Product Liability Playbook - Spring 2019

SPRING 2019

Defense Strategies for E-Cigarette Cell Manufacturers Facing Product-Failure Claims ALSO INSIDE: The Telltale Plug Blade • When Nobody’s at the Wheel • The Gun • ‘B’ Is for Battery, ‘C’ Is for Claim • The Air at Sea • E-Discovery and the Defense of a Product • Voluntary Consent and Personal Jurisdiction • Averting the Scaffold Law • Successful Defense Shows Claimant Fraud •

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SPRING 2019

PRODUCT LIABILITY PRACTICE GROUP CHAIR David J. O’Connell doconnell@goldbergsegalla.com

EDITOR Susan E. Van Gelder svangelder@goldbergsegalla.com

CONTRIBUTORS Leah A. Brndjar lbrndjar@goldbergsegalla.com Petar K. Vanjak pvanjak@goldbergsegalla.com Robert J. Hafner rhafner@goldbergsegalla.com Daniel Mee dmee@goldbergsegalla.com Mathew R. Shindell mshindell@goldbergsegalla.com

PRODUCT LIABILITY PLAYBOOK | SPRING 2019

Letter from the Practice Group Chair We are pleased to introduce this first edition of Goldberg Segalla’s triannual newsletter on product liability, the Product Liability Playbook.

We look forward to sharing with you, in this and future issues, the latest developments, significant case rulings, timely topics, and litigation strategies in the evolving area of product liability law. It is our intent to provide our clients, colleagues, and friends regular, up-todate content in an informal but informative way. The newsletter will publish every four months.

In this issue, we discuss a wide array of topics, ranging from e-discovery to product failures and jurisdiction. We feature an article highlighting the challenges facing battery cell manufacturers in product-failure claims and provide practical advice on addressing those challenges through investigation and discovery. Product identification, a fundamental element of proof in any product liability claim, continues to be one of the most significant challenges in defending battery cell-failure claims, as critical evidence is often destroyed by the accident.

Companies involved in modern litigation or investigations will almost certainly encounter e-discovery, which continues to be an evolving area of the law as our technology changes and advances. In this issue, we discuss recent updates and practical pointers to avoid the pitfalls of electronic discovery in the modern age.

We hope you enjoy this newsletter as much as we enjoyed creating it for our readers. If you have ideas on what you would like to see included in our newsletter, or any comments on our first issue, please contact me at doconnell@goldbergsegalla.com, or the newsletter editor, Susan Van Gelder at svangelder@goldbergsegalla.com.

David J. O’Connell

Cover Photo: GettyImages

Contents SUCCESS STORY

4 | The Telltale Plug Blade A County Investigator Said the Freezer Manufactured by Our Client Caused the House Fire. Using an Electron Microscope, Our Experts Found that the Evidence Told a Different Story.

INSIGHT

5 | E-Discovery and the Defense of a Product COVER STORY

6 | Defending E-Cigarette Cell Manufacturers in Product-Failure Claims CASE NOTES

11 | When Nobody’s at the Wheel Whose Fault Is It When a Self-Driving Car Collides with Someone or Something?

12 | The Gun Connecticut Court Revives Case Involving Firearm Used in Sandy Hook Shootings

13 | ‘B’ Is for Battery, ‘C’ Is for Claim What Does Amazon’s ‘A-to-Z Guarantee’ Cover?

14 | The Air at Sea Liability for Asbestos-Dependent Equipment on Ships SPOTLIGHT

17 | Voluntary Consent and Personal Jurisdiction CROSSOVER

18 | Dismissal of Claim Averts Scaffold Law Successful Defense Shows Claimant Fraud

Spring 2019 | 3

SUCCESS STORY

The Telltale Plug Blade A County Investigator Said the Freezer Manufactured by Our Client Caused the House Fire.

Using an Electron Microscope, Our Experts Found that the Evidence Told a Different Story. and a better understanding of pyro-dynamics over the past 10 to 15 years have been dramatic. And yet, in a 2017 report, the American Association for the Advancement of Science cited subjective judgments and inadequately trained personnel as problems in many fire investigations in the United States. Written by a fire investigator, two analytical chemists, a fire engineer, and other experts, the report covered the very two phases of fire investigation—onthe-scene efforts and laboratory analysis—that came to inform the freezer case.

At this laboratory near Ithaca, New York, Goldberg Segalla experts conducted a pivotal examination of evidence in a house-fire claim. Photo courtesy of Curtiss-Wright IMR Test Labs website.

T

he piece of evidence on which the lawsuit finally turned was roughly the size of a man’s thumbnail.

It was a partly melted metal blade from the plug on an electrical cord, and it showed that some other appliance, not the chest-style freezer manufactured by our client, was the source of a 2011 house fire that led insurers to sue the freezer’s manufacturer for $125,000.

Along with damage to the freezer’s own power cord indicating that it hadn’t caused the fire but, rather, had been attacked by the blaze, the other appliance’s ruined plug blade and a scientific examination of the evidence by our experts enabled Goldberg Segalla partner Lisa M. Robinson to persuade a judge to dismiss the claim against the freezer’s manufacturer.

fire that destroyed a house in Canton, New York, in March 2011. In the predawn darkness that day, a smoke alarm awoke the owner of the home. He got out of bed and saw smoke.

Based on burn patterns on the freezer manufactured by our client and a nearby doorway and also based on where the fire started—at the north end of the garage, where the freezer was—a St. Lawrence County investigator who arrived on the scene soon after the fire was extinguished concluded it had been caused by an electrical malfunction in the freezer. As a result of the county fire investigator’s conclusion, the homeowners’ insurance carrier filed a product-liability claim against our client in March 2013.

Lisa’s successful defense of our client concluded more than a year ago, in April 2018. But the Syracuse-based attorney still clearly remembers the case and the dramatic turn it took in July 2016 at a Lansing, New York, laboratory.

But a few years later, at a single-story beige IMR Laboratories’ facility near Ithaca in 2016, our expert witnesses found that, when viewed through an electron microscope, the evidence told a very different story than the one alleged in the suit—a story that changed the complexion of the case and underscored the importance of using scientific as well as on-thescene methods to investigate a fire.

The lawsuit stemmed from an early-morning

Advances in the science of fire investigations

“It’s an interesting case,” Lisa says, “one that ultimately turned in our favor on the strength of evidence examined under an electron microscope and a heat-damaged, severed plug prong from another appliance that was found in the outlet where the fire started.”

Present for the pivotal evidence examination near Ithaca that summer day in 2016 were lab technicians; our metallurgist, John Gashinski; our electrical-engineering expert, Jim Crabtree; the plaintiff’s expert witness; and Lisa.

Lisa is a member of our Product Liability Practice Group, whose work has made Goldberg Segalla a recognized leader in product-liability litigation and risk avoidance. Our product liability attorneys have tried product liability cases on behalf of Fortune 500 companies throughout the United States and FTSE 100 in the United Kingdom. The practice includes a Certified Fire and Explosion Investigator (CFEI), providing Goldberg Segalla clients the competitive advantage of having on their side fire investigation credentials that often match or exceed those of opposing expert witnesses.

Lisa herself is an experienced trial lawyer who regularly represents manufacturers of industrial and consumer products in federal and state courts. She has defended clients in many personal-injury, property-damage, and fire cases involving alleged design defects and warning claims. And she was watching intently that day in Ithaca as an electron microscope showed ‘Telltale’ continued on page 16

4 | Product Liability Playbook

INSIGHT

E-Discovery and the Defense of a Product

Reliance on Technology and Electronic Data that Comes from It is Ubiquitous across All Industries.

Leah A. Brndjar In everyday business practices, employees communicate by email, draft presentations, track spreadsheets, and post social media content. Customers interact with companies by recorded telephone lines, through emails, and on social media platforms. Each and every one of those recordings, notes, documents, presentations, communications and posts constitute what’s known as electronically stored information, or ESI. When it comes to ESI, companies create and maintain it, and litigators live for it.

Even in this era of hyperbole, the sheer volume of what constitutes ESI is, in every sense of the word, massive. In the world of law, if faced with a lawsuit, this ESI can and will likely be discoverable information that pertains to the defense of your claims. When a products liability lawsuit comes down the pike, the old image of traipsing into a dusty library, funneling through some file cabinets and pulling out folders full of documents to answer discovery requests no longer works. Instead, the searches that are now required are of custodians, emails, servers and hard drives. The results are multiplied from what used to be hundreds of documents to what is now millions. Discovery production is measured in gigabytes, not page counts.

This process can be time consuming, cumbersome, expensive, and frankly, overwhelming.

But there are strategies to employ that can help minimize the headaches.

Know what you’re working with The first issue to address is understanding the sorts of documents that are requested by the opposing party. In most product liability lawsuits, documents that relate to the design, manufacture, and labeling are most pertinent to the defense of any claim. However, with the

onset of ESI, the requests now typically extend to include many of the thought-processes that went into the design, manufacture or labeling, such as emails about designs, changes, ideas, sourcing, recording of meetings, presentations, costs, sales, customer input, and reactions.

Historically, this type of information would not be recorded; rather, it would live and die in a conference room meeting, or potentially in the wastebasket after an early draft of something is replaced. Instead, now we have one- or twoline emails that serve as records of an idea or concern that is expressed in relation to the product, and is forever memorialized.

While the day-to-day business operations can be informed by litigation considerations, the practical reality is that lawyers cannot and should not dictate how employees communicate about the creation and selling of products (despite what they may prefer!). A portion of any litigation defense strategy should include training employees on what is and isn’t safe to communicate in writing. Educate the employees so that they understand that every electronically or digitally recorded thing they do, including emails, phone calls, and presentations, could be read aloud one day in court. That is typically a vivid image for people, many of whom have never had any reason to be involved with the justice system and have no desire to be.

Next, you need to understand what types of systems your company uses in its day-to-day course of business. Depending on the types of products that you sell or manufacture, your industry may be highly dependent upon automated systems, or it could still rely on more traditional methods of record keeping. Knowing whether you have a litany of public-access drives or one traditional file cabinet should inform your company’s approach to ESI requests. Among the questions to ask are whether there are access policies that limit who can touch a document, or when they can access one. Are there tracking tools to mon-

itor the metadata of a document? And how sophisticated is the protocol for creating, revising and saving documents?

Understanding the sophistication of your internal systems will help set a reasonable plan of attack before one is even needed.

Implement an accurate record-retention policy Record-retention policies are an essential component of an ESI strategy. Retention policies should be governed by the particular industry standards that your company is subject to and by any pertinent federal or state regulatory requirements. The most important factor from an ESI standard, though, is that they are actually implemented. Once a retention policy has expired, the relevant data should be deleted. Policies can vary depending on the person serving as custodian, the type of information, or the type of record. But, no matter what the retention period is, the deletion of data is essential.

Record-retention policies for ESI are typically automated with software programs, but experience has shown that a policy’s simply being in place does not mean deletion of documents or ESI has occurred within the specified timeframe. In litigation, if these documents are not deleted, they potentially become discoverable.

Assuming they are responsive to the discovery requests, you are now obligated to produce more documents than what could otherwise have been required. It is a simple, but important, concept. Ensure that your company applies all legally required record-retention policies and then do quality checks to make sure they are implemented correctly.

Know the whos and the wheres With most product manufacturers or retailers, there is a certain set of people or departments that are involved in the life cycle of a product, from inception to sale. Good plaintiff attorneys will ask for, by name, every person who has ever been involved in any part of the life cycle of ‘E-discovery’ continued on page 16 Spring 2019 | 5

COVER STORY

Defense Strategies for Cell Manufacturers Facing Product-Failure Claims Robert J. Hafner Susan E. Van Gelder

T

he defense of claims and lawsuits involving personal injuries and property damage caused by failures of the batteries cells frequently used to power E-Cigs involve unique difficulties from the perspective of the cell manufacturer.

E-Cigs use a heating element to “vaporize” a liquid commonly called juice, or e-juice, and the user inhales this aerosol. Most E-Cigs use one or two batteries (also known as cells) to power the heating elements.

Vape pen

6 | Product Liability Playbook

Single-battery cell vape mod

Dual-battery cell vape mod

Most vape pens are powered by either AAA or button-style battery cells.

Vape mods are frequently powered using rechargeable lithium-ion, or Li-ion, batteries known as 18650 cells because of their size – they are 18 millimeters in diameter and 65 millimeters long. Some vape mods may be designed for other size batteries, but the 18650 appears to be the most common.

Some vape mods have a USB or other connection built into the mod that can be used to charge the cell while in the Mod. Other devices require that batteries be removed and charged using a separate charging device.

Non-rechargeable cells, which can be used only once, are referred to as primary batteries. Rechargeable cells are referred to as secondary batteries.

Parts of an Electronic Cigarette Mouthpiece

Many devices have a switch to activate the heating element.

Cartridge (tank) holds the liquid “juice”

Battery

Microprocessor

Understanding the Li-ion cell technology

Some devices have a light-emitting diode on the end to simulate the glow of a burning cigarette.

Li-ion-based energy storage devices have become ubiquitous in modern society. The Li-ion designation refers to the cell chemistry. Examples of other cell chemistries used for common household batteries include alkaline, lead-acid, nickel-cadmium, or NiCd, and nickel–metal hydride, or NiMH. Today, batteries based on Li-ion chemistry are used to power most notebook computers, cell phones, digital cameras, camcorders, handheld vacuums, power tools, electric mowers, and flashlights, among other things. Cell form is most commonly divided among cylindrical, pouchstyle polymer, or prismatic batteries.

When two or more cells are connected in series or parallel or both and placed inside an enclosure, they are commonly referred to as battery packs. Battery packs assembled using Li-ion cells also include an internal Battery Monitoring Unit, or BMU, that incorporates various protective devices and circuits that monitor such things as the battery pack’s charge state, rate of discharge, and internal temperature to protect against conditions that might damage the cells – conditions such as over- or under-voltage conditions, over-charge or discharge, external short circuit, imbalance among the cells in the pack, and abnormal internal temperature.

Heating element/Atomizer heats the “juice” to make vapor

CELL FORMS

cylindrical cell

pouch cell

prismatic cell

PRIMARY INTERNAL COMPONENTS OF EACH FORM OF BATTERY

When the BMU detects an abnormal condition, it will shut the pack down. Whether the pack will reset and again operate depends on the nature of the abnormal condition detected.

The 18650 cells commonly used with vape mods fall within the category of cylindrical cells. The internal structure for cylindrical Li-ion cells is often called the “jelly roll” because of its form and layered structured.

Most 18650 cylindrical cells are filled with a liquid electrolyte (rather than the electrolyte paste sometimes used in pouch and prismatic cells) that permits lithium ions to flow back and forth through the porous separator as the cell is charging or discharging. The lithium ions collect and are stored on the one electrode (the anode) when the cell is charging and then flow through the separator to the other electrode (the cathode) when a load is placed on the battery (that is, the battery is discharging to power a device). The chemical reactions between the anode, cathode and electrolyte produce electric current that in turn powers the device.

THE COMMON CONSTRUCTION OF A LI-ION CYLINDRICAL CELL

The materials used to make the anodes and cathodes determine the performance, capacity, cost, and safety of a particular type of Li-ion battery. Cathodes made using lithium cobalt oxide provide higher capacity but may be more reactive than cells made with cathodes using lithium iron phosphate, with the latter type cathode also generally having higher power density, longer cycle life, and a wider nominal temperature.

Spring 2019 | 7

Probably the greatest advantage of Li-ion technology is the “energy density” attainable using this cell chemistry – the amount of energy that can be stored in a given space as compared to other batteries using different chemistries such as alkaline, NiCd, and NiMH based cells.

The amount of energy a battery can store over time, commonly measured as milliampere hours, or mAh, is frequently used to rate battery capacity. A higher mAh-rating means the fully-charged battery can power a device that consumes more power and/or for a longer period of time before the battery becomes depleted and requires recharging. When used with a vaping device, the higher the cell rating means the more power that is available to energize the heating element for a longer period of time.

Other advantages of Li-ion batteries are that they are smaller and lighter; they recharge at a faster rate; they have low self-discharge, meaning the battery has a longer shelf life when not being used because it self-discharges slower than batteries with different cell chemistries); they have minimal to no memory effect, a phenomenon whereby rechargeable batteries lose their maximum charge capacity when repeatedly partially recharged); they have high open-circuit voltage; and they have a longer useful life span.

But the greatest advantage of a Li-ion battery, its energy density, also is its greatest hazard.

When it fails it may release its stored energy in a very short period of time, and, the greater the amount of energy being stored, the greater the significance of the event.

Cylindrical cells have a number of protective devices built in, including a positive temperature coefficient, or PTC, current-limiting device; a current-interrupt device, or CID; and a means for venting gases within the cell using a scored disk vent and holes built into the cell-top cap.

The PTC inhibits high current surges. It resets and does not permanently disable the cell when triggered. The CID will disable the cell if the pressure within the cell reaches a certain level by releasing the connection of the pos-

itive terminal thereby breaking the circuit. It may or may not reset. The cell is also designed to open at the top and vent internal gases once a certain internal pressure is reached.

deforming the cylinder and inducing an internal short circuit or creating an external short by contact with things such as coins, keys, and other metal objects.

Potential causes of failures of Li-ion battery cells

The problem can be magnified because E-Cig users frequently search out cells with the highest available capacity, which last longer before requiring recharge and offer more power. Users find these features advantageous, especially when participating in “e-smoke blowing” contests.

Incidents resulting in personal injury or property damage caused by Li-ion cylindrical cells happen when a failure overcomes the ability of the PTC and CID and the heat generated inside the cell converts the liquid electrolyte inside to a gas, which then rapidly vents out the cell top cap and ignites. Numerous videos can be found on the internet showing Li-ion cells failing in people’s pants pockets, or purses. The cell may or may not be in the E-Cig at the time.

If the cell is inside an E-Cig at the time of failure and the E-Cig is being used, it may present a particular hazard to the user because the E-Cigs often are designed such that the top of the cell from which the internal gases vent is pointing toward the user’s mouth.

There are a variety of reasons a Li-ion battery may fail, including: • Manufacturing issues that can lead to internal short circuits

Anecdotal evidence exists that some of the cells available for purchase on the internet actually came from battery packs that were disassembled to obtain the cells for resale.

Another scenario is that cell manufacturers sold cells to pack assemblers/manufacturers with the understanding they would only be used for that purpose but the cells then made their way onto the market as standalone products.

• Charging issues that induce internal failures

Defending claims for battery failures

• External damage to the cylinder wall that can induce internal short circuits

From the perspective of a cell manufacturer, the defense of product liability claims involving Li-ion cells used in connection with E-Cigs can present unique difficulties because

• External short circuits created by, for example, carrying a cell in a pants pocket, purse, etc. along with keys, coins, and other metal objects that can create external short circuits When used to power vaping devices, Li-ion cells are most often used as standalone devices without the enclosure and protective devices associated with battery packs. Unless these protective devices and circuits are built into the vaping device itself (which they commonly are not), failures can be induced in the cell simply by charging it while in the vaping device, not using a properly designed charger, or using a charger not intended for the cell.

E-Cig users also frequently carry spare batteries in their pants pockets or purses. Failures can be induced by other objects denting or

Cross-section of the top of a cell and locations of the CID, PTC, and scored-disk vent

8 | Product Liability Playbook

These cells are frequently intended by their manufacturers for use only with power tools and similar devices and only as part of battery packs that include the aforementioned enclosure and protective devices and circuits associated with the BMU.

• the cells are often not being used for an intended purpose; • the vape shop that sold the cells to the consumer does not have insurance coverage; • the entity from which the vape shop or the consumer obtained the cells is not identifiable or subject to suit in the United States; or • objectively confirming the identity of the cell manufacturer post-incident is impossible.

Product-identification issues The identity of the manufacturer of the product involved in an accident is typically a necessary element of proof to impose liability in tort. The defense of claims and lawsuits associated with

Cross-section of a CID

Li-ion cells is often complicated by the inability to objectively identify the cell manufacturer post-incident.

18650 Li-ion cell manufacturers can often be identified pre-incident by the alpha-numerics printed on the outside of the cylindrical can, especially if they comply with the labeling requirements set forth in the Underwriters Laboratories (“UL”) Standard for Lithium Batteries (UL1642) and bear the UL “recognized component” mark ( ). UL1642 requires that certain information be included in the alpha-numerics printed on the cylinder for the UL recognized component symbol to be placed on the cell.

The required information includes data identifying the manufacturer, the facility at which the cell was manufactured and the date of manufacture. Cylindrical cells are also frequently covered with a plastic wrapper with manufacturers using specific colored wrappers, which may also assist with product identification.

Manufacturer-specific physical cell characteristics can be critical evidence to assist with manufacturer identification/confirmation (such as the number, size, and shape of vent holes in the cell top cap). However, all of these characteristics that might assist with the identification of the cell manufacturer are frequently destroyed by the cell failure. The photographs (right) show an exemplar 18650 cell and a cell that has failed, ejecting the internal components.

Where no markings remain on the cell, we are often left with the consumer or the vape shop from which they bought the cell claiming it was manufactured by a particular company with no independent means to verify their recollection. Witness testimony implicating a particular company as the manufacturer of the cell will likely be sufficient evidence to preclude summary judgment on product identification grounds. Detailed questioning of the plaintiff, distributor and other witnesses concerning the source and foundation for product identification is critical proof that should be examined at depositions.

Fake cells Anecdotal evidence also exists that there are numerous fake cells on the market. Cells made by certain manufacturers may command higher prices. We have seen instances where fake cells have been labeled as being made by a reputable manufacturer when analysis of the alpha-numerics on the cell demonstrate the cells are not authentic – it being the least expensive option to label the cells with the same identical alpha-numerics versus changing the alpha-numerics as done by reputable manufacturers to reflect different manufacture dates, lot codes, manufacturing facility, etc. We have also seen instances where someone has taken less expensive cells, re-wrapped them, and represented them to have been manufactured by a different company in order to receive a higher price per cell. It is very difficult, if not impossible, to distinguish a “knockoff” from an authentic cell if it is in the condition as shown in the photograph below.

have few, if any, assets to contribute to settlement or satisfy a judgment, leaving the injured party to look for available parties higher in the chain of distribution. If the consumer or the vape shop obtained the cell via an internet purchase, the entity selling the cell via the internet is commonly not located in the United States or not subject to the jurisdiction of any court in this country – leaving the plaintiff and their attorney with the cell manufacturer or possibly its United States subsidiary as providing them with their only potential remedy.

If no identifying marks remain on the cell, it also becomes impossible to identify the entity to which the cell manufacturer sold the cell, thereby preventing the manufacturer from pursuing a claim for contribution and/or indemnification against an entity that improperly distributed the cell as a standalone when it should have only been used as a component part in a property assembled battery pack with all the required protective devices and circuits.

Conclusion

Failed exemplar 18650 cell (with undamaged cell inset)

As discussed above, the investigation and defense of claims and lawsuits involving battery cells used with E-Cigs present some unique difficulties from the perspective of cell manufacturers – objective identification of the cell manufacturer and verification of cell authenticity perhaps being the greatest given that all markings on the cell are frequently destroyed by the event. Early identification of the vape shop from which the consumer obtained the cell and distributors higher in the chain of distribution are essential. It is also essential to determine what information and warnings, if any, the retail seller and distributors higher in the chain of distribution provided with the cell and whether they supplied the cell with any type of storage case or holder.

Absence of responsible parties The vape shop from which a consumer bought a failed cell is most often known. However, experience indicates that vape shops frequently fail to obtain insurance providing them with coverage for such product liability claims and

For additional sources of information concerning the hazards associated with E-Cigs and their power supplies, we offer the following links: https://be-cigarettesafe.org/ https://www.fda.gov/tobaccoproducts/labeling/productsingredientscomponents/ucm539362.htm https://www.cpsc.gov/Regulations-Laws--Standards/Voluntary-Standards/Topics/Batteries https://www.usfa.fema.gov/downloads/pdf/publications/electronic_cigarettes.pdf https://ctech.ul.com/en/faqs-ansi-can-ul-8139-standard-for-safety-of-electrical-systems-of-electronic-cigarettes/ http://www.prba.org/news/ http://www.prba.org/wp-content/uploads/PRBA-Policy-on-Use-of-Stand-Alone-Li-ion-Cells-18.pdf

Spring 2019 | 9

Cybersecurity and Data Privacy Practice Group Data is everywhere and everything. It is a resource and a currency; it is a lock and a key; it makes up environments and identities. Businesses in every industry recognize data as an endless stream of opportunity. Too often, they fail to recognize the risk.

The Goldberg Segalla Cybersecurity and Data Privacy Practice Group is a multidisciplinary team of attorneys working across the country to counsel, train, and defend clients facing all conceivable cybersecurity and data-related matters. With verdict-tested trial lawyers, preeminent intellectual property litigators, and leading regulatory attorneys collaborating to provide 360-degree cyber counsel, our team helps industry-leading companies, their executives and IT professionals, and their insurers: • Assess and address data security risks and cyber coverage

TO LEARN HOW OUR TEAMS CAN WORK TOGETHER, CONTACT: Marc S. Voses Cybersecurity and Data Privacy Practice Group Chair mvoses@goldbergsegalla.com

STAY UP-TO-DATE ON THE LATEST CYBERSECURITY AND DATA PRIVACY TRENDS, DECISIONS, AND NEWS:

Data Privacy and Security Blog Complex data security and privacy threats are widespread.

Goldberg Segalla’s Data Privacy and Security blog is an essential tool for understanding — and avoiding — newly emerging risks. » Read more at dataprivacyblog.com

• Prepare for cyberattacks and data breaches

California Consumer Privacy Act Fact Sheet

• Create policies and procedures to mitigate risk and minimize liability

Applications, obligations, and pathways to compliance — what you need to know about the CCPA and how Goldberg Segalla can hellp you navigate your obligations. » To request a copy, email Marc Voses at mvoses@goldbergsegalla.com

• Respond quickly and comprehensively to data security incidents • Defend against post-breach claims and legal proceedings, as well as legal challenges to data-related business practices • Navigate regulatory, statutory, and contractual requirements at every level • Anticipate the future flashpoints that will define the fields of cybersecurity, data privacy, and intellectual property Our approach is comprehensive: By providing counseling and training on how to anticipate risks, assess coverage needs, prepare for breaches, and execute response plans, we’ve been able to help our clients avoid serious incidents, limit liability, and implement the best workplace cybersecurity policies and practices.

When attacks or breaches do occur, we help clients respond and recover quickly and efficiently. Our attorneys are ready to spring into action at a moment’s notice to oversee or assist a client’s internal incident-response team.

www.goldbergsegalla.com

CASE NOTE Nilsson v. General Motors LLC and Self-Driving Car Liability

When Nobody’s at the Wheel

Whose Fault Is It When a Self-Driving Car Collides with Someone or Something?

Petar K. Vanjak The liability questions raised

by Nilsson v. General Motors, the first-known lawsuit in the United States involving a self-driving car, read like riddles. Who’s liable when a car nobody’s driving strikes a person or another vehicle or damages property? Is a self-driving car on auto-pilot a driver or a consumer product?

Besides raising questions that likely will proliferate with the rise of autonomous-vehicle sales, Nilsson, which was filed in U.S. District Court for the Northern District of California in January 2018, presents a potential flaw in the technology of GM’s autonomous vehicles.

The case stems from a December 2017 collision between a motorcycle and a self-driving car in San Francisco. The plaintiff alleges that he attempted to pass a Cruise Automation 2016 Chevrolet Bolt that was in self-driving mode when the vehicle began to switch lanes and then suddenly swerved back into its original lane and collided with the plaintiff’s motorcycle. In January 2018, he filed a negligence suit against GM in U.S. District Court for the Northern District of California, for injuries he sustained to his neck and shoulder.

The plaintiff claimed he was behind the vehicle when its directional signal indicated that it was merging left. Once the car merged into the left lane, the plaintiff drove straight ahead and passed the self-driving vehicle. As the plaintiff was passing, the vehicle suddenly swerved back into the original lane and collided into the plaintiff’s motorcycle. The plaintiff allegedly suffered numerous neck and shoulder injuries

that required “lengthy treatment” and which forced him to take disability leave from his job.

GM, however, reported a different version of events. The company claimed that its vehicle was driving in the middle of three one-way lanes when it attempted to merge into the left lane. GM claimed that a minivan ahead of the vehicle slowed down, at which point the GM vehicle abandoned its attempt to merge. While the vehicle was “re-centering” itself in the middle lane, the plaintiff’s motorcycle passed between two vehicles in the center and right lanes, hit the side of the GM vehicle and crashed. The GM vehicle reportedly had been keeping pace with surrounding traffic at 12 mph while the motorcycle was traveling 17 mph. Further, the San Francisco Police Department’s collision report indicated that the plaintiff merged into the subject lane before it was safe to do so.

The parties ultimately settled in May 2018.

Afterward, GM announced that the technology investment firm, Japan’s SoftBank Vision Fund, would invest $2.25 billion into GM Cruise automated driving hardware and software. In a statement, SoftBank Investment Advisers Managing Partner Michael Ronen said that the company made significant progress toward “realizing the dream of completely automated driving to dramatically reduce fatalities, emissions, and congestion… [using] fully integrated hardware and software.” The move is one of the highest profile, largest investments to date in self-driving technology.

Although the self-driving industry is poised to revolutionize transportation, it faces significant engineering, safety and regulatory challenges.

The Nilsson case presents a potential flaw in the technology of GM’s autonomous vehicles

and raises a number of liability questions we can anticipate in litigation that will undoubtedly proliferate with the rise of autonomous vehicle sales. Is a self-driving car on autopilot a “driver” or a “consumer product”? Who is liable when a self-driving car hits a person or damages property? Will federal and state regulators limit liability for accidents caused by autonomous vehicles? Lawsuits involving automated vehicles will also require additional experts proficient in the areas of programming, statistics, algorithms and analytics significantly increasing the complexity and cost of litigation.

As autonomous vehicle accident litigation increases, liability will focus on autonomous vehicle manufacturers and their software providers. Future legal rules will likely hold autonomous vehicles and their software providers as consumer products whose manufacturers are liable through product liability. As such, manufacturers of autonomous vehicles and their software providers will have to take measures to mitigate and reduce the potential for future lawsuits, including raising customer awareness of the potential safety risks posed by autonomous vehicles. With the avant-garde nature of autonomous vehicles, it is highly likely that many of the technology’s potential malfunctions have not been considered. Accordingly, manufacturers and sellers must address these issues with explicit terms and instructions in their purchase and sales contracts, warnings, instructions, and marketing materials. Clear communication of the risks inherent in the use of automated vehicles could greatly reduce the potential for costly future litigation and consequent adverse regulatory effects.

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CASE NOTE Soto v. Bushmaster Firearms International, LLC, et al., No. 19832, 2019 WL 1187339 (Conn. Mar. 19, 2019)

The Gun

Connecticut Court Revives Case Involving Firearm Used in Sandy Hook Shootings Jeffrey S. Matty In a ruling garnering national attention, the Supreme Court of Connecticut in March 2019 breathed new life into a high-profile lawsuit filed in October 2015 by taking the extraordinary step of reinstating a portion of the plaintiffs’ complaint and permitting a narrow statutory claim to proceed against the manufacturers, distributors, and direct sellers of a certain semiautomatic rifle.

That rifle is the Bushmaster XM15-E2S, the military-style combat weapon used in the December 2012 Sandy Hook shootings. The complaint filed against those responsible for its being available to civilians tells a chilling story whose centerpiece is a clinically worded but ominous section titled “The Gun.” The section recounts the development, history, intended uses, and firepower capabilities of the XM15-E25, a lightweight, semiautomatic AR15 assault rifle that was designed as a combat weapon by a company called Armalite pursuant to specifications developed by the U.S. Army.

Air-cooled and gas-powered, the AR-15 was designed for rapid fire with limited recoil, making it especially lethal even when fired by someone with poor aim and in less-than-ideal combat conditions. It can fire ammunition with enough velocity to pierce body armor and steel helmets – 4,000 feet per second, or about four times the speed of a typical handgun. When it became the military’s standard-issue service rifle, it was given a new name: The M-16.

But the average person’s familiarity with the weapon derives not from military history nor combat experience; rather, our knowledge of this device stems from its prevalent use in mass shootings bringing about tragic results that have been seared into the nation’s consciousness. Few events have impacted us more than the horrific December 14, 2012, shooting at Sandy Hook Elementary School, which took the lives of 26 innocent children and adults, one of whom was 27-year-old Victoria Leigh Soto.

Three years later, Victoria’s mother, Donna L.

12 | Product Liability Playbook

Soto, joined with administrators of the estates of other victims of the shooting to file Soto v.

Bushmaster Firearms International, LLC, alleging that some advertising and marketing by the firearms manufacturer was “unethical, oppressive, immoral and unscrupulous” and that the advertising and marketing promoted the illegal, offensive use of the rifle used in the killings.

Last month’s Supreme Court of Connecticut ruling revived the case after a trial court had granted a defense motion to strike the complaint. The appeals court concluded that the plaintiffs had standing to assert wrongful-death claims under the Connecticut Unfair Trade Practices Act, or CUTPA, and that the Protection of Lawful Commerce in Arms Act, or PLCAA – which generally affords manufacturers and sellers of firearms immunity from civil liability arising from the criminal or unlawful use of their products by third parties – did not preempt the plaintiffs’ claims.

Given the ongoing debate over gun regulation and the interplay between state and federal statutes, this landmark ruling will certainly be the subject of future appellate litigation.

But if the court’s order stands, it will provide a long-sought roadmap for shooting victims to seek redress from manufacturers, distributors and direct sellers of firearms. However, given the tenuous connection between the defendants’ marketing efforts and the perpetrator’s ultimate decision to use this particular assault weapon, it is unclear whether the plaintiffs will ultimately be able to establish a factual predicate for liability that can survive on the merits.

‘Grossly ill-suited’ for civilian use The complaint filed by Soto and others was premised upon two distinct theories of liability: first, that the XM15-E2S is a military-grade weapon “grossly ill-suited” for legitimate civilian purposes, and second, that it has become the weapon of choice for mass shootings such that the risks associated with selling it on the civilian market far outweigh any potential benefits. The complaint also alleges that the defendants advertised and marketed the XM15-E2S in an unethical, oppressive, immoral, and unscrupulous manner, in violation of the CUTPA, by extolling the militaristic and assaultive quali-

ties of their products, specifically the weapon’s suitability for offensive combat missions.

But the trial court granted the defendants’ motion to strike the complaint, concluding that the allegations did not fit within the common-law tort of negligent entrustment; that the Protection of Lawful Commerce in Arms Act, or PLCAA, barred the plaintiffs’ claims insofar as their claims sound in negligent entrustment; and that the plaintiffs lacked standing to bring wrongful-death claims predicated on CUPTA violations because they never entered into a business relationship with the defendants. On plaintiffs’ appeal, the Connecticut Supreme Court reinstated the complaint insofar as the plaintiffs alleged a cognizable theory of liability based upon the defendants’ “knowingly market[ing], advertis[ing], and promot[ing] the XM15-E2S for civilians to use to carry out offensive, military-style combat missions against heir perceived enemies.”

Following an exhaustive review of the applicable statutes, the court concluded that “Congress has not clearly manifested an intent to extinguish the traditional authority of our legislature and our courts to protect the people of Connecticut from the pernicious practices alleged in the presence case. The regulation of advertising that threatens the public’s health, safety, and morals has long been considered a core exercise of the states’ police powers.”

The court further concluded that the plaintiffs’ CUTPA claims based on wrongful marketing were not time-barred because most of those claims were phrased in the present tense and therefore could be understood to allege that the wrongful marketing activities continued through the time the complaint was filed. The court also noted that the specific allegation that the shooter “selected the XM15-E2S on the morning of the assault ‘because of its marketed association with the military’ reasonably could be interpreted to mean that such marketing schemes remained in place at the time of the massacre, during the limitation period.”

The court also rejected the defendants’ argument that the plaintiffs’ claims were barred by the exclusivity provision of Connecticut’s

Product Liability Act, which provides that “[a] product liability claim as provided in [the Product Liability Act] may be asserted and shall be in lieu of all other claims against product sellers, including actions of negligence, strict liability and warranty, for harm caused by a product.” Because the court concluded that the plaintiffs’ wrongful death claims premised upon the sale of assault rifles to the civilian market being inherently unreasonable and dangerous were timed-barred, it did not reach the question of whether the Product Liability Act barred the assertion of those claims as a standalone cause of action. Further, with regard to the wrongful marketing claim, the court held that it was not precluded by the Product Liability Act because the defendants failed to explain how a wrongful-marketing allegation amounts to a product defect claim, observing that there were no allegations bringing the claim within the scope of the Product Liability Act, such as claims that the marketing for the weapon contained inadequate warnings that made the weapon unreasonably dangerous.

Finally, the court ruled that the PLCAA did not

preempt the plaintiffs’ CUTPA claims, because of the statutory exemption for civil actions alleging that “a manufacturer or seller of a [firearm] knowingly violated a State or Federal statute applicable to the sale or marketing of the [firearm], and the violation was a proximate cause of the harm for which relief is sought ....”. The court reasoned that “state analogues [to the Federal Trade Commission Act] such as CUTPA have long been among the primary vehicles for litigating claims that sellers of potentially dangerous products such as firearms have marketed those products in an unsafe and unscrupulous manner” and that CUTPA qualified as a predicate statute under the PLCAA exemption because Congress clearly intended that laws governing the marketing of firearms would qualify as predicate statutes. The court concluded by noting that in view of the statutory exemption in the PLCAA, “[o]nce we accept the premise that Congress did not intend to immunize firearms suppliers who engage in truly unethical and irresponsible marketing practices promoting criminal conduct . . . it falls to a jury to decide whether the promotional schemes

alleged in the present case rise to the level of illegal trade practices and whether fault for the tragedy can be laid at their feet.”

Though the court permitted the plaintiffs to proceed on this limited theory, it otherwise affirmed the trial court’s order striking the vast majority of the plaintiffs’ complaint. With regard to their negligent entrustment claims, the court held that plaintiffs had failed to state a cognizable claim for negligent entrustment because the plaintiffs failed to allege that any of the defendants possessed any knowledge or had any specific reason to believe either the perpetrator’s mother, the purchaser of the weapon, would share it with her son or that he was especially likely to operate the weapon unsafely or illegally. Further, with respect to the plaintiffs’ CUTPA claims premised upon the sale of assault rifles to the civilian population being ipso facto unfair, i.e., that the social costs of such sales outweighed the perceived benefits, the Court concluded that such claims – even if tenable as a matter of law – were nevertheless time-barred under the CUTPA three-year statute of limitations.

CASE NOTE Allstate v. Amazon.com, Inc., No. 17-cv-2738, 2018 WL 3546197 (D.N.J. July 24, 2018)

‘B’ Is for ‘Battery,’ ‘C’ Is for ‘Claim’ What Does Amazon’s ‘A-to-Z Guarantee’ Cover?

Daniel Mee Online retail long ago surpassed sales by traditional brick-and-mortar stores, with the ubiquitous Amazon leading the way for internet shopping. And, because the retailer offers myriad products at its website, the question of whether it is a “product seller” under the New Jersey Products Liability Act (NJPLA) has now been raised.

The District of New Jersey recently confronted the issue in Allstate v. Amazon.com, Inc. Amazon is a self-described online marketplace — a place for vendors around the world to offer products and for consumers to purchase them.

The company is generally involved in three types of transactions: the direct sale of its own Amazon-branded products; the sale of prod-

ucts directly from vendors to consumers, with Amazon merely allowing the vendor to advertise the product and the consumer to order it; and the sale of products from vendors to consumers, with Amazon fulfilling the transaction by shipping products from its own inventory.

The sale in the Allstate case belonged to the third category — the “grayest” one, as the court described it. Allstate brought a product liability fire subrogation action against Amazon when a replacement laptop battery caused a fire in its insured’s home.

The battery was sold by a company based in Hong Kong, which had entered into a services agreement that granted Amazon a “royalty-free ... license to use, ... adapt, modify, reformat, create derivative works of, and otherwise ... exploit in any manner, any and all of [a third-party seller’s] Materials ...,” including a third-party sell-

er’s product information, data, and materials.

Amazon customers cannot make direct payment to third-party sellers; instead, they must be processed through Amazon’s website.

Amazon also guarantees products purchased on its website, including the battery that the insured purchased, through its “A-to-Z Guarantee,” which guarantees “purchases from third-party sellers when payment is made via the Amazon.com website ... The condition of the item you buy and its timely delivery are guaranteed under the Amazon A-to-Z Guarantee.”

Though it doesn’t go as far as a warranty, the guarantee protects customers from defective products. After the fire in the Allstate case, Amazon sent the insured an email advising her of a potential fire hazard with the laptop battery, processed a refund, and advised her to dispose of “the defective battery.”

Spring 2019 | 13

The question before the court on Amazon’s motion for summary judgment was whether its involvement in the sale of the battery qualified it as a “product seller” for purposes of the NJPLA. Allstate argued that someone within the distribution chain, like Amazon, is a “product seller” under New Jersey law. The NJPLA defines “product seller as “[A]ny person who, in the course of a business conducted for that purpose: sells; distributes; leases; installs; prepares or assembles a manufacturer’s product according to the manufacturer’s plan, intention, design, specifications or formulations; blends; packages; labels; markets; repairs; maintains or otherwise is involved in placing a product in the line of commerce.”

The court concluded that the reach of the NJPLA “is not boundless. Indeed, not every party in the distribution process can be classified as a ‘product seller.’” The focus of the inquiry concerns a party’s control over the product, the court noted, and Amazon’s control was specifically limited in its agreement with the foreign company selling the battery. Under the agreement, the third-party seller decides “what to sell, sources the product from the manufacturer or upstream distributor, and ensures the product is properly packaged and complies

with all applicable laws.” Furthermore, in posting the item for sale, the agreement stated that the third-party seller, not Amazon, must provide the content for the product listing.

Furthermore, the NJPLA found that “[a] buyer who purchases [a battery from a third-party seller] on Amazon is engaging in a transaction with the seller that Amazon is merely facilitating, and the agreement does not provide Amazon the ability to modify the product or exercise control over the online listing.” Thus, the court concluded that in this instance, Amazon was not a “product seller” of the defective battery. The court also noted that it was among several recent cases — in Tennessee, Maryland, Pennsylvania, Ohio, and in the Federal Circuit Court of Appeals — showing a disinclination to hold Amazon liable as a seller, distributor, or a supplier of the products offered for sale on its website by third parties.

The court disregarded the plaintiff’s argument that Amazon was “the only link” between the seller and the buyer. It held that whether its services may have caused the insured “to believe Amazon was the seller is of no moment” to the question of whether Amazon exerted control over the product. The court also reject-

ed the plaintiff’s public policy argument that since Amazon is the party best positioned to allocate risk and distribute costs up the distribution chain, it should be held to the status of a seller under the NJPLA: “Although allowing an injured Plaintiff to sue a party that can shift the risk up the distribution chain would support the consumer protection goals of strict products liability, the other policies animating the PLA and its amendments are stronger counterweights … I find that stretching the case law to capture Amazon’s activities in this case would conflict with the spirit of the law. As the Supreme Court of New Jersey has explained, courts should be cautious in expanding the law when doing so would impose a substantial economic burden on these businesses and individuals, without necessarily achieving the goal of enhanced product safety.

In developing steps towards higher consumer and user protection through higher trade morality and responsibility, the law should view trade relations realistically rather than mythically. Against the backdrop of this legislative intent and the weight of New Jersey authority, public policy arguments cannot transform Amazon into a ‘product seller’ in this instance.”

CASE NOTE Air & Liquid Systems v. DeVries

The Air at Sea

Liability for Asbestos-Dependent Equipment on Ships at Sea Petar K. Vanjak On March 19, 2019, the U.S. Supreme Court found that manufacturers are liable for injuries caused by asbestos that the manufacturers did not make, sell, or distribute.

The case, Air & Liquid Systems v. DeVries, involves a group of Navy sailors (led by respondent John DeVries) injured by exposure to asbestos. The defendants are a group of large companies including petitioner Air & Liquid Systems, which manufactured equipment the sailors used. The equipment the companies sold typically did not include asbestos insulation at the point of sale. All the relevant asbestos was applied to the equipment by third

14 | Product Liability Playbook

parties after the Navy acquired it. Further, the companies designed their equipment for use with asbestos insulation; it would not have functioned safely without asbestos insulation.

The court’s decision resolved a circuit split regarding tort liability in maritime law. In Lindstrom v. A-C Liability Trust, 424 F.3d 488 (6th Cir. 2005), the Sixth Circuit adopted a bright-line rule holding that a manufacturer may not be held liable for damage caused by materials added to a product by a third party. In In re Asbestos Products Liability Litigation, 873 F.3d 232 (3d. Cir. 2017), the decision being appealed here, the Third Circuit adopted a fact-specific rule allowing manufacturers to be held liable for damage caused by materials added to a product by a third party if such an addition was reasonably foreseeable.

The issue was whether the respondent companies can be held responsible for injuries caused by asbestos that the companies did not make, sell or distribute. The lower court found that the manufacturers could be liable because the injuries were foreseeable. As the injuries in question occurred at sea, the liability of the manufacturers arises under general maritime law. Maritime law is a body of judgemade federal law for which the Supreme Court is the ultimate authority. Because the subject products could not function without asbestos insulation, it is undisputed that the manufacturers knew that their products would be used with asbestos. The sailors therefore argue that the subject injuries from the asbestos were easily foreseeable.

During recent arguments before the Supreme Court justices, counsel for the companies argued that their connection to the asbestos is so fortuitous that it makes no sense to impose liability on them for asbestos sold and applied by other companies. Counsel argued that the justices should adopt a bright-line “bare-metal” rule, absolving the manufacturers from liability for any asbestos that they did not themselves make, sell, or distribute.

The “bare-metal” rule is a bright-line rule that companies that sold bare-metal products should not be responsible for the foreseeable consequences of the use of their products with asbestos. Counsel argued that adoption of the bare-metal rule is consistent with principles of maritime law in that it affords manufacturers greater protection than traditional tort law does. As an example, counsel presented the “economic loss rule,” which holds that commercial manufacturers have no duty “to prevent a product from injuring itself.” The economic loss rule – like the bare-metal rule – thus limits the scope of manufacturer liability. Companies also claim that the bare-metal rule’s predictability comports with maritime law principles of simplicity and uniformity. They claim that because “most things” on ships are connected with each other, every asbestos-related injury is arguably foreseeable to anyone whose products end up in ships. Finally, companies contend that the bare-metal rule is not unfair to sailors, because sailors could still sue the companies who produce the asbestos-containing components and bring claims against “asbestos trusts.”

Sailors argued that although the bare-metal rule comports with established principles of

maritime law, shielding manufacturers from liability does not. Sailors maintained that ship owners who defend against asbestos-related product liability claims routinely implead manufacturers and that the adoption of the bare-metal rule would prevent these indemnification claims which are necessary to fairly apportion liability. Sailors also argued that whether a manufacturer should foresee that its product will be used with asbestos components is a straightforward question, which, if answered yes, imposes a duty to warn on the manufacturer. Sailors further claimed that abandoning the foreseeability standard in maritime law would leave sailors with fewer remedies than similarly situated non-maritime workers, and would thus contradict maritime law’s goal of protecting sailors’ welfare.

In contrast to the presentation from the counsel for the companies, the justices allowed the sailors’ counsel to present their argument essentially without interruption. The justices did however present the counsel for the sailors with a series of hypotheticals involving the manufacturer of a product that foreseeably could be used in connection with another product that might be dangerous. The hypotheticals involved the manufacturers of ashtrays – presumptively not responsible for the harms to tobacco users; flashlights – presumptively not responsible for the harms from leaking batteries; and aircraft – presumptively not responsible for the harms from exploding engines. Counsel for the sailors responded that the asbestos here was an integral part of the subject equipment and that the equipment itself contributed to the injury from the asbestos, something less likely to be true in the listed hypotheticals.

In a 6-3 majority opinion, the U.S. Supreme Court affirmed the decision of the lower court (Third Circuit) holding that the manufacturers of asbestos-dependent equipment used on Navy ships can be held liable for injuries caused by the asbestos. In an opinion by Justice Brett Kavanaugh, the Supreme Court adopts a standard under which the manufactures are liable if the product required incorporation of a part (the asbestos) and the manufacturer had reason to know that the integrated product would be dangerous for its intended uses.

The court did not elaborate on why this decision was required for maritime law, but merely stated that it is consistent with maritime law’s recognition of “a special solicitude for the welfare of those sailors who undertake to venture upon hazardous and unpredictable sea voyages.” Critics of the Third Circuit decision and amici to the case argue that solicitude was meant for “disputes between the master of a ship and a sailor” and not “a dispute between the manufacturer of bare-metal products and the plaintiffs in these cases.”

The decision creates concern for manufacturers selling products to be used on maritime vessels that may require integration of third-party parts. Those manufacturers will need to determine whether their product “requires” a part and what possible parts could their customers add to their product. The U.S. Navy and other maritime-related parties will also be affected by this decision whether it be through product price increases or the inability to find manufacturers willing to supply the needed product. We are yet to see if this expansion of liability will affect non-maritime product liability law.

Asbestos Case Tracker Goldberg Segalla’s award-winning Asbestos Case Tracker will keep you up-to-date on asbestos litigation with summaries of — and access to — the latest court decisions, legislative updates, and other developments from across the country.

www.asbestoscasetracker.com

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‘Telltale’ continued from page 4

‘E-Discovery’ continued from page 4

that some other appliance, not the freezer manufactured by her client, caused the house fire in Canton.

a product to be identified. Defendants should resist this. Be aware, however, that courts have begun to apply discovery rules more broadly, even in the face of recent amendments acknowledging the huge scale and burdensomeness of production that can occur with ESI. Accordingly, understanding who the key “custodians” are for relevant information can help you streamline the searches and hopefully reduce the possible responsive data.

Lisa wasn’t required to attend the evidence inspection. But most attorneys do, she says, so they can guard the evidence and report back to clients. And it was our expert, Jim Crabtree, who suggested the examination.

What Lisa saw that day has stayed with her. “The most interesting thing about the case,” she calls it.

The items examined, which included the freezer’s power cord, stored in a bag labeled “Item 2: Freezer power cord remains,” had been waiting a while for scientific evaluation. At a court-ordered inspection of evidence from the fire scene five years before, in 2011, the cord had been selected for further examination. So had the damaged plug blade and the ground strap from the duplex receptacle box. But after the insurance carrier filed its claim against our client, the freezer’s manufacturer, in 2013, the case was delayed as Lisa tried to get information about the various contractors who had redone the heating and electrical system at the house and had to reschedule several times the deposition of the fire investigator because of lake-effect snowstorms.

The stored evidence finally was taken to the lab for examination with an electron microscope in the summer of 2016. At the lab that July day, the cord showed evidence of electrical arcing about five inches from the plug, with the wires there showing evidence of external heating.

The arcing, Jim concluded, was the result of charring from an external heat source; while plugged in and energized, the freezer had been attacked by a fire that started elsewhere, with another appliance that happened to be plugged into the same duplex outlet as the freezer.

Examining the duplex electrical outlet along with the remains of the freezer’s plug and a severed plug blade from the other appliance that had been found buried in the outlet’s other receptacle box, Jim concluded that the source of the fire was the unknown appliance associated with the plug blade. The telltale plug blade, which had been stored in a bag labeled “Item 3,” showed evidence of melting at the tip from an electrical-arc fault. The remains of the receptacle box used by the other appliance showed a large notch near the ground-plug socket.

“The lab studies,” Lisa says, “helped our expert witnesses establish, in a very detailed report, that this other appliance was an alternative cause of the fire”—a scenario the plaintiff couldn’t rule out.

Lisa’s cross-examination of the county fire investigator revealed that his analysis of the fire didn’t account for the telltale plug blade implicating the other appliance and wasn’t up to standards. She won her motion for summary judgment and dismissal of the case because the plaintiff’s expert was not qualified to talk about metallurgical issues in the materials examined at the lab and failed to offer any explanation that would rule out the alternative cause of the fire.

16 | Product Liability Playbook

In addition to identifying the relevant people or custodians, you should also map out the pathways for where certain documents are stored.

Companies can sometimes have a hodge-podge of systems in place, built up after years of adding new software or new product lines, and changes in corporate structures or departments. Adding in the typical turnover associated with employees in general, you may find that the same document has been saved 30 different ways, in 30 different places. This can lead to substantively duplicative document production – but in the world of ESI, the different versions would each constitute unique documents because of the different underlying metadata.

One way to combat this issue is to train one of the members of the IT department in the basics of litigation and one of the members of the legal department (or outside counsel) in the basic infrastructure of the company’s technology. Having each person serve as a liaison is an efficient way to streamline and target what systems need to be searched, over what time period, and for what custodians. It can also preemptively “de-dup,” or de-duplicate, documents. It is akin to sifting through a paper file and removing what is unnecessary. While potentially time -onsuming, it could serve as valuable in the long run.

Hire the experts The final word of advice is to hire the experts! While still seemingly new, the field of e-discovery has actually been well-developed for at least the last decade. There are vendors and specialists who can assist in every aspect of dealing with ESI. Some vendors focus on preventative efforts, such as ensuring that software is up to date and record retention (and affiliated deletion policies) is accurately implemented. Others offer services to help better organize the infrastructure of the technology systems so that there are clear pathways and limits to what ultimately becomes discoverable ESI. Once a suit has been filed, lean on the experts (law firms or vendors) to help collect, review, and produce the documents. And, on the backend of a suit, ensure that the data is appropriately discarded.

ESI can be overwhelming, but if you take an organized approach, you can get ahead of it and it becomes a manageable part of litigation.

We can help understand your company’s particular needs and how to handle what is ultimately a very common part of most product liability lawsuits now.

Voluntary Consent and Personal Jurisdiction Matthew R. Shindell A court does not have authority to hear a particular case unless it has personal and subject-matter jurisdiction. The former pertains to the court’s ability to resolve disputes involving particular parties. The latter involves the law and facts in the suit.

The law regarding personal jurisdiction becomes especially complicated when some of the parties are corporations from a different state or country. The United States Supreme Court, in Daimler AG v. Bauman, recently addressed the scope of personal jurisdiction over a corporate defendant. In that case, 22 Argentinian residents filed suit in the Northern District of California against a German public-stock company that manufactures Mercedes vehicles there. It was alleged the manufacturer collaborated with security forces in Argentina to kidnap, detain, torture, and kill workers at a Mercedes plant in that country who were closely related to the plaintiffs. The plaintiffs claimed jurisdiction was appropriate because a subsidiary of the manufacturer, which was incorporated in Delaware and had its principle place of business in New Jersey, distributed vehicles throughout the United States, including California. The Supreme Court was asked to determine whether the California District Court could exercise jurisdiction over the manufacturer if both the perpetrators and victims had no connections with the state.

The court in Daimler explained the longstanding rule under United States law that “a state may authorize its courts to exercise personal jurisdiction over an out-of-state defendant if the defendant has certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” This rule led to the development of two categories of personal jurisdiction.

The first is general jurisdiction, where the corporate defendant’s contacts with the state are so continuous and systematic as to render them essentially at home in the forum. Specific jurisdiction arises when the corporate defendant’s activities in particular state “had not only been continuous and systematic, but also gave rise to

the liabilities sued on.” The plaintiffs in Daimler argued there was general jurisdiction because the subsidiary acted as the German manufacturer’s agent.

The Daimler case provided the United States Supreme Court with its first opportunity to determine whether there is general jurisdiction over a foreign corporation based upon the contacts of its subsidiary in a particular state. The court emphasized a corporation’s place of incorporation and principle place of business serve as the main basis for general jurisdiction in a particular state. Here, the subsidiary had neither in California, so there was no general jurisdiction.

In addition, there was no specific jurisdiction, because the subsidiary had no continuous and systematic contacts in California. Consequently, the court determined the subsidiary could not be sued in California.

SPOTLIGHT

contacts there. The lower court dismissed the case for lack of personal jurisdiction. On appeal, the court stated there is general personal jurisdiction over foreign corporations when the business is incorporated in Pennsylvania, consents to jurisdiction, or carries on continuous systematic activities in the state. Like the business in Webb-Benjamin, the manufacturer consented to do business in Pennsylvania. Therefore, the court had general jurisdiction.

Courts in New Jersey follow the same approach as Pennsylvania. For instance, in Otsuka Pharmaceutical Co., Ltd. V. Mylan, Inc., a Japanese owner of patents filed an infringement suit against a West Virginia subsidiary in New Jersey.

The court determined the subsidiary consented to jurisdiction in New Jersey because it had an agent within the state for service of process.

Hence, there was general jurisdiction.

In 2018, two appellate courts in Pennsylvania addressed similar issues involving out of state companies but developed a slightly different analysis. In Webb-Benjamin LLC v. International Rug Group, LLC, the court held that a foreign corporation registered to do business in Pennsylvania is subject to general jurisdiction because such entities are qualified as foreign corporations under the laws of the state. Under Pennsylvania law, a company may not do business in the state until it registers with the Department of State.

The Supreme Court of Delaware, in Genuine Parts Company v. Cepec, developed a different analysis of personal jurisdiction based upon Daimler. Delaware, like Pennsylvania, requires foreign businesses to register with the state.

However, the court, in Genuine Parts Company, determined this simply serves as means for service of process, not general jurisdiction. Hence, a court in Delaware has general jurisdiction to hear cases involving a corporation that is incorporated there or has a principle place of business within the state.

The Webb-Benjamin case is interesting because it initially appears to conflict with Daimler, which holds that there is general jurisdiction only if a corporation has a principle place of business or incorporated in a particular state. However, the appellate court in Webb-Benjamin distinguished that rule by finding the United States Supreme Court did not address whether a company could consent to personal jurisdiction by registering to do business there.

The above-referenced cases demonstrate the importance of a court’s need to assess a corporation’s “business” in a particular state to determine if there is general jurisdiction. However, it will be interesting to see how each state interprets the holding in Daimler, which developed an “at home” approach that focused on a company’s place of incorporation and principle place of business. The opinion did not specifically address a corporation’s consent to do business in a particular state. Hence, corporations should not presume they are not subject to jurisdiction in a particular state just because they do not have a principle place of business there or are incorporated elsewhere. Consequently, corporations that anticipate doing business in various states should pay close attention to each jurisdiction’s interpretation of Daimler.

In Murray v. American LaFrance, the plaintiffs alleged they suffered personal injuries in New York from a particular product manufactured by the defendant-manufacturer. The defendant argued the Pennsylvania court lacked personal jurisdiction because the defendant’s principle place of business was in Illinois and the defendant had no businesses in Pennsylvania and minimum

Spring 2019 | 17

CROSSOVER Success stories from other Goldberg Segalla practice groups

Dismissal of Claim in Construction-Site Fall Averts Trial, Scaffold Law Associate attorney Chelsea Manocchi knew that if she had to go to trial to defend her insurance-carrier client against the claim filed by a construction worker who’d fallen from a ladder, she would run into the legal equivalent of a brick wall:

recovery of a large workers’ compensation lien, and pain and suffering. He said he had injuries to his arm and shoulder and needed surgery after falling from a ladder while working at a residential-construction site.

New York State Labor Law 240(1)—better known as the Scaffold Law.

Looming over the defense was the specter of the Scaffold Law. If there were a trial, Manocchi, a member of Goldberg Segalla’s General Liability Practice Group, would have had to litigate the underlying labor-law claims, including Labor Law 240(1)— which, in her words, “ imposes an absolute, non-delegable duty for gravity-related injuries on construction sites without regard to [the] plaintiff’s comparative negligence.”

The controversial law—the only one of its kind in the country— makes construction companies and their insurance carriers 100 percent liable for construction-site injuries caused by falls or falling objects. When a case goes to trial under the Scaffold Law, there’s but one thing left to decide: how much the defendant will pay.

The Scaffold Law is so controversial critics have been pushing for its overhaul. According to a 2013 study by the SUNY Rockefeller Institute, the law annually costs taxpayers at least $785 million and private businesses that work on public projects $1.49 billion.

The law figured to prove costly to Manocchi’s client, too—the initial demand was six figures—if she didn’t find a way out of going to trial. Among the damages sought by the plaintiff, a 34-year-old laborer, were lost wages,

But Manocchi had a plan. On October 18, 2018, she filed a motion for summary judgment dismissing the case. Because the plaintiff was working at the construction site through a staffing agency, he was a special employee of Manocchi’s client, she argued, which meant that his claim was prohibited under state worker’s compensation law.

The judge granted the motion, and the two-year-old case was over.

Successful Defense in Workers’ Compensation Case Shows Claimant Fraud Tapped to defend a vocational school and a major insurer against an established workers’ compensation claim, Goldberg Segalla special counsel Andrew R. Arbeit came into some compelling evidence. A private investigation firm’s surveillance of the claimant, who said he had torn tendons in his left shoulder while lifting scaffolding over his head in 2015 and was now alleging the injury was permanent and had caused him to lose the use of his left arm, showed him engaged in a variety of physical activities around his home. There also was a social-media investigation undermining the man’s permanency claim.

Arbeit, a member of our Workers’ Compensation Practice Group, argued that the claimant was not as permanently disabled as he said he was—

18 | Product Liability Playbook

indeed, that he had lied about the severity of his permanent physical condition to the doctors and the workers’ compensation judge to increase his schedule-loss-of-use award, thereby committing fraud. The judge didn’t agree that the man had lied or committed fraud, but we appealed his decision and, on October 31, 2018, the workers’ compensation board reversed it, finding that the claimant had committed fraud and that both mandatory and discretionary penalties were applicable.

The decision, which the claimant did not appeal, likely saved our clients between $51,370 and $76,330 in future awards and also gave them a $32,900 overpayment credit that they could seek, if they so choose, in a civil suit against the claimant.

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