In search of a remedy: do state laws exempting sellers from strict product liability adequately protect consumers harmed by defective Chinese-manufactured products?

• Author: Feeney, Adam

1. INTRODUCTION II. BACKGROUND A. The Birth of Strict Liability for Nonmanufacturers B. Rationales for Strict Liability for Nonmanufacturers C. Criticisms of Strict Liability for Nonmanufacturers D. Laws Limiting the Liability of Nonmanufacturers 1. The Model Uniform Product Liability Act 2. State Limits on Nonmanufacturer Liability a. Laws That Absolutely Immunize Nonmanufacturing Sellers from Strict Liability b. Laws That Immunize Nonmanufacturing Sellers from Strict Liability with an Exception for Cases Where a Court Cannot Gain Jurisdiction over the Manufacturer c. Laws That Immunize Nonmanufacturing Sellers from Strict Liability with an Exception for Cases Where a Court Has Declared the Manufacturer Insolvent d. New Jersey's Nonmanufacturing Seller Strict Liability Statute e. Sealed Container Defective Imports from China f. Why Focus on China? g. The Difficulty for US. Citizens to Sue in Chinese Courts h. The Ability of U.S. Courts to Gain Jurisdiction over Chinese Manufacturers i. The Difficulty of Enforcing U.S. Court Judgments in China j. China's Bankruptcy Law III. ANALYSIS A. This Note's Assumptions B. Current State Laws Limiting the Liability of Nonmanufacturers Fail to Protect Consumers Injured by Defective Chinese Products C. The Model Act Protects Consumers Injured by Defective Chinese Products IV. RECOMMENDATION V. CONCLUSION I. INTRODUCTION

   A wave of defective Chinese-manufactured products hit U.S. shores in the past few years, (1) creating a firestorm of bad publicity for the Chinese manufacturers and the U.S. retailers of these products. (2) This on-going crisis coincides with a U.S. state-level trend of enacting laws limiting the liability of sellers of defective products and shifting liability to the manufacturer. (3) This Note examines the intersection of this crisis and this trend by analyzing whether state laws limiting the liability of sellers of defective products offer adequate protection to consumers injured by defective Chinese-manufactured products.

   Part II of this Note examines the juridical rise of the doctrine of strict liability for all sellers of defective products and the resulting backlash, leading to state laws generally exempting nonmanufacturing sellers from strict liability. Part II categorizes these state laws based on the exceptions they provide that allow courts to hold the seller strictly liable. Part II also examines the barriers faced by U.S. consumers harmed by defective Chinese-manufactured products when attempting to sue the manufacturer in U.S. or Chinese courts.

   Part III examines whether state laws exempting sellers of defective products from strict liability offer adequate protection to consumers harmed by Chinese-manufactured products. Part III analyzes these laws under the categories established in Part II. Part III also examines and discusses the limits of the protection that the Model Uniform Product Liability Act (4) affords consumers harmed by defective Chinese products. Part 1V suggests measures that states can take when drafting laws limiting the product liability of sellers of defective products to provide adequate protection to consumers harmed by Chinese-manufactured defective products.

2. BACKGROUND

   1. The Birth of Strict Liability for Nonmanufacturers

      The doctrine of strict tort liability for products first appeared in Escola v. Coca Cola Bottling Co., (5) a 1944 case in which Justice Traynor, in a concurring opinion, advocated going beyond the majority's res ipsa loquitur (6) approach to a strict liability standard for manufacturers. (7) Twenty years later, strict liability for manufacturers gained the support of a majority of the California Supreme Court in the landmark case Greenman v. Yuba Power Products, Inc. (8) The Greenman court stated that "[a] manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being." (9) The California Supreme Court extended strict liability to sellers of injury-causing defective products in Vandermark v. Ford Motor Co. (10) In Vandermark the court held both the manufacturer and the retailer of a defective car strictly liable for injuries caused to its driver, despite the fact that the manufacturer had delegated the responsibility of the final safety inspection to the car dealership and the dealership had disclaimed liability for personal injuries in its sales contract with the injured driver. (11)

      The American Law Institute's publication of the Restatement (Second) of Torts (12) in 1965 showed the legal community's widespread acceptance of the strict liability doctrine by applying strict liability to both manufacturers and sellers of defective goods. (13) The Restatement holds sellers strictly liable for the injury-causing, defective goods they sell, even if the seller "exercised all possible care in the preparation and sale of his product." (14) The Restatement defines defective products as those "in a condition not contemplated by the ultimate consumer, which will be unreasonably dangerous to him." (15) The Restatement states that strict liability applies to all nonmanufacturers, i.e., "any wholesale or retail dealer[s] or distributor [s]," that sell defective products. (16)

      The vast majority of states incorporated the strict liability principles of Greenman, Vandermark, and the Restatement into their state laws in the following years. (17) The Restatement (Third) of Torts: Products Liability reaffirmed the principle that courts should apply strict liability to nonmanufacturers. (18)

   2. Rationales for Strict Liability for Nonmanufacturers

      Proponents of strict liability for nonmanufacturers advance several rationales in support of their position. (19) One is the "marketing enterprise" argument articulated in Vandermark, stating that "[r]etailers like manufacturers are engaged in the business of distributing goods to the public. They are an integral part of the overall producing and marketing enterprise that should bear the cost of injuries resulting from defective products." (20) Justice Traynor, who is in many ways the father of strict liability, (21) articulated a second strict liability rationale in Vandermark: that strict liability for nonmanufacturers affords injured consumers maximum protection. (22) He pointed out that "[i]n some cases the retailer may be the only member of that enterprise reasonably available to the injured plaintiff." (23) Justice Traynor also argued that nonmanufacturers are in a position to pressure manufacturers to produce safer products. (24) Proponents of strict liability further argue that nonmanufacturers will likely be able to seek indemnification from manufacturers and thus will suffer minimal harm if they are not at fault. (25)

   3. Criticisms of Strict Liability for Nonmanufacturers

      Despite the widespread adoption of strict liability for nonmanufacturers, commentators have presented several arguments against this doctrine. (26) One major argument posed by commentators is that nonmanufacturers have little to no actual control over the goods they sell. (27) They simply receive the goods in sealed packages and sell them to consumers, without taking any action to contribute to the defective nature of the products. (28) Thus, critics of the Vandermark doctrine say the doctrine essentially makes nonmanufacturers insurers of the products they sell without having a means to prevent defects in the products. (29) Further, because the nonmanufacturers did not cause the defect, they are ill-equipped to defend against a lawsuit. (30)

      Critics also attack the argument that nonmanufacturers have a unique ability to influence manufacturers to make products safer. (31) Critics say that, given the increased ability of courts to obtain personal jurisdiction over nonresident manufacturers since Vandermark manufacturers now feel just as strongly threatened by a direct suit from consumers as they do from a nonmanufacturer's indemnification suit. (32) Other factors, such as public relations, also motivate manufacturers to reduce the number of defective products they put on the market. (33)

      Finally, critics argue that the indemnification system is wasteful and inefficient. (34) Critics contend that nonmanufacturers will incur significant legal costs to obtain indemnification, despite the fact that the nonmanufacturers realistically were in no position to prevent the defects. (35) Nonmanufacturers must participate in two lawsuits, one to defend the consumer product liability action, and a separate suit for indemnification against the manufacturer. (36) Further, since the nonmanufacturer has the burden of proving that the product was defective when it left the manufacturer's hands, an indemnification attempt may fai1. (37)

   4. Laws Limiting the Liability of Nonmanufacturers

      1. The Model Uniform Product Liability Act

         Criticism of the Vandermark doctrine of strict liability for nonmanufacturers created a regulatory movement to limit the liability of nonmanufacturers in product liability actions. Established under the Ford Administration and continued under the Carter Administration, the Federal Interagency Task Force on Product Liability, chaired by the Department of Commerce and receiving input from ten federal agencies, researched product liability over a span of several years. (38) The Task Force found two major problems with U.S. product liability law: subjective insurance company ratemaking procedures and diverse product liability standards that lead to uncertainty. (39) As a result, the Task Force attempted to bring uniformity to U.S. product liability law by drafting the Model Uniform Product Liability Act (the Model Act), first published in 1979. (40)

         While the Model Act is sweeping in scope, (41) this Note focuses specifically on the Model Act's limitations on nonmanufacturer liability. The Model Act repudiates the Vandermark doctrine of strict...