It is not unusual to read glaring headlines describing manufacturers that have been hit by a nine-figure jury verdict. These jaw-dropping monetary awards can occur even when a manufacturer has not committed a wrongful act, but the jury believes the company could have done more to protect users of its products. The top three categories of lawsuits that pose a risk to manufacturers are: (1) defects in manufacturing and/or design, (2) marketing defects, and (3) the class action. If these three risks are addressed through a manufacturer’s standard practices and procedures prior to a lawsuit walking through the door, it may fare better during settlement negotiations or at trial.
Defect: Manufacturing or Design
Potential product defects routinely land manufacturers in court. Typically, on the other side of a lawsuit, there is a sympathetic plaintiff who suffered a traumatic injury or death while using the manufacturer’s product. They will claim that the manufacturer either defectively designed or manufactured the product, leading to the alleged injury. As a result, manufacturers must always be prepared to address these types of claims with evidence that their product does not have a design or manufacturing defect.
A lack of adequate record-keeping will always hurt a manufacturer in this type of lawsuit. Manufacturers must be prepared to provide a judge or jury with ample evidence of its efforts to design and manufacture a reasonably safe product. To be in a position to assemble this evidence, manufacturers must make it a top priority to implement policies and procedures that ensure the preservation of documents that may be pertinent in a lawsuit, such as evidence of safety-testing.
Juries also regularly find manufacturers to be non-compliant with governmental or industry standards. Demonstrating non-compliance is an easy way for a plaintiff’s lawyer to prove a product is defective. That said, manufacturers must show the jury the documents that establish a product was in compliance with safety standards at the time. The manufacturers will most certainly also need to put an engineer on the stand to explain to the jury how and why the design met those standards. Without the documents to back up the engineer’s testimony, a jury is likely to find against the manufacturer. Even if the case does not proceed to trial and settles, the value of the settlement may be significantly higher without clear evidence of compliance.
Another area of liability for manufacturers is the so-called “marketing defect.” In this type of litigation, plaintiffs sue claiming a manufacturer either failed to warn of the danger of a product or advertised in an untruthful way to make their product appear safer and more compelling than it actually is.
As seen in the media over the past few years, manufacturers such as Johnson & Johnson are being hit with massive jury verdicts over alleged marketing defects. For example, a Los Angeles jury awarded a woman $417 million after finding that Johnson & Johnson was aware that their talcum powder was linked to ovarian cancer, and failed to warn consumers of the risk.
The best way to guard against such lawsuits is through effective product labeling. A manufacturer should put every possible risk on a warning label, even if the risk is unlikely to occur. The warning labels should be an appropriate size and font so as to catch the eye of the consumer. Even if a manufacturer does place a warning on a product, a jury may still find in favor of a plaintiff if the warning label was so small that an average consumer would not have seen it. There are safety standards that should be used to help craft an appropriate warning. A manufacturer must use these standards because plaintiffs’ lawyers will tell the jury the failure to follow these standards makes the warning inadequate.
The Class Action
A class action lawsuit has the potential to be a manufacturer’s worst nightmare. The plaintiffs’ lawyer can use the class action to take a few plaintiffs with a relatively small problem and combine them with a class of allegedly similar consumers with allegedly similar problems to create a potential multi-million dollar exposure. Even worse than that, potential exposure can be the negative publicity that a class action brings a manufacturer. These are lawsuits that can grab media attention and create the perception that a manufacturer has a shoddy product that has potentially damaged millions of consumers.
One such example is the class action lawsuit alleging certain Whirlpool front-loading washing machines had a design defect that allowed water to accumulate and create moldy front gaskets resulting in smelly washers. Whirlpool ultimately settled this class action in a manner that resulted in notices being sent to more than 5.5 million people advising them they might be eligible for a $50 cash payment or a 20 percent cash rebate on the purchase of certain washers and dryers made by Whirlpool.
As this washing machine example demonstrates, class actions are often brought by plaintiffs’ attorneys to try to force a settlement due to the risks posed by both the lawsuit and the adverse publicity generated by the lawsuit. One of the best ways a manufacturer has to manage those risks is by evaluating the class action thoroughly when first hit with the suit. Often, the class allegations are weak and legally suspect — and can be knocked out on procedural grounds, allowing the class allegations to be dismissed. It is important, therefore, to scrutinize a class action lawsuit to identify jurisdictional concerns or weaknesses involving the class of plaintiffs itself.
Manufacturers are going to get sued, even if their products do not have any defects. To help mitigate potential liability, manufacturers should take steps to keep careful records that clearly demonstrate compliance with safety standards. They should also ensure products carry adequate and clearly marked warnings and instructions. Finally, any class action lawsuit should be met with an aggressive response that focuses on eliminating class allegations from the outset.
Adam K. Peck is a partner at Lightfoot, Franklin & White LLC in its Birmingham office. Amber N. Hall and Bridget E. Harris are associates at the firm.