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Roundtable: Product Liability Defence 2012

The International Who’s Who of Product Liability Defence Lawyers has brought together four of the leading practitioners in the world to discuss key issues facing lawyers today.

Participants

J Peter Coll
Orrick Herrington & Sutcliffe LLP
New York

John Evans
Fulbright & Jaworski LLP
London
Thomas Klindt
Noerr LLP
Munich
Thomas Rouhette
Hogan Lovells (Paris) LLP
Paris




AREAS OF ACTIVITY

Who’s Who Legal: What types of product liability defence work have been the most common in your jurisdiction over the past year? Are there any industry sectors that are particularly active?

J Peter Coll: In terms of market segments, we see the continued activity in defending national asbestos trials and toxic tort mass and class actions in plaintiff-friendly jurisdictions throughout the United States. Also, plaintiffs who are concerned with proving factual causation in personal injury actions are seeking refuge in “no-injury” consumer product class actions, which often have the same allegedly scientific injury allegations but which only require proof of a misrepresentation of fact and a commercial injury – the consumer, in light of the product’s alleged risks, would not have bought the product at all or would not have paid much as much for it. We see this increasingly in California.

Thomas Klindt: One of the main aspects of product liability defence work in Germany is the arguing on the principle of defective product, especially in regard to technically complex products. Another important aspect is the assessment of intended use versus misuse of a product.

In regard to recourse claims between the players at different production stages, a key issue is the recourse in regard to costs of a product recall. In 2009, the Federal Court of Justice decided in the Pflegebetten judgment that recall costs are generally not recoverable in a B2B constellation as the producer would have fulfilled its obligation to avert the danger by publishing a warning. The BGH has not yet decided whether the same approach would be taken towards a product recall in regard to a defective consumer product.

The medical products industry and the automobile sector are most active in the field of product liability defence work in Germany. The solar power plants industry is quite active in product liability defence work as well.

Thomas Rouhette: There is one type of product liability defence work which is particularly growing in some continental European jurisdictions such as France and Italy: criminal defence work. Wrongful death or even personal injury cases give rise to criminal investigations and to criminal prosecution when product safety issues are at stake. The Concorde accident, or the more extreme PIP breast implants cases in France, or the Eternit asbestos cases in Italy, for instance, are good illustrations of this growing exposure to criminal product liability. As a result, product liability defence lawyers also represent their manufacturing clients in criminal courts, especially in those jurisdictions (such as France) where the injured parties would seek compensation from the Criminal Court for the loss suffered as a consequence of a criminal offence.

As to the industry sectors, what I have noted is that, although life sciences remains particularly active, there has been activity in many more areas than in the past. Asbestos (which serves as a sort of laboratory to “test” new approaches to product liability and to develop new heads of damages), pesticides, electronic and other consumer products, transportation, food products, etc, have all been subject to product liability litigation over the past year.

John Evans: Defence lawyers in the United Kingdom, in particular those practising in the jurisdiction of England and Wales, have yet to see a return to the high volume of product liability claims experienced in the 1980s and 1990s. In a sense, we were too successful and, through that success, compromised the willingness of the funding party (primarily, the Legal Aid Board and its successors) to “invest” in such cases. Claims do, of course, continue to be pursued in discrete areas, with asbestos claimants particularly active, and with claims from time to time in the pharmaceutical and medical device arena, but it is difficult to envisage a significant volume increase until the practical effect of developments affecting the funding of such claims can be determined.

The Legal Aid, Sentencing and Punishment of Offenders Act received Royal Assent on 1 May 2012. Some developments will be welcomed by manufacturers, such as the end of the recoverability of success fees in respect of conditional fee arrangements. However, there is a sting in the tail and there is cause to view with greater trepidation the introduction of Damages-Based Agreements (not quite the aggressive US-style contingency fee, given a projected cap of 25 per cent, but nevertheless a potentially powerful incentive to plaintiff lawyers).

An even more concerning proposal for Qualified One Way Cost Shifting (QOCS), essentially permitting a one-way side-step of the usual “loser pays” rule, thus threatening the litigation dynamic which helps guard against spurious claims, did not on this occasion pass into law. Also rejected was a proposal that non-pecuniary damages (for pain, suffering and loss of amenity) should be subject to a 10 per cent upwards adjustment.

Damages-Based Agreements may, of course, encourage greater involvement by Third Party Funders (hedge funds and others) but the prospective returns (even if a 10 per cent increase were to be factored in) may nevertheless be insufficient in circumstances where claims are often at the cutting edge in legal and scientific terms, with costs reflecting the inherent degree of difficulty, but with compensatory damages limited by comparison with awards available in the United States.

If past experience is any guide, the advocates of reform will repeatedly return with re-engineered proposals and it will be necessary to maintain vigilance and influence the debate as and when appropriate.

To illustrate the need for vigilance, the government has indicated, in the face of defeat on this point when the Bill passed through Parliament, that it will deal with QOCS through secondary legislation and changes to the procedural rules. Such changes may not, therefore, be long in gestation.

PLAINTIFFS' BAR

Who’s Who Legal: Lawyers we spoke with commented that the plaintiffs’ bar has become more aggressive and innovative in its search for potential cases. Have you found this to be the case?

J Peter Coll: Yes. Particularly given that the plaintiffs’ bar is a hugely sophisticated contributor to and user of digital media these days, it is a whole different ballgame from the solely print and TV era. Often what we see is not only the active solicitation of cases, but also plaintiffs’ firms “partnering” with or even developing social media sites to promote the “next” mass tort by reaching a broad audience. The Institute for Legal Reform’s January 2012 report on plaintiffs’ digital marketing estimated that plaintiffs’ firms will spend in excess of $50 million on Google keyword advertising alone in a one-year period.

John Evans: I agree that social media is being, and will be, used by plaintiff lawyers. Indeed, I can foresee that such use could be portrayed as productive in the “opt-in”, group action, system presently obtaining in most jurisdictions this side of the Atlantic – more potential claimants can be made aware of the possibility of redress, as asserted, and a greater number than otherwise can thereafter join the fledgling “group” – but I truly question the efficacy of such an approach in an “opt-in” environment, not least because it will compound difficulties already experienced (see my other responses) in separating the wheat from the chaff and the deserving from the copycat hanger-on.

A number of US plaintiff firms now have a London presence. Some specialise in the pursuit of financial institutions. Outside of this sub-group, the model appears to comprehend, firstly, the introduction of potential class action participants to litigation proceeding in the United States (eg, pension funds persuaded to participate in shareholder class actions); and secondly, the indirect utilisation of the proceeds to promote cutting-edge consumer claims in this jurisdiction, to date seemingly confined to the antitrust arena.

In the short term, developments in antitrust may be seen by some as predictors of future activity in the product liability arena but, as noted elsewhere, the playing fields either side of the pond will need to be far more homogenous than exhibited by the current differences between the gridiron and the rugby paddock.

Thomas Klindt: The plaintiff’s bar became more aggressive in Germany. Even though German law does not recognise class action as an instrument, there are some smaller law firms which increasingly specialise in product liability litigation from a consumer perspective. They use the new media to publish legal opinions or reports of individual cases. This approach results in more effective organisation of the plaintiff’s bar.

However, the German (and the European) legislator apparently does not see consumer protection issues in an intensification of product liability law but in tightening the official market surveillance provisions. Whereas the German Product Liability Act was not substantially changed since 1990, a new German Product Safety Act entered into force on 1 December 2011. It is the third amendment of core provisions of product safety surveillance since 1997. According to previous amendments in European product safety legislation (especially the New Legislative Framework), the new ProdSG strengthens the competences of market surveillance authorities. It also provides dramatically increased penalty provisions compared with the current legal situation.

Thomas Rouhette: For a long time, there was even the question as to whether a structured plaintiff’s bar existed at all in Continental Europe. Now, we can see that they are better organised [and] much more efficient and aggressive. They are also much more international. European plaintiffs’ counsel often team up with their US counterparts (in the aviation sector, for instance) and learn from such collaboration. They also know how to circumvent the prohibition of client solicitation (which exists under French professional rules), for example, by using the internet to pass on general information to their targeted audience. They are also very active on the lobbying front, where they are, in particular, advocating for collective redress throughout Europe. In addition, they are also rather creative. We were able to see this in France, for instance, from the development of new heads of damages (such as anxiety or the so-called disruption in the living conditions which allegedly derives from a potential life expectancy reduction resulting from exposure to dangerous substances) or of new areas for product liability litigation (pesticides for instance).

DEFENDING CLAIMS

Who’s Who Legal: Practitioners that took part in the research also noted that in industries such as the pharmaceutical sector, their clients were taking a more hard-line stance in defending claims against them? Do you agree with this? Have you found this to be true for any other industries?

Thomas Klindt: From a German perspective, I cannot share this view. In the pharmaceutical sector, as well as in other industries, there is no hard-line approach towards product liability claims. One reason might be that most manufacturers have product liability insurance. Product liability claims are defended in close cooperation between the manufacturer and its insurance companies. German insurance companies assess the defence strategy on a case-by-case basis. If the insurance company and the manufacturer saw strong arguments for defending a case, they would decide for a hard-line defence. If arguments for defence were not strong enough, the manufacturer and the insurance company would rather try to settle the case without court litigation. An important aspect taken into account for the decision might also be whether there is the danger that litigation would create a precedent.

In Germany, only few – rather smaller – law firms enter the product liability market. The (international) law firms already working in the field of product liability law consolidate their position and expand their product liability teams.

Thomas Rouhette: My French experience is more in line with what was described for Germany. Manufacturers are pragmatic in designing their legal strategy. They would fight or settle claims on a case-by-case basis depending on a number of factors such as the amount at stake, the likely defence costs, the intention to avoid creating a precedent (in terms of a possible unfavourable outcome) or to send a strong message to other potential plaintiffs. The situation is, however, different in circumstances where a massive number of cross-border claimants are known or expected, as it tends to happen in the pharmaceutical or the medical devices sector. Then, manufacturers would take a harder stance in defending claims globally in a coordinated manner, at least during the first stage.

John Evans: That deserving claimants should be compensated is generally accepted by defence lawyers and their clients. Accordingly, the notion that clients routinely take a hard-line stance is misplaced. However, there is force in the suggestion that clients take a necessarily questioning stance in the face of aggregated claims where little or no effort has been expended to separate the wheat from the chaff, with the result that claims are pursued which manifestly should be rejected on first review because they plainly do not belong in the plaintiff cohort. Even without being subjected to the perils of “opt-out” class action litigation in the American style, I know, from my own experience, of instances where the claimant in question was never employed by my client; never used or was never exposed to my client’s product; had innumerable confounding exposures, over different timescales, which were ignored because the claimant’s representatives at no stage reviewed his/her medical records; was time-barred; and so on.

My experience is not unique. Accordingly, perceptions of a hardline stance reflect a repeated failure, on the part of those who raise client expectations to unrealistic levels, to carry out even a modicum of due diligence.

LEGAL MARKET

Who’s Who Legal: Over the years the number of product liability defence lawyers we have included in our books has steadily increased. How active is the legal market when it comes to this type of work at the moment? Have you seen an increase in the number of players looking to enter the market?

J Peter Coll: I do not believe that there has been a significant net increase in the number of lawyers in the defence bar. There has been some market segmentation with certain work moving to lower cost options, but clients recognise that a wide range of risk and complexity are created by product liability matters, and sophisticated companies continue to seek out high-end firms to manage bet-the-company cases or matters requiring national strategic capabilities and experience.

Thomas Rouhette: The litigation market is much smaller on the Continent and tends not to be as specialised as it is in the US, Canada or the UK, for instance. I do not think that there has been an increase in the number of product liability defence practitioners. There are very few lawyers, at least in France, who are profiling themselves as product liability specialists. There is a larger group, of insurance defence lawyers, who would also deal with product liability as the liability and coverage claims are generally dealt with in the same set of proceedings in France, but they would not represent manufacturers.

I, however, think that this is likely to change in the near future when more international law firms move to respond to the demands of their clients in defending multi-jurisdictional, complex product liability disputes.

John Evans: ‘Product liability defence’ is a term which has been used by many in the UK as a generic description for the defence of both instant and creeping disaster claims, ranging from the catastrophic air or rail crash caused, say, by malfunctioning flight controls or railway signalling equipment to personal injury actions where a claimed exposure has allegedly resulted in a disease or condition. The claimed exposure can be workplace or environmental as well as to a product in the conventional sense. That these claims are so bracketed reflects not only defence methodologies but also the fact that the overall volume of such claims, despite exceeding the continental European norm, pales into insignificance when compared with the incidence of such litigation in the United States, meaning that defence lawyers here cannot have the luxury of being over-specialised in, for example, asbestos or device litigation, sometimes to the extent of being single-product specialists.

That is not to say that what happens in the United States does not happen this side of the pond. It does – and with a shorter lead time than was historically experienced. However, the fundamentals of the two litigation systems are so different, notwithstanding a shared common law heritage, that the UK is extremely unlikely to be as welcoming to plaintiff lawyers in the absence of jury trials, inflated compensatory awards, punitive damages, elected judges and contingent fees, all operating in concert.

Plaintiff lawyers here may sense a beneficial movement arising from damages-based agreements but the playing fields remain very different, not least because of the protection afforded against unmeritorious claims by our “loser pays” rule. As previously noted, however, all available protections will come under repeated attack – see, for example, my comments on QOCS.

With manufacturers forever visited by the same issues across their different markets, product liability lawyers in the UK and Europe are as likely to be engaged in the development of pre-emptive strategies designed to limit the risk and incidence of future litigation throu

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