The California Supreme Court recently upheld a Court of Appeal decision which allows evidence of industry practice in certain product design defect cases. (Kim v. Toyota Motor Corp. (2018) 6 Cal. 5th 21). The product at issue in Kim was a 2005 Toyota Tundra which was not equipped with vehicle stability control (“VSC”). Specifically, the high court held in an appropriate case a jury may consider whether a product is as safe, or safer, than any product on the market in evaluating whether on balance the product’s design is defective. As demonstrated below, the Kim decision is significant for multiple reasons. It allows a product manufacturer to embrace its design decisions based on free market economic realities. The decision further diffuses juror anger based on a plaintiff’s one-sided and misleading evidentiary slight-of-hand intended to paint the manufacturer as a danger to the community by disregarding consumer safety.
The Motor Vehicle Accident
The plaintiffs in the underlying action were William Jae Kim and his wife. Mr. Kim sustained serious injuries when he lost control of his 2005 Toyota Tundra pickup truck while driving down a mountain on Angeles Forrest Highway on a rainy April day in 2010. Mr. Kim’s truck was travelling approximately 40-50 mph when he claims an oncoming vehicle crossed into his lane. To avoid the head-on collision, Mr. Kim initiated a sequence of evasive maneuvers, first steering right, then left, then right again during which he lost control of his vehicle. Mr. Kim’s truck went off the side of the road and down a cliff resulting in serious neck and spinal cord injuries rendering him a quadriplegic.
The product at issue in the Kim case is a 2005 Toyota Tundra pickup truck without VSC. VSC is a technology which senses when the vehicle turns more or less than the driver’s steering wheel input. VSC helps a driver maintain control of the vehicle in such an instance by applying a brake to either the front or back tire to counteract excessive front or rear movement of the vehicle. Toyota had included VSC as standard equipment on other vehicles including Lexus models and SUV’s but strategically decided to offer VSC only as an optional upgrade for the 2005 Tundra. This decision was informed by market research which confirmed a price sensitive demographic for the pickup truck. The cost of including VSC as standard equipment on the Tundra would have been $300-350 per vehicle.
Product Design Defect Legal Standards
The Kims sued Toyota for strict products liability and loss of consortium alleging the design of the Tundra without VSC was unreasonably dangerous. In California, a product manufacturer is liable if its product causes injury when the product is being used in a foreseeable manner. (Kim v. Toyota, 6 Cal. 5th at 30, citing Soule v. General Motors Corp. (1994) 8 Cal. 4th 548, 560). A consumer may prove a design defect through the use of one of two different legal tests. The first is commonly known as the “consumer expectations test” wherein the plaintiff proves the product did not perform as expected when used as intended. The second test, and the one at issue in Kim, is the “risk-benefit” test under which the jury is asked to balance the risks inherent in the design against the benefits of the design. See (Barker v. Lull Engineering (1978) 20 Cal. 3d 413, 430).
The key issue in the Kim case is an evidentiary one. The trial court denied an in limine motion filed by the Kims which sought to exclude evidence or argument offered by Toyota for the purpose of showing Toyota’s design choice in not offering VSC as standard equipment was consistent with industry practice. In other words, the Kims contended Toyota should not be allowed to argue the Tundra was just as safe as other similar pickup trucks manufactured by its competitors. However, when arguing the motion, counsel for the Kims would not go so far as to say such evidence was categorically inadmissible because the Kims wanted to offer the same evidence to show why Toyota decided not to include VSC. Thus, the Kims in essence were asking the court to instruct the jury that such evidence was admissible only to explain why Toyota did not include VSC on the Tundra but not to allow Toyota to use such evidence as a defense to liability. The trial court denied the Kims motion but indicated it would entertain a limiting instruction to be litigated at an appropriate time. It is not entirely clear from the decision, but evidently no such instruction was given.
The jury was instructed on the “risk-benefit” test to determine whether the Tundra’s design without VSC outweighed the risks. The jury found the Toyota Tundra was not defective in design. Judgment was entered in favor of Toyota. At trial, the Kims called Toyota’s Product Planning Manager as a hostile witness who explained Toyota decided not to include VSC as standard equipment because it was trying to meet its customers’ needs by keeping the price down consistent with its competition in the same class. On cross-examination, Toyota reiterated the same testimony adding the offer of VSC as an optional upgrade was consistent with industry practice known as “phase-in” whereby expensive new technology is offered as an option rather than standard equipment.
After the trial court denied the Kims motion for a new trial, the Kims appealed based on the court’s denial of its motion in limine to exclude evidence of industry custom and practice. The appellate court denied the appeal. In doing so, the Court of Appeal identified a split of authority as to whether evidence of industry custom and practice is admissible in strict products liability cases. The older line of cases held evidence of industry of custom and practice was irrelevant and inadmissible in strict products liability cases. (See Titus v. Bethlehem Steel Corp. (1979) 91 Cal. App. 3d 372, 381-382 and its progeny). In a more recent case, the Court of Appeal held evidence of compliance with industry standards was an appropriate factor to consider in the risk-benefit analysis. (See Howard v. Omni Hotels Management Corp. (2012) 203 Cal. App. 4th 403, 425-426). In reaching its decision in Kim, the Court of Appeal chose the middle-ground and concluded evidence of industry custom and practice was relevant to both sides’ theories of how the jury should evaluate the risk-benefit of Toyota’s design for the Tundra.
Supreme Court Analysis
The Supreme Court granted certiorari to resolve the split in authority and affirm the Court of Appeal’s analysis. In doing so, the high court emphasized the analysis in a strict products liability case is on the safety of the product, not the manufacturer’s conduct in designing it. This is so, because if the product is unreasonably dangerous, the manufacturer is held liable regardless of whether it acted reasonably. (Kim v. Toyota, 6 Cal. 5th at 30). The court then discussed the “non-exhaustive” list of factors to be considered in the risk-benefit analysis as set forth in the Barker case. Such factors include: the gravity of the danger posed by the challenged design, the likelihood such danger would occur, the feasibility of a safer alternative design, the cost of an improved design, and the adverse consequences of such a design. (Ibid.).
The critical question in the view of the Supreme Court is whether evidence of industry custom and practice tends to prove or disprove any fact consequential to weighing the risks and benefits of the challenged design. (Kim v. Toyota, 6 Cal. 5th at 31). The Supreme Court explained the distinction between industry custom and practice, i.e. what is done, and state of the art evidence, i.e., what could be done. (Id. at 31). The court then reconciled the split in authority by recognizing the Howard court correctly observed “evidence of industry custom and practice sometimes does shed light not just on the reasonableness of the manufacturer’s conduct in designing a product, but on the adequacy of the design itself” which goes to the heart of what the jury is being asked to consider in the risk benefit test. (Id. at 34).
The Supreme Court acknowledged the distinction made by the Kims between evidence of compliance with “industry standards” and “industry custom and practice, i.e. “everybody does it” or “nobody else does it.” The latter purpose goes to conduct and is inadmissible in strict products liability analysis. (Kim v. Toyota, at 34). The Supreme Court, however, finds the distinction to be one without much of a difference considering trade associations who promulgate industry standards are made up of the same manufacturers and related businesses which also comprise industry custom and practice. More to the point, the Supreme Court reasoned industry and custom evidence is not only relevant but could be dispositive in a design defect case. The court noted how the Kims themselves offered such evidence in support of their argument Toyota designed the Tundra without VSC because it valued profits over safety. (Id. at 35).
The Kim decision legitimizes the use of industry custom and practice by product manufacturers to justify design decisions by comparing the challenged design to what others in the industry are or are not offering for comparable products. The manufacturer can tie such decision-making to the collective wisdom of the whole industry as well as free-market economics based on market research regarding customer demographics and needs. Thus, the defense is taking plaintiff’s argument that the manufacturer was motivated by profit over safety and turning it around by embracing it in terms of free market economics, i.e., giving customers what they want at an affordable price point to justify design decisions. As demonstrated by the Kim jury, this approach allows the jury to evaluate the safety of the product in the larger context of the marketplace rather than simply becoming angry at the manufacturer for intentionally not including an added safety feature.