Product Liability Defence 2015: Trends

An increasingly globalised consumer market has led to greater regulatory enforcement across the world. Both consumers and consumer authorities are being more proactive in seeking out liable product manufacturers. This is occurring both inside and outside North America, where the US’s long-standing plaintiff bar and its culture of acute consumer rights awareness are steadily being adopted in other markets. Manufacturers now need to be aware of legal and regulatory developments throughout the world, or face greater liability risks. Ultimately, it is clear from our research that this has led to the broadening of product liability defence lawyers’ practices.

During the cause of our research, a number of practitioners, especially in the US, have made note of an apparent “generational shift”, with a growth of new players whose practices are more expansive than their forebears. In particular, regulatory and litigation avoidance counselling is a growing aspect of the field, as well as an appreciation of product liability and regulatory regimes outside their own jurisdiction. The main reason behind these changes can be seen through the determination of global product manufacturers to seek compliance across the market and to avoid the possibility of litigation in the first place.

One of the key reasons for this is that regulatory regimes are becoming stricter and more sophisticated, raising the risk of regulator litigation and enforcement action. The current proclivity towards heightened consumer rights protection is visible in a number of markets. The European Commission is currently looking at a new package of legislative and non-legislative measures to improve product safety and strengthen market surveillance of products for the single market. China has recently made consumer-friendly changes to its law on the Protection of Consumer Rights and Interests, as it seeks to crack down on rampant consumer fraud. Meanwhile, the Australian Competition and Consumer Comission has been exercising the new powers it received in 2010, which has raised the likelihood of enforcement action in the retail sector.

Along with greater power domestically, consumer protection authorities are also keeping abreast of developments in foreign markets. Practitioners report that if a product has been deemed unsafe and recalled abroad, an authority will usually penalise a company if it fails to recall the product locally. Multi-jurisdictional cooperation has become ever more sophisticated in recent years. In 2012, the OECD set up the GlobalRecall portal that brings together information on product recalls being issued around the world, on a regular basis, so that regulators can take corrective actions. Rather than being reactive, regulators are becoming increasingly proactive in seeking out liable manufacturers. This has also led to clients also becoming more proactive as they look to avoid falling foul of the law. As such, product manufacturers require much more holistic advice from their lawyers including, reducing and mitigating exposure to liability, understanding what triggers plaintiff action, and understanding the pathways to market. Discussions with private practice lawyers and in-house counsel have made it apparent that these are key skills for the modern day product liability lawyer.

Another significant trend has been the expansion of consumer class actions even in jurisdictions where there is no formalised procedure. As one source noted, “The plaintiff bar have been clever to promote the possibilities of class actions outside the US.” Indeed, European plaintiff lawyers have been known to replicate the tactics and funding methods of their American counterparts. Although the absence of US style opt-out class actions has limited the development of a strong plaintiff bar, a formalised regime for collective action in Europe is getting closer to reality, even if it is unlikely to fully adopt the US class actions system.

Even though formalised consumer collective action in Europe has been a discussion point for some time, it has been gathering more pace of late. In 2013, the European Commission published a series of common, non-binding principles for collective redress mechanisms in EU member states in the form of a “recommendation”. Individual countries have also made unilateral moves towards formalised class actions. An opt-in regime was implemented in Italy in 2010; whereas Spain and Portugal already have a restricted version of the US model. In 2014, Belgium introduced class actions into its judicial system. In the UK, a competition law specific collective action is entering into force in October 2015 as part of the Consumer Rights Bill, which could pave the way for product liability collective actions in the future. Moreover, if other member states had been waiting on the Commission’s decision, they may also decide to look at legislative changes in the near future after the submission of its recommendation. Outside of Europe, Australia and China already have an established class action regime; in Hong Kong, the Law Reform Commission has proposed a comprehensive class action regime, which should be adopted on the belief that it would “enhance access to justice and would provide an efficient, well-defined and workable mechanism”. Ultimately, these incremental changes may yet significantly change the global litigation landscape.

In the US market, practitioners report that more and more plaintiffs are using the class action vehicle to file under consumer protection. The defence side also report that the plaintiff bar is using aggressive advertising approaches to enhance the class action culture. On the other hand, the consumer class action regime has taken a pummelling by the Supreme Court in the last few years as it has steered a consistent course against consumers or small businesses that file class actions against corporate defendants. Despite this, US defence lawyers point to a fairly consistent market, highlighting a number of significant litigations, including a huge class action that has recently seen the three largest US tobacco companies agree to pay a total of $100 million to settle hundreds of federal lawsuits in Florida. The medical device industry is particularly prone to class actions at the moment, perhaps the most notable of which is the federal multi-district proceedings in West Virginia comprising thousands of personal injury suits against the manufacturers of pelvic mesh. This market also appears to have the greatest global liability risk; advances in medical technology continue to disseminate the use of medical devices, which leaves life sciences companies more open to international liability than other consumer industries. Most notoriously, the Poly Implant Prothèse’s defective breast implants affected around 400,000 women in 65 countries, causing a global health scandal and the bankruptcy of the French company.

Reports suggest that other traditional areas of consumer goods are not as productive for defence lawyers as they once were. However, the biggest Western revolution in food labelling in generations is affecting the industry. The FDA released new guidelines in 2013; and, more significantly still, the regulator is proposing to update the Nutrition Facts Label found on most food packages in the US. Introduced 20 years ago, changes to the label will have significant ramifications for product liability claims. This is not limited to the US. In December of last year, the Food Information to Consumers Regulations (EU Regulataion 1169/2011) came into full force, which includes the provision that businesses will be required to provide allergy information on their products. If full compliance is attained by food manufactures then the risk of product liability claims should diminish; conversely, the risk of mislabelling will also increase, as will public awareness to issues of liability. In the short term, at least, this does pose a significant amount of work for food companies and their legal teams.

In sum, globalisation continues to affect the product liability sector and it promises to do so more in the future. Consumers and consumer authorities are networked to each other in a way that was impossible 10 years ago. In that time the traditional practice of product liability defence law has started changing to reflex contemporary realities for product manufacturers, particularly those that operate on a global stage.

Legal Marketplace Overview

Given that our research is based on the number of lawyers identified as market-leading in a particular area or locality, we can assess how the makeup of the product liability defence legal marketplace has been affected over the years.

In the past five years the number of lawyers in this guide has grown by 37 per cent, clearly an indication of the demand for top-quality counsel that has occurred over the years through the expansion of commercial markets. However, what is more revealing is that the number of law firms has only increased by 13 per cent in the same time. Compared to other practice areas in our research, this field is very spread out with a relatively large number of independent firms at the top end of the market. However, there is a good indication that there has been some degree of coalescing so far this decade.

In our 2010 edition, there was an average of 1.6 practitioners per law firm; five years on there is an average of two market-leading practitioners per law firm. A proportionally larger increase has also occurred at the top end of the market: the top five listed law firms in our research have double the amount of listings that the top five firms had in 2010. Law firm mergers have been a contributing factor. In particular, the merger of Hogan & Hartson and Lovells in 2010, as well as Hogan Lovells’ subsequent expansion, has created a new force in this area. The firm markets itself on the ability to assist clients in managing product liability risks globally, which is supported by the fact that six of its offices outside the US are recognised as having at least one leader in this field – more than any other firm. The closest comparable firm is Freshfields, which has a trio of leading practitioners in Europe, and also markets its services globally. The ability to offer global product liability services is increasingly seen as a competitive advantage; ultimately, it seems unlikely that a minority will remain the only global operators in our product liability research. This could be seen as a start of a wider trend in the legal market. As enforcement work and regulatory advice becomes more prominent and as the move towards European and Asian class action regimes progresses, one can presuppose that more international firms will sustain the specific regulatory and litigation expertise for product liability defence teams on a global scale.

At the moment, however, the fact remains that the discrepancy between the US and the rest of the world is enormous. Most of the prominent firms remain those that have focused on litigation, serving product manufacturers for many decades. The qualitative research gained through interviews with world experts and the quantitative assessment of our findings both point to a market in gradual transition, but one that still largely reflects the old order for the time being.

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