Evidence of Industry Custom and Practice May Be Admissible in Strict Products Liability Cases

by Low, Ball & Lynch
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William Jae Kim, et al. v. Toyota Motor Corporation, et al.

Court of Appeal, Second Appellate District
(January 19, 2016)

William Jae Kim and Hee Jon Kim filed a strict products liability action against Toyota Motor Corporation after William lost control of his 2005 Toyota Tundra pickup and was involved in an accident.  The Kims alleged the accident occurred because their Tundra lacked electronic stability control (“ESC”) and that this constituted a design defect.  (ESC senses tire slippage and applies brakes to help drivers maintain control.)  ESC was optional, not standard, equipment on Tundras when the Kims’ Tundra was manufactured.  The jury found no design defect and awarded judgment to Toyota.

The trial court denied the Kims’ in limine motion to exclude evidence that automotive industry custom was to not include ESC as standard equipment in pickup trucks.  The Second District Court of Appeal affirmed, holding such evidence may be admissible in a strict products liability action, depending on the nature of the evidence and the purpose for which the proponent seeks to introduce it, parting from prior cases holding evidence of industry custom and practice is never admissible in strict products liability cases and with a recent case suggesting such evidence is always admissible.

There are two alternate tests for identifying a design defect in a products liability action.  Under the “consumer expectations” test, the widely accepted minimum expectations about the circumstances under which a product should perform safely set the standard.  Here, the second test, the “risk-benefit” test, was in issue.  Under the “risk-benefit” test, the plaintiff must prove the design proximately caused the injury; if the plaintiff succeeds, the burden shifts to the defendant to prove the design’s benefits outweigh its risks.  The jury may consider, among other factors, the gravity of the danger, the likelihood it would occur, mechanical feasibility of a safer design, financial cost of an improved design, and adverse consequences to the product and consumer that would result from an alternative design.

The Court of Appeal reviewed leading cases on the subject.  In Titus v. Bethlehem Steel Corp. (1979) 91 Cal.App.3d 372, the trial court refused to instruct on the meaning of “product defect.”  The court reversed, reasoning that absent such an instruction the jury might have found the product was not defective because industry custom and practice was to offer safety guards as optional equipment rather than standard.  Titus stated that custom and usage is not a defense in strict liability actions.  Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757 involved a Ford Pinto which exploded when rearended.  The jury was instructed on the consumer expectations test but not the risk-benefit test.  Grimshaw held the jury’s focus in product liability claims is properly directed to the condition of the product itself, not to the reasonableness of the manufacturer’s conduct, and thus custom and practice was irrelevant.  In Buell-Wilson v. Ford Motor Co. (2006) 141 Cal.App.4th 525, the trial court properly excluded evidence comparing the Ford Explorer’s rollover rate with that of other vehicles, holding that such evidence was evidence of custom and practice, and admission of custom and practice evidence would have been reversible error as the consumer expectations test does not involve considerations of reasonableness of the design, and custom and practice had not been held to be a factor in risk-benefit analysis.  In contrast, the Court of Appeal looked at Howard v. Omni Hotels Management Corp. (2012) 203 Cal.App.4th 403, involving an allegedly defective bathtub, and holding industry custom and practice should be taken in account as part of the design defect balancing process.

The Kim court rejected both of these theories and instead settled on a middle ground.  The court reasoned that the old rule was based on an “outmoded theory that strict products liability is so inherently different from negligence that it should not share any features with negligence doctrines.”  It noted that the California Supreme Court has incorporated negligence principles into strict products liability doctrine, such as when it acknowledged that while the two inquiries are not identical, risk-benefit balancing may resemble a negligence inquiry in some ways (Barker v. Lull Engineering Co. (1978) 20 Cal.3d 413); when it held evidence of the state of the art at the time of manufacture or distribution is admissible in strict products liability failure-to-warn cases (Anderson v. Owens-Corning Fiberglas Corp. (1991) 53 Cal.3d 987); and that the sophisticated user defense applies in strict liability failure-to-warn cases (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56).  The Kim court concluded that evidence of industry custom may be relevant to risk-benefit analysis in certain cases, subject to challenges under Evidence Code section 352 that its probative value is substantially outweighed by the risk of undue prejudice or confusing the issues, or if it is otherwise inadmissible.

The Kim court gave several examples:  (1) Evidence that a manufacturer’s competitors tried to produce a safer alternative design which malfunctioned or functioned only at an unsustainable cost would be relevant to mechanical feasibility, as would evidence that such a design by a competitor was functional and cost-effective; (2) evidence that a competitor’s alternative design made the product less efficient or desirable (including aesthetic considerations) would be relevant to the adverse consequences factor, as would contrary evidence; (3) evidence may be relevant to rebut an opponent’s arguments – here, the Kims’ argument that pickups are similar to SUVs, that SUVs had ESC, and that Toyota was going to make ESC standard on its trucks until it learned its competitors were not going to do so, could be rebutted by evidence of a decision by Ford about including ESC on its pickups.  On the other hand, evidence that competing trucks did not offer ESC would not be admissible because it does not tend to prove whether the product is dangerous.

COMMENT

The court here rejected a “one size fits all” approach regarding admissibility of custom and practice evidence in strict products liability cases, instead holding that a decision must be fine-tuned for each case and depends upon the factors unique to the case where this evidence is under consideration.  Because a determination will not usually be made until trial and will be highly discretionary, this increases pre-trial unpredictability of results and places further emphasis on the already critical factor of appropriate selection of the trial judge.

This creates a third line of argument on this issue in the Appellate Courts and makes the issue more than ripe for Supreme Court consideration.

For a copy of the complete decision, see:

Kim et al. v. Toyota Motor Co., et al.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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