Cal Biz Lit

Component Parts In Product Liability: The Saga Continues

Bruce Nye — 2009-10-23T12:51:15-07:00

CBL, and a lot of our clients in product liability matters, have been closely watching the law develop in California on this question: if a manufacturer's product is not itself defective, but becomes defective when used in conjunction with a third-party's defective products (e.g., the defendant's valves made of steel, but are used with asbestos gaskets and packing made by somebody else), can the manufacturer be held liable for failure to warn of the dangers posed by the component it neither manufactured nor sold?

As we discussed here and here, there have been three appellate decisions on the subject this year. The first, Taylor v. Elliott Turbomachinery Co., Inc. (2009) 171 Cal.App.4th 564, answered the question "no." The second, O'Neil v. Crane Co. (September 21, 2009) ___Cal.App.4th___ (B208225), said just the opposite -- "yes." And the tie breaker four days later was, Merrill v. Leslie Controls, Inc. (September 25, 2009) ___Cal.App.4th ___ (BC352170) which also said "no."

Or at least it was until yesterday. Plaintiffs moved for reconsideration of the Merrill decision (presumably on the basis of O'Neil, filed four days earlier). Yesterday the Court of Appeal granted reconsideration. The defendant has ten days in which to file its answer, after which the Court of Appeal will decide without further argument. Meanwhile, Merrill is no longer citeable as authority.

The Court of Appeal has already denied reconsideration in O'Neill, and the Supreme Court previously denied a hearing in Taylor. CBL guesses the Supremes may be more interested now.

Court of Appeal Reconsiders Arbitration Decision, Then Rules The Same Way

Bruce Nye — 2009-10-21T09:53:49-07:00

As Cal Biz Lit noted here on August 31, arbitration awards in California are almost never reversible. But as that post pointed out, in Burlage v. Superior Court Of Ventura County (Spencer) (August 31, 2009) ___ Cal.App.4th ___ (2d Civil No.B211431), the Second District Court of Appeal created a loop-hole in arbitration finality jurisprudence that seemed big enough to drive an appellate truck through. The loop-hole: arbitration awards can be challenged at the trial court, and on appeal, if the arbitrator erroneously excludes evidence.

Well, the Court reconsidered its opinion. And yesterday it posted a slightly changed opinion here. I should mention that this opinion (like the earlier one) is by Justice Arthur Gilbert, the Presiding Justice of Division 6 of the Second Appellate District. CBL doesn't usually concern itself with personalities on the bench. But CBL makes an exception here because Justice Gilbert is one of CBL's favorites. This is not because of his opinions, but rather because he is a very good (and often very funny) writer of essays dealing with the legal world, and a blogger.

And while Justice Gilbert's slightly changed opinion ends up with the same result -- trial court is reversed, it should have refused to confirm the arbitration award because the arbitrator incorrectly excluded evidence -- he also adds a paragraph that shows arbitrators how to close the loophole: just don't explicitly exclude any evidence. Of course, Justice Gilbert is satisfied that this would not happen:

It may be argued that to avoid the imposition of section 1286.2, arbitrators will simply admit evidence to insulate their decisions from review. We do not subscribe to this cynical view. It is through judicial review that the law is shaped and developed. Arbitrators do not subvert this process because a court might vacate an award. Arbitrators base their decisions on a careful analysis of the law and facts. They, like the arbitrator here, are professionals who conduct themselves according to the canons of ethics and the high degree of integrity their profession demands.

Sigh. Sorry Justice Gilbert, but in the real world, that ain't necessarily the way it works. The fallibility -- and let's face it, bias in both directions -- of arbitrators makes the process a real crap shoot. And arbitrators, like judges, don't like to get reversed. And that, as we've stated before, is why CBL is no big fan of binding arbitration.

Some More Musings On MMSEA

Bruce Nye — 2009-10-06T06:00:00-07:00

Last week, I ran across a pretty good, pretty concise introductory white paper on MMSEA by a Houston company, Medical Research Consultants. If you read the Adams Nye white paper here, and the MRC white paper here, you'll have a pretty good introduction to this nettlesome subject. And if you read everything on the CMS web site, you might even know enough to operate as an RRE, which every insurance company and self-insured tort defendant in the country is giong to have to learn to do.

One good piece of advice MRC gives that I haven't really seen too many places:

It is important for an RRE to obtain a copy of the most recent conditional payment summary prior to settlement either from the claimant or directly from MSPRC with an authorization signed by the claimant.

In other words, if there is to be any hope at all of settling the case, the sides are going to have to cooperate in getting the information long before they agree on settlement terms.

Some Random Thoughts on Medicare Recovery

Bruce Nye — 2009-10-05T06:00:00-07:00

Even though it isn't exactly a California subject, we've been keeping an eye on the ramping up by companies and the Centers for Medicare and Medicaid Services (CMS) in the area of MMSEA and Medicare recovery, because of CBL's belief that MMSEA is going to change the way settlements are reached in every case involving a Medicare eligible personal injury plaintiff. You can find previous posts, citations and a white paper here, here, here, here, here and here.

Reporting and recovery both present uncharted waters. Lawyers, clients, RRE's and everybody else can only hope to get as much advice as they can in the hopes that they won't miss issues. So, with this in mind, last month I "attended" a webinar on MMSE issues put on by Risk and Insurance Management Society, Inc. called "Not Getting it Right Can Cost You: Medicare Secondary Payer Reporting." The presenters were Roy Franco, the Risk Management Strategies Director for Safeway and Katie Fox, Compliance & Resolution Manager for MedInsights. While much of what they covered was introductory (and similar to what you'll find in CBL's posts and white paper), they raised some issues that I hadn't thought of before:

A plaintiff attorney may urge his Medicare-eligible client to keep injury-related bills out of the Medicare system. But neither the attorney, nor the plaintiff, not the defendant or its attorney can depend on this. Providers' back offices are used to sending bills off to anyone and everyone who might pay, and inadvertant billing of Medicare is common. So Medicare's interests have to be protected in every case where it might have made a payment.
Once the government begins its recovery process, the communications from the government are not designed to provide much, if anything, in the way of useful information. It isn't unusual for a large insurance company to receive an invoice from the Department of the Treasury indicating that it is for payments related to "Joseph Smith," with no other identifying information and no information as to what the claim is for. And if it doesn't get paid within sixty days -- because nobody has any idea what it is for -- the next communication comes from the Justice Department.
Finally, RRE's should not get to comfortable with the fact that CMS had delayed reporting until next year. As CBL has pointed out, this delay conflicts with the statute, and it won't be at all surprising if, once the system is at least to some extent up and running, CMS directs RRE's to go back and report settlements starting July 1, 2009.

Is Manufacturer Liable For Injuries Caused By Somebody Else's Components? Now It's Anybody's Guess

Bruce Nye — 2009-09-28T10:02:28-07:00

Last week, CBL reported here on O'Neil v. Crane Co. (September 21, 2009) ___Cal.App.4th___ (B208225), and the decision earlier this year in Taylor v. Elliott Turbomachinery Co., Inc. (2009) 171 Cal.App.4th 564. Both cases addressed
this question: if a manufacturer's product is not itself defective, but becomes defective when used in conjunction with a third-party's defective products (e.g., the defendant's valves made of steel, but are used with asbestos gaskets and packing made by somebody else), can the manufacturer be held liable for failure to warn of the dangers posed by the component it neither manufactured nor sold? The First District in Taylor said no. The Second District in O'Neil said yes.

But this seems to be a moving target. From this past Friday, here comes Merrill v. Leslie Controls, Inc. (September 25, 2009) ___Cal.App.4th ___ (BC352170), also from the Second District, and agreeing with Taylor:

If you didn't manufacture or distribute the component, no duty to warn;
If you didn't manufacture or distribute the component, no strict product liability for injuries caused by adding the component; and
If you didn't manufacture or distribute the component, no negligence liability for failure to warn, either.

So we now have three conflicting decisions on this subject, including two in conflict from the same appellate district. As previously discussed, every trial court can follow any one of them. And this issue has "State Supreme Court review" written all over it.

Now, That's A Big Verdict

Bruce Nye — 2009-09-24T12:00:40-07:00

Per today's Law.com:

A Santa Clara, Calif., jury awarded $49 million in damages Monday to a college student who was on his way to a camping trip when two trucks collided and one struck the car he was riding in, causing him traumatic brain injuries.

Law.com also owns Verdict Search, and reports that its search shows this is the biggest single plaintiff personal injury verdict in California in the last ten years. Law.com also quotes a plaintiff attorney (who was not involved in the case" to the effect that "the Santa Clara jury pool is known to be conservative." (That has not, incidentally, been what we have seen over the years. Jurors in Santa Clara County are hard for a plaintiff to hoodwink on liability, but once they find liability, they can award large damages in large cases).

Attorney Randall Scarlett, who represented the plaintiff, says on his web site that the jury broke down the verdict amounts as follows: $3.4 million in past medical expenses, $27.6 million in future medical expenses, $4.5 million for future lost wages, and $13.5 million in general damages. The jury found the State of California --which had previously settled for $10 million -- 5% at fault.

You Didn't Supply The Dangerous Parts? That's OK -- You're Liable Anyway

Bruce Nye — 2009-09-22T06:54:45-07:00

Earlier this year, one of our courts of appeal decided Taylor v. Elliott Turbomachinery Co., Inc. (2009) 171 Cal.App.4th 564, a product liability decision generally considered to be quite pro-defense. In Taylor, decedent was exposed to asbestos gaskets and

packing used with defendants' ship-board pumps and valves. The defendants did not supply the gaskets or packing, and moved for summary judgment on the ground that they couldn't be held responsible for injuries caused by products (the gaskets and packing) they neither manufactured or supplied. The Court of Appeal for the First District affirmed, holding that (1) because the pumps and valves were not themselves defective, the defendants had no duty to warn about the dangers of other products used with them; and (2) because the pumps and valves were incorporated into the overall propulsion system of the ship, there was no liability under the "component parts doctrine," sometimes known as the "bulk supplier doctrine." (E.g., Artiglio v. General Electric Co. (1998) 61 Cal.App.4th 830.)

Yesterday, the Court of Appeal for the Second District faced the same fact pattern in O'Neil v. Crane Co. (September 21, 2009) ___Cal.App.4th___ (B208225) and reached exactly the opposite conclusions: First, the component parts/bulk supplier doctrine applies to

multi-use or fungible products, designed to be incorporated into some other product. The component will be substantially altered by the customer, and the manufacturer of the component will have no control over the design of that finished product, or the warnings or labels on those products.

Pumps and valves don't fill the bill. Secondly,

[R]espondents incorporated asbestos-containing products into their products and knew those products would over time be replaced with the same kind of product, and that the products were defective because they required asbestos packing and insulation, and because they had no appropriate warnings. We can see no relevance to the fact that the injury was caused by the operation of its product in conjunction with a replacement part which is no different than the original. If respondents had warned the hypothetical original user, or protected that person by avoiding defective design, subsequent users, too, would have been protected.

In other words, the fact that the defendants did not supply the asbestos-containing replacement parts did not shield them from liability. The product could be found defective, and required warning, because it was designed to be used with asbestos.

So now we have two conflicting decisions on these two questions. And under the Cal Supremes' decision in Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal. 2d 450, every trial court in the state is free to choose between them.

Is There Any Claim For Spoliation Of Evidence Left? Maybe Just a Little Bit Of One?

Bruce Nye — 2009-09-20T16:20:12-07:00

As a product liability defense lawyer, I've long been interested in the subject of spoliation of evidence, if only because of the drubbing our Supremes have always given all possible versions of this theory. I like to think of the missing piece of evidence as the trial lawyer's version of the "MacGuffin."

Anyway, the typical spoliation theories are these: (1) the defendant in the tort

case loses or destroys a key piece of evidence -- the MacGuffin, if you will-- and the plaintiff, who thereby loses his ability to prosecute the tort case, sues for spoliation instead. That doesn't work: Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1; (2) a third party loses or destroys the MacGuffin, the plaintiff can't prosecute his case, so he sues the third party for spoliation instead. That doesn't work either: Temple Community Hospital v. Superior Court (1999) 20 Cal.4th 464; and (3) one party or the other fails to take good care of the MacGuffin, or destroys it before or after the litigation, and the other side seeks a discovery sanction. Generally speaking, that one is also a non-starter. New Albertsons, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403. About the most an aggrieved party can hope for is a jury instruction based on Evidence Code section 413 to the effect that if a party has suppressed evidence, the jury can infer that the suppressed evidence wouldn't have done him much good (see our form instruction, CACI 204.

So, what's left? Well, until next week, I would have told you that zilch was left. Then along comes this case, Cooper v. State Farm Mutual Automobile Insurance Company (September 17, 2009) ___ Cal.App.4th___ (E047002). This is a ponderous opinion, meandering on for some 43 pages. I think it quotes the plaintiff's entire opening statement, no kidding. I've read it so you don't have to. More after the jump.

In Cooper, plaintiff's tire failed, his car rolled, and he was injured. His auto insurer, State Farm, took custody of the car and tire, as it had a contractual right to do under his policy. State Farm settled his property damage claim and wanted to keep the tire to seek subrogation against Continental, the manufacturer of the tire. Cooper wanted to ensure protection of the tire for use in his personal injury case against Continental.

State Farm did the following: promised Cooper it would take good care of the tire; had its automobile and tire experts inspect the tire, both concluding that it was defective; and, of course, trashed the car and the tire. Cooper sued State Farm. His attorney alleged that under Stephen v. Ford Motor Co. (2005) 134 Cal.App.4th 1363, the absence of the tire meant he was out of court on his ear in his case against Continental.

In his opening statement, Cooper's attorney argued that State Farm had promised to take good care of the evidence and had failed to do so. The trial court granted nonsuit (i.e., dismissed) after opening statement.

And the Court of Appeal reversed. The pitch is this: because State Farm promised to take good care of the tire and Cooper foreseeably relied on that promise, there was a promissory estoppel, the "doctrine which employes equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced." Id., fn. 3, quoting US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901-902. Or, in the alternative, State Farm voluntarily assumed a duty, Cooper relied on that assumption, and a duty was therefore created where none had been before, citing Coprich v. Superior Court (2000) 80 Cal.App.4th 1081, 1091-1092.

Well now wait a minute. One of the bases for the Supremes' decision in Cedars-Sinai and Temple was this: since the MacGufffin has been lost, a tort cause of action for losing it can't be proved because the plaintiff can't show that if he'd had the MacGuffin, he could have proven his case. This would be, as we defense lawyers say, a matter of speculation. And an inability to prove causation.

But the Court of Appeal says hey, no problem. Because State Farm's experts already inspected the tire, and found it defective, he might be able to convince a jury that with the tire he could have won the case.

Well now, wait another minute. If he could convince the spoliation case jury the tire was defective, why couldn't he just convince a jury in a personal injury case that the tire was defective based on the findings of State Farm's experts? Well, says the Court, maybe he could -- in which case he loses his spoliation case:

[I]t is possible that a jury would find that plaintiff already maintained sufficient evidence to prove the elements of his underlying claim against Continental Tire and, therefore, State Farm’s failure to preserve the tire did not affect his ability to prove his case . . . .

But since this was a nonsuit case, all assumptions and intendments and inferences are given to the plaintiff. But at the end of the day, the trial and the appeal and the 43 page opinion and all that may just be for naught, because while there was spoliation, and while the plaintiff presented the rare -- maybe even unique -- circumstance where he had a right to pursue the spoliation case, it just may be that he should have gone after the tire company instead.

So What Happens When I Walk In The Door?

Bruce Nye — 2009-09-18T17:06:38-07:00

I've long had a wise-crack I use with some corporate clients (usually long-term ones who I count as friends) to the effect that "When I walk in the door, the good news is over." The point being, of course, that they must have a problem or I wouldn't be there.

I was in Michigan visiting the in-house law department of one of my favorite clients last week. Walked in the door of one of the in-house lawyers and found the following on his white-board:

Real posts start up again on Monday.

Binding Arbitration Award Reversed For Excluding "Material Evidence" Causing Substantial Prejudice

Bruce Nye — 2009-08-31T16:54:54-07:00

CalBizLit is not personally a huge fan of binding arbitration, although many of our clients are. CBL realizes that arbitration often reduces the likelihood of a "high end," or runaway verdict. This is why defendants tend to favor arbitration and plaintiffs don't. But it isn't much cheaper than traditional dispute resolution. And because a binding arbitration award is scarcely ever reversible (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1), either side can get hit with an off-the-wall, arbitrary result and not be able to do much about it. Or is that so?

For your consideration, CBL offers Burlage v. Superior Court Of Ventura County (Spencer) (August 31, 2009) ___ Cal.App.4th ___ (2d Civil No.B211431). This is from the court that was reversed by the Supremes seventeen years ago in Moncharsh, and apparently, the court of appeal is still smarting.

More after the jump.

The Court is fairly amusing in writing about Moncharsh:

In 1991, we wrote what we thought was a routine arbitration opinion. (Moncharsh v. Heily & Blase (Apr. 2, 1991, B048936) [nonpub. opn.].) We relied on decades of precedent in our unpublished decision to affirm the arbitration award because no error appeared on the face of the award. In dicta, we noted that had the error appeared on the face of the award and created substantial prejudice, we would have reversed.

To our surprise, our Supreme Court granted review. Our holding was affirmed, but our dicta "reversed." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1.) Oh well, nobody's perfect. Moncharsh held that judicial review of an arbitrator's decision regarding questions of fact or law is extremely limited. Thus, even though an error of law appears on the face of an arbitration award and causes substantial injustice, it is not subject to judicial review in the absence of a limiting clause or as provided by statute. (Id. at p. 25.)

And now, this court does it again. Short version: JAMS arbitrator excludes evidence showing that plaintiff didn't really suffer any damages. Said arbitrator proceeds to issue a seven figure award. Defendant moves to set aside award. Superior Court grants motion on the basis of Code of Civil Procedure section 1286.2, subdivision (a)(5), which requires vacation of an arbitration award when a party's rights are "substantially prejudiced" by the arbitrator's refusal to hear "evidence material to the controversy."

Court of appeal affirms, 2-1. Remember, under Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal. 2d 450, every trial court in the state is required to follow this unless another court of appeal reaches a contrary decision or the Supreme Court grants a hearing (in which case the decision immediately becomes unciteable). CBL will be monitoring this -- if a petition for hearing is filed, which seems likely, the ever erratic CBL crystal ball foresees the Supremes taking it.