The California Supreme Court has blocked an expansion of product liability law in a major decision that provides guidance for other courts facing similar questions and follows a growing trend in this area. In Barbara O’Neil, et al., v. Crane Co., et al. (#S177401; January 12, 2012) the court held that a manufacturer has no obligation to prevent harm from other manufacturers’ defective products used with its product or equipment. Even if a manufacturer could “foresee” the use of another’s defective product with its own, that manufacturer cannot be held liable in strict liability or negligence for damages caused by the other manufacturer’s defective product.
Events Leading to the O'Neil Opinion
The case involved equipment installed in a U.S. Navy ship’s steam propulsion system. Twenty years later, Patrick O’Neil, a sailor assigned to work on/near the equipment, was exposed to asbestos dust from work performed on gaskets and packing embedded in the equipment and asbestos insulation covering the equipment. Forty years later, he developed a lethal cancer (mesothelioma) from these and other asbestos exposures. The plaintiffs sued the manufacturers of the equipment. However, there was no evidence the asbestos gaskets, packing or insulation from which he was exposed were manufactured, sold or distributed by the defendant equipment manufacturers. Over the 20 years since the initial installation, the original gaskets and packing had been replaced. The Navy, in most instances, specified asbestos replacement gaskets, packing and insulation.
At trial, the defendant manufacturers moved for nonsuit saying they were not liable because plaintiffs did not introduce any evidence that their equipment was defective and it did not cause Mr. O’Neil’s cancer. Defendants argued that if gaskets, packing and insulation in and on their equipment were a cause of Mr. O’Neil’s cancer, the defendant equipment manufacturers were not responsible because the asbestos-containing replacement products were designed, manufactured or sold by others.
The plaintiffs countered it was “foreseeable” Mr. O’Neil would be exposed to gaskets, packing and insulation in and on the defendant manufacturers’ equipment. They argued that the equipment was originally sold with asbestos gaskets and packing; that the defendant manufacturers knew users would cover the equipment in asbestos insulation; and, that the defendant manufacturers knew that asbestos replacement gaskets and packing would be used with their equipment. The trial court did not agree with plaintiffs and granted the motions for nonsuit finding there was no evidence the equipment was defective because of the asbestos content and determined that defendants’ equipment did not contribute to the cause of the mesothelioma.
However, the California Court of Appeal reversed. It held the defendant manufacturers are liable “for dangerous products with which [their] product will necessarily be used.” (All emphases added.) The court of appeal made no distinction as to which entity was responsible for design, manufacture or distribution of the defective asbestos products from which Mr. O’Neil was exposed. The court of appeal reasoned that because the defendants’ equipment originally included defective asbestos gaskets and packing and knew that they would need to be replaced with asbestos gaskets and packing made by others, they owed a duty to warn. Moreover, the equipment itself was deemed to be defective, not only because of a failure to warn, but also because their equipment “required” asbestos packing, gaskets and insulation.
Supreme Court's Ruling and Policy Holdings
The California Supreme Court reversed the court of appeal. It found no facts in the record that supported the assertion that defendant manufacturers required asbestos replacement gaskets, packing or insulation. There was no evidence the defendant manufacturers’ equipment depended on asbestos materials to operate. The court stated: “Mere compatibility for use with such components [asbestos containing parts] is not enough to render them defective.” The court concluded that defendants were not liable because their products were not “a legal cause” of the plaintiffs’ injury in strict liability or negligence. Moreover, defendants “had no duty to warn of risks arising from other manufacturers’ products.” (emphasis in original).
The supreme court found the court of appeal’s decision to be an unwarranted expansion of California product liability law: “(W)e have never held that these responsibilities [under California law] extend to preventing injuries by other products that might foreseeably be used in conjunction with a defendant’s product” (emphasis in original). Whether to apply strict product liability doctrine “in a new setting is largely determined by the policies underlying the doctrine...”. “’[T]he strict liability doctrine derives from judicially perceived public policy considerations and therefore should not be expanded beyond the purview of these policies.’” The court revisited its 1963 decision in Greenman v. Yuba Power Products, Inc.(1963) 59 Cal.2d 57, 63, quoting: “’The purpose of such liability is to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market…’” A year later the California Supreme Court extended the strict liability doctrine to retailers as “’an integral part of the overall producing and marketing enterprise.’” Vandermark v. Ford Motor Co. (1964) 61 Cal 2d 256, 262.
Stream of Commerce
The “marketing enterprise” or “stream of commerce” policy consideration is one of two themes at the backbone of the supreme court’s decision in O’Neil. Where product manufacturers “generally ha[ve] no 'continuing business relationship' with each other," they cannot bear responsibility for other manufacturers’ products. They “cannot be expected to exert pressure on other manufacturers to make their products safe and will not be able to share the costs of ensuring product safety with these manufacturers.” The court said it is “also unfair” to require a manufacturer to “shoulder a burden of liability” for another manufacturer’s product where it “derives no economic benefit from the sale of the product that injured the plaintiff.” A contrary rule would require manufacturers “to investigate the potential risks of all products and replacement parts that might be foreseeably used with their own products and warn about the risks.” This would “impose on manufacturers the responsibility and costs of becoming experts in the manufacturers’ product.” This, it said, is “an excessive and unrealistic burden.” Such a rule could also act “perversely” by “inundating users with excessive warnings” and, quoting New Jersey jurisprudence, “[t]o warn of all potential dangers is to warn of nothing.”
Defendant's Act or Control
An even more fundamental policy lies at the heart of this opinion: Liability is not imposed for an injury unless it was caused “by an act or instrumentality under defendant’s control.” The original asbestos gaskets and packing that defendant manufacturers sold with the equipment were gone when Mr. O’Neil was exposed to asbestos from replacement gaskets and packing manufactured by others.
The O’Neil opinion (together with two other cases also on appeal and resolved by the O’Neil opinion) stands for the proposition that there is no legal causation for the original product manufacturer where the defective aftermarket replacement part is the source of the harm, even though:
(1) The equipment manufacturer designs the equipment for use with the defective aftermarket product (e.g., asbestos in replacement gaskets and packing);
(2) The manufacturer specifies the use of replacement parts with the same defect;
(3) The manufacturer also supplies replacement parts with the defect in question;
(4) The manufacturer knows that the purchaser of their equipment or product requires that the original equipment contain the defective component and use of the defective replacement part.
Liability Is Not Foreclosed
Likely due to the variety of economic entanglements product manufacturers may have with aftermarket manufacturers’ products, the supreme court conceived of circumstances where liability for another manufacturer’s parts could arise. The court stated in the O’Neil opinion’s opening paragraph that a manufacturer may be held liable for harm caused by another manufacturer’s product where (1) the defendant manufacturer’s own product, although not defective, “contributed substantially” to the harm, or (2) the defendant manufacturer’s (non-defective) product “participated substantially in creating a harmful combined use of the products.” The O’Neil court discusses two appellate cases where the manufacturer’s product would not have been put “into the stream of commerce” but for the manufacturer’s economically beneficial participation in the product that eventually gave rise to the harm.
Additionally, in a footnote (Fn. 6) the court outlined a hypothetical where a “stronger argument for liability might be made.” If the product/equipment “required the use of a defective product in order to operate” (emphasis in original), the original manufacturer’s product would incorporate the defect and every replacement part would too. The defective replacement parts, though manufactured by others, “would not break the chain of causation.” However, the court warned that in these circumstances, “the policy rationales against imposing liability on a manufacturer for a defective part it did not produce or supply would remain.”
The California Supreme Court appears to have drawn clear rules for precluding liability where an original manufacturer’s product has left its possession or control, but an aftermarket replacement part has ensnared the original equipment manufacturer in litigation. Where the manufacturer does not control or derive direct economic benefit from the defective aftermarket product, it will not be liable. However, the opinion does not build an impregnable wall. The court specifies that an original manufacturer will be liable for another manufacturer’s parts, where the original product contributes substantially or participates in a combined product causing harm. Even under those scenarios, however, imposing liability must not run afoul of the policy rationales supporting the O’Neil opinion.
Christopher W. Wood
Lisa L. Oberg
McKenna Long & Aldridge
San Francisco, CA