Products Liability Litigation
Historically, strict products liability, strict liability, and products liability claims, (all terms encompass the same or similar types of claims and will be referred to herein as “products liability” claims), were adjudicated pursuant to the joint and several liability theory of recovery. Under joint and several liability, any one party in the chain of distribution could be found wholly liable for the entire amount of damages awarded to the plaintiff in a products liability action. This system resulted in a series of tenders of the action from the retail seller to the supplier to the manufacturer; and, in many cases, there were many more layers of entities between the consumer and the manufacturer.
Indeed, Arizona common law recognized and operated according to this principle until very recently. See Holtz v. Holder, 101 Ariz. 247, 418 P.2d 584 (1966); O.S. Stapley Co. v. Miller, 6 Ariz.App. 122, 430 P.2d 701 (1967). Arizona also adopted the common law principle that a joint tortfeasor who had paid the entire amount of damages awarded to a plaintiff could not recover through a claim for contribution or indemnity from a joint tortfeasor in the chain of distribution. Holmes v. Hoemako Hosp., 117 Ariz. 403, 573 P.2d 477 (1977). Pursuant to this common law doctrine, a plaintiff only had to find and prosecute one of the parties in the chain of distribution to be made whole from any injury resulting from a defective product.
In 1978, the Arizona Legislature adopted Arizona Revised Statute (“A.R.S.”) § 12-684 in an attempt to mitigate the harshness of the result where the retail seller was held entirely responsible for a defectively manufacturer and distributed product. A.R.S. § 12-684 provides that in a products liability case, the seller can tender the defense of the case to the manufacturer. If the manufacturer refuses to accept the tender and judgment is entered because of a manufacturing or design defect, the manufacturer must indemnify the seller for any judgment and for the seller’s fees and costs incurred in defending the action.
While A.R.S. § 12-684 alleviated some of the unfairness associated with a retail seller being held entirely liable for a defectively manufactured product, it did not address other parties in the chain of distribution who may have modified or altered the product after it left the manufacturer but before it reached the retail seller. Therefore, in 1984, the Arizona Legislature adopted the Uniform Contribution Among Tortfeasors Act (“UCATA”). This initial version of UCATA did not abolish joint and several liability. However, the 1984 version of UCATA did allow the seller and/or the entities in the chain of distribution to seek indemnification from the manufacturer or other party who was responsible for the defective manufacture or alteration of a product that injured a consumer. 1984 Ariz. Sess. Laws ch. 237, § 1 (codified as amended at A.R.S. §§ 12-2501 – 2509.
The Uniform Contribution Among Tortfeasors Act (1987)
In 1987, the Arizona Legislature revisited UCATA and took the doctrine of “several-only” liability a step farther. In 1987, UCATA was amended and specifically abolished the common law doctrine of joint and several liability in the State of Arizona. The title for the substantive provision of UCATA, A.R.S. § 12-2506, states, “Joint and several liability abolished; exception; apportionment of degrees of fault; definitions.” Because A.R.S. § 12-2506 is lengthy, it will not be quoted verbatim herein but a copy is provided for your review.
Part of UCATA, A.R.S. § 12-2509(A), defines the scope of its application as follows, “[t]he right to contribution under §§ 12-2501 through 12-2504 applies to all tortfeasors whose liability is based on negligence, strict liability in tort or any product liability action, as defined in § 12-681, including warranty.” Pursuant to the plain language of A.R.S. § 12-2509(A), UCATA contemplated that products liability actions would be subject to UCATA and the common law doctrine of joint and several liability in those cases was abolished.
Even though the plain language of the statute seems to abolish joint and several liability in products liability cases, the application of that doctrine has been inconsistent in Arizona courts until very recently. Indeed, most Arizona courts continued to apply the common law joint and several liability doctrine to products liability cases even after UCATA was amended in 1987. This point of law was not settled until the Arizona Supreme Court, sitting en banc, addressed it in 2006 in State Farm Ins. Co. v. Premier Manufactured Systems, Inc., 217 Ariz. 222, 172 P.3d 410 (2007).
State Farm Insurance Companies v. Premier Manufactured Systems, Inc.
The almost twenty years of inconsistent application of UCATA to products liability cases finally came to the attention of the Arizona Supreme Court in the Premier case in 2006. In Premier, State Farm, as the subrogee of its homeowner, brought a claim against Premier Manufactured Systems (“Premier”) for recovery of damages to the homeowner’s residence after a water filtration system manufactured by Premier failed and caused damage to the home. In the manufacture of these water filtration systems, Premier purchased various components from other manufacturers and assembled them in its Phoenix plant for sale at retail outlets. During the course of the litigation, it was determined that the primary source of failure for the water filtration system was a plastic canister used in the product. Premier had purchased the plastic canister from another manufacturer, Worldwide Water Distributing, Ltd. (“Worldwide”). Prior to the failure of the water filtration system in State Farm’s insured’s home, Worldwide had gone out of business and did not have any insurance coverage for its products. This scenario placed State Farm in the position of not being able to recover the majority of the damages against an insolvent manufacturer if UCATA was applied to products liability cases; because, according to UCATA, premier would only be liable for its own fault and not that of Worldwide. Id. at 224, 172 P.3d at 412.
In Premier, the Arizona Supreme ruled that UCATA did do what the plain language of the statute said it did. The Court stated that, “[w]e conclude that the legislative abolition of joint and several liability in 1987 extends to strict products liability actions. In such cases, liability is several only and fault must be apportioned among tortfeasors.” Id. Pursuant to this decision, products liability cases no longer utilize joint and several liability and the parties in these cases are only liable for their own “several” fault. This decision also places the risk of uncollectibility of damages on the plaintiff; rather than penalizing one party in the chain of distribution by being liable for the entire amount of the damages under a joint and several liability doctrine.
The Arizona Supreme Court did note that, although UCATA applied to all entities in the chain of distribution, each of these entities had a “non-delegable duty not to distribute a defective product.”Id. at 226, 172 P.3d at 414. Therefore, in theory, each party in the chain of distribution could be held liable for their portion of fault for distributing a defective product.
What UCATA’s Application to Products Liability Law Really Means
The elimination of joint and several liability for products liability law in Arizona does mean that the days of tendering the entire products liability case up the chain of distribution are over. Because each party is only responsible for its own fault, it is likely that a distributor that does not modify or otherwise change a product would have very little, if any, fault. The counterpoint to that assertion is that if a distributor has knowledge that the product is defective and distributes it anyway then that distributor could bear a fair amount of the fault for the product failure. However, in practical application, it is very difficult, if not impossible, to prove prior knowledge of a defective product that is still distributed by the distributor. Likewise, if the retail seller has knowledge of the defective product, the seller would bear a sizable portion of fault for knowingly selling a defective product.
The application of UCATA to products liability law essentially means that the only recourse for a retail seller is to tender the matter to the manufacturer and attempt to bring them into the litigation. A.R.S. § 12-684 is still applicable and provides that the retail seller can tender the products liability claim to the manufacturer. Again, however, the practical application of this theory is that many of today’s products are manufactured in China. My office has personally had a few cases where this was the case and we were never able to find the manufacturer. Even if one could find the manufacturer, obtaining jurisdiction and serving them in an American court would be very difficult. Therefore, when the trail ends at an importer that obtains products from China, it is most likely that the manufacturer will never be held accountable for its defective product.
All hope is not lost though. The application of UCATA allows the retail seller to name the unknown, or known, manufacturer as a non-party at fault pursuant to A.R.S. § 12-2506 and Rule 26(b)(5), Arizona Rules of Civil Procedure. When a defendant names another party as a non-party at fault, assuming that the evidence supports the theory of liability against the non-party at fault, the jury is given an instruction that they are allowed to allocate percentages of fault amongst the named defendant(s) and the non-party at fault. In that scenario, a retail seller could present sufficient evidence to demonstrate that the product defect is related to manufacturing and that the jury should allocate the majority of the fault to the non-party at fault manufacturer. Under UCATA, the fact that the plaintiff may not be able to recover against a non-party at fault does not matter. The plaintiff bears the burden and the risk for collectibility of any judgment under UCATA.
The application of UCATA to Arizona products liability law has changed the manner in which these cases are prosecuted and defended. Gone are the days of joint and several liability wherein many defendants in the chain of distribution shared the risks because damages could be collected against any one of them for the full amount. However, UCATA does allow a retail seller to name a manufacturer or other party in the chain of distribution as a non-party at fault. The non-party at fault principle allows the jury to allocate fault amongst defendants who are present and those that are non-parties; thus, theoretically, reducing the pro rata share of fault that would be attributable to the retail seller.