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Winning the War on Allegedly Defective Products with Evidence of Industry Custom and Practice

Sep 27, 2018 | Topics: Product Liability, Class Actions

The California Supreme Court recently ruled that manufacturers may present industry custom-and-practice evidence for certain purposes in strict products liability actions involving design defect claims.  While the Court’s ultimate decision is a little convoluted, it can be summarized as follows:  Evidence that a manufacturer’s design conforms with industry custom and practice is not admissible to show that the manufacturer acted reasonably in adopting a challenged design.  However, such evidence is admissible to help the jury to determine “whether the product is as safely designed as it should be, considering the feasibility and cost of alternative designs.”  

In Kim v. Toyota Motor Corp., 6 Cal. 5th 21 (2018), the plaintiff suffered severe injuries when he lost control of his 2005 Toyota Tundra, a pickup truck.  The plaintiff sued Toyota on the basis that his vehicle had a design defect because it was not equipped with a relatively new safety feature, known as vehicle stability control (“VSC”), which would have prevented his accident.  When the plaintiff purchased his Tundra, Toyota offered VSC as optional equipment for Tundras and had offered VSC as standard equipment in some of its sport-utility vehicles.  

The plaintiff claimed that Toyota knew pickup trucks might experience loss-of-control issues that VSC could prevent, but Toyota did not to include VSC in its standard equipment package because none of its competitors offered VSC on their pickup trucks as standard or optional equipment.  The plaintiff also presented expert testimony that estimated the cost of installing VSC technology in the 2005 Toyota Tundra would have been about $300 to $350 per vehicle.  In other words, the plaintiff alleged that despite the relatively low cost of incorporating VSC technology as standard equipment in its Tundras, Toyota knowingly disregarded a known safety risk because there was no “competitive advantage” in equipping VSC as standard equipment on Tundras.

In response, Toyota explained that no other manufacturer offered VSC as standard equipment for their 2005 pickup truck models and the 2005 Toyota was the first pickup truck to offer VSC as optional equipment.  As such, Toyota was “ahead of the game” and there was nothing unreasonable about its decision not to include VSC as standard equipment on Tundras.  Toyota also explained that the industry practice was to “phase in” expensive, emerging technology as an option rather than as standard equipment.

The trial court instructed the jury to apply the risk-benefit theory of strict products liability under which they were to determine whether “the risk of danger inherent in the challenged design outweighs the benefits of such design.”  See Barker v. Lull Engineering Co., 20 Cal.3d 413, 430 (1978).  The jury found that the subject vehicle did not have a design defect and the Superior Court entered judgment in favor of Toyota.  On appeal, the plaintiff challenged the trial court’s admission of evidence of industry custom and practice.  The Court of Appeal affirmed the lower court’s ruling.  The plaintiff appealed this decision to the California Supreme Court. 

The issue before the Supreme Court was whether industry custom-and-practice evidence was admissible when applying the risk-benefit analysis.  The Supreme Court noted that there was a split in authority on this matter, with some courts holding that such industry custom and practice evidence is inadmissible when applying the risk-benefit analysis.  See Titus v. Bethlehem Steel Corp., 91 Cal. App. 3d 372, 374 (1979).  While other courts found such evidence admissible on the basis that a manufacturer’s reliance on industry standards should be considered “as part of the design defect balancing process.”  See Howard v. Omni Hotels Management Corp., 203 Cal. App. 4th 403, 425-426 (2012).

Ultimately, the Supreme Court held that the admissibility of industry custom-and-practice evidence “depends on the circumstances.”  Such evidence may aid the jury’s understanding of the complexities and trade-offs in a design, and “thus may provide some assistance in determining whether the manufacturer has balanced the relevant considerations correctly.”  As such, this evidence is relevant in the jury’s evaluation of “whether the product is a safely designed as it should be, considering the feasibility and cost of alternative designs.”  If presented for this limited purpose, the evidence is admissible.  On the other hand, if the evidence is merely used to show that the manufacturer acted reasonably in adopting a challenged design because other manufacturers did not install the technology, then the evidence is not admissible.

Based on the purposes for which Toyota offered the evidence of industry custom and practice, the Supreme Court held that the admission of the evidence was not improper.  The Supreme Court further noted that the plaintiff himself had introduced industry custom-and-practice evidence to support his claims against Toyota. 

Although this ruling gives manufacturers the option to present industry custom-and-practice evidence in certain situations, manufacturers must take great care to ensure that the evidence is offered, “to shed light on the appropriate inquiry under the risk-benefit test.”  Furthermore, manufacturers must understand that the plaintiff can similarly rely on industry custom-and-practice evidence to support a design defect claim.  Thus, evidence of industry custom and practice is fair game for either side in a design defect action.