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Will the Middleman Get Stuck with the Bill?


Will the Middleman Get Stuck with the Bill?

September 13, 2019

This article originally appeared in Goldberg Segalla’s Product Liability Playbook. Read the issue here.

From the manufacturer to the distributor to the retailer, most products pass through numerous hands before reaching the consumer. If a defect causes an injury, the obvious target is the manufacturer. But what if the manufacturer is unknown, bankrupt, broke, or unavailable?

In states like Pennsylvania, the whole chain of distribution can be strictly liable as “sellers” that put a defective product into the stream of commerce. Traditionally, each could be responsible for an equal share of all of the damages, much like handing a waiter a stack of credit cards to cover a bill, regardless of how much each individual cardholder ate.
Strict liability is a “no fault” concept with the rationale that a consumer is most protected when all sellers must sell defect-free products regardless of whether they exercised due care. Bankrupt defendants were often disregarded, leaving more to shoulder for those companies still standing. (See Ottavio v. Fibreboard Corp.)

In 2011, Pennsylvania passed the Fair Share Act, making each defendant liable only for its jury-decided percentage of liability (with some exceptions). Courts thereafter remained unsettled on whether the Fair Share Act applied to certain strict liability defendants. In 2014, the Pennsylvania Supreme Court issued Tincher v. Omega Flex, Inc., holding that negligence principles have a place in strict liability, rejecting that sellers are absolute “guarantors,” and requiring that sellers be reasonable in balancing the risk of harm and the costs of taking precautions.

Tincher presented unique challenges for asbestos cases in which claimants are often exposed to dozens of products over many years. In Roverano v. John Crane, Inc., the Superior Court (intermediate appellate) denied asbestos cases a “pass” on the Fair Share Act and remanded the case for the jury to determine the comparative fault of each defendant.

Roverano, an electric company worker, was exposed to a variety of asbestos products from 1971 to 1981 and developed lung cancer in 2013. At trial, the jury was charged with determining only if Roverano was exposed to asbestos from each defendant, and whether such exposure caused his lung cancer. Eight defendants were left standing on the verdict sheet and each was stuck with a one-eighth hit of a $6.4 million verdict. The defendants contended that liability could and should be apportioned under the Fair Share Act, while the plaintiff responded that doing so would always be speculative. The Superior Court vacated the verdict, holding that the Fair Share Act mandates the factfinder to allocate liability among joint wrongdoers based on appropriate evidence. Accordingly, the Roverano court also directed that settled bankrupt defendants be on the verdict sheet to be apportioned fault.

This year, the Pennsylvania Supreme Court heard arguments on the plaintiff’s appeal of Roverano, and a decision is expected soon. The implications for all strict-liability defendants are profound. Claims against defendants in a chain of distribution present similar challenges as those against asbestos defendants in that distinct conduct is hard to quantify, and developing theories of apportionment may require thoroughness and creativity. A ruling to support the sweeping reach of the Fair Share Act in Roverano may bring fairness to sellers in the chain with the least involvement in any alleged defect, and will allow defendants to share the verdict sheet with certain bankrupt entities. This approach could develop alongside Tincher, making a risk utility analysis more dynamic and opening the door to new defenses.

Or, the Supreme Court could uphold the traditional approach, possibly limiting the holding to asbestos cases (which would continue the uncertainty for the rest). If multiple strict-liability defendants are subject to per capita apportionment, it would be consistent with Pennsylvania’s refusal to adopt middle-man defenses such as the “innocent seller” or the “sophisticated user” doctrines, and refusal to protect sellers of used products against strict liability claims. (See Frey v. Harley Davidson Motor Co.)

Chain-of-distribution clients defending products in Pennsylvania should be advised of the current unknowns and provided with alternative evaluations based on possible outcomes of the Pennsylvania Supreme Court’s decision. Joining new parties should be encouraged, regardless of their financial exposure, and discovery should focus on increasing the comparative fault of other parties. For many deep-pocketed middle-man companies, a decision for the Fair Share Act could significantly reduce exposure. On the other hand, if a traditional, “per capita” approach is upheld in strict liability, the seller could get stuck with the bill.

A collaborative effort of Goldberg Segalla’s Product Liability practice group examining the latest practices, emerging developments, and influential court decisions in product liability law. View our most recent issue.