2 9 15 Chapter 7 Business Torts and Product Liability Cost of Tort Litigation in US is about 250B year o About half is damage awards o Other half is legal fees and a lot of cases will probably be brought against you o Settle cases that have a legitimate case o Juries are unpredictable Common Torts in business situation Businesses don t want to settle quickly because they ll develop a reputation of that o Fraud someone is knowingly putting out false information and getting you to rely on it scienter you know the information is fault Have to prove that someone misstated a material fact and intended to defraud you and said it to you to get you to rely on it Person who received information justifiably relied on it reason some sort of privety or relationship between the 2 parties stock broker calls you up and tells you to buy a stock you buy it and lose money it was reasonable for you to believe him You cant reasonably rely on a stranger Have to prove false information that you relied on is the cause of your loss proximate cause Can sue for the tort of fraud for compensatory damages o Interference with contractional relations If A mfg B supplier entered into a contact verbal or written and C 3rd party who knows of contract goes to B and says they ll pay more if B cancels contract with A and supplies C exclusively Protecting business contracts and relationships Can ask for an injunction to get them to stop interfering with If relationship reduced anyway in a contract contractional relations o Interference with Perspective Advantage Another party tries to interfere with any advantage a business has not a contract customer list trade secret workforce etc can sue for damages In addition ask for an injunction to get them to stop interfering Just has to show that they knew about your advantage and are trying to interfere o Historically Product Liability suits were contract type suits suing for damages but had to show that a contract existed Warranty is a breach of contract Expressed warranty any statements made to you about their product or if statements are in their advertising Product Liability strict liability 2 9 15 Implied warranty started with food someone sells you food implied that it s safe for consumption if you buy a product it s safe to use in the purpose which it s sold Problem when product is sold from a person to another person court morphed made product liability a Tort action instead of contract based cause of action o Tort Concept Strict Liability Started with food started to apply to other consumer type products Don t care how careful the manufacturer was if a product injures you there s an assumption that it is defective even if they practiced reasonable care Manufacturers have to warn consumer about any possible dangers of using their products Manufacturers of consumer products have to notify consumers of any defects they become aware of minor notify major recall the product and destroy or fix issues Risk Utility Cost of producing differently more safely and the cost to society if you don t make it safer o Some states have concept of Market share Liability Rose in Lead based paint and asbestos If you can show that made you or someone else sick and it s not reasonable for you to prove who made that court can still apply strict liability by saying there are still 3 companies that make this Look at each of their shares of the market share and then split up the damages that way o Defenses to Strict Liability Product Misuse Consumer misuses the product and get hurts Comparative Negligence Partially to blame because you were negligent in your actions mowing lawn drunk Assumption of Risk things like prescription medicine alcohol and tobacco If manufacturer makes it as safe as it can reasonably be and tells of side effects you ve assumed the risk and the manufacturer can t be held responsible Bulk Supplier Doctrine A is manufacturer of consumer product B supplies raw material to A If B tells A how to properly use its raw materials then B has no liability for injuries of users of finished products Sophisticated experienced User Defense If end user reasonably knew or should ve known of products danger they can t sue under the strict liability concept o Statutory Limits Limits damages that might get awarded Workers compensation State insurance plan Employee injured on the job recovery of medical expenses etc cannot also bring a negligence based court not lawyer trial based Quicker every injury is scheduled and capped at how much injuries are worth 2 9 15 Government has set standards for products manufacturers meet the standards they have no further liability for injuries States have stepped in and said punitive damages are going through the roof so state laws have capped the amount of a tort award or damage Ultra hazardous activity dynamite in road construction shipping hazardous chemicals absolute strict liability No defenses against them Tort System Reform Discussion juries are unpredictable o US businesses Tort litigation is very time consuming and expensive and o Consumers don t like large amount of award that goes to attorneys o Litigators Tort Lawyers are all for current system Tort Litigation large use of expert testimony Judges object to the fact that expert witnesses have testified only for the plaintiff Judges have gotten skeptical about the value and weight put on the expert witnesses They can make a big impact on jurors so judges have gotten more leery about it and make sure that it s a fair and honest expert witness and are more open to the defendants objections of the claims Per Capita US has as many lawyers as any other country so many laws so many lawsuits Q5 Person went into restaurant and ate raw oysters and died a week later Menu had warning about the raw oysters especially to those with liver damage or weak immune systems His estate sued the restaurant and oyster company for Negligence and Strict Liability Is this a case for strict liability No Assumption of Risk because there s an adequate warning on the menu Q8 4 year old child got a BIC lighter which had a warning to keep out of reach of children House burned down and 2 year old brother died in house Parents sued due to Strict Liability because of inadequate warning and the lighter was unreasonably dangerous No liability on BIC because there was an adequate warning and it wasn t unreasonably dangerous Q9 Career welders inside of ship cutting sheets of metal with torches They took a break and one started