Research Trends and Conclusions: Product Liability Defence 2012
With the benefit of over 15 years of research and tens of thousands of votes from clients and private practitioners, Who’s Who Legal takes a closer look at developing trends in the product liability defence legal marketplace worldwide.
At a time when companies are pursuing cost-saving agendas and governments are implementing severe austerity measures, product liability defence lawyers are seeing continued proliferation of class actions, principally concerning the three, main sub-categories in this practice: pharmaceutical and medical device matters, consumer products and industrial and chemicals cases.
So far, 2012 has proved to be a positive year of growth in the product liability defence sector. We collected thousands of votes from industry professionals and private practice lawyers around the world, resulting in the selection of 382 leading product liability defence lawyers. This marks a 20.9 per cent increase in the number of lawyers listed from our first edition in 2009, which featured 302 entries, as can be seen in chart two.
The industry is undergoing profound legislative changes in a number of countries, including England, USA and Canada – noticeably, the most sophisticated legal systems which offer experienced and expert legal representation in mass torts. This is culminating, in part, in a growth in the legal marketplace: as one Missouri lawyer stated, “Historically we were fighting three firms with 30 cases, now we fight 30 firms with three big cases.” Work is retained among the specialised and experienced in the field, but the number of dedicated departments and size of teams has grown, particularly in Canada and the US. In short, there are more firms and more lawyers doing this type of work, which eventually filters down our selection process, resulting in more lawyers in the edition.
We notice that, although the legal industry has grown to meet the demands of a more litigious society, the volume of work has not substantially increased, rather, activity continues at a steady upward trend. A leading California lawyer from one of the country’s prominent liability law firms simply summed up the dynamic of the current market, “We are active, but compared to four or five years ago, we are less busy.” Cases are taking longer and lawyers reported that strategic planning, prevention and compliance work is accounting for more of their practice than traditional trial work.
Pharmaceutical and medical device work has always formed a significant portion of work in the field and the commoditisation of life science-related product liability work has become more noticeable. Lawyers are expected to have a level of scientific knowledge and specialisation in this field that is less required in other arenas, in order to be able to deal with the complexities of IP products litigation.
A comparison between the product liability and life sciences editions illustrates the cross over in expertise. We compared the editions year-by-year. The chart below reflects the rising importance of life sciences expertise within the product liability pharmaceutical industry, so for example in 2009, of the 302 product liability lawyers we selected for inclusion, 44 also appeared in the 2009 life sciences edition.
This data suggests that lawyers do not necessarily see their practice areas as distinct: many product liability lawyers that focus on pharmaceutical work explained that, increasingly, law firms encourage a holistic service for clients. This means that they combine product safety advice with counselling on drug licensing and any subsequent litigation from clients and/or competitors. In short, they try to cover all bases, while retaining a focus. Big firms have the capabilities to offer this service, but very few small firms can do so. This is clearly reflected in our research, where the large, IP and product liability centred firms dominate.
Globalisation is a significant trend. The US has the most developed product liability legal market and regime in the world, evidenced in its consistently high showing in our research over the years. US lawyers indicated that there is a desire to export the principles and services to other countries and globalise products work, enabling firms to provide wider reaching services in countries where clients operate. Countries like Brazil, Israel, Germany and Australia have all seen more work in this area: domestic lawyers are becoming better known in this field and therefore receiving more prominence in our research. A number of lawyers concluded that for the past three or four years lawyers have been narrowing their specialisation for marketing purposes and to accommodate the complexity of the law and desire for clients, which includes in-house counsel, to have external specialists, in many locations, who can deal with queries immediately. The result is a widening gap in size and proficiency between the players in the market – the firms with prominent product liability teams and reputations, such as Shook Hardy & Bacon LLP, attract and hold most of the legal specialists which clients, and in-house counsel, seek. As chart 4 demonstrates, a look back at the previous five editions sees the traditional firms, in established jurisdictions retain their dominating presence in the legal marketplace.
CHANGES AND CHALLENGES
Our research identifies trends in the legal marketplace, prompted by changes in policy and regulation in a number of countries that feature in the research.
The US and Canada have seen legislative changes in this area with the introduction of amendments to their Consumer Product Safety Acts. In the US, the Consumer Product Safety Improvement Act (CPSIA) requires stricter reporting, namely that manufacturers, retailers, importers, distributors etc must notify the CPS Commission, within 24 hours, of a defect and the possibility of a substantial product hazard, with two additional requirements: to notify if a product (not necessarily defective) creates an unreasonable risk of serious injury or death, and to report a party if they obtain information that reasonably supports the conclusions that a product could be defect or create a hazard. In short, the effect is that the Act captures more products, and so the potential for reporting has increased. This means more advisory work for lawyers as the provisions call for a fairly in depth investigation of manufacturing processes and even the utility of the product itself. Lawyers explained that parties must reassess their consumer product safety compliance efforts and programmes as failure to comply with new requirements could mean the delay or seizure of products, and fines being levied by the Commission.
Since June 2011, companies who also manufacture, sell or distribute products in Canada now add the Canadian Consumer Product Safety Act (CCPSA) to their compliance considerations. There are significant differences in reporting requirements that are going to impact the work lawyers will be involved in for the next 18 months as they help clients get to grips with the new provisions.
The CCPSA places mandatory reporting on incidents of defects that cause substantial harm, death, have been recalled or incorrectly labelled, within two days of awareness. Defence lawyers explained the intrinsic problem with the requirement: a plaintiff will always argue that if a defendant had to report an incident to the Canadian commission, Health Canada, it has already admitted its product is defective. Even with clarifying statements from the commission, the area is still uncertain and lawyers expect to be dealing with more reporting-based litigation in the coming months. The implementation of the CCPSA last June has made a tough job even tougher for liability defence lawyers: they have to navigate the different compliance duties between countries where companies operate vertically, and now, in the North American market where most major pharmaceutical and consumer product companies are based, lawyers must oversee that clients lead coordinated approaches to the requirements imposed by the act, as a divided approach could create pitfalls between the two commissions and other foreign regulators.
Similarly, the Australia Consumer Law (ACL, effective January 2011) requires reporting by a party, within two days, when a product is being used in a consumer capacity and the suppler is aware it has already caused, or may have caused, serious injury or death. Like the Canadian provisions, the ACL does not deal with incidents occurring outside of Australia, so Australian lawyers must deal with disjointed reporting mandates in many countries and the need to ensure compliance is performed in a defensible way in case of future lawsuits.
In South Africa, the legislative regime has evolved. The new Consumer Protection Act, section 61 shifted the burden of proof from the plaintiff to one of strict liability, bringing it in line with the UK regime. Although it has been in force since April 2011, “it takes two years for matters to get to court but none have come through,” according to a contributor in Johannesburg. The provision has removed the need to prove a tort occurred, so it is easier for plaintiffs to bring a case as they only have to prove the causal link between the tort and the damage. This means tougher work for domestic defence lawyers: the defences available are very strict and the negligence benchmark still applies to cases brought before April 2011. Some lawyers regard this Act as the start of a swing in the pendulum towards a more pro-consumer approach in the South African courts. But time will tell if the defence bar can adapt to the changes in law.
In London, the Supreme Court has clarified the position on the scope of employers’ liability relating to mesothelioma litigation, but the challenge is funding. In March 2012 the Supreme Court of the United Kingdom decided that, irrespective of the actual wording used in insurance policies, policies will be deemed effective at the time of exposure. The decision means that affected policyholders no longer have to self-fund a claim, and it provides clarity for insurers and insureds. Consequently, lawyers expect the asbestos litigation to continue, at least, for another five years. However, over the past 20 years the UK product liability defence bar successfully litigated on asbestos, aviation, tobacco and drug trials, but now, according to one London-based lawyer, access to funding for credible claimants is prohibitively difficult. In a way, the funding crisis is the result of too many past successes and the pendulum has swung so far towards defendants that the claimant bar just isn’t big enough to sustain a profitable product liability practice in England. Compared to the US system, there are still very few jury trials in England, strict punitive damage awards and low compensatory damage awards, no US-style discovery rules, and no US-style class actions and smaller budgets due to the rules on contingency fees. There is simply less willingness for a firm to take a case and so product liability lawyers in England have to diversify into competition and commercial litigation where there is a crossover in principles and procedures in order to expand their skill sets.
As one US lawyer stated, “Product liability litigation will never be as big of a financial risk for law firms in England or the European Union as it has been in the United States.” The returns are lower, therefore investment in the area has been deprioritised by governments and law firms. Third-party funding and contingency fees mean there is some available funding, but legal aid requirements and the reduced fiscal budget have severely disincentivised deserving claimants in these kinds of actions. A review of funding, costs recovery and third-party funding was undertaken by the Legal Aid Sentencing and Punishment of Offenders Act 2012 (received Royal Assent in May 2012) which resulted in the removal of product liability claims from the scope of legal aid funding. Consequently, unless a claim falls within a type specified under the Act or new legislation is brought in to reverse this, the challenge for consumers remains the need for access to funding and justice, and lawyers do not expect this to change in the foreseeable future.
Tort reforms have had a significant affect on the type of work lawyers are doing across many countries. The new legal responsibilities relating to testing, approvals and reporting have led to a more aggressive compliance approach by agencies, and tougher standards than ever before. This has driven a lot of US and foreign litigation, and will likely lead to more class actions and shareholder lawsuits. The global bar is streamlining its expertise, as clients demand first-rate knowledge and experience, yet lacks international cohesion through regulatory reforms and compliance programmes. The positive conclusion is that many leading firms in our research experienced some growth in their showings from last year to this year, which is a good indication that the industry is on a steady, upward trend. Lawyers hope to see an energised product liability defence bar in the future, with pharmaceuticals, health and chemicals regulation continuing to account for the majority of work.