Restatement Third, Torts: Products Liability; what hath the ALI wrought?

• Author: Henderson, James A., Jr.
• Position: American Law Institute, includes commentary and text

In May 1997, the American Law Institute approved the Restatement Third, Torts: Products Liability. This article provides the black-letter text of the new restatement, based on the Proposed Final Draft (April 1, 1997), along with an introduction by James A. Henderson Jr., one of the reporters, and comments on the sections by Donald Patterson, Harvey L. Kaplan and Sheila L. Birnbaum. Initials are used to indicate which author comments on which section.

A Reporter's Reflections

I RECALL a windy, stormy day last November at an oceanside resort near Jacksonville, Florida, when I sat down in the nearly deserted lobby of the hotel to try my hand at rearranging the 20-odd sections into chapters and topics that would replace the jumble that had emerged as the Restatement of the Law of Torts (Third): Products Liability over the four-plus years I had been working on the project. Nearly everyone else who had attended that Florida meeting of the Advisers on the Restatement project had left early for home once it became clear that the gathering storm was not going to blow over. I decided to stick with travel plans made earlier, when better weather had been expected.

What came out of that day of musings is an organizational structure for the new Restatement with which Prof. Twerski and I, as reporters, are quite pleased.

Heart of the matter

Chapter 1, the centerpiece of the project, deals with liability based on product defects at the time of sale. Topic 1 of that chapter, encompassing Sections 1 through 4, covers products generally; Topic 2, which includes Sections 5 through 8, covers special products and product markets, including prescription drugs and medical devices.

Chapter 2, Sections 9 through 11, deals with bases of liability other than defects at time of sale--for example, time-of-sale misrepresentations and post-sale duties to warn and recall.

Chapter 3, Sections 12 through 14, deals with the liability of successors and apparent manufacturers.

Chapter 4, Sections 15 through 18, contains provisions of general applicability, such as causation and affirmative defenses. Definitions appear at the end of Chapter 4 in Sections 19 through 21.

As reporters, we often have been asked why certain topics are not included at all--punitive damages, for example--and why other topics--causation and plaintiff's fault, for example--are included only in the sense that the relevant sections make general reference to applicable local law. Two major criteria combined to determine the boundaries of the project. First, a subject is not included unless it presents unique problems in the context of products liability. Second, a subject is not treated determinatively if it is likely to be treated elsewhere in the near future, including in subsequent projects carried out under the auspices of the Restatement of the Law of Torts (Third). Thus, because causation and plaintiffs fault are to be included in subsequent segments of the third Restatement project, this Restatement of products liability defers to local law on these subjects.

Most important sections

By far the two most important sections of this Restatement are Sections 1 and 2 setting forth the basic rules holding commercial product sellers liable for harm caused by defects at time of sale. And by far the most controversial single provision is Subsection 2(b), which deals with liability for harm caused by defective product designs. The controversy surrounding 2(b) arises from its requirement that the plaintiff in most design cases show that a safer, reasonable alternative design was available at the time of sale, and that failure to adopt the safer alternative rendered the product design not reasonably safe.

Section 2(b) adopts the risk-utility test traditionally associated with the negligence standard. The overwhelming majority of courts have opted for risk-utility balancing to determine whether a product is defectively designed. Many courts and commentators have recognized that the risk-utility test originates in negligence, although some courts have noted subtle differences between design-related risk-utility balancing under negligence, as opposed to strict products liability doctrine, and the new Restatement recognizes these nuances. The basic test for design defect, however, is grounded in the same classic risk-utility balancing that courts traditionally have used in determining negligence.

Consumer expectations test?

Some critics urge that the new Restatement should give equal status to a consumer expectations test for design defect liability. They argue that this test constitutes a true strict liability test. The Restatement takes the position that consumer expectations do not, standing alone, determine defectiveness. Although they are an important factor in risk-utility balancing, consumer expectations are too amorphous to operate as an independent test for design defect.

Critics disagree with the reporters' reading of the case law on this important issue, but we believe they are wrong. Both the reported decisions and a predominant number of commentators agree that the majority rule requires design defect cases to be governed by risk-utility balancing. In adopting the risk-utility test for design defect, courts have said they are following the strong majority rule. A large body of scholarly commentators has stated that risk-utility is and should be the governing test.

What if the product is reasonably designed, and the warnings and instructions are reasonably adequate? Is it not possible that a product nevertheless could disappoint actual consumer expectations? The answer, of course, is yes. No one suggests, however, that actual consumer expectations be the test for liability. That would be totally subjective and unworkable. It is, of course, possible to frame an objective test that asks whether a product disappointed reasonable consumer expectations. Reasonable consumers, however, can only expect products that are reasonably designed and accompanied by reasonable warnings. No reasonable consumer has a fight to expect a product with a design that would have avoided injury but would have created risks of equal or greater magnitude to others using the product.

There is no way out of this dilemma. If a product is reasonably designed and is accompanied by reasonable warnings, the law has accomplished reasonable safety. That is all that a manufacturer can deliver, and that is all that the law should demand.

But consumer expectations live

Consumer expectations come into play in a special genre of cases. Case law in every jurisdiction recognizes that a plaintiff can establish product defect without identifying the type of defect. This class of cases once flew under the banner of res ipsa loquitur. In products liability litigation, some courts prefer to characterize these cases as involving liability based on "malfunction" or simply "circumstantial inference of defect."

The new Restatement attempts to capture this theory of liability in Section 3, which provides:

[sections] 3. Circumstantial Evidence Supporting

Inference of Product Defect

It may be inferred that the harm sustained

by the plaintiff was caused by a product defect

existing at the time of sale or distribution,

without proof of a specific defect, when

the incident that harmed the plaintiff:

(a) was of a kind that ordinarily occurs

as a result of product defect; and

(b) was not, in the particular case, solely

the result of causes other than product defect

existing at the time of sale or distribution.

Section 3 is applied most often when a product fails catastrophically because of a manufacturing defect. Typically the product is destroyed in the action, and the plaintiff is forced to rely on an inference of defect based on the factors set forth in Section 3. But Section 3 is not limited to manufacturing defects. Indeed, the black letter explicitly permits an inference of defect without specifying the particular defect. Comment b discusses the applicability of Section 3 to design litigation.

Yet another question

Driven to risk-utility balancing as the test for design defect by the inexorable force of logic and by the overwhelming body of case law, we reporters confronted one remaining question. Should risk-utility balancing be utilized not for the purpose of deciding whether a product should have been designed more safely, but rather whether it should have been marketed at all?

In our pre-reporter lives, Aaron Twerski and I had pondered this question in a lengthy article and had concluded, first, that courts decisively had rejected the idea of liability without defect based on risk-utility balancing and, second, that such product-category liability was untenable both theoretically and practically.(1) Suffice it to say that, with regard to some products, there was little disagreement within the American Law Institute that these conclusions were sound. Courts have not been willing to declare such products as cigarettes and handguns as defectively designed when there was no reasonable alternative available.

Although some academic critics support imposing design liability for this genre of products based on the fact that the products' over-all misery index outweighs the benefits and pleasure that people derive from them, there was no groundswell of support in any of the advisory groups or indeed at the annual meeting of members of the ALI for product category liability. Some people did argue, however, that courts should be able to declare products, such as egregiously dangerous toys, defective, even if reasonable alternative designs were not available. They contend that when a product represents a high degree of danger and has little or no special utility, the requirement of an alternative design should be dispensed with as a requisite for establishing a prima facie case.

As reporters, we faced a dilemma emanating from two sources.

First, we found almost no authority directly imposing a requirement of reasonable...