Against liability for private risk-exposure.

• Author: Scheuerman, Sheila B.

"Proof of negligence in the air, so to speak, will not do."

Palsgraf v. Long Island Railroad Co. (1)

INTRODUCTION I. "THE GREAT TOYOTA PANIC OF 2010". II. DECADES OF DIVIDE OVER NO INJURY SUITS A. Starting with Standing B. Damages or Defect Manifestation as an Essential Element 1. Damages or Injury as Essential Element 2. Malfunction as an Essential Element 3. Maybe There is a Lack of Causation? C. No Lost Benefit of the Bargain, Therefore No Diminished Value III. ALLOWING NO INJURY CLAIMS: RISK-LIABILITY A. Fraud Claims-"A Class By Themselves". B. Timing Is Everything C. Express Recognition of Risk-Liability IV. AGAINST LIABILITY FOR PRIVATE RISK-EXPOSURE A. Risk Is Not Harm B. Risk Should Not Be Cognizable Harm 1. Consequentialist Theories 2. Individual Justice Theories CONCLUSION INTRODUCTION

In March 2010, Saturday Night Live ran a fake television commercial that showed a young couple driving home after a leisurely walk in the woods. All is well until their Toyota Prius suddenly accelerates out of control and the couple screams in terror. The commercial ends with the logo for one of Toyota's competitors and the words: "Ford. We make hybrids too." (2) The skit parodied what some have called "The Great Toyota Panic of 2010" (3) concerning allegations that Toyota vehicles had a defect causing sudden unintended acceleration (SUA). Although government agencies later concluded that most SUA incidents were the result of driver error, Toyota owners filed more than 200 SUA cases against Toyota. (4)

Though it is not unusual for high-profile product incidents to result in mass litigation, (5) what is notable about the claims against Toyota is that many of the plaintiff-vehicle owners seeking damages for SUA never actually experienced a SUA problem. (6) Nor did they allege that they suffered emotional harm--distress or anxiety caused by the perceived risk that their Toyota might experience SUA. (7) To those unfamiliar with this type of litigation, the Toyota cases might prompt an obvious question: Can a plaintiff who has not yet suffered an injury sue based on the risk of future harm? One would think this question is easily settled. As Judge Frank H. Easterbrook of the United States Court of Appeals for the Seventh Circuit famously stated, "[n]o injury, no tort." (8) And indeed, many courts have rejected these suits on grounds ranging from lack of constitutional standing (9) to lack of causation. (10) Yet the courts are intractably divided over whether these "no injury" or "unmanifested defect" suits are cognizable. This conflict has created incentives for forum-shopping as plaintiffs search for a jurisdiction friendly to no injury lawsuits and class certification. (11) Numerous manufacturing industries, including automobiles, (12) beds, (13) cosmetics, (14) pharmaceuticals, (15) and medical devices., (16) have faced claims for damages now based on allegations that their products might malfunction in the future.

This Article attempts to clear the confusion surrounding these claims. Stripped to their core, these no injury lawsuits permit plaintiffs to pursue private tort and warranty claims based on mere exposure to risk. As I explain, however, such a fundamental change is not justified by either economic or moral rationales. Rather, I argue that manifested harm is an essential element of tort and warranty claims and thus these no injury cases should be rejected. (17) Part I of this Article describes the Toyota litigation, the most recent example of the no injury genre. Part II provides a brief history of no injury lawsuits. These cases exist at the "borderland of tort and contract." (18) These suits originated as tort claims in the 1980s but mostly were dismissed for failure to allege injury. In the 1990s, the plaintiffs shifted the legal theory from tort to contract and focused on warranty theories. The current trend combines this focus on warranty claims with statutory and common law fraud theories. Part II also analyzes the success (and lack thereof) of these theories over the past three decades and the wide variety of treatment given by the courts.

Part III explores the risk-exposure liability at the heart of these suits. Here, I explain how courts implicitly or, in a few rare cases, explicitly have adopted a risk-liability standard. It could be that these jurisdictions simply broadened the meaning of actual harm to include risk. If that were true, these cases could fit comfortably within traditional doctrine and theory. But Part IV.A argues that risk is not harm. In this section, I explain the distinction between risk and harm and conclude that risk is merely an estimate of whether some adverse event may happen in the future.

Even though risk is not harm, tort and warranty law could abandon the traditional requirement of harm. Part IV.B examines whether the two dominant theories of private law, consequentialism and morality, support abandoning a harm requirement for private law claims. Ultimately, I conclude that risk-liability is inconsistent with deterrence, compensation, corrective justice, or civil recourse theories. Simply stated, jurisdictions allowing these no injury suits have erred. Mere risk exposure should not be compensable under private law.

1. "THE GREAT TOYOTA PANIC OF 2010"

   Fueled by massive media coverage (19) and political grandstanding, (20) concern about "sudden acceleration" swept the nation in 2010. (21) "Stop driving" your Toyota, (22) said the U.S. Secretary of Transportation. (23) Why? It might suddenly accelerate out of control. (24)

   Nearly a year later, an investigation by the National Highway Traffic Safety Administration (NHTSA) and the National Aeronautics and Space Administration (NASA) concluded that driver error (25) was the most common cause of the reported sudden acceleration incidents. (26) "[V]ehicle inspections, which included objective evidence from event data recorders, indicated that drivers were applying the accelerator and not applying the brake (or not applying it until the last second or so)...." (27) Indeed, consistent with the NHTSA findings, a New York jury recently rejected a Toyota Scion owner's claim that the vehicle's floor mats caused him to suddenly accelerate and returned a verdict for Toyota. (28)

   The NHTSA and NASA studies did find two mechanical issues that could be connected to the acceleration problems, (29) and Toyota issued multiple recalls to address those issues. (30) As part of those recalls, Toyota fixed over five million vehicles in the United States. (31) In addition, Toyota paid a landmark $48.8 million fine to the NHTSA based on its failure to announce the recalls quickly enough. (32)

   But that did not stop the lawyers. More than 200 lawsuits have been filed against Toyota. (33) The Judicial Panel on Multidistrict Litigation transferred and consolidated the federal cases before Judge James Selna of the United States District Court for the Central District of California. (34) One of these suits is a putative class action that seeks compensation for the alleged diminished value of all makes and models of Toyotas because of an alleged SUA defect in every Toyota. (35) The proposed class includes consumers who did not experience any sudden acceleration problem at all; presumably their Toyotas work just fine. (36) Indeed, more than half of the lead plaintiffs do not allege that they experienced any SUA problem. (37)

   How are consumers who did not experience any unintended acceleration nonetheless injured? In short, these suits are premised on risk: The risk that the vehicle might suddenly accelerate supposedly decreases the car's value. Although premised on a mere risk of injury, (38) these diminished value cases alone could cost Toyota more than $3 billion. (39)

   The federal Toyota multidistrict litigation reflects the divergent approaches courts have taken to this type of litigation. (40) For instance, applying California law, Judge Selna denied Toyota's motion to dismiss based on some plaintiffs' failure to allege sudden acceleration problems in their vehicle. (41) Later, however, when addressing whether California law could apply to a nationwide class, (42) Judge Selna noted that "a number of states, including Alabama, North Dakota, Ohio, Pennsylvania, and Wisconsin, would preclude or would highly likely preclude some or all of the claims asserted by Plaintiffs whose products have manifested no defect." (43) Accordingly, Judge Selna denied the plaintiffs' request to apply California law to all claims. (44) Thus, some Toyota owners who did not experience any sudden acceleration problem may have a claim, but others do not. The result will depend on which state's law applies to the claim.

2. DECADES OF DIVIDE OVER NO INJURY SUITS

   The Toyota cases are just the latest incarnation of the no injury lawsuit. These suits have been around for decades, each wave following the same basic fact pattern: the plaintiffs purchased a product; the product malfunctioned for other consumers; the plaintiffs' products have not yet malfunctioned in any way; and the plaintiffs have not suffered any personal injury or property damage, nor do they claim any emotional harm or fear of injury. (45) Although the fact pattern has remained the same, the legal theories have shifted from an initial focus on tort law to claims based on contract theories to the current focus on fraud and consumer protection based claims. Here, "the fields of tort and contract meet and are interwoven." (46)

   The initial wave of no injury cases began in the 1980s and principally involved two products: vehicles (47) and mechanical heart valves. (48) Plaintiffs typically asserted a mix of products liability, negligence, and warranty claims (49) and often sought aggregation as a class action. (50) Under traditional tort principles, a consumer must show an injury to assert a negligence or products liability claim against a manufacturer. (51) This injury requirement, however, proved a...