Appendix B

A Review of Tort Liability’s Role in Food and Medical Product Regulation

Philip Chen O’Neill Institute for Global and National Health Law Georgetown University Law Center

INTRODUCTION

Public administrative systems and private tort liability1 both play important roles in product regulation in the United States and elsewhere in the world. Administrative systems are driven mainly by government agencies that police the market through standard setting and enforcement. Tort liability is privately driven and occurs after injuries arise from product use and failure. Its impact is primarily felt through the monetary judgments that courts impose on industry actors deemed liable under the law.

This paper provides an overview of (1) the role that tort (primarily product) liability plays in food and medical product regulation; (2) the key factors that affect the capacity of the tort liability system to function; and (3) the state of this system in countries of interest to the Committee’s work.

With respect to these three considerations, this review maintains the following: Tort liability historically preceded and then played an overlapping role with modern administrative systems. Today, tort liability’s role in food and medical product regulation can be analyzed by considering its impact on four objectives: safety, compensation, product availability, and product innovation. The extent of the tort system’s impact on those objectives is a product of the liability rules that are laid down (for example, strict liability versus negligence); the extent of access to the legal process by plaintiffs; and the quality of civil justice institutions, such as the judi-

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1 Although this paper refers to tort liability (the common law term), it intends to include the similar concept of delict in civil law systems.



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Appendix B A Review of Tort Liability’s Role in Food and Medical Product Regulation Philip Chen O’Neill Institute for Global and National Health Law Georgetown University Law Center INTRODUCTION Public administrative systems and private tort liability1 both play im- portant roles in product regulation in the United States and elsewhere in the world. Administrative systems are driven mainly by government agen- cies that police the market through standard setting and enforcement. Tort liability is privately driven and occurs after injuries arise from product use and failure. Its impact is primarily felt through the monetary judgments that courts impose on industry actors deemed liable under the law. This paper provides an overview of (1) the role that tort (primarily product) liability plays in food and medical product regulation; (2) the key factors that affect the capacity of the tort liability system to function; and (3) the state of this system in countries of interest to the Committee’s work. With respect to these three considerations, this review maintains the following: Tort liability historically preceded and then played an overlap- ping role with modern administrative systems. Today, tort liability’s role in food and medical product regulation can be analyzed by considering its impact on four objectives: safety, compensation, product availability, and product innovation. The extent of the tort system’s impact on those objec- tives is a product of the liability rules that are laid down (for example, strict liability versus negligence); the extent of access to the legal process by plaintiffs; and the quality of civil justice institutions, such as the judi- 1 Although this paper refers to tort liability (the common law term), it intends to include the similar concept of delict in civil law systems. 253

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254 ENSURING SAFE FOODS AND MEDICAL PRODUCTS ciary. Each country of interest to the committee faces different challenges in its own product liability system and civil justice institutions, as well as in its regulatory agencies. This review provides a general historical and conceptual introduc- tion, primarily from the perspective of the U.S. and European experience. Because legal systems are rooted in particular historical and cultural con- texts, the determination of the appropriate scope of tort and administra- tive responsibility with respect to food and medical products in a specific country depends on a detailed examination of the social context there. The key variables identified in this discussion may serve as a starting point for such a detailed examination. HISTORICAL PERSPECTIVES ON TORT LIABILITY AND REGULATORY SYSTEMS FOR FOOD AND MEDICAL PRODUCTS Food and medicines have been regulated since ancient times through criminal and civil mandates.2 In the Western world, Roman law prescribed quality and other requirements for food and drink, enforceable by the state. It also provided for civil liability, which could be pursued through private legal action in some instances. Early English history also reflected public and private enforcement of food standards. Under old English law, the Crown established basic quality systems such as uniform weights and measures, bread and grain standards, and officials to ensure compliance. At the same time, the common law permitted a buyer to sue a seller of sub- standard food for damages.3 Owners of restaurants were subject to strict liability for sales of food and drink.4 Nevertheless, before industrialization, at least in common law countries, tort suits based on product quality were few, perhaps in part because the costs of litigation outweighed the benefits.5 Beginning in the mid-19th century, the development of mass produc- tion, industrialization, science, and national markets led to changes in both how the state oversaw food and medical products. In the United States, the rise of the modern regulatory agency in the first half of the 20th century also coincided with expansion of the scope of product liability. Today’s U.S. Food and Drug Administration itself grew from its niche in the Bureau of 2 Peter Barton Hutt and Peter Barton Hutt II, A History of Government Regulation of Adulteration and Misbranding of Food, 39 Food drug & Cosm. L.J. 2 (1984). The following historical discussion is drawn from the authors’ discussion at pages 1-26. 3 Id., at 22. 4 James M. Guiher & Stanley C. Morris, Handling Food Products Liability Cases, 1 Food drug Cosm. L.Q. 115 (1946). 5 Jane stapLeton, produCt LiabiLity 10 (1994).

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255 APPENDIX B Chemistry within the Department of Agriculture into the Food and Drug Administration and took on broader regulatory powers.6 Tort law also evolved in the United States under pressure from the grow- ing number of consumer claims and lawsuits.7 For food products, consumers traditionally could not sue manufacturers directly in tort unless the latter had a contractual relationship with the former.8 In essence, the legal relation- ships characterizing the supply chain became an obstacle interposed between the injured and the producer. However, by mid-century, those barriers had severely eroded. Lawyers for industry told their clients: “[W]ith minor, if any, exceptions, a manufacturer, canner, packer, or processor is presently held to be liable to a consumer for lack of care in the preparation or inspec- tion of his product, where such lack of care proximately results in injury to the consumer.”9 At the same time, the pressure from litigation was also at work: some well-known manufacturers made greater efforts to institute product safety measures in response to the concern of potential exposure to lawsuits.10 Tort liability for goods developed into a specialized area of product liability law, with its own plethora of detailed rules and doctrines. Fore- most among these was the concept of strict liability. Under strict liability, the plaintiff need only show that the product was defective and caused the injury, he or she need not prove that the manufacturer was at fault or had breached a duty owed to the plaintiff. Over the course of the 1960s and 1970s, both judges and scholars emphasized that such rules would result in safer products because manufacturers would be incentivized to take greater precautions to reduce their tort liability costs.11 From the late 1970s through 1990s, growing criticism of this tort 6 danieL Carpenter, reputation and power 75-112 (2010) (describing the history of FDA’s regulatory powers from the 1920s through the passage of the Food, Drug and Cosmetic Act). 7 The American Canners’ Association data showed 151 claims and 5 lawsuits in 1923, and 2,174 claims and 259 lawsuits by 1939. See Guiher and Morris, at 110; see also Bradshaw Mintener, Food Products Liability Law, 1 Food drug Cosm. L.Q. 96, 99 (1946). 8 This legal concept is known as privity. See Rollin Perkins, Unwholesome Food As a Source of Liability, 5 iowa L. rev. 86, 87 (1919). However, the consumer could sue the retailer, who could, in turn, sue the distributor, and so on up the chain. However, such an approach might be “inadequate [because] [t]he dealer may be financially unable to respond to the extent of the injury.” Id. 9 Guiher and Morris, at 113. 10 reed diCkerson, produCts LiabiLity and the Food Consumer 253 (1951) (“The same story was told: a rising claim-consciousness since World War I, resulting in the adoption of all known feasible precautions in an attempt to make food products as claim-proof as possible.”). Coca-Cola instituted a fully automated washing and disinfection system to reduce claims caused by contaminants or impurities in its drinks. diCkerson, at 254-255. 11 See generally riChard a. epstein, torts 389-92 (1999). For an example of influential scholarly work on this point, see guido CaLabresi, the Costs oF aCCidents: a LegaL and eConomiC anaLysis (1970).

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256 ENSURING SAFE FOODS AND MEDICAL PRODUCTS framework arose because of a “litigation explosion” of product liability suits and the rise of costs of goods and services perceived to be the result of these cases.12 Historically, the majority of cases brought under product liability were premised on defects in production and manufacturing. More recently, cases against medical products producers are largely brought on grounds of inadequate warning and defective design, and questions in- creasingly grew over whether such suits improved safety or thwarted the development of beneficial products.13 Today, the debate over the appropriate role of product liability con- tinues in the United States and other developed countries, as competing demands of social objectives together with the costs and benefits of the tort system are balanced. In the next section, this review considers these objectives and the factors that influence the effectiveness of the product liability system. ANALYSIS OF THE RELATIONSHIP BETWEEN ADMINISTRATIVE SYSTEMS FOR FDA-REGULATED PRODUCTS AND PRODUCT LIABILITY Modern administrative systems and tort liability systems today have different purposes and methods to achieve their goals. An administrative regulatory system for food, drugs, and medical devices is primarily designed to oversee safety and effectiveness of the products in the marketplace. It accomplishes this by setting standards that industry must meet, and by enforcing those standards throughout the design, production, and market- ing process using a variety of tools, including registration, pre-marketing approval, guidance, recall, detention, and seizure. Regulators and other law enforcement officials also have access to more coercive tools such as civil and criminal penalties. The modern tort liability system has a hybrid purpose, particularly in the United States.14 On the one hand, it provides compensation and redress 12 Jane stapLeton, produCt LiabiLity 31-33 (1994). 13 See steven garber, produCt LiabiLity and the eConomiCs oF pharmaCeutiCaLs and mediCaL deviCes 40 (1993). A product is defective due to an inadequate warning “when the foreseeable risks of harm posed . . . could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or [relevant parties], and the omission of [these warnings] renders the product not reasonably safe.” A defective design is one in which “the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or [relevant other parties], and the omission of the alternative design renders the product not reasonably safe.” restatement oF torts (3d): produCt LiabiLity at sec. 2. 14 kenneth s. abraham, the LiabiLity Century 8-9 (2008) (“[T]ort is in practice a system of mixed goals.”).

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257 APPENDIX B for injuries to an individual caused by another party.15 In addition, tort systems, especially through the vehicle of product liability, clearly have market effects when large monetary judgments are entered against produc- ers. (Settlements may have similar effects.) The fear of such potential dam- ages, the media and public scrutiny they bring, can foster greater care and discipline on the part of producers. This, in turn, may have other intended or unintended consequences, such as price increases that could be passed on to consumers. This section proceeds in three parts. First, it will briefly suggest some key goals that society seeks to meet in dealing with the development and use of FDA-regulated products and the tort system’s relationship to them. Second, it identifies access rules and the quality of civil justice institutions as additional factors that must be considered when examining a tort system’s effectiveness. Third, it discusses ways in which other significant product li- ability systems, namely the European and New Zealand models, vary from the U.S. model. The purpose of this third discussion is to show the significant variation within product liability practices, and to emphasize that the legal system’s own procedural internal rules and institutions must also be consid- ered when making any general conclusion about tort and administration. Societal Goals This section relies upon Steven Garber’s framework for identifying the goals associated with the regulation of food and medical products.16 Broadly speaking, society has four major objectives with respect to these products: safety, compensation, availability, and innovation. The tort sys- tem affects each of these objectives in a range of ways. Safety By imposing monetary damages on tortfeasors, the tort law increases the costs to them of their activities. In the case of a defectively manufactured FDA-regulated product, the tort law penalizes the producer (or potentially others along the supply chain), and thus incentivizes companies to take greater precautions to prevent future production of defective goods.17 The rules that determine when liability attaches will affect the likelihood that damages will result. For example, as discussed earlier, as a general matter, 15 See generally JuLes L. CoLeman, risks and wrongs (1992). 16 Steven Garber identifies four “outcomes of interest”: product availability, pricing, safety and effectiveness, and innovation. This paper presents a variation of this framework and adds the goal of compensation. See garber, at xxvi-xxix. 17 Tomas J. Philipson and Eric Sun, Is the Food and Drug Administration Safe and Effec- tive?, 22 J. eCon. persp. 85, 92 (2008).

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258 ENSURING SAFE FOODS AND MEDICAL PRODUCTS a rule establishing strict liability for product defects will shift costs to the producer, while a negligence rule may reduce the burden. Compensation One of the key distinctions between administrative and tort systems is that tort systems require legally responsible private parties to compen- sate the injured. In fact, this compensating of the plaintiff by the legally responsible defendant is at the core of tort liability. The definition of com- pensation, including the scope and calculation of costs, such as pain and suffering, are different from jurisdiction to jurisdiction. Administrative systems typically do not provide compensation to in- jured parties,18 and any fines or penalties assessed as a result of regulatory enforcement action inure to the treasury. Regulatory bodies can set up com- pensation funds and administer them, although in the U.S. context, this has not been the common practice.19 Private health, disability, or other forms of insurance may also cover compensation for personal injuries.20 The availability and extent of these systems will vary from country to country. Availability The increased cost to manufacturers as a result of product liability law- suits can also impact the availability of FDA-regulated products by making it no longer economically feasible to continue selling the product. This may produce a social benefit by driving out substandard products. The Dalkon Shield case is often described in this way.21 In other instances, actual or potential tort liability may cause producers in key industries to consider ex- iting the market or to raise prices significantly, which may result in greater social harm. For FDA-regulated products in the United States, one of the more visible examples of this phenomenon was product litigation over 18 One historical exception to this is state-administered worker compensation. In the FDA- regulated products arena, a number of countries have compensation funds administered and financed by the state (or by private industry) for particular FDA-regulated product categories. See, e.g., Fondazaione rosseLLi, anaLysis oF the eConomiC impaCt oF the deveLopment risk CLause as provided by direCtive 85/374/eeC on LiabiLity For deFeCtive produCts 93-99 (2004)(Denmark, UK, Austria, Germany (public funds for certain products); Sweden, Finland, Germany (manufacturer funded). 19 In the United States in the FDA-regulated product area, the National Vaccine Injury Compensation Program is an exception. See n.22 infra. 20 A. Mitchell Polinsky and Steven Shavell, The Uneasy Case for Product Liability, 123 harv. L. rev. 1437, 1462 (2010). 21 garber, at 83-84.

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259 APPENDIX B childhood vaccines, which resulted in shortages of key medicines until the government intervened to reduce the scope of liability for vaccine-makers.22 Innovation Related to the issue of availability is that of innovation. Increasing the cost to producers of certain FDA-regulated products may impact innova- tion by driving companies to abandon projects that may be too risky. This point is made most frequently in the debate over the “development risk clause” in the European Union’s Product Liability Directive. The “develop- ment risk clause” is a defense to liability when the manufacturer can show “that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered.”23 This clause was introduced precisely to ensure that innovation was not inhibited by product liability.24 Empirical Studies It is worth noting that in considering the practical effect of the tort system on issues such as safety, availability, and innovation, no empirical studies provide definitive conclusions (particularly across national jurisdic- tions). Experts all acknowledge the problems in obtaining and interpreting the pertinent data.25 For example, in the case of the European development risk clause and its relationship to innovation, a recent study commissioned by the European Union acknowledged that “[i]t is very difficult to collect sound empirical evidence on the effect the [clause] has on a company’s innovative effort.”26 Multiple variables may enter into the calculation of a potential innovator to continue or abandon research during the course of product creation. With respect to foodborne illness litigation, experts that reviewed jury verdicts noted the difficulty in determining “exactly how 22 Supply concerns were central to the passage of the National Childhood Vaccine Injury Act of 1986. See H.R. Rep. No. 99-908, at 1986 U.S.C.C.A.N. 6344, at 6347-6348. To address this issue, the Act modified tort liability for vaccine manufacturers. It eliminated the ability of plaintiffs to claim that a vaccine was defectively designed, while creating a simplified compen- sation process for claimants. However, it allowed suits against manufacturers on the ground that the vaccine was defectively manufactured, or if manufacturers engaged in fraudulent and other similar activity. See Bruesewitz v. Wyeth, 131 S. Ct. 1068, 1072-1074 (2011). 23 Council Directive 85/374 art. 7(e), 1985 OJ (L 210) (EEC) (on the approximation of the laws, regulations, and administrative provisions of the Member States concerning liability for defective products). 24 stapLeton, at 225-229. 25 See, e.g., garber, at vi; Jean C. Buzby, et al., Jury Decisions and Awards in Personal Injury Lawsuits Involving Foodborne Pathogens, 36 J. Consumer aFF. 220, 235-37 (2002). 26 Fondazaione rosseLLi, at 3.

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260 ENSURING SAFE FOODS AND MEDICAL PRODUCTS firms are affected by such legal action because the actual decision making on food safety issues by firms is generally kept confidential.”27 Even if such data were fully available in the U.S. context, it is not clear how any legal or policy conclusions that are drawn would be directly ap- plicable to other countries because results in other countries depend on the structure of legal institutions, rules of access, social and political attitudes toward litigation, among others.28 These issues are discussed below. Factors Influencing Results and Effectiveness of the Tort Liability System The way in which the tort system affects regulatory outcomes such as safety for food and medical products is largely affected by three main factors: (1) substantive rules governing liability; (2) the ability of injured parties to access the tort system; and (3) the quality of the civil justice in- stitutions that govern the tort system.29 With respect to (1), the key policy and legal concerns were discussed above. This subsection discusses access and institutional concerns. Access The civil liability system in most countries is based in the judicial sys- tem. The primary method of access is through the injured parties’ filing of a lawsuit in a court. Many practical factors influence the relative ease of plaintiffs to use the courts for redress: the principal elements include the 27 Buzby, at 236. Buzby concludes that “[t]here is also reason to suspect that the strongest incentive for food firms to improve food safety is the threat of large outbreaks of foodborne illness resulting in widespread litigation and uninsured economic losses.” Id. at 237. 28 Matthew Reimann, Liability for Defective Products at the Beginning of the Twenty-First Century: Emergence of a Worldwide Standard?, 51 am. J. Comp. L. 751, 812 (2003). Jane Stapleton, an expert on U.S. and European product liability systems makes this exact point about comparability: “In the absence of Rand-type [empirical] studies, such ‘arguments’ [over the effect of product liability on the economy] reduce to speculation and rhetoric. The internal complexity of market dynamics would make any such future studies very difficult to do and their conclusions would probably carry little weight when applied to another legal and economic system where, for example, claims rates are much lower, tax policy is different, and public provision in areas such as health care is much more generous.” stapLeton, at 35. 29 See Christopher Hodges, Approaches to product liability in the EU and Member States, in produCt LiabiLity in Comparative perspeCtive (2005). Hodges identifies a number of these fac- tors in considering product liability: “substantive law on liability”; “mechanisms for funding lawyers and court costs, and the extent and proportionality of the financial risk to claimant and defendant”; “rules of procedure”; “law on damages”; “sometimes, conflict/jurisdictional issues such as proper law, jurisdiction and enforcement of judgments.” See id. at 192.

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261 APPENDIX B cost of litigation and fact-finding.30 For example, one study of consumer foodborne illness litigation in the United States concluded that a key fac- tor in determining the success of such a lawsuit was the ability to identify the pathogen that caused injury.31 This likely requires “supporting medical information [and] microbiological testing on any suspect food,” which could be costly.32 Tort systems have sought to reduce the burden of such lawsuits on individual plaintiffs, particularly with respect to product liability, through a number of mechanisms. The most well known is the class action. This vehicle allows plaintiffs to combine their lawsuits, which contain the same nucleus of law and fact, thus saving the need to litigate individually across many courts.33 In the United States, the expansion of class action mecha- nisms facilitated a wide number of lawsuits concerning FDA-regulated products.34 A second well-known method of cost-reduction for the plaintiff is the contingent fee, in which clients agree to allow attorneys to take a percentage of a successful judgment in return for the attorneys’ covering the costs of the litigation up front.35 Other mechanisms can include state- funded legal aid. The importance of access is reflected in a recently com- missioned study by the European Union in which “greater access to legal assistance” was most frequently mentioned as a “major factor” in “contrib- uting to the success of product liability claims in European jurisdictions.”36 30 riChard a. nagareda, mass torts in a worLd oF settLement 8 (2007) (“Improved capitalization gave plaintiffs’ law firms the financial wherewithal to undertake the kinds of lengthy, expensive discovery campaigns permitted . . . and essential as a strategic matter in litigation against large-scale corporate defendants.”). 31 Buzby, at 235-36. 32 Id., at 236. 33 Fed. r. Civ. p. 23. (listing requirements for class certification). 34 See deborah hensLer et aL., CLass aCtion diLemmas 23-31 (2000) (discussing the his- torical development of class action mechanisms in the United States and noting that “mass personal injury class actions seemed to be growing in number and scope” and listing litigation over HIV-contaminated blood products, asbestos, and silicone breast implants). 35 See herbert m. kritzer, risks, reputations, and rewards: ContingenCy Fee LegaL praC- tiCe in the united states 254 (2004) (noting that “contingency fees can provide a means of access to justice” but also noting that other mechanisms exist such as “legal aid, legal expense insurance . . . [and] fee shifting”). He concludes that the system “encourage[s] lawyers to pursue . . . highly risky and costly cases” but that some of those cases are ones in which “in the absence of legal attack, dangerous products and practices would have gone unabated.” Id. at 267. 36 LoveLLs, produCt LiabiLity in the european union: a report For the european Commission 36 (2003) (findings based on a survey of product liability attorneys, regulators, industry, and consumers).

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262 ENSURING SAFE FOODS AND MEDICAL PRODUCTS Civil Justice Institutions The other essential component of an effective tort system is the quality of civil justice institutions. Some of the principal elements of a function- ing judicial system include: independence of courts from the executive branches, impartiality of judges, adequacy of resources, and the ability of the courts to enforce judgments.37 These attributes are described as “the cornerstone of the rule of law.” Improving the baseline legal institutions such as the judiciary is now considered to be a fundamental part of eco- nomic development by multilateral institutions such as the World Bank. Without a functioning set of judicial institutions, substantive tort law rules are not meaningful. Contextualized Determinations Although tort and administrative systems have different goals, they overlap and influence safety outcomes for FDA-regulated products. Pre- cisely how and to what extent is a combination of the specific institutional design of the tort and the administrative system, the substantive rules gov- erning them, as well as their available resources. The United States itself has a contoured approach that has precluded lawsuits for some types of product liability claims with respect to particular pharmaceutical and medi- cal device products.38 Traditionally, the approach of European states and the United States diverged in terms of the reliance and availability of product liability. The European Union moved toward a greater acceptance of product liability when it adopted regional legislation.39 Momentum to adopt a regional 37 James h. anderson, et aL., JudiCiaL systems in transition eConomies, 57-61 (2005) (World Bank report on legal and judicial reform, focusing on Europe and Central Asia). 38 For example, the medical products realm in the United States currently evinces a compli- cated patchwork of liability rules. Product liability suits against medical device manufacturers can no longer be brought if the claim is based on standards “different from” or “in addition to” FDA requirements. Accordingly, plaintiffs cannot bring cases under theories of design defect or inadequate warning defects under state tort law for medical devices that have un- dergone pre-market authorization. See Riegel v. Medtronic, Inc., 552 U.S. 312 (2008). If the device was in violation of FDA standards (for example, in manufacturing), then the suit could be maintained. However, if the medical device was marketed pursuant to the 510(k) process, the manufacturer could be fully subject to product liability. See Medtronic, Inc., v. Lohr, 518 U.S. 470 (1996). For NDA innovator pharmaceuticals, lawsuits can continue to be brought under the inadequate warning defects theory. See Wyeth v. Levine, 555 U.S. 555 (2009). However, suits against generic pharmaceutical manufacturers filed under the same grounds must be dismissed. See PLIVA, Inc. v. Mensing, 131 S.Ct. 2567 (2011). Claims against vaccine manufacturers must proceed in a special tribunal under the National Childhood Vaccine Injury Act. See Bruesewitz v. Wyeth, 131 S. Ct. 1068 (2011). 39 Council Directive 85/374 art. 7(e), 1985 OJ (L 210) (EEC) (on the approximation of the laws, regulations, and administrative provisions of the Member States concerning liability for defective products).

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263 APPENDIX B product liability rule was deeply influenced by the injuries suffered across Europe due to widespread birth defects caused by the drug thalidomide.40 The European rule adopts similar strict liability approaches, however, it differed in some respects in how it allocated burdens of proof.41 One early difference was that it permitted agricultural products to be exempted from the strict liability system; however, because of the subsequent Bovine Spongiform Encephalopathy (BSE) crisis, the European Union amended the law to require each country to apply strict liability for those products.42 European and U.S. systems also approach the issue of class actions and litigation costs in different ways. The U.S. view seeks “to overcome the problem that small recoveries do not provide the incentive for any indi- vidual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someones . . . labor.”43 As a result, the U.S. ap- proach seeks to deputize the private bar to achieve public policy goals such as market safety. While European jurisdictions have begun to permit class action-styled, group lawsuits, they differ in significant ways, reflecting a desire to control the growth of such litigation.44 On the cost side, the two also diverge: European jurisdictions tend to require the loser to pay winner’s legal fees, which may tend to discourage risk taking by plaintiffs.45 Some countries with well-developed regulatory systems have made de- liberate public policy choices to emphasize one end of the tort-regulatory spectrum. For example, New Zealand significantly curtailed its tort law and replaced substantial portions with a government-administered “no-fault” system in 1974.46 Under the New Zealand system, personal injury lawsuits are replaced with application to a state-run compensation fund. As a gen- eral matter, lawsuits for accidental injuries caused by FDA-regulated prod- ucts cannot be brought under tort.47 Instead, the injured party applies to 40 stapLeton, at 45. 41 Id., at 66. 42 European Union, Defective products: liability, at http://europa.eu/legislation_summaries/ consumers/consumer_safety/l32012_en.htm (last visited Nov. 7, 2011). 43 Amchem Products, Inc. v. Windsor, 521 U.S. 591, 617 (1997). 44 Richard A. Nagareda, Aggregate Litigation Across the Atlantic and the Future of American Exceptionalism, 62 vand. L. rev. 1, 28-30 (2009). 45 Id., at 30. 46 Legal reform was led by a government commission, which produced the Woodhouse Report, detailing the costs and inefficiencies of the tort liability system. See Peter H. Schuck, Tort Reform, Kiwi-Style, 27 yaLe L. & poL’y rev. 187, 188 (2008). 47 One exception may be for foodborne illnesses, because the ACA does not cover personal injuries arising from accidents that are the result of ingesting “a virus, bacterium, or proto- zoan.” See Accident Compensation Act, Section 25(1)(ba); Bill Marler, My View of Food Poisoning Law in Australia and New Zealand, at http://www.marlerblog.com/case-news/ my-view-of-food-poisoning-law-in-australia-and-new-zealand/.

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264 ENSURING SAFE FOODS AND MEDICAL PRODUCTS a government agency, the Accident Compensation Commission (ACC) for redress. The ACC system reduces substantially the ability of the traditional tort system to deter actions of product manufacturers. It arguably places a larger burden on the administrative agency to provide adequate oversight and to ensure compliance. What constitutes the optimal mix of administrative regulation and product liability may depend not only on the state of the civil justice sys- tem, but also on the quality of the public agencies charged with overseeing the safety of FDA-regulated products. As a general matter, administrative systems are largely affected by (1) resource constraints and (2) regulatory independence. Without adequate financial, technical, and human resources, agencies cannot meet existing or expanding responsibilities.48 Regulatory effectiveness also depends on the agency given an appropriate scope of authority and capacity to resist any inappropriate influence on the part of vested interests. For example, when an agency is unduly dependent upon industry, its policies may reflect those viewpoints in a manner that compromises its mission.49 This risk may be higher in countries in which regulatory capacities are still developing. Because FDA-regulated products, particularly pharmaceuticals and medical devices, require substantial scien- tific expertise to develop and to evaluate, a developing country may have a smaller pool of domestic scientific expertise. Those individuals may be highly sought after by both regulators and industry, increasing the risk of inappropriate conflicts of interest.50 48 One current domestic example of this situation: U.S. FDA recognized early on that its expand- ing responsibilities due to technological change and globalization placed an even greater strain on its ability to accomplish its mission. See, e.g., Fda sCienCe board subCommittee on sCienCe and teChnoLogy, Fda sCienCe and mission at risk (2007) at http://www.fda.gov/ohrms/dockets/ ac/07/briefing/2007-4329b_02_01_FDA%20Report%20on%20Science%20and%20Technology. pdf (finding that the agency cannot fulfill its mandate because “its scientific workforce does not have sufficient capacity and capability”). 49 See George Stigler, The Theory of Economic Regulation, 2 beLL J. eCon. & mgmt. sCi. 3 (1971) (articulating concept of agency capture). 50 This risk is not confined only to developing countries. In the U.S. context, the pool of scientific expertise in FDA-regulated products is often highly specialized, and commonly re- sides in industry and in academic settings. The U.S. FDA has established a conflict-of-interest and disclosure system, but concerns rose over the number of waivers granted for persons with identified conflicts. See, e.g., FDA Advisory Committees Process for Recruiting Members and Evaluating Potential Conflicts of Interest at http://www.gao.gov/new.items/d08640.pdf and Guidance for the Public, FDA Advisory Committee Members, and FDA Staff on Procedures for Determining Conflict of Interest and Eligibility for Participation in FDA Advisory Commit- tees at http://www.fda.gov/downloads/RegulatoryInformation/Guidances/UCM125646.pdf.

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265 APPENDIX B A BRIEF REVIEW OF PRODUCT LIABILITY PRACTICES IN SELECTED FOREIGN JURISDICTIONS This section briefly addresses product liability systems in four countries that are critical to this committee’s review: Brazil, India, China, and South Africa. Each country has a unique legal system and culture, with its own institutional structure and challenges. This brief review is not exhaustive, but is meant to introduce the central legal doctrines and institutions that bear on the matter of product liability, particularly for food and medical products. Brazil Brazil’s current product liability system is primarily founded on the Consumer Protection Code, which it adopted in 1990.51 The code was the result of a constitutional amendment and sought to widen consumer access to courts. It did so through a number of key mechanisms. First, liability for defective products is strict and does not depend on a finding of negli- gence.52 Second, the law introduced a more liberal class action procedure that permits non-governmental associations to bring lawsuits on behalf of injured consumers.53 Third, it reduced class plaintiffs’ burden of litigation costs. Under traditional practice, legal costs were borne by the loser. This rule tends to discourage product litigation because it places substantial financial risk on the plaintiff. The consumer protection code alters the cal- culus by only shifting costs to the class plaintiff if the suit itself is deemed to be frivolous.54 The code also places a legal obligation on manufacturers to recall products if they have knowledge of the dangerousness of the product. If the product is not recalled, that fact is deemed as satisfying a finding of negligence on the part of the manufacturer, which can impose further potential liabilities.55 Although the consumer protection code has increased the capacity of parties to sue under product liability in doctrine, a number of factors con- strain the expansion of such suits. For example, unlike in the United States, 51 Consumer Protection Law (No. 8,078 of September 11, 1990). 52 Alejandro Hernandez Maestroni, Part I: Introduction: Overview of the Study Undertaken by the National Law Center for Inter-American Free Trade, 20 ariz. J. int’L & Comp. L. 1, 7 (2003). Brazil recognizes manufacturing, design, and failure-to-warn defects. Although Brazil codifies liability as strict, there is debate over whether manufacturers can claim a “develop- ment risk” defense. Id. at 25 and 30-31. 53 Antonio Gidi, Class Actions in Brazil, 51 am. J. Comp. L. 311, 363-69 (2003) (discussing Art. 82). 54 Id., at 340. 55 Julio Cesar Bueno, Brazil, in the International Comparative Legal Guide to Product Li- ability (2011), at sec. 1.4.

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266 ENSURING SAFE FOODS AND MEDICAL PRODUCTS there is little use of contingency fee arrangements, and plaintiffs have only limited discovery rights.56 The product liability bar is small, and access to scientific expertise necessary to prosecute significant actions is limited.57 One practitioner observes that consumer claims against pharmaceutical products rarely succeed unless “the product is severely defective, and causes a significant side effect to the consumer” and “only those cases that receive media attention make it to litigation.”58 The larger legal framework is also facing challenges in the midst of significant institutional reforms. After the end of military rule, the new constitution established a separate and independent judiciary. The courts crafted their own tenure, pay, and disciplinary systems, with little oversight by other branches of government.59 Serious cases of judicial corruption and waste continued, however, severely undermining the credibility of the courts and resulted in a constitutional amendment that now seeks to rein in the judiciary.60 From a case management perspective, today, the judiciary continues to face a high backlog of civil cases.61 Different localities face severe institutional challenges: in Sao Paolo, each judge has an average of 8,000 to 10,000 cases.62 In sum, while the rules governing product liabil- ity liberalized, the practical difficulties that plaintiffs face in accessing the courts, together with the state of the civil justice system, indicate that the tort system is likely to play a constrained role in product regulation. India India’s modern legal system is grounded in the common law tradition. However, as a result of rising concerns over consumer rights, it substantially reformed its approach to civil liability in 1986 by enacting the Consumer Protection Act. Under the Act, a consumer can recover for injuries suffered but must establish that the manufacturer was negligent.63 56 Gidi, at 320. 57 Id. at 333. 58 Otto Banho Licks, Life Sciences: Brazil (2010), at http://www.practicallaw.com/ lifescienceshandbook. 59 Mariana Mota Prado, The Paradox of Rule of Law Reforms, 60 u. toronto L.J. 555, 559-560 (2010) (discussing Brazilian judicial reform). 60 Prado, at 561. According to one study, corruption generally costs Brazil the equivalent of 0.5% of its GDP or approximately US$5 billion per year. See david FLeisCher, Countries at the Crossroads: Freedom house 2010 report on braziL, at 15 (http://freedomhouse.org/ template.cfm?page=140&edition=9&ccrpage=43&ccrcountry=178). 61 According to an earlier study, there were 17.3 million cases in the system, 1 for every 10 persons. See U.N. Special Rapporteur, Report of the UN Special Rapporteur on the Inde- pendence of Judges and Lawyers, ¶21, U.N. Doc E/CN.4/2005/60/Add.3. (Feb. 22, 2005). 62 Id. at ¶23. 63 Consumer Protection Act of 1986 at Art. 14(1)(d).

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267 APPENDIX B The law establishes special consumer commissions and forums, with authority similar to the regular civil courts, to enforce rules and adjudicate claims under the consumer law, including cases of product liability. These special bodies were meant to ease access by making the legal process “less formal, cheaper, and faster.”64 Under the Act, court fees are low, and the initial pleading requirements are minimal. Complainants can litigate with or without a lawyer. Moreover, the law includes consumer-friendly provi- sions allowing consumer associations or similar public interest groups to sue on behalf of injured parties. Cases have been brought for food adul- teration, and plaintiffs in one case obtained a judgment for $12,000 for contaminated canola oil.65 Yet despite the changes in the law, it appears that product liability suits are only a small fraction of Consumer Protection Act cases.66 In the alternative, plaintiffs still can proceed under the traditional common law tort system. In that forum, the ability of plaintiffs to obtain discovery is greater than in non-common law systems. Plaintiffs can also file class actions, but such actions have been rare in mass tort lawsuits.67 Access is also hindered because attorneys cannot take cases on a contingent fee basis. As an institution, India’s courts also face the problem of corruption, which is reportedly quite severe at lower levels of the system.68 It is esti- mated that use of the regular civil courts in India is “among the lowest in the world.”69 This may be the result of the massive backlog of cases in the courts: estimated to be 20 million in the lower courts.70 The administrative system for FDA-regulated products has similarly undergone significant change and reorganization. The food safety regula- tory system was reformed under the Food Safety and Standards Act of 2006. A notable feature of this legislation is the empowerment of Adjudi- cating Officers and a special Tribunal to summarily handle cases of food 64 Reimann, at 804. 65 avtar singh, Law oF Consumer proteCtion 223-224 (2005) (the judgment figure is in the equivalent of 2011 US dollars). 66 Reimann, at 804. 67 internationaL Commission oF Jurists, aCCess to JustiCe: human rights abuses invoLving Corporations 58-9 (2011). 68 See immigration and reFugee board oF Canada, india: independenCe oF and Corruption within the JudiCiaL system (2007-April 2009); internationaL Commission oF Jurists, aCCess to JustiCe: human rights abuses invoLving Corporations 53 (2011). 69 Marc Galanter & Jayanth K. Krishnan, “Bread for the Poor”: Access to Justice and the Rights of the Needy in India, 55 hastings L.J. 789-90 n.1 & n.2 (2004) (discussing empirical data in India and also finding that “reliable data [on the court system] are scarce”). 70 maJa b. miCevska, arnab k. hazra, probLem oF Court Congestion: evidenCe From indian Lower Courts (2004), at http://www.zef.de/fileadmin/webfiles/downloads/zef_dp/ zef_dp88.pdf.

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268 ENSURING SAFE FOODS AND MEDICAL PRODUCTS safety arising under the law, and regulators can seek civil compensation for victims in that forum in addition to fines and penalties.71 The officers have exclusive jurisdiction of cases arising under the Act, placing it outside the authority of the regular civil courts.72 Although the substantive rules for liability do not appear as friendly as under U.S. law, India has taken significant recent steps toward increasing the access of plaintiffs to legal remedies under the product liability system through its consumer legislation. However, institutional problems caused by docket congestion and corruption plague the effectiveness of the civil justice system, and place in question its ability to serve as a backstop for product safety. China China’s legal and regulatory system is a product of civil law, Soviet law, and common law influences. China’s approach to FDA-product regula- tion is primarily state-centered. It relies heavily upon government agencies to conduct inspections and to penalize violations, either through fines or criminal prosecution. Usually, these are organized as periodic crackdowns, and in recent years, such campaigns have been waged on identified products of public concern, such as dairy and cooking oil.73 With respect to the substantive law, China formally adopted a tort law in 2009 that re-codified and provided greater detail on the scope of tort liability in various specific areas. It provides for strict liability for defective products.74 A defect is an “unreasonable danger existing in a product” that “endangers the safety of human life” or is not compliant with relevant safety standards.75 It appears that Chinese law also includes a development risk clause similar to the European one.76 In its new Food Safety law, China also provided for damages equivalent to 10 times the cost of the product if 71 Food Safety and Standards Act, 2006, No. 34, secs. 65, 68, 70 (compensation provisions and powers of Adjudicating Officer and Appellate Tribunal). 72 Food Safety and Standards Act, 2006, No. 34, sec. 72. 73 See, e.g., Zhang Yan and Cao Yin, 32 held in ‘gutter oil’ crackdown, China daiLy, Sept. 14, 2011, at http://europe.chinadaily.com.cn/china/2011-09/14/content_13682763.htm (last visited Nov. 7, 2011). 74 Tort Law (promulgated by Standing Committee of the National People’s Congress, Dec. 26, 2009, effective July 1, 2010), art. 41, translated in World Intellectual Property Organization, at http://www.wipo.int/wipolex/en/text.jsp?file_id=182630 (last visited Nov. 7, 2011) (P.R.C.). 75 Product Quality Law (promulgated by Standing Committee of the National People’s Con- gress, Feb. 22, 1993, amended and effective July 8, 2000), art. 46, translation at the Ministry of Science and Technology of China, http://www.most.gov.cn/eng/policies/regulations/200501/ t20050105_18422.htm (last visited Nov. 7, 2011) (P.R.C.). 76 Product Quality Law, art. 41(3).

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269 APPENDIX B manufacturers produce unqualified food or sellers knowingly sell unquali- fied food.77 In terms of the civil justice system and access of plaintiffs to courts, large-scale product liability actions are not prevalent. Court institutions are not formally independent, and accordingly are subject to directives from var- ious political authorities, which have tended to discourage such lawsuits.78 Accordingly, successful tort lawsuits against manufacturers for mass torts in the FDA-regulated sphere are few, particularly when they are perceived to lead to potential social instability.79 Aggregated, class lawsuits are permitted under the Civil Procedure Law,80 however, recent national bar association rules concerning the formation and prosecution of class actions require that any case with 10 or more plaintiffs should receive the approval of three or more partners in the law firm and be reported to the local bar association 77 Food Safety Law (promulgated by Standing Committee of the National People’s Congress, Feb. 8, 2009, effective June 1, 2009), art. 96, translation at U.S. Department of Agriculture, http://www.fas.usda.gov/gainfiles/200903/146327461.pdf (P.R.C.). 78 Article 3 of China’s Constitution states that judicial authorities are “created by the people’s congresses to which they are responsible and under whose supervision they operate.” Article 128 notes that “The Supreme People’s Court is responsible to the National People’s Congress and its Standing Committee. Local people’s courts at different levels are responsible to the organs of state power which created them.” More recently, the guiding doctrine of the judiciary (the “Three Supremes”) was enunciated by President Hu Jintao and reiterated by the head of the Supreme Peoples’ Court. The three key principles were 1) supremacy of the Party; 2) supremacy of the people; and 3) supremacy of the law. See Wang Shengjun: “Three Supremes” shall always be the guiding thought of the courts, Xinhua net, June 23, 2008, at http://news.xinhuanet.com/legal/2008-06/23/content_8420938.htm (crediting original source as Legal Daily) (site last visited Nov. 2, 2011). The doctrine was widely interpreted in China as highlighting the importance of political and Party factors over that of law. 79 For example, although product liability lawsuits were filed in connection with the deaths and injuries arising out of the 2008 contamination of milk and milk powder, these cases were ultimately not resolved in the courts. According to various media reports, courts did not accept case filings until a significant number of victims agreed to a settlement mechanism developed by the state. See Andrew Jacobs, Parents Reject China Milk Settlement, n.y. times, Jan. 13, 2009, at http://www.nytimes.com/2009/01/14/world/asia/14china.html?ref=melamine; Edward Wong, Milk Scandal in China Yields Cash for Parents, n.y. times, Jan. 16, 2009, at http:// www.nytimes.com/2009/01/17/world/asia/17milk.html?ref=melamine; Michael Wines, Local Court Is China’s First to Accept a Tainted-Milk Suit, n.y. times, Mar. 25, 2009, at http:// www.nytimes.com/2009/03/26/world/asia/26milk.html?ref=melamine. 80 Civil Procedure Law (promulgated by the National People’s Congress, Apr. 9, 1991, effective Apr. 9, 1991), arts. 53-55, translation at China.org.cn, the authorized government website at http://www.china.org.cn/english/government/207339.htm (site last visited Nov. 7, 2011) (P.R.C.).

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270 ENSURING SAFE FOODS AND MEDICAL PRODUCTS upon receiving the case.81 Such restrictions, together with the state’s general aversion to large-scale litigation because of its effect on political stability, tend to reduce the role that product liability plays in these matters. South Africa South Africa’s product liability system did not contemporaneously follow the changes in doctrine that occurred in North America and in Europe.82 From a doctrinal standpoint, until recently, South Africa fol- lowed traditional tort principles and required the plaintiff to show that the manufacturer’s behavior was negligent before a court would make a finding of liability.83 Much of this started to change as early as 2004, when South Africa’s Department of Trade and Industry put forth a policy proposal to draft comprehensive consumer protection legislation. The agency recog- nized the country’s consumer laws as “outdated, fragmented and predicated on principles contrary to the democratic system.”84 This effort culminated in the country’s Consumer Protection Act in 2008. Under the new law, producers are strictly liable to consumers for pro- ducing goods that are unsafe, defective, or hazardous, regardless of whether the producer was negligent.85 There is no liability, however, if the harm caused is “wholly attributable” to compliance with existing regulatory stan- dards.86 One can infer from this language that producers of FDA-regulated products that comply with South Africa’s regulatory standards may be shielded from liability but only as long as it can be shown that the harm was completely caused by compliance with the relevant rules. Although the text of the law suggests every type of product defect is subject to strict liability, this approach is a significant departure from its own past practice and in some ways different from comparative practice.87 Since the law was 81 A ll China Lawyers’ Association, Guiding Opinion on Attorney Handling of “Mass Cases,” Mar. 20, 2006, at Secs 1.1, 3.1, 3.2, at http://www.dffy.com/faguixiazai/ ssf/200606/20060620110110.htm (in Chinese) (last visited Nov. 7, 2011). It also notes that lawyers should be particularly cognizant of such rules when “sensitive cases” arise. See id. at Sec. 5. One report suggests that the All China Lawyers’ Association is considering revisions to the rule. See All China Lawyers’ Association will revise “Guiding Opinion on Attorney Handling of Sensitive Mass Cases,” Feb. 5, 2010, at Xinhua net, http://news.xinhuanet.com/ legal/2010-02/05/content_12936276.htm (site last visited Nov. 3, 2011). 82 J. neethLing, Law oF deLiCt 317 (2010) (“In this regard [product liability law] it must, however, be pointed out that South African law is still in its infancy.”). 83 Id. at 317-18. 84 Department of Trade & Industry, Draft Green Paper on the Consumer Policy Framework 09/04, Gazette No. 26774, at 6. 85 Consumer Protection Act 68 of 2008 s. 61(1) (South Africa). 86 Consumer Protection Act 68 of 2008 s. 61(4)(a) (South Africa). 87 For example, under pre-existing South African law of delict, such a claim would have been subject to a finding of negligence. Moreover, U.S. and European practice do not apply principles of strict liability in those instances.

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271 APPENDIX B not in effect until April 2011, it may be premature to draw final conclusions on its overall effect on product liability and safety. Despite these changes in the substantive law, access-to-justice issues in South Africa remain a significant barrier. A study notes that a 1-hour legal consultation would cost an average household approximately 1 weeks’ worth of wages.88 Although contingency fees were permitted in 1997, the losing party still bears all costs of the lawsuit.89 The new legislation allows regis- tered consumer groups to conduct litigation on behalf of consumers. This type of representative litigation may also ease access-to-justice problems.90 Approaching the system from an institutional perspective, the new law reaffirms that consumers have access to not only the regular courts, but also special courts such as the Consumer Tribunal and provincial and lower consumer courts.91 It is anticipated that the system of consumer courts will expand as the law is implemented.92 As a general matter, the courts are functionally independent, and funding appears adequate, although there are significant disparities between urban and rural areas.93 Although sig- nificant practical obstacles exist for plaintiffs in pursuing product liability suits in South Africa, revisions to the tort system and passage of consumer protection seem to have created momentum for potential advances. CONCLUSION Assessing the role that the tort system has in the regulation of food and medical products in developing countries requires a highly factual and context-dependent understanding of the potential capacity of both the civil justice and administrative regulatory systems. As this committee recognizes, “developing countries” for the purposes of this study may encompass “a heterogeneous group of 150 or more low- and middle-income countries.” In countries where administrative agencies are under-resourced or chal- lenged by lack of independence, efforts to support the civil justice system, particularly in the area of tort liability may help support the regulation of food and medical products. 88 aFrimap and open soCiety Foundation For south aFriCa, south aFriCa: JustiCe seCtor and the ruLe oF Law 29 (2005) (discussion paper). 89 Christopher Roederer, The Transformation of South African Private Law After Ten Years of Democracy, 37 CoLum. hum. rts. L. rev. 447, 494 (2006). 90 Consumer Protection Act 68 of 2008, s.78 (South Africa). 91 Consumer Protection Act 68 of 2008, s.69 (South Africa). 92 SA Consumers’ Rights in Spotlight, Feb. 7, 2011, at http://www.imc.org.za/news/657-sa- consumers-rights-in-spotlight.html (quoting Department of Trade and Industry spokesperson). 93 aFrimap and open soCiety Foundation For south aFriCa, south aFriCa JustiCe seCtor and the ruLe oF Law at 1-2, and chs. 3 & 4 (2005) (full report).

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