Surviving in the legal jungle: Huge US product liability claims can give unprepared British exporters a nasty shock. Roger Trapp reports
Friday 07 May 1993
The dangers lie not in dark alleys and airport sliproads, but in the courthouses of the most litigious nation on earth. While anxious tourists brush up their self-defence, exporters sign up for seminars designed to demonstrate how the risks of huge product liability claims can be reduced.
The point has been brought home by the record dollars 100m ( pounds 65m) award made against General Motors, the US's biggest vehicle manufacturer. In February, a jury in Atlanta, Georgia, decided that the company should be held responsible for the death of a youth whose pick-up truck caught fire after a crash with another GM truck.
Although the other driver was drunk and the accident took place at high speed, GM was considered jointly liable because of the design of the truck's external fuel tank, which blew up after the crash.
Since the decision has prompted a government inquiry that could lead to nearly 5 million vehicles being recalled, the eventual costs to the ailing car maker could be 10 times the size of the court damages.
The case is an extreme example of a situation that James Tipler, the US attorney who is leading the seminars here, says has been exaggerated. However, he does warn that companies attracted to exporting to the US, particularly at a time when the dollar is relatively strong, could be crippled or even destroyed if they do not pay attention to the country's product liability legislation.
The exact cost of product liability actions is not known. But official estimates put the price of civil compensation - of which product liability is a part - at about dollars 15bn a year.
'It's a real fear, but it's a manageable fear,' he says, adding that it would be foolish to give up the chance of selling into the world's biggest market without knowing what the true picture was. 'It's not just a case of throwing your product into a mad system. There are rules to it.'
Recently, the first group of companies, ranging from pharmaceuticals groups to toy makers, heard him set out those rules. If they went expecting a stinging denunciation of the US legal system, they would have been disappointed. As a lawyer who represents the victims rather than the manufacturers, he is a stout defender of the situation, even of the principle of juries deciding on the scale of damages.
Mr Tipler acknowledges that this has the potential to produce large awards, but believes that juries are in better touch with personal emotions than many judges.
'If you look at jury awards they are commensurate with what has happened. They are terrible things. People don't slip on a banana peel and get a million dollars.'
What somebody like himself has to prove in front of a jury is that the product in question was defective and caused an injury to somebody even if the manufacturer acted properly.
He admits that this is a vague definition that causes widespread concern, particularly among manufacturers. However, he insists that this is part of its power. Through being so wide-ranging, it encourages companies to make their goods safer.
As evidence, Mr Tipler cites the fact that by the end of this decade nearly every car in the US will be equipped with an airbag, while very few will be in Europe. 'Products in the States in general are safer than those elsewhere,' he said.
Not surprisingly, lawyers bringing these cases have the support of consumer groups such as the Centre for Responsive Law headed by Ralph Nader, who made his name with his campaign against the Chevrolet Corvair car under the slogan 'Unsafe at any speed'.
Even cars made by US companies for export to Europe are not as safe as the same goods sold in the domestic market.
For instance, when the steering wheel is moved to the other side of a car other changes are made that require different safety measures. Since these are expensive, they are not carried out unless they are necessary.
Mr Tipler's first lesson, then, for European companies seeking to expand into the US is that they should make make their products to American standards.
'YouE can't prevent a law suit even with the best of intentions,' heTHER write error said. But there are things that can be done that will help a company to win.
Foremost is what is known as the test protocol. Even in the US, products are not required to be totally safe. Instead, they have to meet standards set by experts to determine whether a company's products are 'state of the art' for safety.
Exceeding such standards greatly enhances the chances of winning the case. Discussion of these tests can become highly complicated, creating a great role for experts in explaining to juries what the tests amount to and in challenging evidence.
Mr Tipler accepts that some companies may feel that improving safety measures is too expensive. But he points out that the most obvious alternative - taking out insurance - is hardly cheap.
A third option - relying on one country's laws not being enforceable in another - is not available to British companies because of the strong links between the British and US legal systems. Not surprisingly, Mr Tipler is not anxious to emphasise where taking such an approach might work.
Indeed, for all the advice he is proferring, he is showing no signs of going soft on manufacturers. The man who started his legal career representing entertainers and film studios accepts that he is turning from poacher into gamekeeper for the purposes of the series of seminars that continues in July. But it is not a permanent change.
Already unusual in having offices spread between southern California, Florida, Alabama and Washington DC, he has just opened a London operation that will make it possible to bring cases in the US on behalf of Europeans injured by products made by US companies.
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