Approaches to Product Liability Risk in the U.S. Automotive Industry

CHARLES W. BABCOCK, JR.

Make no mistake about it: the U.S. product liability system is unique1 and, after 25 years, remains entirely unimitated by the legal system of even one other nation,2 even though all nations have had more than 25 years to observe its operation and then adopt it for themselves. It may be, as some contend, that our justice system is being replicated around the world, and well should many of its elements, such as the Bill of Rights. But the U.S. product liability system is not being replicated anywhere. Its contingent fees, blue-sky verdicts, punitive damages, and acceptance of highly suspect expert testimony remain unique to the United States.

Consider today's newly graduated engineer. Because of the globalization of engineering education, one can expect this engineer in Germany or Japan to have mastered the same fundamental engineering, scientific, and mathematical principles as the newly graduated engineer in the United States. Each new engineer will understand the laws of thermodynamics, for example, or Newton's laws of motion, and will attest that they operate in quite the same manner at any given point on the globe.3

How might more experienced engineers advise these new graduates? Surely they would wish them well, since they are members of a limited, precious resource: the world's supply of trained professional engineers. No doubt they would be urged to innovate, and indeed to "push the envelope," by seeking entirely new scientific knowledge. No doubt they would urge them to be creative, to dream, and to find practical ways to apply their knowledge.



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Product Liability and Innovation: Managing Risk in an Uncertain Environment Approaches to Product Liability Risk in the U.S. Automotive Industry CHARLES W. BABCOCK, JR. Make no mistake about it: the U.S. product liability system is unique1 and, after 25 years, remains entirely unimitated by the legal system of even one other nation,2 even though all nations have had more than 25 years to observe its operation and then adopt it for themselves. It may be, as some contend, that our justice system is being replicated around the world, and well should many of its elements, such as the Bill of Rights. But the U.S. product liability system is not being replicated anywhere. Its contingent fees, blue-sky verdicts, punitive damages, and acceptance of highly suspect expert testimony remain unique to the United States. Consider today's newly graduated engineer. Because of the globalization of engineering education, one can expect this engineer in Germany or Japan to have mastered the same fundamental engineering, scientific, and mathematical principles as the newly graduated engineer in the United States. Each new engineer will understand the laws of thermodynamics, for example, or Newton's laws of motion, and will attest that they operate in quite the same manner at any given point on the globe.3 How might more experienced engineers advise these new graduates? Surely they would wish them well, since they are members of a limited, precious resource: the world's supply of trained professional engineers. No doubt they would be urged to innovate, and indeed to "push the envelope," by seeking entirely new scientific knowledge. No doubt they would urge them to be creative, to dream, and to find practical ways to apply their knowledge.

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Product Liability and Innovation: Managing Risk in an Uncertain Environment Now let us consider today's new engineer near career end, rather than at today's beginning. When today's new 22-year-old engineers are age 74—perhaps retired, perhaps still practicing, but in either event still vitally interested in the profession of engineering—it will be the fifth decade of the twenty-first century, the decade of the 2040s. Given the recent, historically explosive growth in science and engineering, some or even most of the applied engineering knowledge new engineers possess today is likely to be obsolete by the year 2045. Thus, the lifelong acquisition of new professional knowledge will be vitally important. But what would one tell 22-year-old engineers about the legal systems in Germany, Japan, the United States, and elsewhere around the world today? How can these new engineers expect to have their professional endeavors judged by legal systems during their careers? It is, of course, dangerous to make predictions about anything, but in spite of the danger, let us deliberately look far beyond our day and think of that year of 2045, a time over half a century from now. It will be the United States' 269th year of independence. Some older Americans living then may be able to remember the celebration of the nation's Bicentennial, in 1976. Thirteen presidential elections will have intervened. Will the principles and practicalities of the U.S. product liability system be the same in 2045 as they are today, with today's damage award and other trend lines simply running straight out to 2045? FUNDAMENTAL PRINCIPLES OF AUTOMOTIVE PRODUCT LIABILITY LITIGATION It was Abraham Lincoln who said, as he began the "House Divided" speech, "If we could first know where we are, and whither we are tending, we could better judge what to do, and how to do it."4 Let us follow Lincoln's plan by first studying where "we are, and whither we are tending" in U.S. product liability law. What is the status of this law today, in 1994? The United States, along with a number of other countries around the world, has as its legal foundation the common law of England, a system hailed for centuries as one of genius, one that offers justice carefully developed through the reasoned decisions of learned judges in particular cases, as distinguished from law dependent entirely upon the statutory fiat of legislative bodies. U.S. product liability law is a part of this system, albeit a very new one. That this new branch of the common law remains unique to the United States, that it is notoriously confusing to the engineering community, and that it is still unsettled in several respects are not in dispute. It is also true

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Product Liability and Innovation: Managing Risk in an Uncertain Environment that over the past generation, product litigation has attracted a substantial number of the best and brightest lawyers now practicing at the U.S. bar, on both the plaintiff and defense sides. The basic principles of the American product liability system are readily applicable to the products of the automotive industry. Persons are permitted to sue automotive manufacturers and allege that injuries, typically sustained in a collision, were the result of the defective manufacture of a vehicle; or of the defective design of a vehicle; or that, even if the vehicle was designed and manufactured flawlessly, its manufacturer failed adequately to warn of a hazard incident to its use, and this failure to warn caused the injury of which the person complains. Since the early 1970s, in the so-called crashworthiness cases, automotive manufacturers have been subject to lawsuits based on the amount of additional injury an occupant allegedly suffered during a collision by reason of a defect, even if the manufacturer had nothing to do with causing the collision itself. This means that every automotive collision can be the subject of a product liability lawsuit. These different kinds of permissible allegations are by no means equally controversial. Manufacturing Cases Manufacturing defect cases not only are easy to explain to engineers and anyone else, but the law is quite well settled. Nor is the field particularly controversial among either legal scholars or practitioners: a product that is defective because it was not manufactured to specification can render its manufacturer liable where the defect causes a person to be injured. Warnings Cases Warnings cases can be controversial, and they certainly present numerous difficult issues. This paper is not the place to discuss them, but a principal problem is the absence of stable, known standards against which a particular warning can be evaluated. Eminent scholars like Alan Schwartz and W. Kip Viscusi have argued recently for national standards for warnings labels, and even for a uniform national vocabulary for warnings.5 Professor Viscusi has noted that "in practice hazard warnings simply give plaintiff another test that producers can fail."6 Design Cases Cases that involve product design are the most controversial part of product liability law. In design cases, the allegation may be made, and the

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Product Liability and Innovation: Managing Risk in an Uncertain Environment jury may find, that the product of which the plaintiff complains was defective in design—that engineers improperly designed not only it but, by direct implication, all other products like it. Who are those whose behavior is sought to be affected by such decisions? What is the target population for this body of law? The answer is obvious: engineers. It is necessary that engineers fully appreciate this truth. The very name "product liability" is somewhat misleading. The matter becomes plain when one considers cases brought against physicians for alleged professional errors: "medical malpractice" cases. The very word "malpractice" is a jarring one for professionals. Its lay meaning is ''misconduct or improper practice," or "unprofessional conduct."7 But what if most physicians were in the employ of hospitals or other medical organizations, so that the malpractice cases that are brought against them personally today were instead brought against their employers, as is the case with so many engineers? Would we then hear the phrase "medical liability cases" instead of "medical malpractice cases"? It may be that we would, but the result would be the same. The truth is that product liability design cases are nothing less than claims of engineering malpractice. One of the first difficulties today's automotive engineers experience is that the automotive industry, entirely apart from product liability litigation, is heavily regulated in the United States, as is the automotive industry in all other leading nations of the world. In the United States, Federal Motor Vehicle Safety Standards, in almost 400 pages of text, state a wide variety of detailed performance requirements that every new vehicle sold here must meet. The standards are written in generally accepted engineering terms, and they are required to be objective and performance oriented. U.S. law states specifically that these standards must be promulgated in such a way that they "meet the need for motor vehicle safety."8 It is important, then, to keep in mind that in U.S. product liability automotive design cases, with infrequent exception, the plaintiff's position is and necessarily must be that the vehicle in question was defective even though its designers complied with all U.S. federal safety standards. What are the implications of this for engineers? No one would think of proposing a federal automotive safety regulation that would state no rule at all. Nor would anyone propose that a federal safety regulation be written in invisible ink, so that no engineer could read it. No one would propose that a federal safety regulation be first published only years after engineering design work had been completed. Nor would anyone propose a federal safety regulation that, though written, simply makes no sense to engineers. And no one would propose an internally inconsistent regulation. Product liability design cases are confusing for automotive engineers, and highly controversial, because they can yield, for the design engineer, any one or more of these results.

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Product Liability and Innovation: Managing Risk in an Uncertain Environment The yes-or-no, liable-or-not-liable pronouncements of juries at product liability trials state no rules for engineers, as regulations do. Even if juries do have engineering reasons for their decisions—reasons that could assist design engineers only if they were stated in the form of comprehensible, technically competent engineering design or performance rules, as regulations are—juries do not announce these reasons. If design engineers ever do manage to learn, perhaps through informal, post-trial jury interviews, just what engineering rules a particular jury applied, they will learn of the rules only years after design work on the product has been completed. Even then, jury members are likely to state their formulated rules in terms that make no sense to engineers. Finally, any manufacturer that is sued often in product liability cases—such as any domestic member of the automotive industry—will verify that one cannot harmonize for engineers the verdicts of many juries sitting in many cases, for there is rampant inconsistency among them. Fuel tank design cases offer a good example. In one case, the plaintiff contends that the design engineers should have designed the fuel tank on the subject vehicle to be on its left side, rather than where is was, near the rear of the vehicle. In another case involving the same model, plaintiff contends that the tank should have been on the right side. In a third case, the plaintiff argues that the tank could properly have been on either the left or the right side, but not near the rear, where it was. In fourth, fifth, and sixth cases, the jury considers each of these allegations, in the same order. The juries return verdicts for the plaintiffs in each of the first three cases, but for the defendant manufacturer in the fourth, fifth, and sixth cases, without explaining their reasons in any of them. What design rule has the U.S. legal system thus promulgated to fuel system design engineers? This is greatly troublesome. U.S. product liability litigation, in design cases, violates perhaps the single most fundamental and ancient principle of jurisprudence, because the rules of law it would impose on the group whose conduct is to be affected, that is, on design engineers, cannot be effectively communicated in advance to that group, or to anyone else. This is the difficulty with the concept of specialized courts, whose task it would be to decide whether a given design is permissible even though all engineering design work had ended years before. Because of this, product liability design cases affect engineers in the automotive industry during the design phase of a product far less than do federal safety regulations, for which each company has extensive compliance programs in place. From the viewpoint of the consumer and the product user, the U.S. civil justice system, unwieldy and awkward as it is, serves only those few who use it. Regulation, in sharp contrast, is pervasive:

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Product Liability and Innovation: Managing Risk in an Uncertain Environment it not only informs the design engineer in advance but also serves every product user. How could we have arrived at this present position? HOW IT ALL BEGAN: THE WAY WE WERE IN 1966 In the mid-1960s, many Americans believed or at least were told that automotive design engineers could easily and dramatically improve highway safety but simply refused to do it or were prevented from doing so by industry executives. As law professor Gary T. Schwartz described it recently: One feature of public thinking in the 1960s was that major American corporations—and, in particular, the Big Three automakers—were economic colossi that could easily bear whatever burdens might be imposed on them by way of regulations or liability. A second feature of public opinions was that these corporations should not be held in high respect; indeed, they should be frequently distrusted.9 In their major, helpful book, The Struggle for Auto Safety (1990), Yale Law School professor Jerry L. Mashaw and Washington attorney David L. Harfst summarize their extensive study of the history of automotive safety regulation in the United States. They point out that the mid-1960s view depended on a fundamental assumption about design engineering—that there was no technical barrier to dramatic increases in highway safety, but only a behavioral one: Of course, this … assumed both that engineering solutions were at hand or could be feasibly developed and that government was an effective agent of innovation.10 The 1960s criticism of the industry, and those of automotive engineers, was truly extreme. In their 1990 book, Mashaw and Harfst specifically cite the 1966 testimony of a former administration official, who spoke of "the venality of the automobile industry,"11 suggested that "for brute greed and moral imbecility the American automobile industry has no peer,"12 and concluded: Part of the task of the management of public affairs in the modern world must be to take into account the fact that large segments of life will be in the hands of men of modest endowment.13 What were judges—very few of them engineers—to do in the midst of such a widespread public attitude? As Professor Schwartz suggests: [T]ort judges in the 1960s and 1970s were genuinely responding to the appeal of the concept of liability for negligence or unreasonableness. That is, those judges did want car manufacturers to make proper decisions relating to crashworthiness; they did hope that design defect rules could induce the proper design of consumer and industrial products.14

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Product Liability and Innovation: Managing Risk in an Uncertain Environment Time and experience have ameliorated the extremity of the typical views of the mid-1960s, and in particular the belief, even among our best and brightest leaders, that the compulsion of law could force automotive design engineers readily to end highway death and injury. Of course, there has been much progress in highway safety, including automotive design, since the mid-1960s, but it has been the result of genuine scientific innovation rather than the mere implementation of fully developed mid-1960s technology, and it has been seen worldwide, rather than only in the United States. In the meantime, today's public seems increasingly to comprehend the excesses of the mid-1960s positions.15 In any event, U.S. product liability law developed in this atmosphere of the mid-1960s. As Professor Schwartz notes: [M]odern tort law can be regarded as one of those ambitious programs initiated during the Great Society and then confirmed and further institutionalized during the 1970s.16 IS THE U.S. AUTOMOTIVE INDUSTRY AFFECTED BY PRODUCT LIABILITY LITIGATION? The U.S. automotive industry was affected immediately and significantly by the U.S. product liability system, from its initiation in the mid-1960s, and it continues to be. All torts scholars surely would agree.17 General Motors may have led the way, as it sought to defend the Chevrolet Corvair design cases in the mid-1960s, but Ford, Chrysler, and other manufacturers quickly were made defendants as well in a rapidly growing number of product liability cases. The Nature of the Risks It is axiomatic that product liability cases can present very substantial risks.18 One of the high risk factors is the possibility, in many cases, of an award of punitive damages—those jury awards, not infrequently ranging into seven, eight, or even nine figures, that do not compensate an injured plaintiff but rather add to the jury's compensatory award a further amount designed to punish the manufacturer defendant. A recent decision of the United States Supreme Court, in a case called TXO Production Corporation v. Alliance Resources,19 demonstrates the risk. The Court refused to find that a punitive damages award more than 526 times greater than the actual damages awarded by the jury was so grossly excessive as to violate the Due Process Clause of the Fourteenth Amendment of the Constitution. As it had in a 1990 decision,20 the Court in TXO refused to establish a

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Product Liability and Innovation: Managing Risk in an Uncertain Environment lawful boundary for legally permissible punitive damages awards, except to repeat that it had said in the 1990 decision, that "a general concern of reasonableness … properly enters into the constitutional calculus."21 In TXO, a plurality of the Court determined that In sum, we do not consider the dramatic disparity between the actual damages and the punitive award controlling in a case of this character … we are not persuaded that the award was so "grossly excessive" as to be beyond the power of the State to allow.22 Justice O'Connor observed that all the justices at least agreed that it is possible for a punitive damages award to be unlawfully large.23 How should an automotive manufacturer deal with this risk and the other risks that lie in product liability litigation? Over the years, automotive manufacturers generally have followed the same approaches in seeking to defend against these cases. A generation ago, the automotive industry, along with other industries, began to learn which approaches to this new kind of litigation were not successful. For example, some manufacturers thought it possible through contractual provisions to cause other companies to assume their product liability risks. But this soon proved either impossible legally or simply unwise, because a manufacturer could too easily lose control over matters significantly affecting its reputation and future insurability. Some manufacturers sought to turn over all cases to their product liability insurers and simply let the latter deal with them. But this tended to put the insurers in a difficult position and proved unwise for the manufacturers as well, at least for those facing many product liability cases. The risks to the company were simply too great for manufacturers not to maintain full control over them. Another reason is that there were, and remain, various insurability problems: for example, punitive damages are not or may not be insurable in many states. Manufacturers generally have determined over the years that it is necessary for them to control the selection of trial counsel and for their corporate attorneys to work with them throughout the course of each matter. In recent years, some corporations have developed sophisticated, unprecedented, and highly successful managerial control systems for product liability litigation. Two of this author's own colleagues, senior lawyers at General Motors, have pioneered recently in new, highly effective product liability cost control and litigation management techniques and have received well-deserved national recognition for doing so. Needless, inappropriate losses and unnecessary, overly generous settlements can prompt waves of new case filings. Therefore, no automotive manufacturer today seeks to settle all or virtually all U.S. product liability cases. This is true even of the Japanese manufacturers, in whose home

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Product Liability and Innovation: Managing Risk in an Uncertain Environment country—perhaps quite wisely—virtually all legal disputes traditionally are settled.24 On the other hand, no automotive manufacturer today would ask trial judges in every case for a full trial on the merits. One reason is that sometimes there is no dispute—the plaintiff is correct. An obvious example would be a manufacturing defect case in which it appears that a failure by the manufacturer to comply with its own engineering specifications caused the injury of which the plaintiff complains. The only remaining course is the existing reality. Manufacturers seek to evaluate each risk, on a case-by-case basis, settle where that course is appropriate for a variety of reasons, and seek a fair trial where the allegation seems technically incorrect. In today's environment, this requires outstanding corporate counsel case managers, and outstanding trial defense counsel in every jurisdiction. Insiders will tell you that a recent problem of increasing concern is unfair new pretrial discovery abuses, which, if permitted by judges, can present enormous burdens and even prevent meritorious cases from ever reaching trial. Many in the practice believe that the discovery rules, designed as they are to elicit truth, can be used as a powerful weapon, especially in cases where there is no causative engineering defect, and thus no genuine liability, so that counsel's motivation is never to go to trial, but rather to make discovery so oppressive as to force the defendant to settle a case of no technical liability.25 Manufacturers must demonstrate the greatest respect for the judicial system while continuing to resist such pressures. Trial The trial record in the automotive industry is very good indeed. General Motors prevails in the substantial majority of product liability cases that are resolved by jury trials, and it is this author's impression that the same is true of other automotive manufacturers. Inevitably some cases are lost, even though manufacturers are motivated to take to trial only cases of no technical liability. A particular, chronic problem is the quality of the science that finds its way into U.S. courtrooms in product liability cases, typically introduced through the testimony of expert witnesses. Many engineers in the automotive industry experienced in product liability design litigation are troubled by the scientific and engineering propositions that are too often presented to juries today. Numerous scholarly articles have been written about this problem. Indeed, one scholar wrote recently that "Perhaps the most troubling issue confronting courts today involves the management of scientific evidence."26

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Product Liability and Innovation: Managing Risk in an Uncertain Environment Perhaps because science and the law are not disciplines frequently pursued by the same person, many believe courts approach science with some considerable hesitation.27 The obvious peril is that courts, in the interest of fairness or equality among the parties, or as a result of discomfort with science itself, may permit what Peter Huber has so correctly called "junk science" to enter the courtroom. On June 28, 1993, the U.S. Supreme Court handed down a landmark decision, Daubert v. Merrell Dow Pharmaceuticals,28 in which it ruled for the first time on the proper use of scientific evidence in U.S. federal court-rooms. On balance, many believe the Court's carefully considered decision may lessen the "junk science" problem.29 Preventive Advice In the United States, corporate lawyers naturally seek to explain the product liability system to engineers, and to counsel them in various techniques for complying with it. In manufacturing cases, this process is straightforward enough. Quality control, the making of products to specification every time, is demanded by the increasingly discerning consumer. The engineer must understand that U.S. product liability law reinforces this demand, since liability in a product liability case can result from a mismanufactured product. Design cases, however, present notorious professional difficulty for the corporate lawyer. What does the lawyer tell the engineer, and how, in rendering the advice, does the lawyer seek to maintain and increase the engineer's respect for the U.S. legal system? Should the lawyer advise the engineer to design every part and assembly to the standard of maximum conceivable safety, regardless of practical considerations and consumer resistance, even if the engineer purports to know what "maximum conceivable safety" might mean in actual design practice? Should the lawyer advise the engineer to ensure that his or her designs are identical to those in competitors' current products? Should she advise the engineer simply to meet government regulations? Several things can be suggested to every engineer: Ask questions. Innovate. Write accurate documents. With regard to the last suggestion, many contested product liability design cases are based on documents obtained during discovery that contain negative predictions written by the manufacturer's own engineers during the design process, speculative predictions that prove inaccurate when the

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Product Liability and Innovation: Managing Risk in an Uncertain Environment products actually enter the marketplace. The single greatest strategy to minimize legal risk in design defect cases may be this: to convince engineers of the importance of accurate report writing. DOES U.S. PRODUCT LIABILITY LITIGATION DISCOURAGE ENGINEERING INNOVATION? In the automotive industry there is evidence on both sides of the question whether U.S. product liability law discourages product innovation. Evidence That the System Does Discourage Innovation Distinguished law professors have said it may,30 and so has a recognized leader in U.S. transportation policy, Patricia Waller, director of the Transportation Research Institute at the University of Michigan, who stated at the Second World Conference on Injury Control that "Our system of product liability discourages the adoption of new technology."31 Industry observers have said so as well.32 Many would take the position that U.S. product liability law at the very least can discourage the development of a new, unique design obviously unlike existing products sold by competitors. Other evidence may be found in the variety of automotive products available overseas but not in the United States. An American tourist simply walking about the street in a major European capital, or in Japan, may be surprised to see many different kinds of motor vehicles, such as small commuter or city cars that are as long as ours are wide; three-wheeled vehicles; the kinds of small vehicles a company like Daihatsu can design and sell in Japan, with far better fuel economy than anything available to U.S. consumers today; and trucks or vans optimized for special purposes. All of these have been type-approved by national vehicle safety authorities. It seems likely that these kinds of vehicles are not sold in the United States in large part because of product liability considerations. European and Japanese motor vehicle consumers clearly have a much larger range of engineering innovation from which to choose. Further, there may be influences from U.S. product liability law and practice that affect design engineers but are difficult to quantify. It may be that vague, imprecisely defined fears created by sensationalized media accounts of spectacular adverse verdicts in product liability design cases affect design engineers, prompting them to avoid innovation in design. The plain irrationality and unfairness of the product liability system in design cases surely tends to disorient engineers and make them apprehensive of further irrationalities. This alone could stifle innovation and creative freedom. The evidence, however, is unclear. Whether design engineers

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Product Liability and Innovation: Managing Risk in an Uncertain Environment APPENDIX: REFORMING PRODUCT LIABILITY LAW Tort Reform There has been a great deal of recent activity in both the federal and state legislatures designed to reform the U.S. product liability legal system.61 Indeed, one law professor has written that the tort reform movement, by the mid-1980s, was the most active period of statutory reform of tort rules in western legal history.62 Tort reform is legislative in concept rather than judicial, in that the law is to be reformed by the enactment of statutes rather than by the considered decisions of common law judges in particular cases. Legal scholars can detest this because the process seems political: [T]he reasoning set forth in judicial opinions contributes to the intellectual development of tort law. Tort-reform statutes, by contrast, are typically lacking in any such effort at reasoned explanation.63 Although statutes certainly can set forth rules of law without much ancillary explanation, such complaints are somewhat misleading. This complaint does not concern mere tort reform proposals, or the debates over them, but rather tort reform statutes: bills that have been passed by legislatures despite vigorous opposition from plaintiff lawyers and others, and signed into law by governors. In virtually every such case, the legislative process generates a voluminous public record. The "reasoned explanation" for each new statute, therefore, is readily to be found in the recorded chorus of complaints over the effects of the existing tort system that created the widespread support necessary for its successful passage. Will today's "tort reform" movement provide the ultimate, mid-twenty-first century solution? It can help, to be sure. The subject is so significant that in our company, one experienced senior product liability expert and lawyer has been put in charge of the field nearly full-time. A number of leading litigation experts at major national law firms work virtually full-time today for tort reform. The importance of significant change to help restore fairness in product liability litigation makes these efforts correct for our time. But what of 50 years from now? The ultimate, twenty-first century solution seems much more likely to be comparatively radical, well beyond the boundaries of "tort reform" as the term is understood today. Consider, for example, this view: Although more than forty states adopted tort reform legislation of some kind during the last decade, on the whole this legislation has merely tinkered with tort law doctrine and cannot be seen as fundamental change.64

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Product Liability and Innovation: Managing Risk in an Uncertain Environment Although affected manufacturers surely would protest the use of the word "tinkered" to characterize legal change that can have very significant effects in existing litigation, it is nevertheless true that tort reform is not likely to produce "fundamental change." A typical misgiving about "tort reform" is that the judges who created the legal system that tort reform statutes are designed to repair must themselves interpret the statutes. If judges are not convinced of the need for reform, their decisions may tend to be conservative, restrictive, and not in the spirit intended by the reformers. Court-Led Reform But what of reform led by these judges themselves? What are U.S. judges likely to do on their own about the present state of U.S. product liability law and practice? Are they the ultimate, twenty-first century solution? In this regard, two leading law professors, Professors Henderson and Twerski, suggest that the "truly interesting question is … what limits courts will set on design litigation."65 Judges, of course, could be the necessary reformers, and in the future they may well be. Their judicial predecessors created the U.S. system, after all, and today's judges are free to reform it. Professors Henderson and Twerski predict that, going forward, courts will be "leaner and meaner" than … in the seventies and early eighties. Courts, assisted here and there by legislatures, will shift more of the responsibilities for managing generic risks to product users and consumers.66 But what of the opposite direction? Will the courts "correct" the problem by imposing "enterprise liability"—that is, manufacturer liability for any injury related to the use of one of its industry's products, regardless of cause? There seems to be little interest in this blatantly unfair change in the law, one that would establish a hopelessly inefficient compensation mechanism. Professor Henderson seems correct in stating that ''I agree with Schwartz's conclusion that sweeping enterprise liability is not part of the future of American tort law,"67 and that "… court-made strict enterprise liability would be totally (and unfairly) unmanageable."68 How can any legal system better promote safety and still encourage engineering innovation? The most likely answer is that by 2045, and hopefully long before, the United States will have brought itself into line with the legal systems of other advanced nations. Ironically, this is, at least in general concept, what several leading torts scholars seem to have predicted 40 years ago. The Georgia Law Review recently featured an important symposium on "Modern American Tort Law."69 The symposium included articles by several

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Product Liability and Innovation: Managing Risk in an Uncertain Environment of today's leading torts scholars, including Gary Schwartz, David Owen, Michael Wells, Kenneth Simons, and James Henderson. Modern readers are indebted to Professor Schwartz for pointing out in his article that the January-February 1953 issue of the Northwestern Law Review70 had likewise featured a symposium on "The Law of Torts." The 1953 symposium included articles from several of the leading torts scholars of that day, including Leon Green, Fleming James, Clarence Morris, Albert Ehrenzweig, and Fowler Harper. Today, in 1993, one can evaluate their ideas against the reality of the subsequent 40 years of U.S. product liability law development. As Professor Schwartz has noted: [Fleming] James' ultimate proposal was that tort law should be abolished in favor of a more general system of social insurance (combined with improved programs in safety regulation). An indeed, in their classic 1956 casebook, Harper and James wrote: The best and most efficient way to deal with accident loss … is to assure accident victims of substantial compensation, and to distribute the losses involved over society as a whole or some very large segment of it. Such a basis for administering losses is what we have called social insurance.71 and Beginning with workmen's compensation in 1910 and getting great impetus from the depression of the 1930s, social insurance legislation has grown apace in America.72 Although they admitted that social insurance certainly rejects the limitations of the fault principle and it has for that reason been condemned as "offending the sense of justice."73 Professors Green and Ehrenzweig, as Professor Schwartz noted in his 1992 article, "urged the repudiation of the tort system and the adoption of social insurance; indeed, Ehrenzweig dismissed the tort system as a neurotic mess."74 Ehrenzweig's 1953 views may seem quite sound to today's engineer: [W]hile deterrence would, indeed, presuppose a "wrongdoer's" fault at least in the eyes of those to be deterred, it cannot support a fault liability of lawful enterprise. Clearly, imposition of liability on the manufacturer for harm caused by his defective merchandise to the ultimate consumer despite all possible caution, is not designed to deter him or others from operations otherwise so effectively encouraged by society. Nor can, realistically, a higher premium he might become obligated to pay in consequence of greater losses, cause him to exercise greater case.75 Ehrenzweig argued that ultimately, in accordance with schemes proposed in Scandinavia and Germany, the development must lie towards the wholesale substitution for tort liability and liability insurance, of loss insurance … rather than liability.76

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Product Liability and Innovation: Managing Risk in an Uncertain Environment His 1953 concerns about tort litigation seem strangely timely: [I]t is the more imperative to seek a way to remedy what has become a meaningless game in our courts, which, by encouraging skillful and often devious practices in influencing witnesses and juries, by permitting the perversion of court trials into frivolous gambles and by preventing our judges from attending more speedily and effectively to other duties, threatens further to increase dangerous disrespect for court procedures and court law.77 Will some of the published views of these earlier legal scholars become a reality before their centennial? If one postulates that the good of the general citizenry would be best served by (a) optimally safe product designs and (b) universal health care, at least for catastrophic injury, then one must appreciate the reality: these two needs are well understood and are being met today, entirely without U.S.-style product liability litigation, in every other advanced, leading nation in the world except the United States. We, however, have no national health care system, as the dean of the Columbia Law School and another prominent legal scholar pointed out in a 1993 article: The United States does not have a system for compensating the victims of illness and injury; it has a set of different institutions that provide compensation. We rely on both tort law and giant programs of public and private insurance to compensate the victims of illness and injury. These institutions perform related functions, but the relationships among them are far from coherent. Indeed, the institutions sometimes work at cross-purposes, compensating some victims excessively and others not at all.78 The United States lacks an intellectual structure to undergird its web of programs compensating the victims of illness and injury.79 They suggest that it is possible that with the advent of universal health insurance, reducing the scope of tort liability would find more political favor than at present, and that the savings from this reform could be used to help finance the health insurance system.80 and that Once a system containing these elements of compensation is developed, the role of the tort system in compensating the victims of illness and injury could be de-emphasized. Because compensation for health care expenses and lost income would already be assured independently of the tort system, the desirability of providing compensation for these losses through tort recoveries would substantially decline.81 If, by the year 2045, the United States has a comprehensive, affordable, and universal health care system, how then is it likely to address the need for vehicular safety? The most likely answer seems to be by enlightened, scientifically sound regulation. But rational, successful intermodal transportation policy for the mid-twenty-first century seems likely to involve

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Product Liability and Innovation: Managing Risk in an Uncertain Environment the engineering community as the centerpiece, not as a target for abuse, and not an afterthought. The proper, ultimate resolution must support and encourage the engineering profession in the United States. Nearly everyone seems to agree that as a nation we must dramatically increase the emphasis on science and technology in our educational system if we are to remain a world leader in the new century and not collapse into a mere shadow of what we were. This means the encouragement of the study of mathematics and science from an early age, especially for present minorities, an increasing percentage of America and thus of the future American workforce. The ultimate resolution obviously must encourage the American engineering profession in general and American engineering innovation in particular. In the automotive sector, then, the public interest seems to lie not in preserving and increasing the role of the civil litigation system, but rather, as Mashaw and Harfst have suggested, in achieving the greatest economically beneficial reduction in motor vehicle deaths and serious injuries consistent with politically acceptable levels of regulation.82 Peter Schuck of Yale Law School assured his readers, in a recent article on the subject of legal complexity, that the existing product safety legal system in the United States is indeed relatively complex. In his view, this is because the product safety system is, among other things, "institutionally differentiated," itself a complex term: A legal system is institutionally differentiated insofar as it contains a number of decision structures that draw upon different sources of legitimacy, possess different kinds of organizational intelligence, and employ different decision processes for creating, elaborating, and applying the rules. Product safety, for example, is institutionally differentiated in that it is governed by statutory provisions, regulatory standards promulgated by several different agencies and private technical organizations, tort litigation, and common law contract principles.83 The difficulty with institutional differentiation, in Schuck's view, is that it spawns legal indeterminacy, another governance cost. The proliferation of policy-making institutions multiples the sources of innovation, information, and legitimacy—precious resources in any social system. On the other hand, this diversity also encourages conflict and raises decision costs.84 Automotive engineers typically do not complain of the U.S. product liability litigation system in design cases by employing Professor Schuck's terms—that is, on the ground that the system is "institutionally differentiated" and thus "spawns legal indeterminacy." But it is what they mean, and it is why they criticize the system.

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Product Liability and Innovation: Managing Risk in an Uncertain Environment Professor Schuck notes that [L]ess institutional differentiation might reduce the legal indeterminacy that such differentiation tends to spawn. In tort cases, for example, technical standards issued by regulatory agencies and satisfying certain conditions could be made presumptively binding on juries.85 Groups that are targets of legal systems—design engineers in this case—naturally resent institutional differentiation, since it makes the law seem incomprehensible, as Professor Schuck points out: But if the complex legal landscape contains many pitfalls for the governors, it is terra incognita for the governed … the density of the legal system—the penetration of law into every corner of human life … is bound to be a source of deep resentment …. When this Delphic law also emerges from an institutional black box that is itself dense and difficult to comprehend, its legitimacy—the sense of "ought-ness" that the lawmakers hope will attach to it—is diminished.86 Professor Schuck argues that the current tax structure is a notorious example of the price society pays for needless complexity, but that: there is ample evidence of delegitimation costs in fields other than tax. A RAND study of corporate responses to modern product liability law, for example, found that the law emitted such noisy, random, and confusing signals to manufacturers that it had little effect on the product design decisions it was supposed to influence.87 Further, he notes that the main producers, rationalizers, and administrators of law—legislators and their staff, bureaucrats, litigants, lawyers, judges, and legal scholars—generally benefit from legal complexity while bearing few of its costs. On balance, they prefer a complex system.…88 In contrast to the cost bearers, the beneficiaries of complexity can drape themselves in lofty public interest goals, such as securing the individual's right to a day in court, preventing the shrewd from circumventing the law, and heading off problems before they arise.89 In summary, we live in a period of widespread dissatisfaction with the existing system, and thus in an unsettled period. NOTES 1.   See, e.g., The Liability Maze: The Impact of Liability Law on Safety and Innovation (Peter W. Huber and Robert E. Litan, eds., 1991), at 47-51; Alfred W. Cortese, Jr., and Kathleen L. Blaner, The Anti-competitive Impact of U.S. Product Liability Laws: Are Foreign Manufacturers Beating Us at Our Own Game?, 9 J.L. & Com. 167 (1990); at 179-180; Charles W. Babcock, Could We Alone

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Product Liability and Innovation: Managing Risk in an Uncertain Environment     Have This? Comparative Legal Analysis of Product Liability Law and the Case for Modest Reform, 10 Loyola L.A. Int'l & Comp. L.J. 321 (1988), at 351-355. 2.   Cf., e.g., James A. Henderson, Jr., and Aaron D. Twerski, Stargazing: The Future of American Products Liability Law, 66 N.Y.U. L. Rev. 1332 (1992), at 1341 (footnotes omitted): We are the only country on the face of the globe that provides such high damages in tort cases. Other legal systems view our awards as outrageous and unconscionable. 3.   Sir Isaac Newton himself once said as much: [T]o the same natural effects we much, as far as possible, assign the same causes.… As the descent of stones in Europe and in America.… I. Newton, Rules of Reasoning in Philosophy, in Sir Isaac Newton's Mathematical Principles of Natural Philosophy and His System of the World 398 (F. Cajori ed., 1960)(A. Motte trans. 1st ed. London 1792)(as translated from Newton's original Latin) (emphasis in original). 4.   Abraham Lincoln, Speech before the Illinois State Legislature, June 16, 1858; in A Treasury of Great American Speeches (Hawthorn Books, New York, 1959), at 73. 5.   W. Kip Viscusi, Reforming Products Liability (1991), at 248: The genesis of this proposal is the hazard warnings section of the American Law Institute report prepared by Alan Schwartz and myself. 6.   Id., at 211. 7.   Webster's New Twentieth Century Dictionary 1091 (William Collins Publishers, 2d ed. 1979). 8.   15 U.S.C. §1392(a) (1988): Each … Federal motor vehicle safety standard shall be practicable, shall meet the need for motor vehicle safety, and shall be stated in objective terms. 9.   Gary T. Schwartz, The Beginning and the Possible End of the Rise of Modern American Tort Law, 26 Ga. L. Rev. 601 (1992), at 615. 10.   Jerry L. Mashaw and David L. Harfst, The Struggle for Auto Safety (1990), at 63. 11.   Traffic Safety Part 2: Hearings on H.R. 13228 before the Committee on Interstate and Foreign Commerce of the House of Representatives, 89th Congr., 2d Sess. 1314 (1966). 12.   Id. 13.   Id., at 1317. There was more. The highway safety problem could best be resolved merely by changing the behavior of automotive executives: An attraction of this approach is that it [can] be put into effect by changing the behavior of a tiny population—the forty or fifty executives who run the automobile industry. Id., at 1314. These executives, of course, included then and include now many automotive engineers. Note the key assumption believed by so many Americans at the time: Probably the most efficient way to minimize the overall cost of accidents is to design the interior of the vehicles so that the injuries that follow the accidents are relatively mild. Id., at 1312. 14.   Schwartz, id. n. 9, at 640-641. 15.   Cf., e.g., the following conclusion of an editorial that appeared in the Colorado Springs Gazette Telegraph (Friday, May 7, 1993, p. 27): It's often said that ours is a litigious society, and nowhere is that more evident than in the absurd expectations we often heap upon manufacturers in the field of product liability…. 16.   Schwartz, id. n. 9, at 619. 17.   See e.g., id., at 632: Car manufacturers loom large in the jurisprudence of products liability.… 18.   See, e.g., Book Note, The Judge as Shield, 105 Harv. L. Rev. 1124 (1992), at 1124: we live in "an age of incalculable liability exposure."

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Product Liability and Innovation: Managing Risk in an Uncertain Environment 19.   509 U.S.____, 113 S.Ct. 2711, 125 L. Ed. 2d 366 (1993). 20.   Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed. 2d 1 (1990). 21.   Haslip, 499 U.S. at 18, quoted by the Court at 113 S.Ct. 2711 at 2713. 22.   113 S.Ct. 2711 at 2722, 1993 U.S. Lexis 4403, *34. 23.   113 S.Ct. 2711 at 2731, 1993 U.S. Lexis 4403, *63: It is thus common ground that an award may be so excessive as to violate due process. 24.   See, e.g., Could We Alone Have This? id. n. 1., at 333. 25.   One must resist the temptation to cite specific examples, even where it would be ethically proper to do so. This sort of thing is unpopular, especially among scholars, who typically dislike "mere anecdotes," deriding them with description like "captivating little stories." Michael J. Saks, Do We Really Know Anything About the Behavior of the Tort Litigation System—And Why Not?, 140 U. Pa. L. Rev. 1147 (1992), at 1161. But it is the sum of these ''mere anecdotes" that constitute the whole of the existing reality. It therefore may be valuable for torts scholars deliberately to gather "mere anecdotes" from existing cases regarding current discovery practices and carefully analyze them. 26.   David L. Faigman, Struggling to Stop the Flood of Unreliable Expert Testimony, 76 Minn. L. Rev. 877 (1992), at 883. 27.   See, e.g., Faigman, id., at 883: Despite its pervasiveness, courts approach expert scientific evidence inconsistently and with trepidation. 28.   509 U.S.____, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993). 29.   E.g., see generally Peter W. Huber, Galileo's Revenge: Junk Science in the Courtroom (Basic Books, 1991), as well as the Huber contribution in this volume. 30.   See, e.g., Stephen D. Sugarman, The Need to Reform Personal Injury Law Leaving Scientific Disputes to Scientists, Science, May 18, 1990, at 824 (footnotes omitted): … liability concerns are said to cause … enterprises to withdraw socially desired products from the market. … Liability jitters may discourage firms from undertaking important research or from bringing to market beneficial inventions.… 31.   Patricia Waller, Injury Control: How Does It Fit In the Emerging National Transportation Program?, Second World Conference on Injury Control, May 20-23, 1993, Atlanta, Georgia. 32.   See, e.g., "How Liability Stifles Design," Design News, February 1, 1993, at 118, in which Robert L. Rickert, President of Indramat, a division of Rexroth Corporation, is quoted as saying that the U.S. product liability situation is serious enough: to either scare American companies away from product development or to prolong product introduction while engineers laboriously test products to death.… 33.   Waller, id., n. 31. 34.   Stephen F. Williams, Second Best: The Soft Underbelly of Deterrence Theory in Tort, 106 Harv. L. Rev. 932 (1993), at 933. 35.   Paul A. Eisenstein, "Will Your Next Car Be Designed By the Courts?", Investor's Business Daily, July 12, 1993, at 4. 36.   "All-belts-to-seats" is automotive industry jargon for a lap-shoulder safety belt system design in which all the belts are anchored to the occupant's seat rather than to the floor or elsewhere in the vehicle, such as the roof rail. 37.   Letter from Tore Helmersson, Saab Automobile AB, Trollhättan, Sweden, dated July 1, 1993, written at request of the author. 38.   Viscusi, id., n. 5, at 209. 39.   Alan Schwartz, The Case Against Strict Liability, 60 Fordham L. Rev. 819 (1992), at 819. 40.   Mashaw and Harfst, id., n. 10, at 241. 41.   Michael Wells, Scientific Policymaking and the Torts Revolution: The Revenge of the Ordinary Observer, 26 Ga. L. Rev. 725 (1992), at 725 (footnote omitted).

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Product Liability and Innovation: Managing Risk in an Uncertain Environment 42.   James A. Henderson, Jr., and Theodore Eisenberg, Inside the Quiet Revolution in Products Liability, 39 UCLA L. Rev. 731 (1992), at 743-44; see also The Quiet Revolution in Products Liability: An Empirical Study of Legal Change, 37 UCLA L. Rev. 479 (1990). 43.   Inside, id., at 734. 44.   Id., at 742 (footnote omitted). But see, for an analysis that takes issue with the statistical bases for the Henderson and Eisenberg findings, Arthur Havener, "Not Quite A Revolution In Products Liability," Manhattan Institute, Judicial Studies Program, 1992. 45.   Saks, id. n. 25, at 1150. 46.   Sugarman, id. n. 30, at 825. 47.   Id., at 823. 48.   Id. 49.   Id., 825 (footnote omitted). 50.   See, e.g., Leonard Evans, Traffic Safety and the Driver, at 2-3, 332-338 (Van Nostrand Reinhold, 1991). 51.   Patricia Waller, director of the Transportation Research Institute, recently described seven of these presently new technologies: Near Object Detection System (NODS); Run-Off-The-Road Warning; Cooperative Intersection; Adaptive Cruise Control; Collision Warning/Avoidance; Night Vision Enhancement; and Call For Help: Mayday. Id., n. 31. 52.   See, e.g., Evans, id. n. 50, at 92-93, and works cited by Dr. Evans, including B. E. Sabey and G. C. Staughton, Interacting Roles of Road Environment, Vehicle and Road User in Accidents, Fifth International Conference of the International Association for Accident and Traffic Medicine (1975); B. E. Sabey and H. Taylor, The Known Risks We Run: The Highway, in Societal Risk Assessment—How Safe is Safe Enough?, at 43-63 (R. C. Schwing and W.A. Albers, eds., Plenum Press, 1980); K. Rumar, The Role of Perceptual and Cognitive Filters in Observed Behavior, in Human Behavior and Traffic Safety, at 151-165 (R. C. Schwing and W. A. Albers, eds., Plenum Press, 1985); O. M. J. Carsten, M. R. Right, and M. T. Southwell, Urban Accidents: Why Do They Happen? , AAA Foundation for Road Safety Research (1989); J. R. Treat, A Study of Precrash Factors Involved in Traffic Accidents, The HSRI Research Review (May-August 1980). See also Report in Support of Department of Transportation and Related Agencies Appropriations Bill, 1994, H.R. Rep. No. 149, 103rd Cong., 1st Sess. 103 (June 22, 1993): Numerous studies of crash causation have shown that driver-related factors account for about 90 percent of all highway crashes. 53.   Id., Mashaw and Harfst note that, at most, 13 percent of accidents involve some mechanical failure and that: Within the 13 percent most failures result from inadequate maintenance, not from defective design or construction. Mashaw and Harfst, id. n. 10, at 11 (citing the Tri Level Study: Institute for Research in Public Safety, Tri Study of the Causes of Accidents, 7-9, 18-23 [1979] (study prepared by private consulting group for NHTSA). 54.   See, e.g., H.R. Rep. No. 149, id. n. 52, at 101: Alcohol-impaired driving remains the single most important problem in highway safety and will require sustained and intensified attention. Mothers Against Drunk Driving (MADD), in its 1993 annual summary of statistics, notes that in 1992 An estimated 17,699 persons died in alcohol-related traffic crashes—an average of one every 30 minutes … it is estimated that 1.2 million persons were injured in alcohol-related crashes—an average of one person every 26 seconds.… About two in every five Americans will be involved in an alcohol-related crash at some time in their lives.

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Product Liability and Innovation: Managing Risk in an Uncertain Environment     Mothers Against Drunk Driving, A 1993 Summary of Statistics: The Impaired Driver Problem (1993), at 1. 55.   See, e.g., H.R. Rep. id. n. 52, at 97: In 1992, the nation experienced the lowest ever number of highway fatalities despite an increasing amount of travel on the roads. NHTSA's latest estimates show that 39,500 persons died on the nation's highways in 1992, 1,962 fewer fatalities that in 1991, and the lowest level in 30 years. The fatality rate set another all-time low in 1992 at 1.8 fatalities per million vehicle miles traveled. 56.   Alan Schwartz, id. n. 39, at 819. 57.   Gary Schwartz, id. n. 9, at 695. 58.   Viscusi, id. n. 5, at 210. 59.   Id., at 128. 60.   Francis Hutcheson, Treatise II, Concerning Moral Good and Evil , in An Inquiry into the Original of Our Ideas of Beauty and Virtue, Sec 3, VIII, at 177 (London, 1716, Yale University Library, reprinted 1971, Garland Publishing Company). 61.   The phrase "tort reform" is somewhat imprecise. The law of torts, or civil wrongs, covers a wide range of unreasonable human activity that courts permit to be the subject of recovery in civil litigation, include unwelcome personal advances, defamation, tortious interference with business activity, and many more activities. Only one of the many branches of the law of torts is to be understood by the current phrase "tort reform": the tort of selling a defective product that has caused an injury of which the plaintiff complains. The current phrase thus would more precisely be rendered "product liability law reform." 62.   Michael Wells, id. n. 41, at 725 (footnote omitted). 63.   Gary Schwartz, id., n. 9, at 682. 64.   Kenneth S. Abraham and Lance M. Liebman, Private Insurance, Social Insurance, and Tort Reform: Toward a New Vision of Compensation for Illness and Injury, 93 Colum. L. Rev. 75 (1993), at 76, n. 2. 65.   Henderson and Twerski, Stargazing, id. n. 2, at 1334. 66.   Id., at 1334-1335. 67.   James A. Henderson, Why the Recent Shift in Tort?, 26 Ga. L. Rev. 777 (1992), at 778 (footnote omitted). 68.   Id., at 781 (footnote omitted). 69.   26 Ga. L. Rev. 601 et seq. (1992). 70.   47 NW. U. L. Rev. 751 et seq. (1953). 71.   Id., at 762-763. 72.   2 Fowler V. Harper and Fleming James, Jr., Law of Torts (1956) 759 (footnote omitted). 73.   Id., at 761, citing Oliver Wendell Holmes, Jr., The Common Law 96 (1881). 74.   Gary Schwartz, id. n. 9, at 635. 75.   Albert A. Ehrenzweig, A Psychoanalysis of Negligence, 47 NW. U. L. Rev. 855 (1953), at 865. 76.   Id., at 871 (footnotes omitted). 77.   Id. 78.   Abraham and Liebman, id. n. 64, at 75. 79.   Id., at 85. 80.   Id., at 99. 81.   Id., at 117. 82.   Mashaw and Harfst, id. n. 10, at 205. 83.   Peter H. Schuck, Legal Complexity: Some Causes, Consequences, and Cures, 42 Duke L. J. 1 (1992), at 4. 84.   Id., at 21. 85.   Id., at 49.

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Product Liability and Innovation: Managing Risk in an Uncertain Environment 86.   Id., at 22-23. 87.   Id., at 24, citing, in n. 96, George Eads and Peter Reuter, Designing Safer Products: Corporate Responses to Product Liability Law and Regulation 27-29 (1985). 88.   Id., at 26. 89.   Id., at 27.