As we begin a new year, we are all no doubt grateful for the blessings in our lives, including the ability to achieve justice for our clients through the legal system. But, to be honest, aren’t you a little disappointed that it is now 2020 and there is no real prospect of traveling by flying car in sight? Many of us grew up believing 2020 was the year cars would take flight. Now some manufacturers estimate 2025 is the earliest commercial flying vehicles will hit the market, while analysts believe it could take much longer.

We may not have flying cars yet, but the age of the self-driving car has begun. To many, the idea of sitting passively in a car that does the hard work of navigating through traffic is appealing. But plaintiffs’ lawyers likely find the idea terrifying. We know how companies cut corners and send products to market too soon without adequate safety testing. We know how manufacturers have been willing to risk the safety of consumers in order to maximize profits by using cheaper tempered glass instead of laminated glass, and by using airbag inflators that were known to be ticking time bombs. And we know manufacturers have been all too willing to hide dangerous product defects from the public. One can easily imagine how self-driving vehicles that are not subject to human direction and control will lead to increased opportunity for the manifestation of product defects.

Truly self-driving cars will not only have the same potential for traditional product defects as other automobiles, like faulty seat belts, bad airbags, etc., but there will also be potential for defect in the cars’ “brains” — the artificial intelligence programming that will enable these vehicles to completely eliminate the need for a driver. Part of this programming must include a system of artificial ethics to guide a self-driving vehicle when making life and death decisions.

If you are interested in discussing any of the issues raised in this opinion piece, please contact us or reach out to Leslie directly at lkroeger@cohenmilstein.com or 561-515-1400.

Every day in Tallahassee, Florida lawmakers are being inundated with legislation that flies in the face of protecting the constituents they are elected to serve.

There’s an attack on consumer rights in Florida. The attack is happening in Tallahassee. While hard-working, tax-paying consumers go about their everyday lives, there are various attacks on consumer rights happening right now in the state Capitol that could severely limit access to medical care, prevent lower insurance rates, prohibit consumer protections after a storm, and even limit access to the courts.

Every day in Tallahassee, Florida lawmakers are being inundated with legislation that flies in the face of protecting the constituents they are elected to serve.

While consumer advocates are trying to protect the system that ensures a person can seek the care they need, the insurance industry is one step ahead trying to protect their bottom line.

Time and time again we see these heartbreaking stories.

Families who think their property insurance will cover damages related to natural disasters like a hurricane. Yet more than 15,000 Floridians are still trying to have claims resolved more than a year after Hurricane Michael impacted our state and sadly, over 20,000 have had their claims closed without receiving a single penny. Many are still not able to return to their homes because there is nothing left – only a concrete slab remains.

Florida drivers pay 81 percent more than the national average for auto insurance. The Sunshine State is one of only two states that does not require auto insurance coverage for bodily injury liability, putting it far behind the rest of the country when it comes to protecting its citizens from significant economic losses and higher insurance costs for all drivers.

Florida could join the 48 other states in the country which require their drivers to buy bodily injury liability insurance, providing coverage for injuries caused to others. This would help us return to responsible roadways and lower insurance rates for all drivers. But the insurance industry continues to block legislative proposals that ensure a safer Florida and are good for all consumers.

Other proposals would limit injured Floridians from receiving adequate care and compensation when they suffer injuries caused by another party. This means limited access to necessary and in some instances, life-saving health care because some providers will not treat out of fear of never getting paid for services. Patients will be increasingly limited to what doctors and specialists they can see.

In these cases, it’s not the consumers fault they are put into a position where they need to seek treatment or compensation for losses; however, the insurance industry and big business seek every opportunity to convince lawmakers to pass new laws that will further limit consumers ability to receive fair treatment, compensation, and care after individuals and their families have experienced a tragedy.

Florida consumers deserve the truth about what is happening and the roadblocks that are being created for them in Tallahassee. Lawmakers, it’s time to put a stop to these attacks on everyday Floridians and enact sensible legislation that truly protects Florida consumers.

Investors suing GreenSky, Inc. and its underwriters for failing to disclose important changes to the company’s business in documents accompanying its 2018 initial public offering (“IPO”) cleared an important procedural hurdle recently when a federal judge denied defendants’ motion to dismiss the case.

Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York announced his ruling from the bench November 25, 2019 after presiding over a spirited oral argument, handled largely on the plaintiffs’ side by Cohen Milstein Managing Partner Steven J. Toll with participation by Partner S. Douglas Bunch. Judge Hellerstein issued his order denying the motion to dismiss the next day.

Cohen Milstein is co-lead counsel in the case, representing co-lead plaintiffs Northeast Carpenters Annuity Fund and El Paso Firemen & Policemen’s Pension Fund. Judge Hellerstein upheld all claims alleged by those two funds, dismissing only one overlapping claim brought by a third co-lead plaintiff, the Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge.

GreenSky is a technology company that operates an online platform that allows creditors to process loan applications at the point of sale. More than 10,000 businesses use GreenSky’s platform.

Plaintiffs argued that GreenSky was required under the Securities Act of 1933 to tell IPO investors about its decision to sharply reduce business from solar energy merchants who earned the company high transaction fees in favor of other less-profitable merchants.

In 2016, two years before its IPO, GreenSky had derived approximately 20 percent of its transaction-fee revenues from solar panel merchants; that share had dropped to 12 percent by 2017 and to 8 percent in the first quarter of 2018, just before the IPO. By the second quarter of 2018, it had fallen to 5 percent. While it was aggressively reducing its presence in the solar panel business, where the average transaction fee was 14 percent, the company was increasing its involvement in the elective healthcare industry, where the average transaction fee was 6.5 percent. When the truth about GreenSky’s reduced transaction fees and consequential impact on transaction fee revenue emerged, the company’s stock price fell, damaging investors.

At issue was whether, taken at face value, plaintiffs’ allegations appeared plausible and were pleaded with enough particularity and detail.

At the November hearing, defense counsel argued that the company was not required to disclose the shift in merchant mix in its offering documents and that some of the decline in business from solar panel merchants was unexpected. Defense counsel also contended that the risk disclosures contained in the prospectus for the IPO constituted sufficient disclosure.

Judge Hellerstein, however, noted that the shift from the higher-profit solar panel sector to lower-profit elective healthcare merchants seemed “counterintuitive” and was never explained in the prospectus. “There’s something missing here. It doesn’t make sense,” he said. Toll argued that the prospectus and other offering documents made virtually no mention of the solar panel merchants, let alone their importance to the company’s bottom line. Despite all the pages in the prospectus devoted to risk disclosures, “you do not find the words ‘solar panel merchant’ in any risk factor in the entire prospectus,” he said.

In addition, Toll said, investors couldn’t know how a shift to healthcare would hurt the company without knowing more about its reliance on solar panel merchants. “This was their most profitable business,” he said. “It’s not like it’s 1 percent. It’s 20 percent in ’16. The investors aren’t told that. They don’t have a clue. So when [GreenSky] make[s] this disclosure they are going to actively reduce transaction volume with solar merchants, no investor knows what that means.”

The judge agreed. “The prospectus cries out for an explanation,” he said. “It doesn’t make sense without more of an explanation. At this point, I have too many questions to grant the motion [to dismiss] in this aspect.”

The case, In re GreenSky Securities Litigation, No. 18 Civ. 11071 (S.D.N.Y.), is proceeding to discovery.

A Checklist for 2020

Ask public pension plan trustees or counsel what keeps them up at night, and you’re likely to hear about ethics, compliance and fiduciary issues. Resolve to address these issues in 2020. Here’s a checklist to help you achieve your New Year’s resolution.

Tone at the Top: “Tone at the top” is not just a cliché—it has a significant effect on an organization and its people, and shapes the culture of ethics, compliance and risk management. Several organizational studies have shown that, when presented with a hypothetical ethical quandary, only a small percentage of individuals in an organization are likely to always do the right thing or the wrong thing. For the vast majority—90 percent, according to these studies—their choice of actions will depend upon the organization’s culture and the individuals’ access to guidance.

These studies confirm that when faced with a moral choice, most people act based upon environmental circumstances. For that reason, it is essential to set the correct tone and focus on core values. Communicate the message throughout the organization, speaking frequently on it, and integrating the message throughout. Articulate the mission and the values of the organization. Don’t just pay them lip service. When an organization’s ethical culture is weak you can wind up with headlines like those we’ve seen over the years—pay to play scandals, improper disability awards, pension spiking, nepotism, lack of oversight, and misrepresentation—which have led to ethics investigations, criminal convictions, regulatory enforcement actions, and reputational damage. Don’t let that happen to your organization.

A Resource for Guidance: The organizational studies cited above also found that access to information and guidance were key factors in determining ethics and compliance issues. Make sure your organization has a resource where people can comfortably go get the answers to ethical questions. The person tasked with responding to questions from trustees and staff must be knowledgeable, approachable and able to address sensitive questions. Importantly, that person must be given enough resources to respond quickly.

A Reporting Mechanism: Ethical cultures create an atmosphere in which individuals are comfortable coming forward to report wrongdoing. Be sure you have an appropriate resource where people can report allegations without fear of retaliation and with a belief that the issue will be taken seriously, together with a mechanism for investigating such allegations.

Codes of Ethics: An important element of the vigorous and robust ethics program needed to create an ethical culture or maintain an existing ethical culture is a code of ethics that sets forth permissible and impermissible conduct. Such codes must be workable and clearly written, preferably with examples of actual conflicts of interest or situations that create the appearance of a conflict. Many public pension plans have separate codes for trustees and employees, although sometimes both appear in the same document. At a minimum, codes must be consistent with the state or local ethics laws, but public pension systems often wish to adopt customized codes that are directly applicable to the work and mission of pension plans.

Training Program: Clearly communicating rules is essential to compliance. Put in place a comprehensive training program to educate trustees and staff. Remember the 90 percent of the population cited in the studies above—the overwhelming majority of trustees and employees are trying to do the right thing and need access to resources to help them do so. Among the elements of an effective training program are annual fiduciary training for trustees and appropriate staff, and regular ethics and compliance training for trustees and all staff. Attendees say they often prefer shorter, more frequent training sessions on tightly focused topics. Use a variety of speakers to keep the material fresh. For example, while a staff member is likely in the best position to train on the organization’s code of ethics, you may wish to invite a trainer from your jurisdiction’s commission on open meetings/open records to speak on those requirements for a subsequent session.

Governance: It is hard to overstate the importance of good governance in public pension plan management and success. Among the most critical questions in this area is whether the board has delegated appropriately and, having delegated, is careful to exercise appropriate oversight without micromanaging day-to-day operations. While trustees should not be substituting their judgment for that of staff who have been delegated authority, trustees are responsible for carefully monitoring and overseeing those operations and for regularly reviewing the performance of direct reports (the Executive Director and sometimes the Chief Investment Officer).

Policies and Procedures: Policies and procedures are at the heart of the public pension plan and can provide a strong system of internal controls. Many plans organize their policies in a Board Governance Manual that sets forth committee charters and contains such policies as a Communication Policy, Gifts Policy, Travel Policy, Placement Agent and Political Contribution Policy, Whistleblower Policy, and Discrimination, Harassment and Retaliation Policy, among others. In addition to having the right internal controls in place, policies and procedures must be regularly revisited and revised so that they remain relevant and robust.

Chief among policies is the Investment Policy Statement (IPS), which is at the core of good governance. The IPS should clearly set forth investment objectives; roles and responsibilities among trustees, staff, consultants and advisers; long-term strategic asset allocation; operational guidelines for carrying out the asset allocation; and rules for monitoring and reviewing the investment strategy.

Process: Remember that fiduciaries are judged by the process by which they reach their decisions. Establishing a reasonable decision-making process and adhering to that process helps to demonstrate prudence. Documenting the process is an important part of demonstrating prudence. Be sure that your review process has been sufficiently memorialized in order to demonstrate such prudence.

Happy New Year!

It is important for Taft-Hartley plan trustees to be informed of developments related to ERISA fiduciary liability. Cohen Milstein continuously monitors ERISA lawsuits, and in this issue of the Shareholder Advocate, we summarize developments related to several lawsuits concerning actuarial equivalence rules found in certain ERISA provisions. Over the last year, there were nine class cases filed that allege pension plans are violating ERISA by paying less than actuarially equivalent benefits to defined benefit plan participants. Plaintiffs in these lawsuits generally allege that plan fiduciaries and sponsors of their defined benefit plans violate ERISA when a plan uses outdated mortality tables to calculate alternative forms of benefits or “form factors,” which are predetermined factors used to convert normal form benefits into alternative forms. The plans at issue in these lawsuits are those sponsored by household names, such as American Airlines, U.S. Bancorp, AT&T, Metropolitan Life Insurance Company, Anheuser-Busch, Raytheon Company, and Huntington Ingalls Industries.

A participant’s pension benefit is generally expressed as a monthly pension payment beginning at “normal retirement age” as defined by the plan (no later than age 65). This monthly payment is called a single life annuity because it pays a monthly benefit to the participant for her entire life (i.e., from the time she retires until her death). ERISA-governed pension plans may (and, in some circumstances, must) offer optional forms of benefits. Several provisions of ERISA require that when participants receive optional forms of benefits, the value of the optional forms must be actuarially equivalent to benefits expressed as a single life annuity commencing at normal retirement age.

“Actuarial equivalence” is a computation that is designed to ensure that, all else being equal, two alternative forms of benefit payments have the same present value as each other. Generally speaking, present value is calculated using two primary actuarial assumptions: (1) an interest rate and (2) a mortality table. The interest rate discounts to present value each future payment using an assumed rate of return that is based on current market conditions. The mortality table provides the expected duration of that future payment stream at the time the table is published based on statistical life expectancy of a person at a given age. ERISA’s actuarial equivalence requirements are summarized as follows:

• For defined benefit plans “if an employee’s accrued benefit is to be determined as an amount other than an annual benefit commencing at normal retirement age [of 65] … the employee’s accrued benefit … shall be the actuarial equivalent of such benefit[.]” ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3).
• ERISA’s non-forfeitability requirements provide that if a participant receives less than the actuarial equivalent value  of her accrued benefit, this results in an illegal forfeiture of her benefits, and hence a violation of ERISA § 203(a), 29 U.S.C. § 1053(a).
• In addition, ERISA requires all defined benefit plans to provide Qualified Joint and Survivor Annuities, which are the “actuarial equivalent of a single annuity for the life of the participant.” ERISA § 205(a) & (d)(1)(B), 29 U.S.C. § 1055(a) & (d)(1)(B).
• Finally, if a plan offers early retirement benefits, ERISA requires that all participants receive no less than the actuarial equivalent of their benefit commencing at normal retirement age. ERISA § 206(a)(3), 29 U.S.C. § 1056(a)(3).

Whether the actuarial equivalence requirements have been met turns, in large part, on whether the actuarial assumptions used to calculate optional forms of benefits are reasonable and have been updated to reflect current trends in mortality and interest rates. In many of the cases where fiduciaries were sued, the mortality tables used to calculate optional forms of benefit were very outdated (with publication dates ranging from 1951-1984). If these allegations are true, the mortality tables used by several large plans have not been updated for decades—in some cases, for as much as 70 years. In other cases, the plans use form factors to convert benefits into optional forms and plaintiffs similarly allege that those form factors have not been updated for decades. These are the types of factual issues to be aware of if you are a trustee of an ERISA-governed plan.

While it is unclear how the lawsuits that have been filed to date will resolve, two of them have survived motions to dismiss and, in the one case that was originally dismissed, plaintiffs’ motion for reconsideration was granted. Given the likelihood of continued litigation in this area, trustees should consider taking some “belts and suspenders” actions to help defend against or avoid these types of lawsuits. For example, trustees could ask their plan’s actuary to periodically review the actuarial assumptions or form factors used to calculate the Qualified Joint and Survivor Annuities and early retirement benefits. The plan actuary could provide an opinion as to whether those assumptions or form factors are reasonable. Note, however, that if the plan actuary provides an opinion that the assumptions or form factors used by the plan to calculate benefits are unreasonable, the plan likely will need to revise its terms to employ reasonable actuarial assumptions. The revised terms may increase pension benefits obligations for the plan and negatively impact its funding status. Being proactive in working with the plan’s actuary to identify any potential issues related to actuarial equivalence should serve the plan well.

In a 150-page complaint filed on December 31, 2019, styled Advanced Gynecology and Laparoscopy of North Jersey.et. al. v. Cigna Health and Life Insurance, Cigna is accused of violations of  the Employee Retirement Income Security Act of 1974 (ERISA), of acting in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), and of committing a variety of state law violations. The Complaint accuses Cigna of engaging in several “brazen embezzlement and conversion schemes, through which it maximizes profits by defrauding patients, healthcare providers, and health plans of insurance out of tens of millions of dollars every year.”[1] Complaint ¶ 1. The plaintiffs, a number of different out-of-network health care providers, allege that Cigna cheats out-of-network healthcare providers by massively underpaying them for medically necessary services already rendered to beneficiaries of health plans administered by Cigna. Id. Cigna then allegedly retains those amounts withheld, which rightfully belong to the health plans, for its own use. Id. The complaint alleges that as a result, Cigna shifts the “financial responsibility for covered expenses onto the backs of patients, their employers, and [p]laintiffs, while Cigna gets rich.” Id.

The plaintiffs claim they protested Cigna’s unlawful processes and procedures in numerous communications to Cigna management. However, Cigna management allegedly informed them that Cigna has no compliance department capable of addressing these issues and encouraged the providers to file a lawsuit to “prompt Cigna to act.” Complaint ¶ 2. This lawsuit was filed on the heels of two similar class-action lawsuits against Cigna and its third-party administrator (TPA), American Specialty Health (ASH). Cigna settled these lawsuits for $20M total (one for $11.75M and one for $8.25M) in September of 2019. Both lawsuits were filed by out-of-network chiropractors, and alleged that Cigna and ASH colluded to overcharge members of Cigna’s employer-sponsored health plans. Specifically, the cases alleged that ASH charged employer-sponsored health plans hidden fees, by [including false charges for therapy services that were never provided /calling certain charges medical expenses for therapy services.] The plaintiffs accused Cigna and ASH of breaching their ERISA duties by concealing information about the true nature of the charges and alleged that Cigna falsified the Explanation of Benefits (EOB) forms to hide ASH’s administrative fees. The settlement was approved by the Pennsylvania district court judge, and neither Cigna nor ASH admitted any wrongdoing, although the judge’s approval order acknowledge that both organizations agreed to take certain actions to reform some aspects of their business.

• Cross-plan offsetting occurs after a plan’s carrier or TPA determines that an out-of-network provider received an overpayment; the overpayment is “reimbursed” by offsetting the amount owed with another payment owed to the same provider under a different health plan. 
• Many times, the alleged overpayments are made from an employer’s fully insured plan and the offset is taken from an employer’s self-funded plan. This can result in self-funded plan participants facing large “balance bills” or “surprise bills” if the provider seeks to recover the remainder of its charges that were offset by the TPA.
• This practice raises many fiduciary concerns under ERISA, including the duties to monitor, to act prudently and to refrain from using plan assets for any purpose other than providing benefits to plan participants and beneficiaries and defraying reasonable administrative expenses.
• The DOL believes cross-plan offsetting violates ERISA. Although dicta, the court in Peterson v. United Health Group also believes the practice likely violates ERISA. 
• You can also be liable, as a plan fiduciary. You should ask your TPA if they engage in cross-plan offsetting and if allowable, best practices is to opt out of that practice. 

By: Julie Goldsmith Reiser

Note: This opinion piece originally appeared in the January 1, 2020 edition of the Financial Times.

 

Toxic corporate culture drags down morale and can be a bombshell waiting to explode

When banks harm customers and preventable wildfires rage, corporate boards are remade and top executives are fired. Since 2016, when US regulators revealed that Wells Fargo had opened millions of unauthorised accounts, nine of 14 members of the bank’s board of directors have stepped down, and the chief executive has changed twice. Pacific Gas & Electric, blamed for sparking wildfires in California, has brought in a new CEO and 10 new directors, or 77 per cent of its board.

One might expect companies reeling from sexual harassment scandals, brought to light by the #MeToo movement, to hold their corporate directors similarly accountable. As a lawyer who represents investors in lawsuits against corporate boards, I can tell you that the reality is very different when it comes to cases that involved allegations of pervasive sexual harassment, such as the ongoing litigation against Alphabet. Directors of companies embroiled in #MeToo-related crises have largely avoided accountability. 

Take, for example, what used to be known as 21st Century Fox. In the first year following reports of rampant sexual harassment by news chief Roger Ailes and anchor Bill O’Reilly, not a single member of the company’s board of directors stepped down. Even today, Fox has just one woman on its board. 

There has also been no turnover on the board of directors at National Beverage Corp, even though billionaire CEO Nick Caporella has faced lawsuits alleging sexual misconduct (which he denies). Likewise, the Martin Agency’s creative director, Joe Alexander, left his firm suddenly in 2017 after multiple allegations of improper behaviour (which he denies). Although its parent company, Interpublic Group Cos Inc, installed female leadership at the Martin Agency, IPG’s board remained the same. 

Boards may feel comfortable giving themselves a pass because the top court in Delaware, where most US companies are incorporated, ruled in the 2000 case of White v Panic that an all-male corporate board’s decision to settle eight sexual harassment lawsuits with company funds, and to take no disciplinary action against the CEO, were “routine business decisions in the interest of the corporation”. 

Companies have successfully invoked this ruling for years. As far as I know, the recent ruling that the board of directors of Wynn Resorts may face liability for failing to adequately investigate or act on allegations of sexual harassment by company founder Steve Wynn, is the sole recent exception. (Full disclosure: I represent shareholders who recently settled with Wynn Resorts. He denies misconduct.) 

The Delaware courts are more willing to hold boards of directors to account when public health and safety are jeopardised. Recently, judges there allowed a lawsuit to go ahead that alleges Clovis Oncology’s board “ignored” red flags about safety in clinical trials. They also revived a lawsuit against ice-cream maker Blue Bell’s corporate board over a listeria scandal. 

It is time to force boards to respond to sexual harassment scandals that trigger public safety concerns within their own workforce. White v Panic should be overturned, so it cannot be used to shield boards that enable sexual predators. This is not just the right thing to do. It makes financial sense. A toxic corporate culture drags down workforce morale and can be a bombshell waiting to explode. A company hit by scandal suffers damage to both its reputation and stock price, and may struggle with a leadership transition. 

Boards should stop hiding behind an outdated legal decision to dodge responsibility for preventing sexual harassment and discrimination. Enabling harassers is a breach of directors’ fiduciary duties. Shareholders ought to insist on the removal of those who are complicit. 

* * *

A PDF of this opinion piece can be accessed here.

Since 2006, plaintiffs seeking to demonstrate class-wide damages in consumer fraud actions have often used conjoint analysis.[1] But recently some conjoint-based damage models have faced judicial rejection.

According to these decisions, while conjoint surveys can provide a reliable average as to the impact on demand from a corrected disclosure, they cannot alone provide the fair market value of a good or service. While conjoint surveys can support damage models, proponents should take additional steps or include alternative models with class certification.

The Value of Conjoint Surveys

Conjoint analysis involves a multifactorial survey that displays to participants a series of choice sets — matrices with changing attributes. After the participant makes their selections, the survey expert converts the choices to part-worths.[2] If price is an attribute, the conjoint analysis can be used to value the differing attributes and allow the surveyor to quantify a feature’s demand. This can help answer a key causation question: How much less would consumers have paid if the seller had accurately represented or disclosed the truth about an attribute?

A conjoint survey identifying a reduced consumer demand can accomplish three things. First, it can support Article III standing by demonstrating that the misrepresentation impacted price harming all purchasers.[3] Second, if the degree of impact on price would matter to the reasonable consumer, it can support materiality.[4] Third, the survey can serve as part of a damage model that measures the refund owed to consumers related to the misrepresentation’s price impact.[5]

Conjoint Analysis and Damage Models

The limits of a conjoint-based damage model are often explored in the motion to exclude under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals Inc.,[6] and the motion for class certification under Federal Rule of Civil Procedure 23 and Comcast Corp. v. Behrend.[7]

Daubert requires that the expert be qualified, the method reliable and the opinion aid the trier of fact. Comcast requires that if a model is being used to support class-wide damages, that it fit with plaintiff’s liability theory. For consumer class actions, that may be a subset of the benefit-of-the-bargain theory — that the consumer paid a price premium due to a misrepresented feature or an undisclosed defect.[8]

The title of the section of the Journal is Products Liability. Each month, various types of defective products and corresponding litigation are described in hopes of educating you and warning you about what’s literally in your backyard. But, regardless of your legal acumen or experience level, it’s often good to take a step back and rethink the basics.

Black’s Law Dictionary (11th ed. 2019) defines products liability as, “1. A manufacturer’s or seller’s tort liability for any damages or injuries suffered by a buyer, user, or bystander as a result of a defective product. 1. Products liability can be based on a theory of negligence, strict liability, or breach of warranty. 2. The legal theory by which liability is imposed on the manufacturer or seller of a defective product. 3. The field of law dealing with this theory. — Also termed product liability; (specif.) manufacturer’s liability. See LIABILITY; 402A ACTION. — products-liability, adj.”

Seems simple enough.  A company makes and sells a product.  Your client uses it.  Your client gets hurt. There must be a defect.  Well, maybe – let’s look a little closer.

Products don’t just magically appear on store shelves or in Amazon’s inventory; they start in someone‘s imagination. Often that someone is working in a marketing department and looking for something new to sell to make more profit for themselves or their company. Regardless of where a product starts, at every step in the process, from imagination, design, testing, and manufacture, through sale, there is a duty to act with reasonable care toward the end user.