Retailers Escape Responsibility for Dangerous Foreign-Made Products

One of the little-discussed changes to Tennessee tort law contained in the Tennessee Civil Justice Act of 2011 is a change of the law concerning the liability of sellers of defective or unreasonably dangerous products.

Under the previous version of Tenn. Code Ann. §29-28-106, a seller of a product could be sued for strict liability under very limited circumstances. Lawyers representing plaintiffs were able to avoid the limitation on seller liability by filing breach of implied warranty claims against sellers.

Product sellers complained that they were often hauled into court for no reason other than to destroy complete diversity and thus permit the plaintiffs to maintain their claim in state court rather than federal court. Lawyers for plaintiffs maintained that they had the legal right to assert implied warranty claims against sellers and that the sellers faced no real risk of out-of-pocket loss in most cases because of contractual or common law indemnity.

Section 12 of the Tennessee Civil Justice Act of 2011 abolished the right of plaintiffs to bring implied warranty claims against sellers of products.1 Thus, for causes of action that accrue on or after Oct. 1, 2011, product sellers can be sued only under the following circumstances:

No “product liability action”, as defined in § 29-28-102(6), shall be commenced or maintained against any seller, other than the manufacturer, unless:

(1) The seller exercised substantial control over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the alleged harm for which recovery of damages is sought;
(2) Altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought;
(3) The seller gave an express warranty as defined by Title 47, Chapter 2;
(4) The manufacturer or distributor of the product or part in question is not subject to service of process in the State of Tennessee and the long-arm statutes of Tennessee do not serve as the basis for obtaining service of process; or
(5) The manufacturer has been judicially declared insolvent.

There will be fights over certain portions of the text of this statute (what is “substantial control”; what rises to the level of a “substantial factor” in causing harm) that will take years to resolve. That is a common problem with statutory changes. What makes the changes to Tenn. Code Ann. §29-28-106 different is that the legislation will bar the courthouse door to many victims of defective or unreasonably dangerous products.

Who will be barred? Those injured or killed by products manufactured by foreign manufacturers who do not make “brand name products.” In other words, those with claims against Honda or BMW will have no additional problems by the statutory change (although they may end up in federal court rather than state court, but that is a different kind of problem). The more serious problem arises when a $50 widget sold by Big Box Store kills or maims someone.

This example drives the point home. Consumer buys a $50 blender from Big Box Store. Consumer uses the blender to make a pitcher of daiquiris to celebrate the new purchases. When the machine is turned on, the glass pitcher explodes, sending shards of glass around the kitchen, one of which lands in the eyeball of the Consumer, costing him the sight in his left eye. Subsequent investigation reveals that the glass used in the blender pitcher is inappropriate when using the blender to crush ice. (Exactly why else would one use a blender?) Thus, Consumer wants to file a products claim.

Consumer looks at the box and the name of the manufacturer is not revealed. The fine print says that the blender was made in China for Worldwide Imports of New Mexico. Research on the Internet reveals that Worldwide Imports is a distributor that never touches the product and plays no role in its design, labeling, etc.

A letter to Big Box Store inquiring about the name of the manufacturer goes unanswered. A letter to Worldwide Imports yields the same result.

Under the old law, Consumer could have sued Big Box Store, obtained discovery via Rules 33 and 34 of the Tennessee Rules of Civil Procedure on the identity of the manufacturer and via Rule 45 of Worldwide Imports on the same subject. The manufacturer could have been added to the case or not, depending on the cost of doing so and the likelihood of getting service of process and jurisdiction over that manufacturer. Big Box Store could have protected itself from loss by requiring an indemnification agreement before purchasing the product for resale.

Under the new law, how does Consumer identify the manufacturer now? Truly, unless either Big Box Store or Worldwide Imports wants to cooperate, Consumer is out of luck. Our rules of court have no mechanism to require a retailer or distributor to share this information.

Even if the consumer is able to figure who the manufacturer is, obtaining service of process is difficult and cost-prohibitive in smaller cases. It will be a real challenge (and investment of time and money) to prove that many foreign companies, especially those in China, are (or are not) subject to the jurisdiction of Tennessee courts. It remains to be seen what level of effort must be used to be able to persuade a court that the “manufacturer … is not subject to service of process in the State of Tennessee and the long-arm statutes of Tennessee do not serve as the basis for obtaining service of process?” What is clear is that retailer defendants will argue that whatever the plaintiff did was insufficient, thus further increasing the cost of litigation.

The cost and uncertainty associated with these efforts means that relatively small products liability claims against foreign, non-brand name manufacturers will be rejected by lawyers. Our office has already rejected one such case.

What is particularly ironic about this change to our law is that the Tennessee Civil Justice Act of 2011 was sold to the public as an effort to create more jobs in Tennessee. This aspect of the law protects retailers who buy defective goods from foreign companies. This may create more jobs in foreign countries, but does little to create jobs in Tennessee and, to the extent it might, does so at the expense of Tennesseans injured by defective products.

Note

  1. A plaintiff may still bring claims for breach of express warranty.

John Day JOHN DAY, a trial lawyer in Brentwood, represents plaintiffs in all types of personal injury and wrongful death litigation.