Just in time for Thanksgiving, the Pennsylvania Supreme Court handed down a decision last week in Tincher v. Omega Flex Inc., that will significantly revamp the letter of product liability law in the state, earning high praise from both sides of the bar. In a 137-page opinion, outgoing Chief Justice Ronald Castille surveyed the history of tort law in Pennsylvania, with references as far back as 13th century England. Ultimately the court unanimously overruled a 1978 decision, Azzarello v. Black Brothers Co., which had formalized the state’s distinction between strict liability and negligence. Significantly, the court also decided not to adopt the American Law Institute’s Restatement of Torts, Third, while referencing repeated predictions from the Third Circuit that they would ultimately do so.

In Tincher, a jury returned a $1 million verdict against manufacturer Omega Flex Inc. in response to a homeowners’ allegations that its stainless steel tubing was defective when it left the company’s possession. The plaintiffs, Judith and Terry Tincher, alleged that the tubing caused their house to burn down after the tubing was energized by a nearby lightning strike.  Omega Flex appealed and urged adoption of the Third Restatement, given that under that version of the law, “the plaintiff could not simply criticize the existing design; instead, the plaintiff would be required to prove that the manufacturer could and should have adopted a reasonable alternative design.” The Tinchers, meanwhile, responded that the Third Restatement, by considering manufacturers’ obligations, improperly introduced negligence into strict liability cases. The Pennsylvania Superior Court affirmed the jury verdict and refused to adopt the Third Restatement, noting that only the state Supreme Court had the power to do so.

On Wednesday last week the state Supreme Court justices ruled 4-2 against adopting the Third Restatement, but were in complete agreement in overruling Azzarello, a long-maligned decision that stripped juries of the ability to make judgments on the dangerousness of products. The Azzarello case dictated that juries receive instructions to reach conclusions on whether products are defective without undertaking any consideration of a product’s risks and utilities and the reasonableness of the manufacturer’s conduct. The result, according to arguments advanced in Omega Flex’s briefing, is that juries receive no guidance over the key question of whether a product is “safe for its intended use.”

In his ruling, Chief Justice Castille outlined new standards for jury instructions in strict liability cases.  Importantly, overruling Azzarello means that judges will no longer be the risk-utility calculators for products, i.e. they will no longer be the ones determining whether the prospect of injury outweighs the cost of an alternative design.  Under Azzarello, the trial court made the risk/benefit determination often before the facts were even in evidence.  From now on, the determination will be made by the jury based on the facts, bringing Pennsylvania in line with the rest of the country.

While the abolition of Azzarello is considered a boon for the defense bar, the Supreme Court’s decision not to adopt the Third Restatement is seen as a victory for plaintiffs, given that its adoption would have introduced into liability questions of whether a manufacturer acted reasonably in designing the product and whether it could have foreseen the product’s risks. As a result of the ruling, plaintiffs can prove that sellers placed products in a “defective condition” either by showing that they violated a consumer expectation standard or a risk-utility standard.  This puts the focus on the product, not the conduct of the manufacturer, and is arguably easier for plaintiffs to prove.

Although both sides stand to gain from this revision of product liability law in the commonwealth, the state Supreme Court’s ruling is by no means the last word. Indeed, Chief Justice Castille’s opinion identified that many of the issues at play with respect to strict liability are ripe for consideration by the General Assembly as a matter of public policy.  In the absence of legislative initiative, however, the Court would fill the void.

Furthermore, the ruling ensures that trial judges will still have a substantial role going forward – one that will involve interpreting and articulating components of the revised law. How will the new jury instructions be formulated in a post-Azzarello world? What exactly will the burden of proof look like for plaintiffs and would it be shifted to the defendants under a risk/utility analysis? These issues were left for another day by the Court.  Trial judges’ interpretations of these elements will surely not be uniform, and differing approaches employed by the lower courts is likely to cause confusion, at least initially. One thing is certain – Pennsylvania’s appellate courts will have their hands full in the coming years, and ultimately the Pennsylvania Supreme Court will likely have to weigh in again. We here at the Monitor will be watching how this important development plays out in 2015 and beyond.

Jurors are real people – they have kids, they have jobs, they coach little league, they go to church. Real people like people they can identify with. Real people like people they can trust. And real people have a hard time finding against or punishing people they like. It’s just human nature. So what do you do when your client is not a person at all? How do you persuade a jury to like and identify with a corporation? Humanizing the corporation is often the key to a successful defense, particularly in the products liability litigation context.

Counsel for an individual plaintiff injured by a product, such as a prescription medicine, will seek to play to juror biases against corporate defendants, painting the corporate defendants as impersonal, nameless, faceless deep pocket conglomerates motivated by greed and indifferent to the safety and welfare of real people. Plaintiff’s counsel can be impassioned and aggressive in his or her efforts to capitalize on anti-corporate biases and inflame the jury. Corporation versus individual plaintiff is often not a fair fight. But by successfully changing the framework and recasting the players as two individuals, defense counsel can take away the natural edge a plaintiff often has when litigating against a large corporation.

The process of humanizing the corporation starts by speaking publicly when appropriate. The days of “no comment” as a viable strategy for a corporate defendant when reputational issues and huge dollar amounts are at stake are over. Real people speak. Real people say something in their defense. Corporations must get the story straight and get it out early and consistently.

Once inside the courtroom, defense counsel must introduce jurors to the people who work at the company. Counsel may choose to do this in person, by having corporate employees take the witness stand, or by description in opening and closing statements, or both. Showing jurors that the company is made up of real people just like them, people who drop their kids off at school in the morning and go to work every day, trying to do a good job and working to provide for their families is critical. Allowing jurors to get to know the people who make up the company gives them something to which they can relate. All of a sudden, the big bad corporation that plaintiff’s counsel attacked in his opening statement is nothing more than a bunch of folks just like the jurors, folks who are working hard to do a good job.

The proper identification and preparation of company witnesses is another opportunity to humanize the corporation. Defense counsel must prepare corporate witnesses to be truthful, polite, concise and firm. An evasive, hostile or blabbering witness will do more harm than good. Often appearance is as important, if not more important, than substance. Does the witness appear trustworthy, honorable, and likeable? Can the jurors relate to the witness? A stiff, robotic witness or a combative, aggressive witness will only reinforce jurors’ biases about corporations. As a general matter (and in the right jurisdictions), having a corporate representative – a key witness who has knowledge of the relevant facts in dispute – sit in court throughout the trial can also be helpful in defense counsel’s efforts to get jurors to relate to the corporation.

Humanizing the corporation can be critical to a successful defense. Corporations are made up of real people and, if presented in the right way, jurors should be able to relate to and identify with them. By presenting the corporation, not as a nameless, faceless greedy conglomerate, but as a bunch of folks just like the jurors, defense counsel can successful even the playing field and cast the dispute as one between two people. Doing so can dismantle jurors ingrained biases against corporations and allow jurors to like the corporate defendant in the same way they might like an individual plaintiff.

Last week the First Circuit Court of Appeals reversed a trial court’s dismissal of a contract suit against a foreign corporation that had no physical presence in the United States.  The contract between the plaintiff, an investment bank based in Massachusetts, and the defendant, a Canadian corporation that produces nutritional supplements, provided that the plaintiff would serve as the defendant’s exclusive financial advisor for the sale of defendant’s corporate assets.  The parties never had an in-person meeting and all of their communications took place through mail, telephone, and electronic means.  Moreover, no representative of the defendant was ever present in the U.S. in connection with the contractual relationship.  When the alleged breach of contract took place – the defendant was sold without the involvement of the plaintiff and no transaction fee was paid – the plaintiff initially filed suit in Massachusetts state court, and the defendant later removed the action to federal court.  The application of Massachusetts’ long-arm statute to provide grounds for jurisdiction over the case was analyzed by the district court, and later de novo by the First Circuit, for its constitutionality under the Due Process clause.

The questions at issue were whether the claim arose from the defendant’s activities in Massachusetts, whether the defendant’s contacts with Massachusetts “represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state’s laws and making the defendant’s involuntary presence before the state’s courts foreseeable,” and whether the exercise of jurisdiction is reasonable.  It is this last prong – reasonableness – that the First Circuit focused on after holding that the other two prongs were clearly met given the specific and intentional nature of the defendant’s contractual relationship with the Massachusetts-based plaintiff.  (It should be noted, though, that the district court – despite a great deal of evidence and case-law to the contrary, including the defendant’s decision not to even contest the first prong at the district court level – found all three prongs to be lacking.)

The First Circuit considered five factors in determining the reasonableness of finding jurisdiction in this case, as have been outline by the Supreme Court: 1) the burden on the defendant, 2) the forum state’s interest in adjudicating the case, 3) the plaintiff’s interest in litigating in the forum state, 4) whether the forum provides the most effect resolution of the controversy, and 5) overriding social policy.  The First Circuit held that the fact that the defendant corporation was based in a foreign nation, and not just in another state, was not in and of itself a critical factor; though, the court did consider how – if at all – this fact might impact the burden on the defendant of litigating in the U.S.  In this instance, the Court found the effect on the defendant’s burden to be nominal because the area of Canada where the defendant is located is not a great distance from Massachusetts geographically, there were no language or cultural barriers, and there were no other international policies implicated since Canadian law can be applied to the substantive issues even in the Massachusetts forum.  In this way, the First Circuit held that this case is very different from the seminal Supreme Court case Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987), where jurisdiction over a Japanese company was denied given the unreasonableness of forcing the defendant to travel to California and litigate in English a dispute that arose primarily from transactions that took place in Asia, where most of the witnesses and evidence were located.

Finding that the burden on the defendant was low, coupled with its finding that Massachusetts has a strong interest in adjudicating a claim that arises entirely from business conducted with a resident bank, the First Circuit held that jurisdiction over the defendant was reasonable and not in violation of Due Process.  The precedential case-law on personal jurisdiction over foreign defendants has generated as many questions as it has answered, and courts continually grapple with the reach of the authority of U.S. forums.  While in many ways this case was more clear-cut than others since it involved an intimate transaction between two parties with limited evidence overseas, perhaps rendering the outcome not surprising, what is interesting about this opinion is that it did not grant much weight, if any, to the defendant’s alien status as a de facto policy consideration.  This suggests that while there are clearly limits on the scope of U.S. jurisdiction, there are also limits on the significance of a defense based on nationality alone.  Defendants seeking to avoid the jurisdiction of a U.S. forum need to focus primarily on the facts of the case that render jurisdiction unreasonable or otherwise unconstitutional, and not rest on the fact of foreign citizenship alone, particularly where – as here – other factors weigh in favor of extending jurisdiction.  In addition, foreign defendants seeking to avoid American courts should also consider choice of venue – in addition to choice of law – provisions in their contracts with U.S. entities as a means to bolster their arguments that they should not be subject to personal jurisdiction in the United States.

Solicitor General to Participate in Oral Argument in False Claims Act Case

November 14, 2014

On November 10, 2014, the Supreme Court granted the motion of the Solicitor General for leave to participate in oral argument as amicus curiae in Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, No. 12-1497, a case we have been watching.  To review, Kellogg Brown is the first case […]

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SCOTUS Asked To Resolve Daubert Circuit Split

November 13, 2014

We’d like to call your attention to a recent development in expert issues.  In September, SQM North America Corporation (SQMNA) petitioned SCOTUS to reverse the Ninth Circuit’s decision in SQM N. Am. Corp. v. City of Pomona, 750 F.3d 1036 (9th Cir. 2014), in which the appeals court held that “only a faulty methodology or theory, as […]

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