The MacNeil/Lehrer Report; Product Liability

ROBERT MacNEIL: Good evening. Every year some 30,000 Americans are killed and 36 million injured in accidents involving products, thousands of products -- cars, vacuum cleaners, toys, motorcycle helmets, IUDs, flammable pajamas, drugs, and machines in the workplace. Thousands of these cases wind up in court, and manufacturers are often ordered to pay heavy compensation. In the past five years the number of product liability cases in federal courts has tripled. These cases are litigated under a patchwork of state laws that industry believes are heavily biased in favor of the consumer. Now Congress is considering a bill which some claim would tilt the balance in industry's favor and make it harder for victims of defective products to seek compensation. The bill would replace various state laws with a single federal statute. Manufacturers are for it; lawyers and consumer advocates are against it. Tonight, who would a federal product liability law really protect? Jim?

JIM LEHRER: Robin, there are two legal terms at the core of this debate -- "strict liability" and "willful negligence." Strict liability means just about what it says: a manufacturer can be held responsible for injury caused by a product that was adjudged defective because of poor construction or poor design, or because the user wasn't properly warned of its potential dangers. In most of the 32 states with product liability laws, strict liability is the current standard. Willful negligence also means what it says. Under it, to prove a product defective is not enough. The manufacturer must also be judged to have known it was defective. The proposed federal law would enforce strict liability only on the construction of the product, but not on the design or warnings, where the willful negligence rule would apply. Meaning: if a wooden stepladder collapsed because the wood was rotten, the manufacturer would be strictly liable, but not if it was caused by faulty design or if the warning labels weren't right. The author and chief Senate sponsor of the proposed federal law is Senator Robert Kasten, Republican of Wisconsin, chairman of the Senate Consumer Subcommittee. Senator, why only on construction would strict liability be there?

Sen. ROBERT KASTEN: Well, first of all, Jim, let me say I'm not a lawyer, and I'm the only non-lawyer in this group tonight so that I'm going to try to back up and just talk about --

LEHRER: Are you complaining or explaining?

Sen. KASTEN: No, in most audiences that wins votes. I'm not sure about tonight's audience, but usually it does. Let me give you an example, another example. I'm going to talk about a weightlifter. His name was Columbo and he lived in the state of California. Columbo was going to run in a race, and he decided that he was going to strap a refrigerator onto his back in order to run in this race.He wanted a little handicap. So he strapped, with two or three straps, a refrigerator onto his back. And as Columbo the body builder is running the race in California, one of the straps slips, the refrigerator falls off, and Columbo is injured. Columbo couldn't compete in some weightlifting contests for the next several months, or maybe it was even years.Therefore, Columbo the weightlifter sued the manufacturer of the straps saying that they were defective, and columbo won a million bucks. Now, how in the world could a strap manufacturer think that ever their straps were going to be used by Columbo to put a refrigerator on his back? And a million dollars! Now, the fact is this system is wrong because we are not able to pinpoint the responsibility. And that's what we want to do. You've got a system here which, as Robin said, is a patchwork of laws. Today, 77 cents goes to lawyers for every 66 cents that are going to injured parties because it's so -- of this patchwork and of the fact that we are not pinpointing responsibility. What we want to do is recognize when someone like Columbo uses something like a strap to put a refrigerator on his back and the manufacturer clearly should not have to protect himself from those kinds of absurd uses.

LEHRER: Is it your position that there are a lot of Columbo-type cases out there?

Sen. KASTEN: There are a lot of Columbo-type cases out there, and let me give you another -- when you get a situation -- let me take the example of a crane. In Illinois, if you'd back a crane up into a power line, the crane manufacturer can be held liable, but in Minnesota or in New Mexico, exactly the same accident, a crane manufacturer [sic] backs a crane into a power line in both New Mexico and in Minnesota, they say the crane manufacturer can't be held liable; an average driver of a crane should recognize that power lines, when they touch the crane, should hurt. Now, there's an example once more, absurd.It seems to me that an average crane driver should know that touching your crane to a power line could cause an accident. It's not the crane manufacturer's fault. The crane has to be higher than the power line in order to serve its purpose.

LEHRER: So you believe that it has been tilted in favor of the consumer up to now, this patchwork, as you say, of state laws.

Sen. KASTEN: No, it's not been tilted in favor of the consumer; it's been tilted in favor of the lawyers.The consumers are going to benefit from this particular legislation because we're going to cut down the transaction fees and the amount of dollars that are going now to insurance companies and to lawyers in order to insure against and protect ourselves from this weird set of laws. So the consumer will benefit when my bill is passed because we're going to be able to pinpoint the responsibility at the party who is negligent, and its cost will not be passed on.

LEHRER: Well, the consumer may benefit, but there will be less likelihood that the consumer will get a payoff at the end of the lawsuit, right?

Sen. KASTEN: If the consumer is harmed by a product that's unsafe, the consumer will benefit because he will get his payment. If we've got a Columbo, you're going to have a harder time for Columbo to collect. But Columbo should have a harder time because right now every person that bought that strap from that strap manufacturer is paying for part of that $1 million that Columbo got. In other words, those dollars are just being passed through the system.

LEHRER: Well, if the strap manufacturer, to use your example, is not responsible, who is responsible when somebody gets seriously injured in something like that?

Sen. KASTEN: In that case Columbo should be responsible. An average person should know that a strap should not be used to -- that you shouldn't necessarily run a foot race with a refrigerator strapped onto your back, and if in fact you do, you're taking a certain kind of a risk that no insurance company should be insuring against, and no strap manufacturer can possibly predict.

LEHRER: Thank you. Robin?

MacNEIL: One of the groups that is organized to oppose the Kasten bill is the Consumer Federation of America. It's a coalition of 200 national, state and local consumer and labor organizations claiming to represent some 30 million people. The Federation's legislative director is David Greenberg. Mr. Greenberg, why do you oppose the Kasten bill?

DAVID GREENBERG: Well, basically we oppose the Kasten bill because we think it's going to harm safety.What the law says now in a majority of the states is if you design an unreasonably dangerous product, you're liable for that. It focuses on the quality of the product -- the dangerousness of the product. What the Kasten bill would say in design and warning cases is not, was the product dangerous, but was your conduct wrong? And we think that because the problems of proof are often so tough and the problems of litigation and the complications involved in litigation are often so burdensome that the Kasten bill will not only insure that people injured by unreasonably dangerous products won't in some circumstances recover. It's also going to make the whole litigation process and the transactions costs that Senator Kasten referred to more expensive and more of a problem.

MacNEIL: Well, what about the unreasonable use of the present system, to quote a couple of the cases -- he just instanced a couple of the cases where clearly, I think, the Senator thinks that it is unreasonable to make claims against manufacturers for the use of products or misuse.

Mr. GREENBERG: Well, if those examples are as they seem, I agree that those are unreasonable uses of the court system. But I think that by and large those cases would not stand up under most of the laws of the 50 states right now. Anyone can bring a lawsuit at any time, and until there's some fact-finding done, you can have some crazy examples and you can have some cases that make it to the court that don't belong in court. But I can cite equally crazy examples on the other side, where people were injured by seriously dangerous drugs and weren't able to recover, even though they could prove that the drug industry was negligent, but simply because they couldn't pinpoint which manufacturer, which drug manufacturer, made the drug. So I don't think we ought to be focusing on these extreme cases. But we ought to ask ourselves as a society, what kind of rules will most promote safety? And it's out belief that we ought to focus on dangerous conduct.

MacNEIL: Could you put it very simply for me? How is this bill, if passed, going to hurt consumers?

Mr. GREENBERG: Well, there are a variety of ways. Let's take a couple of examples. Your mother takes a drug; 20 years later you develop cancer. Unless you can prove that the manufacturer was negligent -- and I underscore unless you can prove negligence, even if it was there, you might have problems with documents; you might have problems with witnesses --

MacNEIL: You mean the manufacturer actually knew the drug could be harmful?

Mr. GREENBERG: Well, no, the standard isn't "knew," but it's "knew" or "should have known."

MacNEIL: Should have known.

Mr. GREENBERG: So the real core of the problem is, what happens when you have an innocent manufacturer who produces a very dangerous product and an innocent consumer -- thousands of innocent consumer -- who used that product?Now, the manufacturer is the only party of those two who could have prevented the risk by more research in design. It's the only one of the two who could have insured against the risk. And it's the only one of the two, frankly, who maybe made millions of dollars from the product. We think that it promotes safety much more to have the manufacturer be liable in those instances.

MacNEIL: One of the arguments raised by the backers of this bill is that it will promote safer products because manufacturers will no longer be afraid to make improvements in products in case, as they argue at present, they are then accused of having had an inferior product, perhaps even a dangerous one, before they made the improvement.

Mr. GREENBERG: Well, what they're talking about is a rule in a couple of states, and I think that a specific instance like that is overwhelmed by the general standard in the bill, which says if you can prove that you were ignorant and if you can prove that you didn't know, then -- or shouldn't have known, then you won't be liable. I see no way that that promotes safety when you compare that to a standard that says if you made an unreasonably dangerous product, you pay. There's plenty of protection for manufacturers within the concept of unreasonably dangerous. That doesn't mean that the product hurt someone. That means that it hurt someone in an unreasonable way, an unanticipated way.

MacNEIL: Well, thank you. Jim?

LEHRER: Some 200 manufacturing, insurance and other companies have formed a group to support passage of the Kasten bill. It's called the Product Liability Alliance, and its counsel is Victor Schwatz. Mr. Schwartz headed a federal task force on product liability in the Carter administration. He's now a private attorney here in Washington and teaches product liability law at American University. Mr. Schwartz, why do manufacturers want a federal law?

VICTOR SCHWARTZ: They want predictability. Right now they're faced with 51 different sets of rules. And it's even inaccurate to call them rules because they change every day. The courts make rules retroactively. When you're running a business, when you're trying to design your product carefully, you can't really do that if you're spoken to with 51 different voices. Second, they see a lot of their money going to lawyers and very little to victims. At hearings held by Senator Kasten he heard example after example of businesspeople who paid a relatively small amount to victims, but a huge amount to lawyers, the average being seven cents to the lawyers and six cents to the victims. But there are many examples where a million dollars is paid to lawyers and a small amount to the victim.

LEHRER: Well, won't they just be in federal court now instead of state court? They're still going to file lawsuits, aren't they?

Mr. SCHWARTZ: They will file lawsuits, but it's a different situation when you have one set of rules to look to that are written down. The consumers can read and businesspeople can read, as compared with the diversity of rules we have now. Just one example, if you make a convertible car, you're judgedby the standard of a convertible car in the state we're in now -- Virginia. On the other hand, in other states, they'll compare that convertible car to a hardtop to determine the strength of the roof. Now, what are you supposed to do? Before, an example was given about improving your product. If you improve your product in most of our states it's not used against you. In a few states it is. And David said two states. Two of the few states are New York and California. If you're doing business in interstate commerce, you're going to be chilled and worried about putting an improvement in your product when you know that can be used against you for older products that you have.

LEHRER: Mr. Greenberg suggests that if this law is enacted, that it is going to discourage manufacturers from making safe products.

Mr. SCHWARTZ: I don't think that's true. The Kasten bill is built on over seven years of work, beginning with the Ford administration, the Carter administration and the current administration. And three Congresses.It works to place incentives for risk prevention on the party who can best handle it. In the example the Senator gave, it would be on Columbo, the person who used the product. In other instances, the manufacturers can --

LEHRER: What about Mr. Greenberg's instance of having caught cancer 20 years after your mother took a medicine?

Mr. SCHWARTZ: In that situation, if the manufacturer is proved to be negligent ther is liability. And it's not just that the manufacturer knew. It's knew or "should have known as a prudent person," and that's the same standard that's used for lawyers, architects, even newsmen.

LEHRER: But what about -- I beg your pardon! But what about his point that if you have an innocent manufacturer and you have an innocent consumer that it's the innocent manufacturer that ought to bear the burden of the responsibility?

Mr. SCHWARTZ: Well, that's an interesting argument. We have things for innocent injuries. We call them social security systems, worker compensation systems. We have accident insurance. Accident insurance or health insurance that we buy for a dollar's worth of premium returns 83 cents to us. Liability insurance returns about 13 or 14 cents to us.When there's total innocence the tort system -- and that's what we're talking about, that's the fundamental -- is not the place to look.

LEHRER: The tort system meaning -- that's the system of law where you establish responsibility?

Mr. SCHWARTZ: That's right -- where you sue somebody. The meaning of the word "tort" comes from the Latin "twisted," "wrong." And that's the place you go for wrongs. And you get a lot of money in that system. You don't get just what you lost. In fact, if you've gotten all your money through health insurance and accident insurace, you get it all again; then you get eight or nine times that for pain and suffering.And if you can show the person was really reckless. you get punitive damages. That's where we get our multimillion-dollar awards, and the system has an inportant place. It does encourage safety, and it's a place to hit the wrongdoer. For innocence, compensation systems are the answer.

LEHRER: Thank you. Robin?

MacNEIL: One of the most notorious recent product liability cases involved asbestos. A New Jersey court found manufacturer Johns-Manville liable for not warning its employees of the cancer-causing effects of the asbestos they handled over 20 years. One of the attorneys who argued the case against the manufacturer is Ronald Grayzel. If the Kasten bill had been law, would it have changed the outcome of the asbestos case?

RONALD GRAYZEL: It would have changed the outcome of the asbestos case not only for my client but for the tens of thousands of asbestos victims across the country. And the reason that is, is because the --

MacNEIL: Some of whom are still suing.

Mr GRAYZEL: That's correct. What the Kasten bill does is it replaces a uniform system of products liability law that has been established by legal scholars in a restatement of the law and adopted in a majority of states, and replaces it with the antiquated doctrine of negligence. And what that does to the victim of a defective product such as asbestos is, one, to increase his burdens of proof and, two, to vastly increase the expense of the litigation he's involved in.

MacNEIL: Why is that? Why would it be more expensive to do that?

Mr. GRAYZEL: Under the Kasten bill, in order to establish that a manufacturer of a defective product is liable, you must establish that that manufacturer either had actual knowledge of the hazard of the product or that there was reasonable scientific information available at the time the product was manufactured to alert him to the hazards of the product. The only way that a plaintiff can gather that kind of knowledge is to invest thousands and thousands of dollars to obtain expert witnesses to do the necessary research and collect the data regarding the scientific information which is available or, in the alternative, to finance an assault upon the corporate personnel of the defendant to find out actually what they knew at the time the product was manufactured.

MacNEIL: Given all that, if this law -- if this bill had been law, would you have even brought the case, the suit in the asbestos case?

Mr. GRAYZEL: In the particular case that I was involved in, I would have been able to bring that particular lawsuit because the victim of that particular incident was fortunate enough to have selected a law firm that had the resources to finance that kind of case. If the Kasten bill becomes law, it will chill, it will deter, it will prevent plaintiffs from being able to mount the type of lawsuit that's required to obtain reasonable compensation for their injuries.

MacNEIL: Now, you've been talking about legal costs. You're a product liability lawyer; you earn your living doing this. You heard what two of the other guests have said, that one of the reasons there's so much cost in this is that 77 cents of every dollar goes to lawyers and only 66 cents, on average, to plaintiffs.

Mr. GRAYZEL: Well, that may or may not be an accurate figure, but if indeed it's correct, the manufacturers have no one to blame but themselves. Under the circumstances that exist in my state, the lawyers rarely take in excess of 20% of a substantial verdict in products liability. The overwhelming amount of costs that go to lawyers are incurred by manufacturers who invest unreasonable amounts of money in resisting legitimate claims. And not only in resisting legitimate claims, but in using the adversarial process to resist legal lawful process to compensate victims of industrial accidents and defective dangerous products. If manufacturers want to reduce legal costs, it's very simple. Simply quit resisting legitimate claims, quit paying inordinate fees to do so, and compensate the victims of your failure to manufacture safe products. That would reduce legal costs.

MacNEIL: What effect overall do you think this bill, if it became law, would have on the safety of American products?

Mr. GRAYZEL: This bill, as I see it, in two important aspects is a liability avoidance act. The New Jersey Supreme Court, in the case that I was involved in, made it very clear to manufacturers who do business in New Jersey -- as have the majority of states who have adopted the strict liability doctrine -- they've made it very clear to manufacturers, "You must either conduct the necessary tests or research to find out if your products are hazardous, and if they are hazardous, warn or take precautions against those hazards. And if you fail to do so, then you must compensate the victims of your defective products." What Mr. Kasten's bill does, it removes that legal incentive to conduct research and to take precautions against hazardous product. What Mr. Kasten's bill does, it only applies liability to manufacturers of defective products who had actual knowledge or reason to know of the dangerousness of their products. And what most manufacturers will do and what most manufacturers have done in the past is simply sit on their hands, do no research whatsoever, do no exploration of design alternatives, and then come into court and say, "Well, we're awfully sorry that Mrs. Curly's husband died of asbestos-related cancer, but unfortunately we didn't know because we didn't do any research, because we didn't do any tests, and thus we shouldn't have to pay."

MacNEIL: Thank you. Jim?

LEHRER: Is that what you've got, Senator, a liability avoidance bill?

Sen. KASTEN: Not at all, and I think, first of all, I'd be absolutely amazed if the average lawyer in product liability in the state of New Jersey works at something 20% or less. That would mean the state of New Jersey is significantly different than the 50 states, because we've had lawyers from all over the country. And the other point that he made that I think is wrong -- every single person who has testified before us, and this is in hearing records going back several years, agrees with our percentages, that roughly 70 cents are going -- 77 cents are going to lawyers for every 66 cents that are going to -- that are going to the manufacturers [sic] --

LEHRER: Well, his point, and I want to get back to Mr. Schwartz on that, is that your clients could take care of that. His point is your clients don't have to spend all that money on lawyers. They could give it to the victims.

Mr. SCHWARTZ: I agree with that; they could give it to them. We have a system which is based on showing some sense of responsibility. In the cases that he referred to, and that's asbestos cases, the plaintiffs' lawyers have been able to establish fault in a significant number of cases. When fault is established or if lawyers believe there is fault, they settle the cases. Over 95% of the cases in the United States are settled, and Mr. Grayzel knows that. And I want to comment. Senator Kasten always amazes me. He says he's not a lawyer, but then he picks out rules. New Jersey has a very unusual rule on contingent fees that limits them to a certain percentage as you go up on the scale. And the Organization of American Trial Lawyers Association, which I think Mr. Grayzel is a member of, fought that rule all the way to the Supreme Court of New Jersey. They lost that time.

LEHRER: Let me ask Mr. Greenberg on this. You represent the consumers. Are you concerned that so much of what comes out goes to the lawyers rather than to the consumer?

Mr. GREENBERG: Well, concerned is barely the right word. Our 30 million members reach for their pocketbooks and wallets when lawyers are arounds, but what they say is this. As long as we're stuck with a system where we've got to go to court and prove damages for our injuries, we want a system where even a poor person who is injured by an unreasonably dangerous product can go to court and have a lawyer finance some of the necessary costs. That's the contingent fee system we have, and as long as we have to make those kinds of proof, we're stuck with it. We'd be willing to cut lawyers out of this whole game entirely and move to a system --

Sen. KASTEN: Don't imply that we in any way in our bill, though, are trying to make any changes in the contingency fee system. That fee -- there are some small manufacturers that came before us and said, "That's the way you solve this problem. Get rid of lawyers' contingency fees." We did not do that, and we are still going to protect the court with access for all groups of people.

LEHRER: All right, let's go back to Mr. Grayzel's major point, which is that your bill is going to make it much more expensive, and almost prohibitive, for the average low-income, average American to go in and challenge some manufacturer on a product thing because of all -- you heard what he said -- all the evidence and the scientific witnesses and all that that would be involved.

Sen. KASTEN: That's not true. What we're simply trying to do is through an efficient mechanism pinpoint the responsibility on the party that's responsible. And we're trying to -- frankly, by pinpointing the responsibility we're going to reduce the legal costs; we're going to reduce the transaction time; we're going to take out all these middlemen that the trial lawyers bring in hoping that they can find one of them in the chain that they can somehow find to be partly liable. We're going to reduce the costs and therefore help the consumer.

LEHRER: You don't agree with that, obviously, Mr. Grayzel. How can you all look at the same thing and see it so differently?

Mr. GRAYZEL: The reason that I see it from a different perspecitve is because unlike Mr. Schwartz and others, I am not representing the Products Liability Alliance. I am representing consumers and working people who are constantly the victims of catastrophic injuries which are a result of defective products. And this is a perspective L've not only seen in my profession, but in my own background as a factory worker. And I know from my own background that this doctrine of strict liability and tort, which has evolved over 20 years and has been promulgated by leading American scholarz, is the only tool available to workers and consumers today to force manufacturers to design and market safe products.

LEHRER: Is that the -- let me just get a final word here from Mr. Schwartz. Is that the only tool?

Mr. SCHWARTZ: There are worket compensation systems for everybody injured in the workplace --

LEHRER: No, but he's talking about forcing the manufacturers at the top end.

Mr. SCHWARTZ: Well, the manufacturers -- I disagree with his characterization of the law, and I think that except for New Jersey, when we're talking about warnings, the courts, although they sometimes say strict liability, will look to whether a manufacturer who was a prudent manufacturer knew or had reason to know of the risk. And that is an engine for safety. You can't do more than a prudent person. And they do go to the court to get their recovery if they can show that.

LEHRER: Thank you. Robin?

MacNEIL: Senator Kasten, Mr. Greenberg, Mr. Schwartz, thank you. Mr. Grayzel, thank you. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: That's all for tonight. We will be back tomorrow night.I'm Robert MacNeil. Good night.