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Products Liability: Evidence of Industry Custom & Practice may be Admissible Under Risk-Benefit Analysis

In William Jae Kim, et al. v. Toyota Motor Corporation, et al. (January 19, 2016) 243 Cal.App.4th 1366, a motorist brought action against automobile manufacturer for strict products liability. The Second Appellate District Court of Appeal determined, among other issues:

  • Whether the jury could consider evidence of industry custom and practice in the risk-benefit analysis to determine whether a product has a defect supporting strict products liability;
  • Whether a jury could consider manufacturer’s compliance or noncompliance with Federal Motor Vehicle Safety Standards and industry custom in applying the risk-benefit test; and
  • Whether a consumer expectation test was inapplicable to motorist’s products liability claim.

Facts

William Jae Kim and Hee Jon Kim (“Kim”) filed a strict products liability action against Toyota Motor Corporation (“Toyota”) after William lost control of his 2005 Toyota Tundra pickup and was involved in an accident. The Kims alleged the accident occurred because their Tundra lacked electronic stability control (“ESC”) and this constituted a design defect. ESC was optional, not standard, equipment on Tundras when the Kims’ vehicle was manufactured. The jury found no design defect and awarded judgment to Toyota.

The trial court denied the Kims’ motion in limine to exclude evidence the automotive industry custom was to not include ESC as standard equipment in pickup trucks. The Second District Court of Appeal affirmed, holding such evidence may be admissible in a strict products liability action depending on the nature of the evidence and the purpose for which the proponent seeks to introduce it. This holding parted from prior cases which held evidence of industry custom and practice is never admissible in strict products liability cases and with a recent case suggesting such evidence is always admissible.

Analysis

Two alternate tests are used to identify a design defect in a products liability action. Under the “consumer expectations” test, widely accepted minimum expectations regarding the circumstances under which a product should perform safely set the standard. In this case, the second test, the “risk-benefit” test, was at issue. Under the “risk-benefit” test, the plaintiff must prove the design proximately caused the injury; if the plaintiff succeeds, the burden shifts to the defendant to prove the design’s benefits outweigh its risks. The jury may consider, among other factors, the gravity of the danger, the likelihood it would occur, mechanical feasibility of a safer design, financial cost of an improved design, and adverse consequences to the product and consumer that would result from an alternative design.

The Court of Appeal reviewed leading cases on the subject as follows. In Titus v. Bethlehem Steel Corp. (1979) 91 Cal.App.3d 372, the trial court refused to instruct on the meaning of “product defect.” The court reversed, reasoning absent such an instruction the jury might have found the product was not defective because industry custom and practice was to offer safety guards as optional equipment rather than standard. Titus stated “custom and practice” is not a defense in strict liability actions.

Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757 involved a Ford Pinto which exploded when rear–ended. The jury was instructed on the consumer expectations test but not the risk-benefit test. Grimshaw held the jury’s focus in product liability claims is properly directed to the condition of the product itself, not to the reasonableness of the manufacturer’s conduct, and thus custom and practice were irrelevant.

In Buell-Wilson v. Ford Motor Co. (2006) 141 Cal.App.4th 525, the trial court properly excluded evidence comparing the Ford Explorer’s rollover rate with that of other vehicles. The court held such evidence was evidence of custom and practice, and admission of custom and practice evidence would have been reversible error as the consumer expectations test does not involve considerations of reasonableness of the design, and custom and practice had not been held to be a factor in risk-benefit analysis.

In contrast, the Court of Appeal looked at Howard v. Omni Hotels Management Corp. (2012) 203 Cal.App.4th 403, involving an allegedly defective bathtub, and holding industry custom and practice should be taken in account as part of the design defect balancing process.

The Kim Court rejected both of these theories and instead settled on a middle ground. The Court reasoned the old rule was based on an “outmoded theory that strict products liability is so inherently different from negligence that it should not share any features with negligence doctrines.” It noted the California Supreme Court has incorporated negligence principles into strict products liability doctrine, such as when it acknowledged while the two inquiries are not identical, risk-benefit balancing may resemble a negligence inquiry in some ways (Barker v. Lull Engineering Co. (1978) 20 Cal.3d 413); when it held evidence of the state of the art at the time of manufacture or distribution is admissible in strict products liability failure-to-warn cases (Anderson v. Owens-Corning Fiberglas Corp. (1991) 53 Cal.3d 987); and when it determined the sophisticated user defense applies in strict liability failure-to-warn cases (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56).

The Court concluded evidence of industry custom may be relevant to risk-benefit analysis in certain cases, subject to challenges under Evidence Code section 352 (that its probative value is substantially outweighed by the risk of undue prejudice or confusing the issues), or if it is otherwise inadmissible.

For this position, the Court gave several examples:

(1) Evidence a manufacturer’s competitors tried to produce a safer alternative design which malfunctioned or functioned only at an unsustainable cost would be relevant to mechanical feasibility, as would evidence that such a design by a competitor was functional and cost-effective;

(2) Evidence a competitor’s alternative design made the product less efficient or desirable would be relevant to the adverse consequences factor, as would contrary evidence; and

(3) Evidence may be relevant to rebut an opponent’s arguments – here, the Kims’ argument pickups are similar to SUVs, that SUVs had ESC, and that Toyota was going to make ESC standard on its trucks until it learned its competitors were not going to do so, could be rebutted by evidence of a decision by Ford about including ESC on its pickups. On the other hand, evidence that competing trucks did not offer ESC would not be admissible because it does not tend to prove whether the product is dangerous.

Ruling

Here, the Court rejected a singular approach regarding admissibility of custom and practice evidence in strict products liability cases, instead holding a decision must be specific for each case. As such, it allows the specific trial court to fashion its own ruling as to the permissibility of using the risk-benefit analysis as each products case may be distinctly different based on its facts and issues.

ABOUT THE AUTHOR: David P. Ramirez is Senior Counsel at TYSON & MENDES, LLP, and primarily represents clients in complex litigation, including construction defect, insurance law, property disputes, and product liability. Mr. Ramirez was recently named as a “Top Lawyer” in San Diego for “Complex Litigation” in March 2016 by San Diego Magazine. Contact David at 858.459.3365 or dramirez@tysonmendes.com

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