Research Trends and Conclusions: Product Liability Defence 2010
Emma Notfors -
Faults or defects will arise periodically in all sorts of products, and this is an area in which manufacturers cannot afford to dispense with expert legal advice.
The often highly publicised fallout of defective products and the damage that this can do to the reputation of a single brand – or even an entire manufacturer – can be long-lasting, so effective legal advice that can prevent or minimise this is a worthwhile investment, even in tough economic times. It can be argued that the financial crisis has not had much effect on the level of work seen by lawyers in this practice area. However, the legal needs of clients change with their business plans, production models, regulatory changes and economic circumstances.
Growing Awareness and Regulation
Consumer awareness looks set to be a significant growth factor for product liability lawyers. One of the most significant growth trends, in terms of its future and long-term impact, is the strengthening presence of jurisdictions such as China and India in the international legal market; there has already been a growth of activity in India. Consumers in these markets are becoming more aware of their rights, although they have far to go before they reach the levels of litigiousness typical in jurisdictions like the United States. International awareness of climate change and global warming – and the prominence of these issues in the world’s press – is already increasing scrutiny of some companies’ industrial activities, and this is another area in which growth seems likely.
A well-informed public is not the only source of claims, and high-profile recalls do not only impact the reputation of the manufacturer. They can also cause regulators to increase their scrutiny of certain industries and bring these to the attention of the plaintiff’s bar which, particularly in the United States, can always be relied upon to expand into new areas, particularly within the drug and device or consumer goods industries. Indeed, one heavily-publicised recall or defective product often results in a number of claims against similar products by the same manufacturer or its competitors.
The scale and geographical spread of many product recalls is echoed in the way that product liability cases have developed. Cases have continuously moved from individual actions to class actions and finally to government actions. Once a case reaches the stage of action by a government, the compensatory or punitive costs become less about the original user of the product and arguably more about governmental costs – in the case of pharmaceutical products, healthcare costs. Opinions about whether litigation will maintain its current levels are split – many corporations are increasingly risk-averse and are doing all they can to avoid the cost, time and risk of trying cases. On the other hand, most lawyers could not identify a suitable alternative to litigation and so product liability defence lawyers look set to be provided with a stream of work that is at least reliable, if somewhat varied in content and unpredictable in outcome.
This growth in global consumer awareness is accompanied by more regulations by various governments. One of our interviewees, based in central Europe, mentioned that several European regulatory authorities have become increasingly inflexible in their enforcement of regulations. The German, Dutch, Spanish and Swedish authorities were cited as examples. China recently adopted the Tort Liability Law, which significantly increases recall obligation and creates civil rights of action against producers or sellers of defective products. Similarly, the Department for Environment, Food and Rural Affairs in the United Kingdom has launched a consultation on issues related to the use of “green terms” (such as “carbon neutral”, “carbon footprint”, etc) in marketing. Finally, a bill currently under review by the United States Senate would facilitate prosecution of manufacturers based outside the US as long as their products were sold there. All of these mean that product liability defence lawyers must have in-depth knowledge of the seemingly treacherous waters of international regulatory variations.
Legal Strategies
An essential part of providing legal services for corporate entities is providing pre-emptive advice and proactive services rather than reacting to situations as they arise – in effect reducing the likelihood of litigation. There are a number of strategies mentioned by our interviewees to prepare companies for the eventuality of product recalls and prosecutions. Perhaps the most prominent of these is that of preventative advice and contingency planning – making sure that the client is well informed and giving advice about how to prevent problems in this area. This means that clients who may not necessarily have much experience of product recalls or being held liable for a faulty product can make use of the extensive and varied experience of their legal counsel. In a worst-case scenario, the ability to focus the minds of a number of people with different ideas on how to deal with a particular crisis, but not much experience, is invaluable. However, it is not always easy to give this sort of advice, especially if the client in question does not find itself in a crisis situation. In the day-to-day running or keeping afloat of a company, which would arguably be the most effective time to impart information and advice, and many lawyers find it difficult to convince their clients of the importance of putting in place routines and contingency plans when there are other more immediate problems.
In any case, it is this advice that can help clients to avoid as many instances of faulty or malfunctioning products as possible. This is particularly true when companies are under more and more pressure to cut costs throughout their manufacturing and supply process. For example, many international car makers purchase components from outside producers who are able to manufacture these car parts at a lower cost, because of labour costs or production methods. This practice is seen in most industries where the final product consists of many components – toys, jewellery, weapons and fashion products are all susceptible and a problem with one part of the supply chain will affect the whole product. Clients can incur astronomical costs when dealing with hidden or public product recalls and notifications, which can be made more complicated when it occurs across a distribution network that encompasses several jurisdictions with varying regulations. Skilled legal counsel perform a vital role in this process, who can in some ways be counted as another part of the chain of production in that they help to minimise costs for the company.
Regulations and judicial conditions vary according to the jurisdiction or district in which a product is marketed or a product liability issue reaches court. This is a second area in which product liability defence lawyers can bring to bear their experience and contacts. One lawyer we spoke to participates in seminars and conferences simply in order to get to know people in the authorities. This work pays off when this lawyer is able to pick up the phone and speak to a contact in the regulatory authorities in order to handle things in a smooth way. Another lawyer mentioned the ability to be able to negotiate with government officials, prosecutors and investigators as an essential part of the process of achieving the best outcome for their clients.
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Product liability defence lawyers are undoubtedly facing a period of adaptation that will irrevocably change the way in which they work. Consolidation across the board and reduced legal budgets mean that lawyers must become as efficient as possible. Growing public awareness and increased regulation will continue to provide new challenges and in order to provide the best legal services lawyers must make use of all of the knowledge and experience they possess. This means being able to provide preventative advice and knowing how to apply it to the specific situation of the client – understanding how that particular business works and where the pitfalls may lie. This also means familiarity with international and national regulatory and judicial differences, as well as a reliable network of contacts that can be used to the advantage of the client.