The term paper analyzes product liability laws that regulate important relationships between manufacturers and consumers. The goal of these laws is to protect the consumer from a defective product since it can cause harm to a person, property or economic interests. Economic interests are impacted since the product is not as valuable as it would have been and could result in future economic losses. However, the downside is that consumers have attacked manufacturers on false claims in order to benefit from what they believe is a bottomless well of compensatory damages. The purpose of the Uniform Commercial Code (UCC) is to provide legal rules and regulations governing commercial or business dealings and transactions. Under the UCC, buyers, customers, employees of the buyer and third parties or bystanders may recover because of harm caused by a defective product. These parties can recover from the seller, the manufacturer of the product, and generally the manufacturer of the component part of the product that caused the harm. The paper will briefly inform the reader of the Five Theories of Product Liability, examine instances of product liability lawsuits in two different industries, discuss the long-term ramifications of each lawsuit and conclude with a discussion on business ethics. By defining terms and analyzing real world examples, the reader should have a clear idea as to when to call a lawyer regarding product liability.
Five Theories of Product Liability
Five theories in law are often lumped into the term product liability; (1) express warranty, (2) implied warranty, (3) negligence, (4) fraud, and (5) strict tort liability. These theories are not mutually exclusive, a given set of facts may give rise to liability under multiple theories. This does not mean that the plaintiff (party who initiates a lawsuit) has a choice of all five theories in every case. The case presents facts, which then dictates the choice of possible recovery.
An express warranty is a statement to the buyer that the goods purchased have a specified promise of performance that cannot be lost through a distribution chain. This statement must be in ordinary, understandable language that assures the buyer of quality, capacity, and other characteristics of the goods. The express warranty does not need to include the terms “warranty” or “guarantee” in the description. Advertising a drink as “sugar free” constitutes as an express warranty that the drink is free from sugar. If the express warranty is false, a breach of warranty has occurred. An excuse that the seller had no reason to believe that the warranty was false after manufacturing and handling the product is not an appropriate defense. By definition an implied warranty is one that was not expressly made by the seller but that is implied in certain circumstances by law. The difference between an express and implied warranty is that the implied warranty will automatically arise from the result of the sale regardless of the sellers conduct. The two can either exist together or independently from each other.
If a buyer claims negligence, they have likely been injured by a defective product and are seeking to recover from the seller of manufacturer. The buyer must prove that the seller/manufacturer failed to take proper care in preparation or manufacture of the specific product. If the party selling or making the product knowingly was untruthful, the buyer will be able to claim fraud due to misrepresentation. Finally, the strict tort liability requires that a defect in a product exists at the time it left control of the manufacturer of distributer. An example may be that the tires sold on a new car were defective, but the car manufacturer isn’t excused from the liability. In this case, knowledge of the defect is not a requirement for liability but the assumption of a defect or risk by the injured party could be a defense to the seller.
Liebeck v. McDonald’s Restaurants
Perhaps the most famous product liability lawsuit occurred in 1992 when a seventy-nine-year-old woman by the name of Stella Liebeck was burned by a cup of coffee she had purchased at a McDonald’s drive thru restaurant in Albuquerque, New Mexico. Ms. Liebeck was injured in the passenger seat of her grandson’s car when he stopped for her to add cream and sugar to her coffee. To do so, Ms. Liebeck placed the cup of coffee between her legs as she peeled back the lid to the container. In the process she spilled the hot coffee into her lap sustaining burns to her thighs, buttocks, and groin area. About six percent of her total body surface area. A key component to the severity of the burns was the sweatpants that Ms. Liebeck was wearing since they absorbed the hot coffee and held it next to the skin of her thighs. The case became part cautionary tale and part urban legend due to the large amount of monetary damages recovered for such a frivolous lawsuit.
After spending eight days in the hospital, and going through surgical skin grafts, Ms. Liebeck brought a suit against McDonald’s and was willing to settle for $20,000. McDonald’s decided to fight the claim despite over 700 separate claims regarding coffee burns, and $500,000 in damages already paid out prior to this lawsuit. McDonald’s confessed that they intentionally heated coffee to between 180 -190 degrees Fahrenheit despite knowing that other fast food restaurants served coffee at a lower temperature of 160 degrees Fahrenheit. McDonald’s argued that consumers knew how hot the beverage was intended to be and that they wanted it that way. They tried to explain that the coffee was meant to be consumed when the customer returned home since the coffee had time to cool down. Ms. Liebeck had an expert on thermodynamics testify that liquids at 180 degrees would cause full thickness burns to the mouth and throat in two to seven seconds, but as the temperature fell to 155 degrees the chance of injury would exponentially fall. On top of that, a quality assurance manager from McDonalds gave the most damaging testimony to the fast food chain:
The most damaging testimony against McDonalds actually came from its own quality assurance manager who testified that McDonalds required their restaurants to keep the coffee pot temperature at 185 degrees. He admitted that a burn risk existed for any food (or drink) served at over 140 degrees and that the coffee poured into the cups was not yet fit for consumption since it was well above that temperature. Burns to the mouth and throat would occur if the consumer would drink the coffee at that temperature. He also stated that McDonald’s had no plans to reduce the temperature of its coffee. (Weiman)
The testimony from the assurance manager provided proof that McDonald’s knew of the risks associated with their product internally. They had zero plans to change their business practices.
So why was Ms. Liebeck awarded $160,000 in compensatory damages and $480,000 in punitive damages? McDonald’s committed a breach of implied warranty because of a product defect, and fitness for normal use. McDonald’s knew about the danger associated with the high temperature of coffee stemming back to the 700 previous claims. The high temperatures made for a defective product since there was inadequate instruction on how to use the product, or inadequate warning against the dangers involved in using the product. McDonald’s also made an implied warranty of the merchantability to the coffee, promising that the beverage was fit for the ordinary purpose for which it was sold. Since an expert in thermodynamics testified that coffee over 180 degrees would cause full thickness burns to the mouth and throat in two to seven seconds, obviously this meant the coffee was not fit for the ordinary purpose for which it was sold.
To conclude, it’s important to understand the long-term ramifications of the lawsuit to fast food and drive-thru coffee stops like Dunkin Donuts and Starbucks. Even for the early nineties, the story had become a huge media sensation for many years after. To imagine stopping at a Dunkin Donuts this day in age and adding in cream and sugar to your coffee after receiving it from the drive-thru teller is highly unusual. Nearly two decades later the world now caters to the coffee drinker. The design of coffee cups has changed too, now there is a sculptured lid with a little opening on the top, removing the need to open the cup and reducing the chance of a spill. A zarf now goes around the outside of the cup to protect the consumers hand from the heat penetrating through the walls of the cup. Warning labels are strategically placed on nearly every cup and insulated, refillable travel mugs have been further developed. Finally, car manufacturers seem to perfect their cup holders with each new vehicle. Perfect for drivers in the front, and passengers up to two rows back. No coffee or fast food drive thru chain would like to be front page news, or in this day in age, all over the internet for a frivolous lawsuit such as a beverage spill.
Philip Morris U.S.A v. Williams
Philip Morris is a cigarette and tobacco manufacturing company that is most notably known for their best-selling product Marlboro. In 1997 a man by the name of Jesse Williams died because of his mental and physical addiction to smoking. He was diagnosed with lung cancer five months before his death after smoking a pack of cigarettes a day for over forty years. After passing away, his widow Mayola Williams alleged that Philip Morris knew smoking cigarettes was dangerous and used a 40-year publicity campaign to leave an impression in the minds of millions addicted that there were legitimate reasons to doubt the risks associated with smoking. Philip Morris used the campaign to not directly refute scientific knowledge, but rather to find ways to create doubt in the minds of the consumer. Offering to stop business the next day if they believed that their products were harmful or taking a harmful ingredient out of the cigarette, were fraudulent promises made by the tobacco manufacturing company to remove doubt from the mind of the consumer. The jury ended up finding for Williams and awarded her $821,485.50 in compensatory damages and $79.5 million in punitive damages at the time.
When analyzing product liability, how does the Philip Morris lawsuit differ from the McDonald’s hot coffee incident? Instead of dealing with an implied warranty, this lawsuit focused more on negligence and fraud on the behalf of Phillip Morris more than anything else. Mayola Williams sued Philip Morris alleging negligence, fraud, and strict product liability. Her claims can be best described by looking at a similar lawsuit in 1999.
Shortly after the lawsuit involving Jesse and Mayola Williams, the United States Department of Justice sued several major tobacco companies for decades of fraudulent conduct in the United States v. Philip Morris D.O.J lawsuit. An article from Public Health Law center explained that:
The DOJ then sued on the ground that the tobacco companies had engaged in a decades-long conspiracy to (1) mislead the public about the risks of smoking, (2) mislead the public about the danger of secondhand smoke; (3) misrepresent the addictiveness of nicotine, (4) manipulate the nicotine delivery of cigarettes, (5) deceptively market cigarettes characterized as “light” or “low tar,” while knowing that those cigarettes were at least as hazardous as full flavored cigarettes, (6) target the youth market; and (7) not produce safer cigarettes. (Public Health Law Center)
Commercial advertisements for cigarettes and tobacco products were fraudulent since Philip made them with the knowledge that they were false and with reckless indifference to their truthfulness. Philip Morris was also negligent in providing proper warnings of danger to consumers especially the youth market.
The long-term ramifications of the lawsuit originated in Mayola Williams’ point of view that Philip Morris had perpetuated one of the longest fraudulent campaigns in United States history. Most importantly it caused Philip Morris and other major tobacco companies to come forward and admit that cigarettes cause health problems. No ifs, ands, or buts about it. The case later served as a template for other families that had lost loved ones to tobacco products and wished to hold these companies accountable.
Business Ethics and Product Liability
To cover a related component of course study, it’s important to analyze business ethics as it relates to these product liability cases. The focus of business ethics is to balance the goal of profits with the values of individuals and society. McDonald’s and Phillip Morris did not abide by Kant’s categorical imperative. In Kant’s words “One ought only to act such that the principle of one’s act could become a universal law of human action in a world in which one would hope to live” (Twomey 35). By acting in a way that gave McDonald’s and Philip Morris a one-sided benefit, there was a breach of trust. For capitalism to succeed there must be equal trust in the buyer and seller relationship. For a customer to purchase cigarettes from Philip
Morris, they must believe in their commitments to deliver quality and then stand behind the facts and provide adequate disclosure about their product.
As the reader observed in the McDonald’s hot coffee case, a breach of ethics carries a long-lasting memory regarding the situation. An extreme example on the impact a breach of ethics can have on a reputation can be found in the course textbook:
The Peanut Corporation of America had to declare bankruptcy in 2009 after government officials discovered that its plant was the source of salmonella poisonings among those customers who had eaten peanut products that used the Peanut Corporation’s base in their production. Records showed that the Peanut Corporation continued to produce the product even after salmonella warnings and questions arose. The company’s name and image became so damaged that is could not continue to make sales. (Twomey 41)
Each company analyzed prior to The Peanut Corporation were lucky to be able to rebound from their respective lawsuits. Although there were significant damages to be paid out and a likely decrease in business around the time period of each respective lawsuit, they are still in operation.
By considering the ethics of a business, one can use the Laura Nash model to determine when to call a lawyer over a potential product liability lawsuit. The model is a series of questions to help business professionals make the right decision regarding ethical dilemmas by examining the situation from all perspectives. How did this situation occur in the first place? What is your intention in making this decision? How would you define the problem if you stood on the other side of the fence? Each of the three questions are excellent questions to ask yourself if ever found in a potential product liability lawsuit.
After defining terms and analyzing real world examples, the reader should now have a clear idea as to when to call a lawyer regarding product liability. The theories of (1) express warranty, (2) implied warranty, (3) negligence, (4) fraud, and (5) strict tort liability were not mutually exclusive but did not mean the plaintiff had the choice of all five theories in every case. Defect and not being fit for normal use led to a breach of an implied warranty by McDonald’s Restaurant in maybe the most famous product liability lawsuit due to its frivolous nature. Philip Morris knew smoking cigarettes was dangerous and used a 40-year fraudulent campaign to leave an impression in the minds of millions addicted that there were legitimate reasons to doubt the risks associated with smoking. McDonald’s and Phillip Morris did not abide by Kant’s categorical imperative, but rather indulged in a one-sided benefit at the risk of their consumers. By standing on the other side of the fence and analyzing a situation, if you believe that the seller is responsible for your injuries sustained from their product, it is time to call a lawyer.