Thearchives.net - PowerPoint PPT Presentation

Title: Thearchives.net


1
BUSINESS TORTS

• Chapter 8

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Torts in the Business Setting

• There is no such thing as a business tort
• By definition, this means torts that concern
  businesses
• Often cases with businesses are settled out of
  court
• There are usually big awards, as plaintiffs view
  businesses as deep pockets

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The Types and Costs of Business Torts

• Costs of Torts
• Direct costs range from 40-150 billion per year
• Businesses lobby for statutory limits on tort
  liability
• Pain suffering and punitive damages place a
  high sticker price on certain behavior

• Types of Torts
• Intentional
• Negligence
• Strict Liability
• Torts are traditionally common law
• More and more statutes are playing an important
  role in this area of the law

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Torts Particular To Businesses

• Misrepresentation
• Interference With Contractual Relations
• Interference With Prospective Advantage
• Premises Liability
• Product Liability
• Consumer Products Negligence
• Consumer Products Strict Liability
• Ultrahazardous Activity

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Misrepresentation

• Deliberate Deception
• The tort may be called fraud, misrepresentation,
  fraudulent misrepresentation or deceit
• Intentional Misrepresentation
• Relationship of parties is a factor in creating
  legal duties
• 1) Representation has been made knowingly
• 2) Without belief in its truth, OR
• 3) Recklessly and careless whether it is true or
  false
• Negligent Misrepresentation
• A failure to meet a duty of care, i.e. attorney
  fails to file documents
• See Squish La Fish v. Thomco, p. 226

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Squish La Fish, Inc. v. Thomco Specialty
Products, Inc., p. 226

• Squish holds patent on Tuna Squeeze (squeezes
  water oil from tuna cans) ProPack is hired to
  assist with store displays
• ProPack brings in Thomco for advice on adhesive
  for the displays
• Thomco says the adhesive would wash off Squish
  relies on the advice, but adhesive wont wash off
• A Squish distributor is not happy with the
  situation finally cancels their contract
• Squish sues Thomco for negligent
  misrepresentation
• District Court grants summary judgment for
  Thomco Squish appeals
• Held Reversed and remanded for disputed issues
  to go before the trial court. There may be
  indirect reliance by Squish through ProPack on
  Thomcos representations

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Interference With Contractual Relationsand
Interference With Prospective Advantage

• Interference with Contractual Relations
• Breaking the contract benefits a 3rd party
• 1. Existence of a contractual relationship
• 2. 3rd party knows about the contract
• 3. 3rd party intentionally interferes with the
  contractual relationship
• See Robi v. Five Platters, p. 227

• Interference With Prospective Advantage
• A business attempts to improve its place in the
  market by interfering with anothers business
• Unreasonable improper manner of interference
• Predatory behavior, not merely competitive
• See Monette v. AM-7-7, p. 229

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Robi v. Five Platters, p. 227

• Platters singing group formed in 1953
• During 1960s Ram buys shares of the Five Platters
  (FPI) New group is The Platters
• Robi (one of the original group members) still
  tries to work as The Platters
• FPI sends letters to booking agents, promoters
  threatens to sue if they use Robi fearful, the
  promoters, agents, etc. cancel Robi income and
  business opportunities are lost
• Robi sues FPI for interference with contractual
  relations
• 3.5 million in damages awarded FPI appeals
• Held Affirmed. There is ample evidence of FPIs
  harassing behavior.
• Note FPI bought shares of stock, not the name
  The Platters.

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Monette v. AM-7-7, p. 229(Classic Interference
Case)

• Monette buys a bread route buys bread products
  from the AM-7-7 Baking Co.
• AM-7-7s owner doesnt like Monette says hes
  going to boot him out of here
• AM-7-7 has employee ride route takes down the
  customer list

• Am-7-7 takes over route refuses to sell bread to
  Monette
• Monette sues for intentional interference with
  prospective economic advantage awarded 60,000
  AM-7-7 appeals
• Judgment affirmed.

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Premises Liability

• Accidents that result from negligence of the
  business
• Common are slip-and-fall cases
• Not providing sufficient security is a newer area
  of this tort
• Problems are especially in high crime areas
• Issue Owner knew or should of known of
  problem in the area
• Issue Did owner act reasonably to protect
  patrons?
• Ways owners may protect themselves lighting,
  safety patrols, posters, warnings
• See Ann M v. Pacific Plaza, p. 230

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Ann M. v. Pacific Plaza Shopping Center, p. 230

• Ann M. was working alone in a San Diego store in
  Pacific Plaza (strip mall)
• She opens the store at 800 a.m. man with a
  knife enters store, rapes her, robs the store
  flees is not caught Ann M. sues shopping center
  for failure to provide proper security
• Trial court grants Pacific Plaza summary
  judgment appeals court affirms she appeals to
  CA Supreme Ct.
• Held Judgment affirmed
• Landowners must maintain reasonably safe
  conditions must take reasonable steps to secure
  common areas against foreseeable criminal acts
• Requiring security guards will force landlords to
  become insurers of public safety
• Violent assaults were not foreseeable to require
  the store to have security guards in common areas

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Product Liability

• See Is Japan Really Different?, p. 232
• It is usually said that Japan has less litigation
  and fewer lawyers
• Some analysts say fewer lawsuits make Japan more
  competitive
• In fact, the US and Japanese tort systems are
  similar (even if the rules are different)

• Liability of producers and sellers of goods re
  defective products
• General term applied that deals primarily in
  tort law
• Involves some contract law
• Involves some statutory law

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History of Consumer Products and Negligence

• In the 19th century courts, there was privity of
  contract requirement--a contractual relationship
  with the manufacturer was needed
• Burden on consumer
• If there was no relationship, caveat emptor
  applied--Let the buyer beware
• This changed with MacPherson v. Buick Motor
  Company, p. 233

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MacPherson v. Buick Motor Company, p. 233
(1916 case)

• Buick sells cars to dealers
• NY dealer sells car to MacPherson
• Wheels made by another company wheel collapses,
  causing accident that results in injury
• MacPherson files a negligence suit Buick says it
  has no privity with MacPherson trial court holds
  that privity not required MacPherson wins
• NY Ct. of Appeals holds manufacturer has primary
  control over product design safety
• Defects could have been discovered by reasonable
  inspection, which was omitted
• Buick is responsible for the finished product
• Judgment affirmed

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THE NEW NEGLIGENCE STANDARD

• Manufacturer must exercise reasonable care under
  the circumstances
• Were the dangers foreseeable?
• Care must be taken to avoid misrepresentation
• Defects and dangers must be revealed
• Causal connection must be present between the
  product or the design defect and the injury
• By the 1960s, courts began to apply the strict
  liability doctrine to manufactured products

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Consumer Products and Strict Liability

• Manufacturers are strictly liable for defective
  products
• The courts ask
• Was the product defective?
• Did the defect create an unreasonably dangerous
  product or instrumentality?
• Was the defect a proximate cause or substantial
  factor of the injury?
• Did the injury cause damages?
• Courts do not worry about carefulness, due care,
  reasonableness, etc.
• See also Strict Liability Goes Global, p. 249
• The EU uses the strict liability standard
  involving defective consumer goods
• Japan is expected to have strict liability by now

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Strict Liability Created Through Warranties Under
Contract Law

• Implied Warranty of safety
• Implied Warranty of Merchantability
• Under the UCC Implied Warranty For Fitness For A
  Particular Purpose
• Implied AT LAW--whether manufacturer wants the
  warranty for the product or not

• Express Warranty
• Guarantee of safety or performance
• By model
• By statement
• By contract
• By Advertising See Baxter v. Ford Motor
  Company, p. 236

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Baxter v. Ford Motor Company (1932 case), p. 236

• Baxter buys Model A
• Printed material states Triple Shatter-Proof
  Glass--will not fly or shatter under the
  hardest impact. . .it eliminates the danger of
  flying glass
• Rock hits windshield-Baxter loses left eye
• Trial court did not allow advertising to be
  admitted in evidence said there was no privity
  of contract
• Baxter appeals

• Held Trial court erred in taking the case from
  the jury.
• Representations of Ford were false and Baxter
  relied on them.
• Reversed and remanded and to grant a new trial
  allowing advertisement to be admissible evidence

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Strict Liability Through Advertising
Warranties-Cipollone v. Liggett , p. 238 (in the
reading)

• 1940s/1950s Liggett advertising says no health
  problems from smoking
• Rose Cipollone dies of lung cancer in 1984
• Liggett should have known that smoking isnt
  healthy--is strictly liable under express
  warranty in UCC 2-313

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Strict Liability in Tort Law--California Changes
Law Greenman v. Yuba Power, p. 238

• Wife buys husband power tool
• 2 years later wood flies out of machine, striking
  Greenmans head
• He alleges breaches of warranties and negligence
• However S. Ct. of Calif. affirms trial court
  decision in favor of Greenman and says that the
  mfgr. is strictly liable in tort
• By mid-1970s every state supreme court had
  adopted strict liability rule

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Strict Liability and the Failure To Warn
Standard, p. 242(Manufacturers wonder how far
the laws will go)

• Gun mfgr. is liable for failure to warn of
  possible damage to users hearing from long-term
  exposure to gun fire
• Diet-food producer is liable for failure to warn
  about using adult diet food as baby food
• Commercial pizza dough roller machine mfgr.
  liable when worker sticks hands in machine to
  clean it machine is on
• Campho-Phenique (external medicine) states Keep
  out of reach of children. For external use.
  In case of ingestion--seek medical help call
  poison center. Not strong enough to explain
  dangers.
• Johnson Johnson pays 8.85 million to a liver
  transplant patient due to the fact years of
  drinking taking Tylenol had destroyed his
  liver. Company knew drinking taking regular
  doses of Tylenol could damage liver.
• See Morales v. American Honda, p. 240

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Morales v. American Honda Motor Co., p. 240

• 9-year-old Gary drove Honda Motorcycle into path
  of pick up truck as he left an unpaved farm road
• Driver of pickup was not at fault--her view of
  the dirt road was obstructed by bales of hay
  she had the right of way
• Severe injuries to Gary, including permanent
  brain damage medical expenses were more than
  320,000
• Mother brings lawsuit trial court grants summary
  judgment against Morales
• Question Were the warnings given with the
  motorcycle a contributing cause of the accident?
• Held This is a question that should be
  presented to the jury for determination
• Summary judgment vacated and case remanded

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Strict Liability Design Defects, pp. 242-243

• Worker receives 750,000. Co-worker removes metal
  plate covers machine with cardboard (failing to
  put plate back). Worker falls into machine and
  loses his leg. It is a manufacturing design
  defect that machine can run when the metal plate
  is removed.
• Restaurant employee badly burned. He tries to
  retrieve an item that fell from his shirt pocket
  into French Fry machine.
• Child pushed emergency stop button on an
  escalator, causing person to fall, and be
  injured. Its a design defect to make a button
  red--kiddies might like it and push it!!!
• A man drives a riding mower up a steep hill,
  mower rolls over he is cut by the blades.
  Manufacturer should design it to shut off
  automatically when it leaves ground.
• See also Its Nerf Basketball. . ., p. 246

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Its Nerf Basketball for the Ivy League, p. 246

• Cornell freshman tries to dunk the ball, hits
  hand on rim, falls down, hurts both wrists sues
  university and basketball hoop maker for
  negligence and strict liability
• Claims rigid rims caused or enhanced his injuries
• Cornell asks for summary judgment noting what
  goes up must come down
• Judge denies summary judgment case goes to trial

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Pree v. Brunswick Corp, p. 243

• During 130 a.m. lightning storm, boat tries to
  dock in choppy waters
• Pree falls off boat (had been partying
  drinking)
• Injured by uncovered spinning propeller blades
• Pree sues Brunswick claiming propeller should
  have been covered
• Jury rules for Brunswick
• Pree appeals, claiming propellers without guards
  are defective

• Chairman of National Boating Safety Advisory
  Councils Propeller Guard Sub-committee testifies
  that propeller guards are not recommended. Its
  better not to cover them. If covered, it may
  cause entrapment.
• Judgment affirmed
• Brunswick wins

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Strict Liability and Unknown Hazards or Latent
Defects

• Dangers not known at the time of the products
  manufacture
• Hazard associated with the product is not learned
  for many years
• See Borel v. Fibreboard Paper, p. 244
• Consumer Expectation standard used by courts
• What is the expectation of an ordinary customer
  regarding safety of a product?

• Asbestos Industry-- has paid billions of dollars
  to tens of thousands of plaintiffs
• Silicone Breast Implants--3 billion settlement
  over 220,000 women affected
• Manufacturers must have recalls or warnings when
  hazard is detected

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Borel v. Fibreboard Paper Products Corp., p.
244

• Borel is exposed to asbestos from 1936-69 as he
  worked on insulation jobs 1969, is diagnosed
  w/pulmonary asbestosis
• Has lung cancer in 1970 and lung is removed he
  sues against 11 manufacturers dies soon
  thereafter heirs continued litigation 4 suits
  settled one was dismissed six, including
  Fibreboard and Manville are left jury finds them
  liable under strict liability manufacturers
  appeal
• Held Manufacturers Petition for Rehearing is
  denied
• No manufacturer ever warned of the dangers of
  inhaling asbestos dust is their responsibility
  to inform user or consumer of risks
• Here there is failure to give adequate warning
• Manufacturers must keep up with scientific
  knowledge have a duty to test and inspect their
  products
• Bear ultimate burden regarding their conduct and
  duty

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Market Share Liability or Enterprise Liability

• Used when, because of latent effect, plaintiffs
  do not know the specific manufacturer
• Arose in response to DES drug suits (see p. 246)
• May sue any or all of the manufacturers in
  question
• Manufacturers share liability according to their
  share of the market for the drug

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Joint and Several Liability

• Plaintiffs may sue any or all manufacturers to
  share the liability created
• Any of the defendant-manufacturers may be held
  responsible for all damages
• Some states have abolished it
• The tendency is to use market share liability
  (though that term is not actually used by courts)
• See Collins v. Eli Lilly, p. 247

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Collins v. Eli Lilly Co., p. 247

• Collins mother took DES during pregnancy
• Drug is later banned due to cancer risks to
  reproductive organs of adult female offspring of
  women who took the drug
• Collins develops ovarian cancer has radical
  cancer surgery
• Mother didnt know exactly who manufactured the
  DES she took sues a dozen manufacturers who
  produced it
• Held She can sue any of them--they pay
  proportion of damages based on the share of the
  market they had at time of the injury
• Q Between the manufacturer (who provided the
  product) and the defendant (who was not at
  fault), who should bear the cost of injury?
• A The manufacturer

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Defenses To Strict Liability

• Product Misuse or Abuse
• Assumption of Risk
• Tobacco and alcohol use are controversial areas
  so far courts havent applied the defense to
  users
• Sophisticated Purchaser or Knowledgeable
  Purchaser
• i.e. another mgfr.
• or Air Force employees who handle certain
  chemicals
• Some statutory limits exist

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Ultrahazardous Activity

• Common law rules developed about uncommon
  activities where utmost care is needed
• i.e. use of explosives, transport of dangerous
  chemicals, crop dusting
• See Old Island Fumigation (in text on p. 250)

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Product Liability Reform

• Setting caps on awards
• Limiting or abolishing punitive damage awards
• Manufacturers argue liability costs make American
  products less competitive
• Threat of liability forces good products off the
  market
• Free market economists say the market will adjust
  as to which products are good or not
• Trial lawyers argue for no changes in the present
  system
• Some middle ground may be the outcome of opposing
  views
• See p. 251 for some of the recommendations
• See What Would Tort Reform Lead To? p. 252