California Supreme Court Adopts Sophisticated Intermediary Defense in Product Liability Cases
On May 23, 2016, the California Supreme Court issued its opinion in William Webb v. Special Electric and in doing so formally adopted the sophisticated intermediary doctrine as a valid defense to product liability claims alleging inadequate warnings.
In California, a manufacturer may be held liable for injuries caused by its failure to provide adequate warnings of non-obvious dangers inherent in its product. For plaintiffs with product liability claims, proving a product contained an inadequate warning has traditionally been the path of least resistance to establishing liability. However, the Webb case offers a potentially powerful new argument for product manufacturers and suppliers sued for failing to provide adequate warnings to consumers. The sophisticated intermediary defense may be viable where a manufacturer sells a product to a distributor, packager, processor or retailer as opposed to the end user of the product. Prior to Webb, the law imposed a duty on a manufacturer to take steps to insure that its warnings reached the end user. This duty could not typically be discharged by either supplying the warnings to downstream intermediaries or relying on the sophistication of these downstream intermediaries to formulate adequate warnings and convey them to the end user.
After Webb, a manufacturer may now discharge its duty to warn end users about the risks of its product if the manufacturer: 1) provides adequate warnings to the product's immediate purchaser, or sells to a sophisticated purchaser that it knows is aware or should be aware of the product's dangers, and 2) reasonably relies on this intermediary purchaser to convey appropriate warnings to downstream users who will encounter the product. The potential impact of Webb for product defendants is two-fold.
First, a manufacturer may avoid liability if its retailers and distributors failed to pass along warnings the manufacturer provided. Second, if a manufacturer's distributors and retailers are sophisticated in the use of the manufacturer's product, the manufacturer may rely on that intermediary to formulate and provide warnings to the end user. If this sophisticated intermediary fails to provide warnings of dangers it knew or should have known were inherent in the product, the manufacturer may use the sophistication of the intermediary as a defense.
While the Webb decision creates this new defense for product manufacturer, it also illustrates how difficult it can be to succeed with the defense, particularly in the context of a motion for summary judgment. In Webb, the plaintiff contracted mesothelioma due to exposure to crocidolite asbestos contained in piping manufactured by Johns-Manville. Johns-Manville purchased the asbestos in the piping from a South African mine in a contract brokered by Defendant Special Electric Company. Special Electric never took possession of the asbestos and did not provide warnings to Johns-Manville regarding the dangers of the material. Both at trial and on appeal, all parties conceded that Johns-Manville was one of the largest manufacturers of products containing asbestos and that it had knowledge as early as the 1930s of the health dangers posed by the material.
Plaintiff sued Special Electric alleging that it failed to adequately warn him about the dangers of the asbestos. Special Electric countered that it could rely on Johns-Manville, as a sophisticated manufacturer of products containing asbestos, to provide adequate warnings to the end user. The jury found for the plaintiff but the trial court vacated the verdict and entered judgment in favor of Special Electric after finding that the evidence established Special Electric did not have a duty to warn given the sophistication of Johns-Manville. The California Supreme Court, in finding the trial court had erred in entering judgment for Special Electric, agreed that Johns-Manville was a sophisticated user of asbestos in general but that there was no evidence that it knew the unique dangers of the specific raw asbestos at issue, crocidolite.
The Supreme Court also emphasized that Special Electric did not show at trial that it actually and reasonably relied on Johns-Manville to warn end users like Plaintiff. In determining whether a supplier is reasonable in relying on an intermediary to provide warnings, the Court set out three factors for lower courts to consider: 1) the gravity of the risks posed by the product; 2) the likelihood the intermediary will actually warn the end user; and 3) the feasibility of the supplier to provide direct warnings to the end user. These factors, the Supreme Court noted, all deal with questions of fact which would reduce the likelihood a defendant could win a summary judgment motion based on the defense.
The Webb decision implies that the sophisticated intermediary defense will be most effective where the manufacturer supplies warnings to the intermediary and takes steps to satisfy itself that the intermediary will communicate the warnings to the end user. The defense is less likely to succeed if the manufacturer never provides the warnings to the intermediary and simply relies on the intermediary to formulate the warnings on its own.
This decision should serve as notice to vendors to review their agreements with manufacturers. Vendors' agreements should include indemnity provisions that apply regardless of whether the vendor is found to be a sophisticated intermediary or not.
As a final point of interest, the Supreme Court noted in a footnote that its decision did not address a manufacturer's duty to warn its customer's employees about the risks posed by a product. Webb provides a foundation for future case law that would limit a manufacturer's duty to warn a customer's employees of risks inherent in the product. Arguably, the second prong of the defense where the manufacturer would need to prove it actually and reasonably relied on the employer to pass on its warnings to the employee would be established simply by proving the employment relationship between the injured employee and employer. This is because the employer has a separate and distinct duty to train and supervise its employees and the manufacturer may reasonably rely on the employer to discharge this duty. Thus, where a plaintiff injured himself using a product provided by his employer, the product manufacturer could avoid liability for failing to provide an adequate warning to the employee simply by proving it provided the warnings to the employer or the employer was a sophisticated user who either knew or should have known the dangers associated with the product.
Nathaniel Lucey is a partner in the San Jose office. He can be reached at 408.286.0880 or email@example.com.