Market Share Liability – Did New York Go Too Far?

From 1947 to 1971, physicians widely prescribed diethylstilbestrol (“DES”), a synthetic estrogen, to pregnant women in order to prevent miscarriages. In 1971, the Food and Drug Administration (“FDA”) withdrew its approval of DES as a miscarriage preventives after tests linked DES to a high occurrence of vaginal and cervical cancer in women who were exposed to it in utero. Numerous lawsuits followed. Due to the generic nature of DES and the extended latency period prior to discovery of any injury, plaintiffs typically have been unable to identify the culpable defendant. As a result, most courts have denied recovery to victims of DES.

Market Share Liability – Did New York Go Too Far?: Hymowitz v. Eli Lilly & Co., St. John’s Law Review, Volume 64 Issue 2, Number 2 Article 7, Winter 1990.

Some courts, however, have permitted recovery by either modifying existing tort theories or fashioning new ones. The theory of market share liability is one of several relatively recent tort doctrines which provide for the imposition of liability without a traditional showing of causation. Recently, in Hymowitz v. Eli Lilly & Co.,  the New York Court of Appeals adopted a market share liability theory which imposes liability on manufacturers of DES, based on their proportionate share of the national market at the time of a plaintiff’s exposure to DES. The Hymowitz court further held that liability would be several, and that defendants would be precluded from exculpating themselves.

In Hymowitz, the plaintiffs sought relief against several manufacturers of DES, alleging that they had sustained injury from DES while in utero. As in most DES litigation, the plaintiffs were unable to specifically identify the manufacturer of the drug that caused their particular injury. In addition, several plaintiffs whose actions were previously time barred” were permitted to bring their actions under the New York Revival Statute, which revived the claims of victims of DES and certain other toxic substance injuries, for one year from the date of its enactment.

In Hymowitz, the defendant manufacturers moved for summary judgment on the ground that the plaintiffs were unable to identify which manufacturers of the drug allegedly caused their individual injuries. Several of the defendants, contending that the revival of the actions was violative of both the Federal and State Constitutions, sought dismissal on statute of limitations grounds as well. The trial court denied the defendants’ motion for summary judgment and, on cross motion by the plaintiffs, rejected the defendants’ affirmative defense of the statute of limitations. The Appellate Division affirmed, but certified a question to the Court of Appeals as to whether the orders of the trial court were proper. The Court of Appeals answered the certified question in the affirmative and affirmed the order of the Appellate Division.

Writing for the court, Chief Judge Wachtler upheld the adoption of the market share theory of liability based on a national market for determining liability and apportioning damages in DES cases. The court further held that the revival statute as it applies to DES was constitutional. The market share theory of liability apportions each defendant’s liability according to the amount of risk of injury it created in marketing DES for use during pregnancy. The court concluded that each defendant would be liable to the plaintiff for the proportion of the total damages that represented the defendant’s share in the national DES market. The court further added that a defendant who sold DES for pregnancy use could not excuse itself from liability, even if it was able to prove that it was not the particular seller or manufacturer of the drug that injured the plaintiff. To balance the court’s hard-line disallowance of exculpatory attempts by defendants, it also determined that a defendant’s liability would be several, not joint.

Although concurring in the majority’s decision to uphold the constitutionality of the revival statute and the adoption of the market share liability theory, Judge Mollen rejected the court’s conclusion that a defendant who sold DES for pregnancy purposes could not exculpate itself. Judge Mollen contended that a defendant should not be held liable if it could prove, by a preponderance of the evidence, that it was in no way responsible for the production or distribution of the particular drug which injured the plaintiff. Moreover, to ensure full recovery by the plaintiffs, he proposed that liability be joint and several.

It is submitted that while the court acted properly in adopting a market share liability theory in DES cases and in upholding the constitutionality of the revival statute, it acted improperly in denying those defendants who are not responsible for the plaintiff’s injuries the opportunity to exculpate themselves. This Comment will examine market share liability as adopted by the court in Hymowitz. In addition, this Comment will suggest that defendants who can prove that they are not responsible for the plaintiff’s injuries should be excused from liability. Finally, this Comment will propose that in determining a defendant’s share of the national market, the sales of a defendant who properly has exculpated itself should be subtracted from the total national DES sales, and the market shares of the remaining defendants should be adjusted to reflect this new market.

I. MARKET SHARE LIABILITY

In order to recover under a traditional products liability theory, the plaintiff must prove that the product was defective, that the defect caused the injuries, and that the defendant was in some way responsible for the defective product. The theory of market share liability was created in order to help ease a plaintiff’s burden in proving that a particular defendant was directly responsible for manufacturing the product that caused the injuries. Since its inception in Sindell v. Abbott Laboratories, several courts, through various versions of market share liability, have attempted “to achieve as close an approximation as possible between a DES manufacturer’s liability for damages and its individual responsibility for the injuries caused by the products it manufactured.” The market share theory abolishes the plaintiff’s burden of proving the traditional tort requirement of a causal relationship between the injury and the defendant’s actions. Thus, a plaintiff may bring an action where the specific manufacturer of the drug causing the injury is indeterminable. In turn, a particular defendant’s liability is apportioned according to its share of the market, thereby making causal blame proportionate to the degree of certainty that the defendant caused the harm.

While market share liability relieves the plaintiff’s burden of proving causation with respect to a particular defendant, the plaintiff still must prove that the defendant acted tortiously in producing or marketing DES, and that DES was the cause of the injury. Thus, liability will not be imposed on a particular defendant if it can prove that it properly tested the product, and produced or marketed a reasonably safe product. Therefore, although a defendant did not cause a particular plaintiff’s injuries, that defendant is not considered “wholly innocent”.

II. EXCULPATION OF DEFENDANTS

Unlike other courts which have adopted the market share liability theory, the Hymowitz version holds a manufacturer liable notwithstanding proof that it did not manufacture the DES which injured the plaintiff. This approach greatly increases the possibility that a defendant will be held liable for injuries that it in fact did not contribute to, which, in effect, turns each manufacturer into an insurer of a product which conformed to all government regulations and controls. Under Hymowitz, a manufacturer is subject to liability where there was a chance that someone could have been injured by its product, whether or not anyone, in actuality, was injured by its product.

By denying defendants the right to exculpate themselves, the Hymowitz court has “unnecessarily contravened the established common-law tort principles of causation. Although public policy favors imposing liability on the manufacturers who created the risk and benefited from the sale of the product, liability should not be imposed unless it can be shown “that the defendant drug company reasonably could have contributed in some way to the actual injury.” This is consistent with the basic principle of tort law that the one who causes the harm should be liable for the resulting injuries. The mere creation of a risk which does not result in injury is not a tort. Further, it has been held that the ultimate goal of market share liability is “the imposition of liability only on those companies who could have manufactured the DES which caused the plaintiff’s injuries.”

Moreover, the Hymowitz court stated that if a plaintiff is able to identify the particular manufacturer of the product which caused her injuries, the plaintiff’s action must be brought under “established principles of products liability” since there is no need to utilize market share liability in those cases. This will expose manufacturers of an easily identifiable product to “double” liability; they will not only be liable for one hundred percent of the judgment when identification is possible, but will also be liable for the proportion of a judgment representing their market share in cases where identification is not possible.

Furthermore, if exculpation is not allowed, a manufacturer of a fungible product, such as DES, has no incentive to maintain accurate records or implement additional safety measures since it will be held liable even when it could prove that it was not responsible for the product which caused the plaintiff’s injuries.” By not permitting exculpation, the Hymowitz decision will inhibit manufacturing of new and innovative drugs since “as each new product faces huge and seemingly unlimited liability, the incentive to continue research is reduced.”

III. LIABILITY OF INDIVIDUAL DEFENDANTS

Under the system of market share liability adopted by the court in Hymowitz, the individual defendants are only subject to several liability. Put into effect, the plaintiff will recover less than one hundred percent of the full judgment. Judge Mollen, in a separate opinion, suggested, alternatively, that manufacturers who were unable to exculpate themselves should be held jointly and severally liable for the plaintiff’s damages. It is submitted, however, that the court was correct in its adoption of several liability only. Several liability based on a defendant’s market share is “an equitable way to provide the plaintiffs with the relief they deserve, while also rationally distributing the responsibility for plaintiffs’ injuries among defendants. If liability were joint and several, defendants with the deepest pockets who were amenable to suit would end up paying an amount far greater than their market share. Further, the imposition of joint and several liability would frustrate the effect that market share liability has in balancing the interests of the DES manufacturers and the injured plaintiffs, and would therefore have a “chilling” effect on the manufacturers of pharmaceuticals.

IV. A PROPOSED METHOD FOR DETERMINING MARKET SHARES

Defendants who can prove that they did not market or produce the DES that injured a plaintiff should be permitted to exculpate themselves. Moreover, it is proposed that in computing the relevant market shares of the defendants for the purpose of apportioning damages, the relevant market should be reevaluated without including the sales of the exculpated defendants. This adjustment of the market shares would result in a more accurate representation of the probability that each remaining defendant caused the plaintiff’s injury. Since information about national market shares has already been compiled, the above method of reevaluating market shares could easily be performed.

CONCLUSION

Denying recovery to innocent victims of prenatal injuries because of their inability to pinpoint the particular manufacturer of the drug which injured them is a great injustice. The theory of market share liability provides a just and equitable solution to this problem. However, while the interests of justice and fundamental fairness favor providing an innocent plaintiff a remedy, the courts must also balance the interests of both the plaintiffs and the defendants when fashioning a solution. In Hymowitz, the New York Court of Appeals has unnecessarily departed from fundamental principles of causation by preventing innocent defendants from exculpating themselves.

William D. Wilson, 2012.

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