supreme Court confirmed that all that has changed. Instead, Arizona now applies the comparative fault system to product liability cases. This means that in Arizona, unlike in most states, each company in the chain of distribution is only responsible for damages according to the percentage of fault that the jury applies to it. So, using the example above, if a dangerous, defective product was made in China, shipped by a German company to the United States, distributed by a Nevada company to all 50 states, and sold by a local Arizona store to the plaintiff, the plaintiff should name all of those companies as defendants, and drag them all into court in Arizona. This may be very difficult to accomplish. And if, for instance, the plaintiff successfully names the local store and the Nevada company as defendants, but is unable to serve the German distributor or the Chinese manufacturer as defendants (where, for example, the foreign companies have gone out of business), then the American defendants will inevitably provide a notice identifying the foreign companies as non-parties at fault, and  then point the finger at those companies at trial.

The Arizona Supreme Court based its decision in Premier Manufactured Systems on the fact that the Arizona Legislature specifically included the terms "strict liability" and "products liability" in the definition of "Fault" in the UCATA. ARS 12-2506(F)(2). Because those terms were included in the definition of fault, the Arizona Supreme Court held, lawsuits alleging product liability (and numerous other related claims) were subject to the comparative fault system.

If this sounds like a bad idea for consumers and a good idea for irresponsible companies, it is. And although the case has been around since 2007, according to a December 2012 search of the Westlaw database, not a single court in any other state has ever cited the Arizona Supreme Court's case as precedent. The bottom line is that consumers in Arizona should be aware that if they injured by a defective, dangerous product, and a lawsuit results, careful attention must be paid to the legal requirements for pursuing the case in Arizona.

Laird Law Firm, - Providing fearless, compassionate and trustworthy representation to people who have been the victims of severe personal injuries, including injuries from dangerous, defective products, boats, automobiles, and other machinery.

Brian A. Laird

                        Tucson, Arizona