Market Share Liability Adopted to Overcome Defendant Identification Requirement in DES Litigation

The Supreme Court of California in Sindell v. Abbott Laboratories sidestepped a major obstacle to recovery for Diethylstilbestrol (DES) victims by adopting a market share liability exception to the defendant identification requirement that is essential to recovery in products liability actions.

Market Share Liability Adopted to Overcome Defendant Identification Requirement in DES Litigation, Sindell v. Abbott Laboratories, 26 Cal. 3d 588, 607 P.2d 924, 163 Cal. Rptr. 132, cert. denied, 101 S. Ct. 286 (1980), Washington University Law Review, Volume 59 | Issue 2, January 1981.

Plaintiff Judith Sindell brought suit against eleven drug companies on behalf of herself and similarly situated women. Sindell alleged that the administration of DES to her mother during pregnancy resulted in plaintiff’s development of cancerous and precancerous tumors. Plaintiff was unable to identify the specific manufacturer of the drug taken by her mother because of the time lapse between ingestion of the drug and discovery of plaintiffs injuries. The trial court sustained the defendants’ demurrers because plaintiff failed to identify the culpable manufacturer. The Supreme Court of California reversed, in a 4-3 decision, and held: When plaintiffs cannot identify the specific manufacturer of the drug that caused their injuries, each manufacturer of a substantial percentage of the generically identical drug is liable for its proportionate share of the market. Any defendant who can prove that it did not manufacture the drug that caused plaintiff’s injuries will be absolved from liability.

Since the advent of products liability law, courts have imposed liability on a manufacturer for harm caused by a defective product only on proof that defendant actually manufactured the product in question. The identification requirement is also essential to prove causation in negligence, breach of warranty, and strict liability actions. Because of increasing industrialization in the last century, the judiciary developed three major exceptions to the identification requirement to protect consumers’ rights: concert of action, alternative liability, and enterprise liability.

The prima facie concert of action case requires proof that multiple actors pursued a common plan or design to commit a tortious act. The agreement among the parties may be inferred from the actors’ knowledge of the commission of tortious acts if a tacit understanding to commit these acts existed among the parties. The tortfeasors are jointly and severally liable for all damage to the plaintiff. The identification requirement in the concert of action case is relaxed when the court imposes liability on the group, rather than on the individual wrongdoer. The practical difficulty of apportioning damages among tortfeasors initially results in imposition of the entire loss on each defendant. If a logical basis for apportionment exists, however, an approximate division of damages among defendants may occur.

The courts developed the alternative liability theory to overcome identification problems inherent in tort cases. All potential defend ants must be joined in an alternative liability action to prevent the true wrongdoer from escaping liability. In Summers v. Tice, for example, the plaintiff’s two hunting companions negligently fired shotguns simultaneously. A single pellet damaged plaintiff’s eye. Only one of the defendants’ shots was responsible for the wound, but plaintiff could not possibly identify the particular gun that caused the injury. The Summers court reasoned that when only one actor injured a plaintiff, compensation will not be denied because plaintiff cannot establish which of two equally culpable defendants was responsible for the injury.

The courts, in products liability decisions, have cautiously embraced both the alternative liability and the concert of action theories to overcome the identification hurdle in DES cases. A Michigan court of appeals in Abel v. Eli Lilly & Co. accepted the alternative liability theory to dismiss DES manufacturers’ demurrers. Because plaintiffs bear a heavy burden in proving that each defendant breached a duty of care in marketing DES, the court refused to require plaintiffs to apportion the damages among defendants. The Abel court thus shifted the burden of dividing liability to proven wrongdoers after plaintiff established the manufacturers’ culpability.

The theory of enterprise liability, which is designed to aid the plaintiff who cannot identify the manufacturer of an injurious product, is a hybrid of the concert of action and alternative liability theories. The court in Hall v. El du Pont de Nemours first imposed the concept of enterprise liability on a group of manufacturers of dynamite blasting caps for injuries caused by the product, even though plaintiff could not identify the culpable manufacturer. The theory assigns the burden of proof of causation to a group of blameworthy manufacturers who assume calculable risks in marketing certain products as a cost of doing business. The theory requires the identification of defendants that are both capable of bearing the cost of the damages and sufficiently culpable to warrant not only the shifting of proof of causation, but also the apportioning of the damages among them. The ultimate distribution of cost hopefully achieves an efficient and proper use of society’s resources to compensate the injured victim. The theory, although attractive to some scholars and plaintiffs, has not been accepted widely by courts in DES cases.

The Supreme Court of California in Sindell v. Abbott Laboratories6 rejected these three exceptions to the identification requirement, and based its judgment on a new theory: market share liability. The court first addressed the alternative liability theory, which would shift plaintiff’s burden of proof even though defendants did not have greater access to the injury causing information. The Sindell court did not interpret Summers to require that defendant possess the information, but only that the knowledge be accessible to defendants. The court noted, however, that if defendant establishes it did not manufacture the specific DES taken by plaintiff’s mother, it will be dismissed from the action. The court rejected the alternative liability theory, however, because it is possible that none of the five defendants manufactured the injury-causing DES.

The Sindell court dismissed plaintiff’s contention that a concert of action existed among the defendant manufacturers in developing, testing, and marketing DES. The plaintiff did not allege a tacit understanding among the manufacturers in producing DES, but stated that defendants produced the drug from an identical formula in adherence with guidelines of the Food, Drug, and Cosmetic Act and common practice of industry. The court held that to apply the concert of action theory would impose liability on individual manufacturers for the products of an entire industry, despite a showing that a defendant did not produce the particular drug that caused plaintiff’s injuries.

The majority rejected the theory of enterprise liability enunciated in Hall v. EL. du Pont de Nemours. First, the Hall court imposed liability on a small number of manufacturers representing an entire industry, and warned that application of the enterprise liability theory to a decentralized industry with a large number of manufacturers would be “manifestly unreasonable. Second, defendants in Hall relied on a trade association to guard against the foreseeable risks inherent in their industry, while plaintiffs in Sindell failed to allege a similar concerted delegation of authority. Finally, because the Hall majority recognized that the Food and Drug Administration, which sets testing and marketing standards for new drugs, controls the drug industry, DES manufacturers who follow criteria stricter than common industry practice should not be held accountable for plaintiffs’ injuries.

The California Supreme Court, however, did not limit its decision to the three identification requirement exceptions. The court modified the most persuasive arguments of Summers, applied the arguments to the enterprise theory of Hall, and proposed its own market share liability theory to overcome defendants’ demurrers. The market share liability theory ensures both the likelihood that joined defendants provided the injurious product, and that the specific wrongdoer will not escape liability. A particular defendant may be excluded from an action by proving that it could not have manufactured the product that caused plaintiff’s injuries. Remaining defendants may file cross-complaints against others not joined in the action to equitably distribute liability throughout the industry. The Sindell court maintains that each manufacturer’s ultimate liability for injuries caused by its production of DES under the market share theory would approximate the portion of damages caused by its product.

When the Sindell court attempted to develop a market share liability theory to relieve the plaintiff’s identification burden, it created a flawed and untenable doctrine. The problem lies in the theory’s abrogation of the Summers and Hall requirement that all possible defendants be joined in an action to shift the burden of proof of causation. The market share theory requires only that plaintiffs name manufacturers representing a substantial share of the relevant market. “Substantial share” is an undefined term that infers something less than a seventyfive percent share of the appropriate market. The Sindell dissent illustrates that the substantial share is an aggregate of the individual shares of independent manufacturers who occupy only a small portion of the relevant market.96 An individual defendant may be held proportionately liable for injuries caused by a particular product that it probably did not produce.

The tortfeasor can escape liability, under Sindell, if it is not joined in the action. Although the court suggests that joined defendants may implead other possible defendants, all the liability will fall originally on the joined defendants. Some manufacturers will either be outside the jurisdiction of California courts or no longer in business. Other states may not accept the market share theory, which will cause an uneven distribution of costs.

Problems of proof relating to market share data emphasize that the ultimate assignment of liability will be based arbitrarily on the conjecture of the court. Problems associated with the rule will not be limited to DES manufacturers. The Sindell dissent criticizes the rule as a future imposition of liability exceeding absolute liability, opening the door to a substantial increase in the volume of products liability suits. The effect of a holding that guarantees plaintiffs will prevail on the causation issue at trial because remaining defendants will be incapable of disputing allegations that they manufactured the cause of plaintiff’s injuries is an immediate concern to DES manufacturers.

The majority, in developing a new theory, upheld the court’s power to declare policy, rather than allowing the legislature to resolve the issue. Similarly, the court did not discuss alternate modes of compensation for victims of defective products. Although the need for compensating the DES victim is clear, the court’s theory drastically alters basic postulates of products liability law.

Washington University Law Review, 1981

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