… continue reading the full paper: An Examination of the Legal and Ethical Public Policy Consideration Underlying DES Market Share Liability, Journal of Business Ethics 2000 March II: 24(2): 141-163 on Springer.
As our society progresses in complexity, theories of tort law have evolved in order to provide redress for the harms caused in a changing world. Tort law evolution has resulted in the creation of new remedies and, in many instances, the erosion of certain preconditions for recovery in tort. Nevertheless, with limited exceptions, there has not been significant erosion of the requirement that a plaintiff must first be able to identify the person or entity that caused her injury before she can recover in tort. In the past decade, however, a small number of courts have abrogated this principle, which is referred to as “causation in fact.” In the place of causation of fact, these courts have adopted the concept of “market share liability.”
Market Share Liability in DES Cases: The Unwarranted Erosion of Causation in Fact, DePaul Law Review, Volume 40, Article 5, Issue 3, Spring 1991.
The market share liability theory has developed mainly through lawsuits filed by women who claim to suffer injuries resulting from their mothers’ ingestion of the drug Diethylstilbestrol (“DES”) while pregnant. These plaintiffs are commonly referred to as the “DES daughters“. The time that passes between the maternal ingestion of DES and the diagnosis of the injuries is generally twenty or more years because the injuries do not manifest themselves until sometime after the daughter has reached puberty. A DES daughter is often unable to identify the specific manufacturer of the drug her mother took for two key reasons: the long passage of time and the fungible nature of DES. Faced with the possibility of leaving these plaintiffs without a remedy as a result of their inability to identify the manufacturer, some courts have instead abolished the traditional requirement of establishing causation in fact. In place of causation in fact, these courts have adopted a theory that imposes liability upon any defendant who participated in the manufacturing or marketing of DES in the relevant market. Under this “market share liability” theory, each defendant is liable for the proportion of the judgment that its share of the market represented during the relevant time period.
Market share liability has been controversial since its inception. The concept has been adopted with varying modifications by a handful of courts e and promoted by a larger number of legal commentators. At the same time, other courts have denounced the theory of market share liability when faced with the opportunity to adopt the proposition in either DES cases or cases involving other products. Currently, only nine state supreme courts have addressed the market share liability issue in a DES case. Most likely, however, other jurisdictions will eventually be forced to face this issue, especially in light of the fact that DES was used nationwide, some plaintiffs have achieved success with the theory, and there is the potential for large recoveries.
Most legal commentary on the issue of market share liability has supported the adoption of the theory. Commentators and courts that support the market share liability theory correctly argue that there is a need to adapt our existing tort law in the face of progress. They also argue that there is strong emotional appeal to insure a remedy for all plaintiffs, especially plaintiffs who are innocent of any wrongdoing. However, this Article contends that courts should not develop a market share liability concept.
This Article begins with a brief history of the development of the drug DES. In the next section, this Article reviews the tort requirement of causation in fact. The third section outlines the DES cases in which state supreme courts have adopted market share liability, and the fourth section addresses cases where courts have rejected the theory in the DES context and in other actions.
The Article concludes that market share liability is an unsound concept, that it represents too wide a leap in our tort principles, and that the abrogation of such a fundamental tort requirement is unwarranted. Two ideas are presented to support this conclusion. First, there is insufficient data to accurately develop the required market shares for each of the hundreds of pharmaceutical companies that produced DES. This lack of data precludes the fair allocation of liability for DES related injuries among all DES manufacturers. Second, upon close scrutiny, the underlying policies offered to justify adoption of the market share liability theory are either not achieved by the theory, and even if they can be achieved, they do not provide sufficient reasons to adopt it. This Article proposes that the judicial development of market share liability involves making public policy determinations that more appropriately should be left for state legislatures. A legislative response, similar to the federal legislation established to compensate persons injured by childhood vaccines such as the diphtheria, pertussis, and tetanus (“DPT”) vaccine is a proper method of compensation, and one that will not require a radical change in a state’s tort law.
I. HISTORY OF DES
DES is a synthetic substance that duplicates the activity of estrogen, a female hormone crucial to sexual development and fertility. In 1940, a number of pharmaceutical companies sought Food and Drug Administration (“FDA”) approval to market DES in up to five milligram doses to treat vaginitis, engorgement of the breasts, excessive menstrual bleeding, and symptoms of menopause. The FDA approved the use of DES for these purposes in 1941, and, in 1947, the FDA approved the use of DES as a miscarriage preventative. In 1952, the FDA declared that DES was no longer a “new drug” within the meaning of the Federal Food, Drug, and Cosmetic Act,16 and was therefore considered safe for general use. This status allowed DES manufacturers to market the drug without submitting data to the FDA concerning its safety and effectiveness for any desired use.
In 1971, two medical studies suggested that there was a statistically significant association between the outbreak of clear cell adenocarcinoma, a form of cancer, in young women and the maternal ingestion of DES during pregnancy. The mothers of the women stricken with clear cell adenocarcinoma generally had used DES as a miscarriage preventative. Later that year, the FDA contraindicated the sale of DES for use by pregnant women. According to estimates, by the time of the FDA ban, as many as 300 companies had produced DES for sale. Each company’s product was essentially fungible, in that each product contained the same chemical composition. However, DES was marketed in a number of different colors, dosages, sizes, and shapes.
DES is no longer used as a miscarriage preventative. The drug is, however, still prescribed as an estrogen replacement for women with hormone deficiencies, for treatment of unusual menopausal symptoms, and for treatment of certain kinds of cancer of the breast and prostate. DES is also a major ingredient in the “morning-after pill,” a post coital contraceptive.
Since the 1970s, hundreds of daughters of women who took DES while pregnant have filed lawsuits against DES manufacturers. Generally, the complaints allege that the drug companies failed to test DES properly and to warn women adequately of its dangers. The injuries these women suffered are unquestionably serious. Some women have died, and others have required partial or total hysterectomies due to cancer that may be linked to their mother’s ingestion of the drug. DES manufacturers, however, contend that statistics regarding DES daughters have not shown a high incidence of cancer, and that it is not generally accepted that the injuries suffered are the consequence of the maternal ingestion of DES.
Some DES plaintiffs who could identify the manufacturer of the DES their mothers ingested have been able to proceed to trial. Other DES plaintiffs allege, after extensive discovery, that they are unable to satisfy the identification element. A number of circumstances contribute to the barrier of establishing causation in fact in these cases. The effect of prenatal exposure to DES usually does not manifest itself until at least after the child reaches puberty, and more years may pass before the cancer is linked to DES. During this long interval, whatever records the doctor, pharmacy, or manufacturer maintained often become lost or destroyed, and the memories of the persons involved have faded. Contributing to the lack of records is the fact that the manufacturers were not required by law to maintain records for long periods of time. Moreover, during the twenty-five years that DES was used to treat pregnancy-related problems, as many as 300 companies manufactured the fungible product. Additionally, many manufacturers no longer exist, having either merged with other concerns, or having gone bankrupt.
II. THE IDENTIFICATION REQUIREMENT
Typically, the tort causes of action DES daughters advance are based on negligence or strict liability theories. A fundamental principle of these theories, and of tort law in general, holds that the plaintiff has the burden of proving, by a preponderance of the evidence, that the named defendant caused the harm or injury complained of; mere conjecture or speculation as to the identity of the responsible party is insufficient proof of causation. This principle is known as the identification requirement. The requirement is one aspect of the element of causation in fact, which in turn is a common element to virtually all tort law litigation. The issue of identification, although important and present in every negligence and strict liability action, is infrequently litigated. Normally, plaintiffs know the identity of the manufacturer or seller of a product, or the identity is not difficult to discover. This is not true, however, in market share cases. Therefore, an essential issue each court must address when faced with a request to adopt market share liability is whether it is advisable to abolish the identification requirement.
The identification element of causation in fact serves important functions in the law of torts. One goal of our tort law is to compensate victims for their injuries. However, our justice system has so far determined that a no-fault society, one in which all injuries are compensable, is not desirable. Instead, tort law only redresses those injuries that result from a defendant’s culpability and then only if the defendant can be identified.
In promoting the goal of compensating victims, however, it is necessary to avoid establishing laws that act as an excessive deterrent to useful activity, such as the production of socially desirable products. Therefore, tort law’s goal of compensation must be balanced against a second tort law interest, that of protecting people from excessive liability. Requiring the plaintiff first to identify the responsible defendant as a condition of liability insures that a defendant will only be held liable for those injuries he more than likely caused.39 Because causation in fact limits a defendant’s potential liability to injuries that the defendant actually caused, the goal of preventing excessive deterrence is promoted. Otherwise, if potential liability is excessive, a person’s useful conduct along with his undesirable conduct will be inhibited. Moreover, although causation in fact restricts liability, it also helps to assign blameworthiness to the culpable party.
Notwithstanding the benefits that causation in fact provides, a narrow line of cases have created exceptions to the requirement of proof of causation in fact. The particular exceptions that DES plaintiffs most often raise are enterprise liability and alternative liability. These two exceptions allow a plaintiff to shift the burden of proof on the causation issue to a defendant or a group of defendants. Liability may attach to the group of defendants as a whole if a particular defendant is not identified as the party responsible for the injury. Besides market share liability, DES daughters have pursued two other causes of action with more lenient identification burdens: concert of action and civil conspiracy. These two causes of action are not exactly exceptions to the identification requirement. Although DES plaintiffs typically allege elements of each of these causes of action, the courts almost always reject all but the market share liability theory.
There has been a split among courts on the question of whether to adopt market share liability in negligence and strict liability actions brought against drug manufacturers for injuries suffered by women whose mothers ingested DES while pregnant. Currently, the highest courts of California, Washington, Wisconsin, New York, and, most recently, Florida have adopted some form of the market share liability theory in DES daughter cases. The supreme courts of Illinois, Missouri, and Iowa have specifically rejected the market share liability theory in DES cases.
III. JUDICIALLY PROMULGATED MARKET SHARE THEORIES
None of the five states that have adopted the market share liability concept have implemented the same procedure. All five states, however, have a number of similarities in the procedures adopted. This section generally discusses the concept of market share liability as a unified principle, noting the important variations each state has included in the particular form adopted.
A. Reasons for Adopting a Market Share Liability Theory
The DES cases are examples of the reality that in our complex industrialized society, advances in science and technology have created fungible goods that may harm consumers and that are difficult to trace to a specific producer. Courts faced with cases involving fungible products must determine whether they will fashion a procedure to allow the plaintiff to overcome the obstacles of identification that these technological advances cause. Courts in the DES cases answering this question affirmatively generally rely on three basic policy reasons as justification for adopting market share liability.
The first policy is that as between an innocent plaintiff and a manufacturer of a defective product, the manufacturer should bear the cost of the injury. The courts conclude that the plaintiff in these cases is not at fault in failing to provide evidence of causation, reasoning that the conduct of the defendants played a significant role in creating the unavailability of proof. The Washington and Wisconsin courts expanded on this justification, explaining that because each defendant contributed to the risk of injury to the public and consequently to the risk of injury to the plaintiff, each defendant shared, in some degree, culpability for producing or marketing DES.
Courts also articulate two other policy reasons to support the adoption of market share liability. The second policy justification is that as between the injured plaintiff and the possibly responsible drug company, the drug company is in a better position to absorb the cost of the injury. The large pharmaceutical companies, the courts conclude, not only can insure against the costs of injury, they also can pass on these costs to the public. The final reason given to support market share liability adoption is that because the manufacturer is in the best position to recognize defects in its products and to guard against them, holding the producer liable for these defects provides an incentive to produce safe products.
B. Market Share Liability Theory
These three policy reasons have prompted courts to reevaluate their state’s tort laws in an attempt to hold DES manufacturers responsible for injuries their drugs caused. The first court to adopt market share liability was the California Supreme Court in Sindell v. Abbott Laboratories. The Sindell court based the market share liability theory it adopted, and some of its rationale in adopting the theory, on a student law review article. The article argued that, in DES cases, some form of enterprise liability should be fashioned. The court, however, did not literally follow the article’s proposal. Similarly, each court adopting market share liability since Sindell has likewise placed its own twist on the market share liability theory.
The preliminary component of any case using market share liability concerns the number of defendants who must be joined. In Sindell, the court held that the plaintiff had to join as defendants the manufacturers of a substantial percentage of the DES sold in the relevant market. This requirement must be met before defendants may cross-claim against other possibly responsible manufacturers. The substantial share component was important in the concept of the market share liability theory conceived in the law review comment the court relied upon. The substantial share requirement diminishes the likelihood that a manufacturer will be liable for injuries a product it did not produce caused. Therefore, the substantial share requirement helps preserve the causation in fact element to a limited extent because a manufacturer who contributed to a substantial share of a market for DES will more likely be liable for injuries its products actually caused.
On the other hand, the other four states, which have adopted market share lability have not adopted the substantial share component of the California theory. In Washington, Wisconsin, and New York, the plaintiff need only sue one drug company that produced DES and that company’s DES sales need not constitute a substantial share of the market. Inevitably, though, a single named defendant will implead other companies that sold DES in the relevant market.
The next element necessary to succeed in a market share liability action is that the plaintiff must prove a prima facie case on every element of a negligence or strict liability action except identification of the direct tortfeasor. Therefore, the plaintiff must prove, by the preponderance of the evidence, that her mother took DES, that the DES caused subsequent injuries, that the defendant produced or marketed the type of DES the plaintiff’s mother ingested, and that the production and marketing of DES breached a legally recognized duty to the plaintiff.
Once the plaintiff has presented a prima facie case of negligence, the burden shifts to the defendant to exculpate itself. In order to do so, a defendant must prove by a preponderance of evidence that it did not produce or market the type of DES the mother took, that it did not produce or market DES for the prevention of miscarriage in that geographical area, or that it did not produce or market DES at that time.
In Hymowitz v. Eli Lilly & Company, New York’s highest court, the Court of Appeals, made it difficult for a defendant to exculpate itself. New York uses a national market. Therefore, a defendant can only exculpate itself through proof that it did not participate in the marketing of DES for pregnancy use.80 Even conclusive proof that the defendant-manufacturer could not have caused a particular plaintiff’s injury is insufficient for exculpation purposes in New York.
If the defendant fails to exculpate itself, the court next defines the relevant geographic market area for the purpose of measuring and apportioning liability. Remaining defendants which provided DES in the relevant geographic market become members of the plaintiff’s DES market. The relevant geographic market area ideally is defined on a local level, however, where local market share evidence is unavailable, county, state, or even national market share figures are admissible to determine the defendant’s market share. Damages are then apportioned according to the likelihood that any of the defendants supplied the product. This apportionment is achieved by holding each defendant liable for the proportion of the judgment its share of the market represents. The intended result of market share liability is that a manufacturer’s liability for an injury will be approximately equivalent to the amount of damage caused by the DES the manufacturer supplied in the relevant market area.
New York is the only state which refuses to narrow the relevant market. Rather, New York uses a national market. New York rejected the idea that a market share liability theory could be finely tailored so that liability for many injuries would equal the injuries actually caused by the product of a particular manufacturer. Nevertheless, the New York court realized that a national market could not provide a reasonable link between liability and the risk a defendant created toward a particular plaintiff. Instead, a national market apportions liability so as to correspond to the overall culpability of each defendant, measured by the amount of risk of injury each defendant created to the public-at-large.
A last common characteristic of market share liability is that the liability is not joint and several; rather, it is only several. In adopting market share liability, the New York Court of Appeals concluded that joint and several liability would represent a retreat from the attempt to achieve as close an approximation as possible between a defendant’s liability for damages and its individual responsibility for the injuries that the products it manufactured caused. In cases in which all manufacturers in the market are not joined, a plaintiff will receive less that 100% recovery because liability will be limited to the market share represented.
Beyond this basic framework of market share liability, each state has developed certain important distinctions. The unique twists to the theory adopted by California and New York courts have already been discussed. However, Washington and Wisconsin also have developed profound variations in their versions of market share liability. These variations generally relate to the apportionment of damages.
The market share liability theory that the Washington court has adopted is known as “alternative market share liability” because of its similarities to alternative liability. Under the Washington theory, after defining the geographic market, all defendants are presumed to have equal market shares and are liable on a pro rata basis. Manufacturers may rebut this presumption by proving their actual market share. A defendant proving actual market share in the relevant market is only liable for a percentage of damages equivalent to the market share. The presumptive share of the remaining defendants that are unable to establish their actual market share is then adjusted upward, so that 100% of the market is accounted for. If all defendants are able to establish their actual market share and the percentage of the market represented is less than 100%, plaintiff’s recovery is limited to the percentage of the market that is actually represented.
Wisconsin’s theory, on the other hand is known as the “risk contribution theory,” and relies on that state’s comparative negligence statute for apportioning damages. Under Wisconsin’s theory, if only one company is sued and no others are impleaded, that company is liable for all the damages if it cannot exculpate itself. If more than one defendant is joined or impleaded, then damages are determined according to the jury’s assignment of liability under Wisconsin’s comparative negligence statute. A number of factors may be considered in apportioning damages. These factors include the market share of the defendant, whether the company conducted safety tests on DES, the role the company played in seeking FDA approval of the drug, and whether the company issued warnings about the dangers of DES.
IV. COURTS THAT HAVE REJECTED MARKET SHARE LIABILITY
The concept of market share liability has not received strong support. The supreme courts of Illinois, Missouri, and Iowa have refused outright to adopt the market share liability theory in the context of DES daughter cases. The extent of each court’s analysis varies, although there are certain common justifications that each court has given for its holding. Each court has recognized the strong appeal of imposing liability on manufacturers that profited from the sale of a product that has injured an innocent victim.108 However, these courts have realized that the market share liability theory was too great a deviation from existing tort law and, therefore, as the theory presently existed, was not a viable concept. The market share liability theory, as these courts perceived it, did not present sufficient policy reasons to alter causation in fact. Rather, if any change was to be made to the existing tort laws, the courts reasoned that the legislature, and not the courts, would be better equipped to construct a solution to the DES liability problem.
In addition, the Illinois and Missouri courts stressed that the inadequacies of the data available on manufacturers’ market share made the concept unworkable. As a result, these two courts reasoned that it would be unfair to award damages based on inaccurate evidence. Both courts also declined to embrace the underlying policy reasons on which the courts that accepted market share liability relied. In Zafft v. Eli Lilly & Co., the Missouri Supreme Court discounted the argument that “as between an innocent plaintiff and negligent defendants, the latter should bear the cost of the injury” because “defendants can better absorb the cost of injury. The Zafft court stated that this argument ‘ignored the strong countervailing interests that support the causation in fact requirement. The Illinois and Missouri courts also both recognized that adoption of market share liability would have little effect on production of safer products. In fact, these courts believed adoption of market share liability would have a detrimental effect on desired pharmaceutical research and development. In addition, the Illinois Supreme Court disputed whether the theory would have any significant effect on enhancing record keeping.
The Illinois Supreme Court, in Smith v. Eli Lilly & Co., further explained that the market share liability theory had the potential for treating plaintiffs who were unable to identify the culpable manufacturer better than the average plaintiff who was able to do so. Where the manufacturer can be identified, a plaintiff runs the risk that the culpable party may not be amenable to suit or may be insolvent. The Smith court also refuted the plaintiff’s contention that the defendants’ breach of a duty to her formed a basis for adopting the theory. Moreover, the Smith court concluded that imposing liability under the market share liability theory would make the remaining manufacturers of DES the insurers of the industry. The Illinois court reasoned that imposing liability would be especially unfair because the relevant industry existed between twenty and forty years ago and there were some 300 manufacturers involved; however, only the few manufacturers still in existence would have to shoulder the liability costs. Lastly, the Smith court rejected the plaintiff’s analogies to res ipsa loquitur and alternative liability as too tenuous.
Most federal courts that have addressed the issue of whether to apply market share liability in a DES case have declined to adopt the theory.127 The federal courts generally characterize the theory as a radical departure from the common law of the state in which they sit. Therefore, without a clear direction from a state’s supreme court, a federal court sitting in diversity would be usurping the proper authority of a state court.
For example, in Mizell v. Eli Lilly & Co., the South Carolina federal district court refused to apply California’s market share lability law. Even though the Sindell rule was the appropriate law according to conflict of law principles, the Mizell court refused to apply market share liability because it violated the public policy of the forum state, South Carolina. The Mizell court concluded that “market share represents a radical departure from the body of products liability law that has been developed in South Carolina” and has the potential for placing liability on defendants who bear no responsibility for the defective product.
Likewise, in Tidler v. Eli Lilly & Co., a case decided under Maryland law, the Court of Appeals for the District of Columbia declined to adopt the market share liability theory. The Tidler court reasoned “that the theory that plaintiffs would have us ‘construct’ requires that we build on a new foundation, not on the structural underpinnings of the traditional common law of torts. Neither the highest court of Maryland nor the District of Columbia had addressed the issue. The Tidler court, therefore, held that such a marked deviation from the common law was beyond the authority of a federal court bound by the Erie doctrine.
B. Attempts to Expand Market Share Liability
Beyond DES Cases Plaintiffs have attempted to extend market share liability to contexts other than DES cases but with considerably less success. In Shackil v. Lederle Laboratories, the New Jersey Supreme Court refused to apply market share liability in an action filed against manufacturers of the diphtheria, pertussis, and tetanus (“DPT”) vaccine. The plaintiff in Shackil allegedly became severely retarded as a result of receiving a DPT vaccine. The plaintiff was unable to identify the specific manufacturer of the DPT vaccine she received. As a result, the plaintiff sued a number of manufacturers that potentially could have produced the vaccine she received and argued for adoption of a market share liability theory. The court determined that to adopt market share liability in a DPT case “would frustrate overreaching public-policy and public-health considerations by threatening the continued availability of needed drugs and impairing the prospects of the development of safer vaccines. The fact that Congress had already established a fund and a mechanism to compensate plaintiffs the vaccine allegedly injured also influenced the court’s decision.
The largest area of cases in which plaintiffs have been largely unsuccessful in attempting to impose market share liability has been in asbestos litigation. The main factor prohibiting application of the theory to asbestos cases is that asbestos is not a fungible product. Asbestos is a generic term for a family of minerals. Asbestos products have wide variances in toxicity depending on the amount of asbestos contained in the product; the greater the toxicity, the greater the risk of harm.” Therefore, establishing market shares based on the amount of product a manufacturer supplied into the market would not accurately reflect the amount of harm its product caused.
In Goldman v. Johns-Manville Sales Corp., the Ohio Supreme Court clearly articulated the reasons for which market share liability theory is rejected in asbestos cases.’ 60 The Goldman court reasoned that market share liability is inappropriate “in an asbestos litigation case, especially where it cannot be shown that all the products to which the injured party was exposed are completely fungible. The risk that the manufacturer created, the Goldman court noted, is not accurately reflected in its market share because many products contain different degrees of asbestos. The court further reasoned that there would be difficulties with the theory as applied to asbestos cases because the largest asbestos supplier, Johns-Manville, was not amenable to suit. Instead of adopting a market share theory, the court concluded that the problem required legislative solution.
Plaintiffs in a less cohesive mixture of cases have likewise been unsuccessful in their attempts to expand the doctrine of market share liability. In one line of cases, courts have held that plaintiffs, injured by the explosion of multipiece truck wheels, could not use market share liability against the manufacturers. These courts generally reason that the plaintiff failed to prove that the product was defective. Additionally, courts have found no proof that each company’s product shared the same defect. Manufacturers of clothing alleged to be unreasonably flammable, were held not liable under the market share liability theory because the products were not sufficiently fungible. The market share liability theory also was rejected in actions against the manufacturers of a type of blood product from which plaintiff contracted AIDS, the manufacturers of benzidine congener dyes, the manufacturers of Salk polio vaccine,162 and the manufacturers of a breast prostheses.
As illustrated, a slim majority of state supreme courts have embraced the market share liability theory in DES cases. The market share liability theory, however, has been rejected in almost all other contexts. Furthermore, the five courts that adopted some form of market share liability have criticized and ultimately rejected, in whole or in part, the theory as developed in the other jurisdictions. Each adopting court has recognized that its version of the theory may be flawed, but adopted the market theory anyway, believing that subsequent opinions would refine the concept. Nevertheless, after a decade of refining, the courts recognize that they apparently have been unable to resolve many of the problems with the concept. Courts should not be swayed to adopt market share liability, or one of the slightly altered variations of it, based on the strong emotional appeal to provide injured plaintiffs with a remedy. The theory is not only infirm, it is also a marked deviation from useful tort principles.
A. Criticisms of the Procedures Adopted for Implementing Market Share Liability
Market share liability represents one of the most important, if not one of the most radical, developments in tort law in the past decade. It has understandably been the subject of criticism. Market share liability defendants and some commentators have argued that the whole concept is flawed. The flaws associated with the overall concept of market share liability will be addressed later in the Article. This section discusses the flaws associated with the procedural elements of market share liability.
The first procedural component in a market share liability case is the identification of defendants. The California market share liability theory requires the plaintiff to name defendants having a “substantial share” of the market, while the market share liability theories of the three other states require the plaintiff to name only one defendant. One criticism specific to the California “substantial share” requirement is that the Sindell court failed to define what constitutes a “substantial share” of the market, such that the burden of proof shifts to the defendant. The law review article that the court relied upon suggested that the plaintiff join seventy-five to eighty percent of the manufacturers. The court, though, rejected this percentage as too high and held that only a substantial percentage share is required.
The three other state supreme courts only require the plaintiff to sue one defendant. However, without the requirement that a “substantial share” of the market be present, perhaps at least fifty percent of the market, there is the realistic potential of creating liability disproportionate to the amount of damage a manufacturer caused, especially if only a small manufacturer or a few small manufacturers are joined. If a substantial share is joined, there is at least a likelihood that one of the defendants before the court caused the injuries. Without the substantial share requirement, one manufacturer or a handful of manufacturers could continually be named defendants and be forced to pay damages. Consider what could happen if the sole defendant is a small contributor to the DES market. This manufacturer could possibly shoulder complete liability, without proof of it being the cause in fact of the injury; in fact, the great likelihood will be that the manufacturer did not cause the plaintiff’s injuries. For example, under the Washington procedure, a small company that no longer has records of its actual market share is given a presumptive share which equals the portion of the damages unattributed. Thus, that company could be responsible for seventy-five percent or more of the damages, when common sense dictates that a small company surely could not have distributed such a high percentage of the DES used in the market.
Defendants assigned presumptive shares are also held liable for the share of the market attributable to companies no longer in business or not otherwise amenable to suit. Defendants who are amenable to suit become insurers of the products that other manufacturers, not amenable to suit, made and marketed. Therefore, a market share liability theory that does not require the identification of a substantial number of defendants can be substantially unfair to any company that is unable to prove its market share, especially if that company is small.
Another criticism of the procedures developed is that each theory, other than New York’s, fails to identify the relevant market-the local area, the county, the state, or the nation-for purposes of determining a particular defendant’s market share. The relevant market area is important because a manufacturer’s liability will vary widely depending on which market is used. The courts adopting the theory claimed that market share liability approximates each defendant’s responsibility for the injuries its own product caused. However, these assertions are undermined by the fact that, depending on the chosen market, there is this potential for extreme variance in liability. Furthermore, each state’s theory fails to specify how the market for DES can be allocated fairly when DES was prescribed for uses other than as a miscarriage preventative. Failure to account for the diverse uses of DES exacerbates the improbability that the market share theory apportions liability in any way that approximates the injuries each defendant caused.
The Wisconsin provision that holds a single named defendant who can not prove market share 100% liable for a plaintiff’s injury, in particular, is subject to criticism. The Wisconsin Supreme Court emphasized that it was adopting the concept due, in part, to the fact that the defendant created a risk of harm. The other courts adopting market share liability did not go so far as to impose potentially total liability on a single defendant merely for creating a risk of harm. The Collins decision contravenes the principle that a mere possibility that a defendant is the responsible party is insufficient to satisfy causation. It is possible, therefore, under the Wisconsin theory that the defendant’s liability will far exceed the probability that it caused the injuries.
The Wisconsin court, in Collins, also rejected “unalloyed market share,”‘ 86 concluding that it “does not constitute the most desirable course to follow in DES cases because the theory, while conceptually attractive, is limited in practical applicability. The Collins court found that defining the market and apportioning the market share are almost impossible to accomplish fairly and accurately because of the insufficiency of the data on market shares, and because a second mini-trial to determine market share would waste judicial resources. While this observation may be true, it has been pointed out that the Collins single defendant method does not resolve the perceived errors in allocating market share. Moreover, under the court’s procedure, the errors are compounded by inundating a jury with a mass of information and by adding a trial on the separate issue of apportioning liability.
The New York Court of Appeals recently declined to accept Wisconsin’s risk contribution theory, believing that it would only be feasible on a limited scale. The New York court was wary “of setting loose, for application in the hundreds of cases pending in this State, a theory which requires the fact finder’s individualized and open-ended assessment of the relative liabilities of scores of defendants in every case. The court concluded that the injustice resulting from delays in recoveries and inconsistent results militated against adoption of the theory.
B. Inability to Reconstruct the Defendant’s Market Shares
There are numerous problems with the overall concept of market share liability aside from those concerning the procedures each court developed to impliment its theory. A major flaw with DES cases is that there is only a small amount of, or in some cases no reliable information available to establish the defendants’ percentages of the market. No party can be blamed for the lack of information. The lack of information is, in part, the result of the inadequacy of the laws in effect regarding maintenance of records. Other factors relate to the long lapse in time from the sale of the drug to the filing of the lawsuit. Besides the lack of records for existing manufacturers, many of those defendants named in the lawsuits are no longer in business. For these companies especially, it is unlikely that records are available to establish their share of any market. The lack of available records is evidenced by the fact that after extensive discovery, many plaintiffs are unable to identify the responsible manufacturer or even to narrow it to a likely group of defendants. Unfortunately, the courts that have adopted market share liability have done so while ruling on pretrial motions. These courts have not had the benefit of hearing evidence regarding the unavailability of market share data before ruling on whether or not to adopt the market share liability theory.
The experiences of trial courts in California, directed by the Sindell court to apply the market share liability theory, exemplify the problems courts will encounter in determining market shares. The Smith court noted that California trial judges, in In re Complex DES Litigation, attempted to define the relevant market as narrowly as possible. After extensive discovery proceedings, the parties were unable to present data on a narrow market. Therefore, the judge determined that the only practical relevant market was a national market. Likewise, the Smith court noted that another California court, in Stapp v. Abbott Laboratories, expressed exasperation with the task of attempting to formulate market shares after spending over four weeks examining the DES market. The Stapp court concluded that there simply was no such market share data. The Stapp court criticized the courts that developed the market share concept for adopting the theory despite their obvious lack of trial experience and lack of knowledge as to what would go into proving a case based on the theory.
Those who support the market share liability theory, and those courts that developed it, did so believing that attributing damages in proportion to the percentage of DES a manufacturer supplied in a narrow market would, over the run of cases, result in holding each defendant responsible for the amount of harm its own product caused. Thus, the causation in fact element was preserved as much as possible. It is highly unlikely, however, that market share liability can meet the goal of apportioning damages in the context of DES cases.
A truly reliable market share calculation must be limited to an accurate reflection of the amount of DES a manufacturer supplied into the market. Such an accurate determination of market share apparently cannot be achieved. Moreover, any market share determination must be limited to the amount of DES the manufacturer sold for use in preventing miscarriages. This narrow market is appropriate because the drug was, and is, safe for the other purposes for which it was sold. The task of determining market share is especially awesome in the case of DES sales because of its widespread use and because of the long period of time over which it was prescribed. To reconstruct the market and apportion liability accurately, evidence must be presented detailing each defendant’s percentage of the relevant market for a specific year, overlapping years, or span of years. For instance, if a plaintiff’s mother, for some reason, took DES intermittently over a period of three years before the plaintiff’s birth, the trial court will have to reconstruct the market shares of each defendant for each year. In addition, DES cases have generally been consolidated before a single trial judge for docket management purposes. The judge has the difficult task of developing the various market shares for the numerous defendants and years involved in the multitude of DES cases before the court. This can mean reconstructing the sales data for thirty or more manufacturers for any number of years between 1947 and 1971.
Unfortunately, reconstructing these narrow markets can be nearly impossible due to the scant amount of market data that remains available. If courts and juries are allowed to apportion damages when reliable information is not available, the clear result will be arbitrary determinations and wide variances between judgments, without sufficient explanation for these differences. This unpredictability makes it difficult for manufacturers to insure against liability and to reach reasoned settlements in pending suits. Additionally, states that adopt market share liability place a burden on their trial courts and the parties involved to determine market shares. This burden bogs down trial courts and creates for them an almost futile endeavor. The burden of establishing market shares based on unreliable or insufficient data also comes at a tremendous cost to the court system and to litigants, both monetarily and in terms of manpower.
Contributing to the misperception regarding the ability to reconstruct markets is the implicit contention that defendants amenable to suit can establish their true market shares. Throughout the history of the use of DES as a miscarriage preventative, hundreds of manufacturers produced the product. It is impossible to bring them all before a single court. The defendants who do appear in court face the difficult burden of proving their market share. Those who cannot meet this task, but who still desire to reduce their potential liability, will have the even more difficult burden of establishing market shares of codefendants or unnamed manufacturers. The likely result of the failure of market share proof will be that those companies that are amenable to suit, but unable to establish their market share, will be liable for a wholly speculative and disproportionate amount of the damages. Instead of having every DES manufacturer pay damages that, in the long run, approximate the harm the manufacturer caused, the market share theory places liability on only the small percentage of the many DES manufacturers that are still viable and amenable to suit.
One contention that may support adoption of market share and may overcome some of the problems discussed is, that after a number of jurisdictions have grappled with developing market shares, there will become a pool of generally accepted market share data for the various DES manufacturers. Such a proposition, however, is not accurate. Any generally accepted data that courts develop will likely be established for those few large companies that are still viable and amenable to suit. Also, any generally accepted data will most likely be only for large manufacturers’ national market shares. Under each adopted market share liability theory, except for New York’s, the trial court first attempts to determine the local market share-that is the market shares of the defendants who participated in a specific neighborhood, county, region of the state, or whole state. Thus, regardless of a manufacturer’s national market, if suits are brought throughout the country, the incentive and the burden will remain for a manufacturer to attempt to establish a more localized market share.
Even if the trial courts agree to accept only data on national market shares, inevitably disagreement will arise about these markets. For example, after extensive discovery and hearings, a San Francisco California court developed national market shares for the years involved in the cases before it. However, the litigants in a New York DES case declined to accept these figures. The New York court is now attempting to construct its own market share figures. Subsequently, the San Francisco court decided to relitigate the market share issue because of perceived errors in its calculation.
Last, the national market data will inevitably be flawed due to the lack of reliable information. Market share figures likely will not include all the companies brought before each court or will not include the many companies no longer amenable to suit.
C. Tort Principles Used to Justify Adoption of Market Share Liability
Irrespective of the lack of reliable market share data, the underlying policy goals of market share liability do not justify adoption of the theory. Proponents of the theory argue that certain policy considerations of negligence and strict liability law compel courts to adopt market share liability. Although tort law must remain viable to impose liability on the responsible manufacturer or manufacturers, market share liability either does not effectuate the principles and policy reasons offered as justification, or, to the extent market share theory achieves tort law goals, the proposed reasons are insufficient to warrant adoption of the concept.
The Sindell court relied upon two policy reasons for adopting market share liability: (1) as between an innocent plaintiff and a manufacturer of a defective product, the manufacturer should bear the cost of injury; and (2) as between the injured plaintiff and the possibly responsible manufacturer, the manufacturer is better able to absorb the cost of the injury. These two policy reasons are also cited to justify imposition of strict products liability. The courts that followed Sindell in adopting the market share liability also justified adoption of the theory based in part on these policy reasons.
However, eight years after Sindell, in Brown v. Superior Court, the California Supreme Court held that prescription drugs should be exempt from strict liability; in so holding, the Brown court adopted comment k of the Restatement (Second) of Torts section 402A for determining the liability of a pharmaceutical manufacturer. Brown held that, in general, “so long as the drug involved was properly prepared and accompanied by warnings of its dangerous propensities that were either known or reasonably scientifically knowable at the time of distribution,” a manufacturer is not strictly liable. As shown earlier, market share liability is a theory that has essentially been limited to actions against manufacturers of DES, a prescription drug. Interestingly, when California, the first state to adopt market share liability, explained its reasons for accepting market share, the court relied on policy reasons underlying strict liability. Nevertheless, in Brown, a later California case, the California Supreme Court held that in an action under market share liability, the plaintiff could not rely on an action sounding in strict liability. In California, a plaintiff can now recover under the market share liability theory only by proceeding under a negligence cause of action.
The California court’s legal reasoning is patently unsound. First, the court legitimized the adoption of market share liability based on the policy reasons supporting strict liability, and then the court later declared that the market share theory should not be used in a strict liability action. In the meantime, the subsequent courts that adopted market share liability unwisely accepted the underlying policy reasons for adopting market share without analyzing whether the policies support adoption of the concept. After scrutinizing the policy reasons, it appears doubtful that they do sufficiently support adoption of the market share liability theory.
As noted, one policy consideration relied upon in adopting the theory is that drug companies are better able to absorb the costs of the injury by insuring against liability and passing the costs on. Linked with this principle is the contention that the pharmaceutical drug companies are in solid financial condition and, therefore, are able to afford insurance to cover the costs. Manufacturers have strongly contested the figures and conclusions regarding their financial status, or any implication that one company’s solid position reflects the security of other participants in the drug manufacturing industry. The producers further contend that expansions in tort law, such as the adoption of market share liability, have the perverted result of eliminating production of certain useful and necessary drugs. Additionally, manufacturers contend that adoption of market share liability dramatically increases insurance costs to such an extent that some companies either can no longer obtain insurance or cannot pass the costs on to consumers, while other companies can no longer survive.
There are a number of examples of drugs that are no longer produced because of increased product costs related to potential liability. For example, Oculinum and Benedectin were considered safe and useful but are no longer available to the public because manufacturers cannot afford to insure their sale of the drugs. The federal government has interceded in some cases to protect companies from liability, in order to insure availability of a drug. For instance, the government intervened to insure availability of the swine flu and polio vaccines. The New Jersey Supreme Court voiced this same concern when it declined, on policy grounds, to impose market share liability on manufacturers of DPT because of the crippling effect potential liability would have on the availability of the vaccine.
Surely, broadening manufacturers liability exposure through market share liability will have the concomitant effect of negatively impacting drug availability. Manufacturers will need to insure against losses arising from the sale of their own products as well as the products of others in the industry, most of whom are no longer in existence. Even if a manufacturer decides not to insure against losses, it will still be obliged to cover the costs of any damage awards. This added potential for liability will likely contribute to a reduction of the number of participants in the market and the availability of drugs, as well as a decline in the amount of new drug research. It may be tempting to impose liability based on the fact that these manufacturers profited from the sale of a drug that may be responsible for the plaintiff’s injuries, regardless of their actual ability to cover these costs. However, this temptation alone is not a sufficiently compelling reason to adopt a theory that significantly alters a state’s tort law, while only providing a clearly flawed alternative. Likewise, the policy considerations regarding the ability of manufacturers to absorb costs is insufficient to justify adoption of market share liability given the unclear effect on future drug availability.
Another policy consideration supporting the development of products liability is that the production of safer goods will be promoted. Proponents of market share liability argue that adoption of the theory is also necessary to provide incentive to produce safer generic drugs. However, this argument is unconvincing. First, the industry arguably needs no additional encouragement above and beyond the incentives that strict liability and negligence laws provide to produce safer drugs. For years, the pharmaceutical industry has been the frequent target of litigation, facing large damage awards. This exposure has provided the industry with incentive to produce safe products. Before any drug is introduced to the public, extensive research and development costs are incurred to ensure that the product is safe. Furthermore, this country has established and yearly funds the Food and Drug Administration which is responsible for regulating the safety of pharmaceuticals. The FDA must first approve the use of any new drug before it is allowed on the market. After a drug is approved for sale, the FDA retains authority to remove the drug from the market if a problem later is discovered.
The likelihood of an incentive towards safety resulting from the imposition of market share liability in DES cases also is questionable for another reason: liability is not imposed until forty years after the undesirable behavior occurred and almost twenty years after the potential harm was discovered and the product removed from the market. Most of the defendants in current DES litigation had very little to do with the marketing of the drug when it was taken as a miscarriage preventative. Imposition of liability at this late date will have little deterrent effect. Today, drug manufacturers are guided in their safety incentive by medical and scientific research and FDA regulations not by this new concept for ensuring recovery. A third reason why market share liability does not provide a safety incentive stems from the fact that the theory imparts potential liability on all manufacturers in the particular industry. There cannot be an incentive to produce safer products if liability is still imposed as a result of the negligence of others in the industry. The incentive towards safety is also diminished if a manufacturer knows that others in the industry will absorb the damages resulting from its negligence.
The safety incentive rationale is questionable for a final reason: the theory has been adopted in only a limited number of jurisdictions, and thus far, market share liability is’only being applied to manufacturers of DES. Therefore, if a court adopts market share liability, the goal of warning manufacturers to produce safer products will not reach a wide array of drug manufacturers or other industries. The limited reach of the rule will produce little incentive for most manufacturers to produce safer goods since only one segment of the pharmaceutical industry is affected.
Similarly unavailing is the policy argument that adoption of market share liability encourages manufacturers to maintain more detailed records that will enable plaintiffs to identify the culpable party. Normally, when DES leaves a manufacturer’s plant, it is identifiable. Somewhere along the chain of distribution, however, the drug becomes commingled and less traceable. Due to the fungible nature of DES, drug manufacturers have very little ability to keep track of the ultimate market and user of the drug. Moreover, the drug industry did not violate any laws regarding the maintenance of sales records. With the adoption of market share liability, however, manufacturers nevertheless are punished for their failure to maintain better records.
Certainly, there are infirmities in the rationale offered to justify adoption of market share liability. Moreover, to the extent that these reasons and policy goals are met, they do not provide sufficient basis for judicial adoption of the theory.
D. Pharmaceutical Drug Manufacturers Should Not Become Insurers of Their Industry
Another justification offered for adoption of market share liability is that the DES manufacturers breached a duty to make a safe product and, therefore, liability should be imposed. First, one must note that in the cases adopting the theory no breach of duty had yet been established because the issue was decided on the basis of pretrial motions. Additionally, there is conflicting evidence as to whether DES is in fact an unreasonably dangerous product or whether it is especially harmful. Regardless, the concept that liability may be imposed based merely on a breach of duty or creation of risk, without causation established, has long been rejected in American tort law.
Courts should not easily discard historic tort law principles merely because the defendants are members of the drug industry or because a plaintiff has suffered an injury. Market share liability, however, does disregard tort law principals. As a result, manufacturers are insurers of not only their own products but also the products of other manufacturers in the industry. Additionally, market share liability in DES cases causes solvent defendants to become insurers of an industry that existed approximately twenty to forty years ago.
As Justice Richardson stated in his Sindell dissent:
The majority’s decision effectively makes the entire drug industry (or at least its California members) an insurer of all injuries attributable to defective drugs of an uncertain or unprovable origin, including those injuries manifesting themselves a generation later, and regardless of whether particular defendants had any part whatever in causing the claimed injury.
Such a result is unwarranted. The majority of plausible DES defendants have not been, or cannot be, brought before a court. Those defendants who are brought before courts bear the difficult burden of establishing their share of a relevant market. The companies that cannot prove their share will have to pay the unattributed portion of the damages, thus paying the damages that rightfully belong to companies that are insolvent, not amenable to suit in the jurisdiction, or for some other reason, are not before the court. The Sindell court justified its ruling in part on the belief that over the run of the cases, a company’s liability would approximate the harm it caused. However, this assumption is purely illusory, as recognized in Hymowitz. This type of judicial legislation is an unreasonable overreaction in an attempt to achieve what is perceived as a socially desirable result. A decision to adopt market share liability not only distorts a state’s common law but also is best decided by the legislature and not the courts.
VI. LEGISLATURES, NOT COURTS, SHOULD DETERMINE THE PUBLIC POLICY IN DES CASES
There is a strong appeal in compensating DES daughters for their injuries. However, in fashioning market share liability theories, the state supreme courts are, in essence, legislating. In fact, the courts that have adopted market share liability have expressly done so after determining what they perceive as public policy demands in the DES cases. The courts declining to adopt market share liability recognized that the issue demands a judgment on public policy; these courts then concluded that the legislatures could better address the issue. The Sindell court, however, rejected the dissent’s argument that the issue should be left to the legislature because the majority found no “justification for shifting the financial burden for such damages from drug manufacturers to the taxpayers of California.
The market share liability issue involves determinations of public policy. The various state legislatures are the appropriate forums for determining public policy in this instance. A legislature has the ability to hold hearings, listen to debate, receive data on the extent of the problem, and ultimately to determine what, if any, remedy the state should provide. In performing this function, legislatures face divergent interests when considering the adoption of market share liability. On the one hand, a state may strongly desire to ensure that its citizens are compensated for injuries and have access to courts to pursue their claims. On the other hand, a state legislature may recognize the strong public interest that the pharmaceutical industry continue its research and development of new and safe drugs. A legislature is equipped to determine what economic effect the imposition of market share liability will have on the industry. State lawmakers may determine that the laws should not sanction a tort theory which likely will apply to only a small group of defendants-pharmaceutical manufacturers-and which may have a disproportionately large economic impact. Or lawmakers may determine that the theory unreasonably expands the state’s laws to benefit a narrow class of plaintiffs. The legislature also may decide to fashion its own form of market share liability, or it may decide to remunerate the victims without assigning fault to any group of defendants.
Courts are not the proper forums for making these policy evaluations in DES cases because they do so without any concept of the extent of harm or even risk of injury involved by the maternal ingestion of the drug. Reliable evidence indicates that although hundreds of thousands of women took DES, the incidence of injury to their children is minimal. The courts are thus emasculating existing tort law for the benefit of a narrow group of people while the necessity of the action remains open to question. Such a determination could be addressed more intelligently and thoroughly in the legislative forum, where both sides of the issue would be analyzed appropriately.
Certainly one may argue against deferring to the legislature in this instance because the pharmaceutical industry and the insurance industry are influential and will be able to politically sway the issue their way. On the other side of this issue, however, are the powerful trial lawyers associations and other bar groups, both of which are coordinated on the state and national levels and which have also exhibited legislative persuasion. Moreover, in similar instances, legislatures have in fact determined that persons suffering’ injuries resulting from drugs or other products should be compensated, thus thwarting the desires of the insurance industry and drug manufacturers. The compensation such legislation provides is not awarded by courts. Instead, compensation comes from a specific fund established for the purpose.
Legislation which compensates victims for injuries resulting from defective products generally establishes a fund and a procedure people must follow in order to receive money. The recovery fund is established from revenue received by members of the industry producing the product or through tax revenue. A structured and predictable system for recovery is thereby created that operates at a lower monetary cost and in a more efficient and expeditious manner. Injured parties benefit by avoiding protracted and uncertain civil litigation. The legislation recovery system insures that there is a source from which to recover. Also, the manufacturers’ costs of defending suits and the necessity of insuring against unknowable damage awards are eliminated. A legislated recovery system is predictable in the sense that manufacturers know in advance what their costs of compensation will be. However, the public ultimately bears the costs for this either in its tax bill, if it is funded through tax revenue, or in the higher prices paid for the goods, if the manufacturers have to bear the cost and decide to pass it on in the form of higher prices.
Courts in the past have not been hesitant to develop new tort concepts. Courts should, however, decline to adopt market share liability because of the theory’s infirmities. Market share liability is a flawed concept that likely will apply only to a narrow class of plaintiffs and defendants. Moreover, rejection of the market share liability concept will not leave DES daughters or other plaintiffs without a remedy. Some DES plaintiffs have been able to establish the identity of the specific manufacturer, while others will be able to establish enough evidence to proceed to trial on the issues of causation in fact or negligence. Adoption of the market share liability theory, though, contravenes existing tort principles. The theory deviates too greatly from a principle which serves a vital function in the law: causation in fact. In the final analysis, the legislature, and not the court, is the appropriate forum for determining whether to adopt or reject market share liability.
David M. Schultz, 1991.
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More DES DiEthylStilbestrol Resources
In its famous Palsgraf decision, the Court of Appeals of New York faced the issue whether, given that a defendant acts negligently towards someone, this negligence gives rise to liability to an unforeseeable plaintiff. Judge Benjamin Cardozo concluded that proof of negligence in the air, so to speak, will not do. Because the defendant’s conduct did not pose an unreasonable risk of harm to the particular plaintiff, and the damage to her was unforeseeable, the fact that the conduct was unjustifiably risky to another was irrelevant.
Market Share Liability New York Style: Negligence in the Air, Missouri Law Review, Volume 55, Issue 4, Article 7, Fall 1990.
In a recent decision, the highest court of New York adopted a theory of market share liability that strays from Cardozo’s foreseeability theory. The New York court added a new twist to “traditional” market share liability and held that a defendant could be liable even if the defendant can show that it did not make the particular drug that injured the plaintiff. This Note evaluates the New York approach, with particular emphasis on the consequences of holding a defendant liable for “negligence in the air.”
I. FACTS AND HOLDING
Hymowitz v. Eli Lilly and Co. consolidates four cases in which plaintiffs alleged injury resulting from their mothers’ ingestion of the drug diethylstilbestrol (DES) during pregnancy. Various manufacturers of the drug were joined as defendants in the underlying actions.
DES is a synthetic form of the female hormone estrogen. Production of DES is much cheaper than isolating natural estrogen. From 1947 to 1971 the drug was marketed for human miscarriage prevention. In 1971, however, the Food and Drug Administration (FDA) prohibited the use of DES for this purpose. Studies linked the use of DES with vaginal adenocarcinoma, a form of cancer, and with adenosis, a precancerous vaginal growth, in the female offspring of DES users. Because an estimated one-half to three million women used DES during pregnancy, the potential monetary damages to users’ daughters is estimated in the billions of dollars.
Potential DES plaintiffs face a virtually impregnable bar to recovery under traditional tort principles. This bar stems from the difficulty in’ identifying a particular DES manufacturer and from the latent nature of DES injuries. It is estimated that, during the 24 years in which DES was approved for use during pregnancy, as many as 300 companies may have produced the drug. Further, DES is a generic drug, meaning that each manufacturer uses an identical formula in production. Thus, druggists usually fill prescriptions from whatever source is on hand.
The long gestation period also clouds the identification issue. The Hymowitz court stated:
Memories fade, records are lost or destroyed, and witnesses die. Thus the pregnant women who took DES generally never knew who produced the drug they took, and there was no reason to attempt to discover this fact until many years after ingestion, at which time the information is not available.
Because of the latent nature of DES injury, many DES cases are barred by the statute of limitations before discovery of the injury. The traditional New York rule was that “the limitations period accrued upon exposure in actions alleging personal injury caused by toxic substances.” This “exposure rule” made it practically impossible for DES plaintiffs to recover. In 1986, however, the New York Legislature enacted a “discovery rule” for “the latent effects of exposure to any substance.” Thus, the statute of limitations clock does not begin to tick until discovery of the injury.
While helping DES plaintiffs, this legislative action does not resolve the identification issue. In the Hymowitz cases, the defendants moved for summary judgment on the grounds that the plaintiffs could not identify the particular manufacturer of the particular drug that purportedly injured them. In three of the four underlying actions the defendants also moved on statute of limitations grounds. The defendants alleged that a New York statute reviving causes of action for DES exposure for one year was unconstitutional. The trial court denied all motions. Particularly, on the statute of limitations defense the trial court granted plaintiffs’ cross motions, which eliminated defendants’ affirmative defense that the actions were timebarred.
On appeal, the New York Supreme Court, Appellate Division, affirmed in all respects. It certified the following question to the court of appeals: “whether a DES plaintiff may recover against a DES manufacturer when identification of the producer of the specific drug that caused the injury is impossible. The New York Court of Appeals answered yes. It held that a market share theory, using a national market for determining liability, was the appropriate method for determining liability and apportioning damages in DES cases in which identification of a particular manufacturer was impossible.
II. LEGAL BACKGROUND
The seminal case on market share liability is Sindell v. Abbott Laboratories. The fact pattern presented to the California Supreme Court in Sindell was very similar to that presented in Hymowitz. The Sindell court stated that generally there can be no liability without a specific showing that defendant caused plaintiff’s injuries. The court noted, however, this general causation rule was not without exceptions. The Sindell court proposed and adopted a new basis of liability for this situation; it based its proposal on a modification of an existing exception to the causation rule.
The first and most important exception examined by the California court was the so-called “alternative liability” theory as set forth in Summers v. Tice. In Summers, the plaintiff was negligently shot by one of two hunters using identical guns and ammunition. Although the plaintiff could not prove which of the two defendants actually caused his injury, the court held the defendants jointly and severally liable. The defendants could, however, escape liability by showing they could not have caused plaintiff’s injury. The Sindell case did not find the alternative liability theory applicable because of the large number of DES producers and because of the long latency period involved in DES claims.
The court also discussed a second exception to the traditional causation requirement, the theory of “concert of action. The Sindell court quoted the RESTATEMENT (SECOND) OF TORTS, providing that
for harm resulting to a third person from the tortious conduct of another, one is subject to liability if he
- (a) does a tortious act in concert with the other or pursuant to a common design with him,
- or (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself,
- or (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.
Because there was no evidence of an express or tacit agreement between manufacturers to engage in tortious conduct, there was no viable cause of action under the concerted action theory.
Finally, the Sindell court discussed the theory of “enterprise liability” posited in Hall v. E.L Du Pont de Nemovis & Co., Inc. In Hall, several children were injured by blasting caps. Unfortunately, the plaintiffs could not identify the specific manufacturer of the injury-causing product. The court imposed liability on the entire domestic blasting cap industry, which consisted of six manufacturers. The court specifically found that those six entities jointly controlled the risk. The court also focused on the parallel behavior present in the establishment of industry wide safety standards. Thus, “under this industry-wide liability theory, the existence of industry wide standards or practices may support a finding of joint control of risk and shift the burden of proving identification to the defendants.” This theory however, has never been adopted by any other court.
The Sindell court rejected the theory of enterprise liability, and noted that in the Hall case there were six possible manufacturers, while in the DES situation there were at least 200. Further, the court relied on the absence of concert of action for the proposition that defendants did not jointly control the risk. Also, the drug industry is monitored by the Food and Drug Administration; therefore, the industry standard is suggested by the government rather than by industry consensus.
Modifying the Summers v. Tice alternative liability theory, the California Supreme Court adopted a new theory of market share liability. The Sindell court first changed the Summers requirement that all potential defendants be before the court to a requirement that a “substantial percentage” be joined. Next, the Sindell majority held “each defendant will be held liable for the proportion of the judgment represented by its share of that market unless it demonstrates that it could not have made the product which caused plaintiff’s injuries. Thus, a defendant can exculpate itself by showing it could not have made the injury-causing product. The court rationalized that under this approach, each manufacturer’s liability would approximate its responsibility for the injuries caused by its own products.
The Sindell decision left open the question whether the liability imposed would be joint and several or several only. In Brown v. Superior Court, the California Supreme Court resolved this ambiguity, by providing that each defendant’s liability under market share is several only. An individual manufacturer’s liability cannot be inflated to allow for the full recovery of plaintiffs’ injuries. Thus, in California liability cannot exceed a given company’s market share.
The Wisconsin Supreme Court adopted its own version of market share liability in Collins v. Eli Lilly Co. It declined to follow the Sindell approach, and held instead that “unalloyed market share theory does not constitute the most desirable course to follow in DES cases because the theory, while conceptually attractive, is limited in practical applicability. By practical inapplicability, the court was referring to “the practical difficulty of defining and proving market share.”
The Wisconsin approach begins with the general proposition that each defendant contributed to the risk of injury to the public … thus each defendant shares, in some measure, a degree of culpability in producing or marketing … a drug with possibly harmful side effects. Under this approach, the plaintiff’s prima facie case consists of establishing by a preponderance of the evidence that a defendant produced or marketed the type (e.g., color, shape, markings, size, or other identifiable characteristics) of DES taken by the plaintiff’s mother.
Once the plaintiff has alleged a viable cause of action, the burden of proof shifts to the defendant to prove by a preponderance of the evidence that it did not produce or market the subject DES either during the time period the plaintiff was exposed to DES or in the relevant geographical market area in which the plaintiff’s mother acquired the DES. The Collins court held that determination of liability was a jury question to be answered in the context of Wisconsin’s comparative negligence doctrine. According to the court, market share remains an important factor for the jury’s consideration. The goal of the Wisconsin approach appears to be to allow the jury to hold a defendant liable in proportion to the amount of risk it created that the plaintiff would be injured by DES. This risk-based approach resembles market share liability only when a jury is allowed to consider market share in making its assessment of the proportion of risk of injury for which a defendant is liable.
Shortly after Collins, the Washington Supreme Court adopted another version of DES market share liability in Martin v. Abbott Laboratories. The Washington version, styled “market share alternative liability,” claims justification in that “each defendant contributed to the risk of injury to the public and, consequently, the risk of injury to individual plaintiffs.” The Washington court did leave defendants an out: Individual defendants are entitled to exculpate themselves from liability by establishing, by a preponderance of the evidence, that they did not produce or market the… DES taken by plaintiff’s mother . . .
An interesting aspect of the Washington methodology is that defendants who fail to exculpate themselves are “presumed to have equal shares of the market and are liable for only the percentage of plaintiff’s judgment that represents their presumptive share of the market.” A defendant may rebut this presumption by introducing evidence to establish respective market share. If proven, a particular defendant is liable only for the percentage of the total judgment corresponding to the company’s market share. The liability of unexculpated defendants, however, is inflated to allow for a 100% recovery.
The Washington Supreme Court further developed its theory in George v. Parke-Davis, a subsequent DES decision. First, the determination of market share is a question of fact in each case. Second, depending on the circumstances of a particular case, the relevant market may be as small as the local pharmacy or as large as the country. The court stated “the relevant market for determining liability should be as narrow as possible”.
III. THE INSTANT DECISION
A. Rejection of Accepted Tort Doctrine
Judge Wachtler, author of the majority opinion, began by rejecting the established tort doctrines of alternative liability and concerted action: He stated “we agree with the near unanimous views of the high [s]tate courts that have considered the matter that these doctrines in their unaltered common-law forms do not permit recovery in DES cases.
Relying on Summers v. Tice, the Hymowitz court stated the rule of alternative liability as “where two defendants breach a duty to the plaintiff, but there is uncertainty regarding which one caused the injury, the burden is upon each such actor to prove that he has not caused the harm. The court stated that “the central rationale for shifting the burden of proof in such a situation is that without this device both defendants will be silent, and plaintiff will not recover; with alternative liability, however, defendants will be forced to speak, and reveal the culpable party, or else be held jointly and severally liable themselves.
The court postulated that in order to invoke the doctrine of alternative liability, the defendant must have better access to information than the plaintiff, and all possible tortfeasors should be joined in the action. Further, the court stated “alternative liability rests on the notion that where there is a small number of possible wrongdoers, all of whom breached a duty to the plaintiff, the likelihood that any one of them injured the plaintiff is relatively high, so that forcing them to exonerate themselves, or be held liable, is not unfair.
The Hymowitz court ultimately held the large number of potential tortfeasors and the long time period between ingestion and injury created problems for this traditional tort theory. Defendants did not have the requisite better access to information, and it was virtually impossible to have all possible producers before the court. The court seized also on the issue of fairness, holding “while it may be fair to employ alternative liability in cases involving only a small number of potential wrongdoers, that fairness disappears with the decreasing probability that any one of the defendants actually caused the injury.” In DES litigation the chance a particular defendant actually caused the injury in question is often very remote. Therefore, alternative liability provides no relief.
Next, the court dealt with the theory of concerted action. Analogizing to drag racing cases, it stated the theory provides for joint and several liability on the part of all defendants having an understanding, express or tacit, to participate in ‘a common plan or design to commit a tortious act.
The court conceded the drug companies had engaged in parallel conduct in producing DES from an identical formula. There was, however, no evidence of any agreement to market DES in an unsafe manner.9 ” The court concluded “parallel activity, without more, is insufficient to establish the agreement element necessary to maintain a concerted action claim.”
Although the traditional common law doctrine provided plaintiffs with no relief in Hymowitz, the court rationalized that “judicial action is … required to overcome the inordinately difficult problems of proof caused by contemporary products and marketing techniques.”‘ Thus, the court opened the door for the imposition of market share liability.
B. Market Share Liability
In looking to non-traditional forms of relief, the Hymowitz court stressed that in the DES situation, “it is more appropriate that the loss be borne by those that produced the drug for use during pregnancy, rather than by those who were injured by the use, even where the precise manufacturer of the drug cannot be identified in a particular action.” Policies of fairness and justice mandated judicial relief.
First, the court had to deal with its previous DES decision in Bichler v. Eli Lilly & Co. Some commentators interpreted Bichler to create a modified form of the concerted action doctrine. In Bichler, the court submitted jury instructions substituting “conscious parallel activity by manufacturers” for the traditional common law requirement that a plaintiff prove “actual or tacit agreement to participate in a common plan to commit tortious behavior.” Because of the defendant’s failure to object, “the modified concerted action theory became the law applicable to that particular case.”
The Hymowitz court, however, refused to adopt this modified concerted action theory as the general law of the state. It held
inferring agreement from the fact of parallel activity alone improperly expands the concept of concerted action beyond a rational or fair limit; among other things, it potentially renders small manufacturers, in the case of DES and in countless other industries, jointly liable for all damages stemming from the defective products of an entire industry.
Parallel behavior is too common in modern industry to warrant the imposition of liability.
Finally, the Hymowitz court turned to the concept of market share liability. After examining the various forms of market share liability adopted in other jurisdictions, the court posed its own solution. Relying primarily upon California’s experience, the court concluded “a market share theory, based upon a national market,” provided the practical solution. The court explicitly rejected the Wisconsin “assessment of risk” approach, finding this methodology would prove too burdensome and inconsistent over the long run.
The court realized the adoption of a market share liability theory using a national market would probably result in a disparity between an individual manufacturer’s liability and the actual injuries caused by that manufacturer in New York. Thus, the Hymowitz policy differs from the Sindell policy. Liability is not expected to correspond with causation over the long run of cases. Further, the court recognized that the use of a national market would not necessarily result in liability in proportion to the risk created by a defendant towards a particular plaintiff. The Hymowitz court chose “to apportion liability so as to correspond to the overall culpability of each defendant, measured by the amount of risk of injury each defendant created to the public-at-large.”
C. The “New Twist”
In contrast to previous versions of market share liability, the Hynowitz court refused to excuse a defendant from liability upon a showing that it could not possibly have manufactured the particular drug which injured the plaintiff. The court stated that because liability here is based on the over-all risk produced, and not causation in a single case, there should be no exculpation of the defendant who, although a member of the market producing DES for pregnancy use, appears not to have caused a particular plaintiff’s injury. The majority rationalized that it is merely a windfall for a producer to escape liability solely because it manufactured a more identifiable pill, or sold only to certain drug stores. These fortuities in no way diminish the culpability of a defendant for marketing the product, which is the basis of liability here. The majority did concede that a defendant could not be held liable if it did not make DES for use during pregnancy.
Finally, the Hymowitz court found DES producers severally liable, not jointly and severally liable as had other jurisdictions. Liability should not be inflated when all participants in the market are not before the court in a particular case. The court realized its rule would result in some plaintiffs failing to recover their total damages. The court explained that because it refused to allow a defendant exculpation from liability, it would not be fair to increase a defendant’s liability beyond its fair share of responsibility.
D. Judge Mollen’s Opinion
Judge Mollen concurred in two of the underlying cases and dissented in part in the remaining two. Mollen agreed with the majority that market share liability based on a national market was the proper theory for the plaintiffs to pursue. He would, however, allow exculpation of a defendant who could prove, by a preponderance of the evidence, that it did not manufacture the particular pill taken by the plaintiff’s mother. Further, he would allow joint and several liability in order to ensure that a particular plaintiff obtains full relief.
Judge Mollen noted that in the California, Wisconsin, and Washington approaches, a defendant could exculpate itself by proving it could not have made the specific drug taken by the plaintiff. He realized “to preclude exculpation would directly and unnecessarily contravene the established common-law tort principles of causation.” Mollen contended the majority “provides DES plaintiffs with an unprecedented strict liability cause of action.” He maintained the majority’s rationale is “unfair and inequitable” to those defendants who could prove they did not manufacture the drug in question. In Mollen’s opinion, the majority was merely adopting the Bichler “modified concerted action” theory which they explicitly purported to reject in their opinion.
Judge Mollen appears to embrace the Sindell approach. He advocates
the shifting of the burden of proof on the issue of causation to the defendants and he would impose liability upon all of the defendants who produced and marketed DES for pregnancy purposes, except those who were able* to prove that their product could not have caused the injury.
Judge Mollen further advocates imposing joint and several liability on those defendants who are unable to exculpate themselves. Mollen’s version of market share liability differs from Sindell in this respect. Joint and several liability ensures plaintiffs a full recovery for their injuries.
This procedure also provides defendants with an incentive to implead DES manufacturers not joined by the plaintiff. This opportunity reduces unfairness to innocent defendants. Mollen claims this approach furthers the “valid public policy of imposing the burden of bearing the cost of severe injuries upon those who are responsible for placing into the stream of commerce the causative instrumentality of such injuries. Finally, Judge Mollen concludes the majority engages in judicial legislation by eliminatinh fundamental causation requirements.
This Note uses the policy behind tort law and products liability as a framework for analysis. This policy framework warrants a terse review. Further, the Note examines attempts to expand market share liability outside the DES arena, and evaluates a potential legislative solution.
A. Policy Framework
Compensation and deterrence are the two most widely announced purposes underlying tort law. Other frequently mentioned purposes are the assessment of moral blame in the eyes of society, and the punishment of wrongdoers. A major purpose of the cause in fact requirement in tort law is to limit the scope of potential liability. Professor David Fischer writes that the “cause-in-fact requirement is one way in which the law limits the scope of liability and attempts to avoid discouraging socially desireable activity.”
There are six generally recognized goals of a strict products liability regime. These goals include
- compensation (or loss spreading);
- encouraging useful conduct;
- overcoming proof problems;
- protection of consumer expectations;
- and cost internalization.
The compensation goal is based on the premise that in our modern society injuries to individual consumers caused by the use of complex products are inevitable. Because of the gravity of potential injury, it is fair to impose liability on the manufacturers of these products who can, in turn, shift the loss back to consumers via price increases or insurance.
The deterrence goal rests on the proposition that the threat of liability motivates manufacturers to make safer products. Strict liability is believed to be a stronger deterrent than negligence. Under a negligence standard a manufacturer is held to a reasonable person benchmark, while the strict liability standard may require a manufacturer to go beyond this reasonable person criterion if the cost of added safety is less than the cost of potential liability.
The third goal, and perhaps the most important for purposes of analyzing the New York version of market share liability, is encouraging useful conduct. The deterrence and compensation goals nearly always indicate liability. Yet, until the New York version of market share liability:
no court has imposed the liability of an insurer on manufacturers by requiring them to pay for all harm caused by their products. This is because of the fear that such absolute liability would place unreasonable burdens on manufacturers and discourage them from producing useful products. The policy of avoiding over-deterrence by balancing the needs of defendants against needs of plaintiff is clearly at work, although it is seldom articulated.
The fourth goal of products liability law is to help plaintiffs overcome difficult proof problems. Often the defendant is in a much better position than an individual plaintiff to prove fault or lack of fault. Some commentators conclude that the market share liability theory reflects courts policy judgment that as between an innocent plaintiff and defendants who are allegedly guilty of some wrongful conduct, the plaintiff should prevail-even if the alleged (not necessarily established) conduct in question did not cause .the plaintiff’s injury. In products liability actions courts often simplify the plaintiff’s prima facie case or shift the burden of proof on an issue to the defendant.
The final two commonly articulated goals of product liability law include the protection of consumer expectations and the policy of cost internalization. The consumer expectation policy is grounded in the notion that manufacturers induce consumers to rely on safe products, thus the consumer should be protected from hidden perils. The cost internalization goal depends on manufacturers passing liability costs back to consumers, who can then make intelligent purchases based upon the true costs of products.
B. Policy Implications of New York’s Version of Market Share Liability
The traditional tort requirement of causation in fact fails to further tort goals of deterrence and compensation. Professor Fischer provides the following illustration:
Suppose a falling tree that had been struck by lightning injured plaintiff. If plaintiff were able to establish that a railroad company was negligent in failing to equip its locomotive with a whistle, a court could further the tort policies of compensation and deterrence by imposing liability for plaintiff’s injury upon the railroad company, even though no causal connection existed between the company’s negligence and plaintiff’s injury. As long as the railroad company understood that liability was being imposed upon it because of its negligence, it would have an incentive to equip its locomotives properly in the future. At the same time, requiring the railroad company to compensate the injured party would further society’s interest in compensating accident victims.
Thus, market share liability fails to profoundly effect these goals.
The goal of assessing moral blame flounders in the context of “traditional” market share liability. The plaintiff may not have even joined the culpable defendant. This problem is magnified under the New York theory, where there certainly will be cases where a defendant could exculpate itself if given an opportunity. The policy of assessing moral blame is further watered down as courts decrease the threshold of “substantial market share” below the ninety percent level. This problem is intensified if market share is expanded to industries which, unlike the DES market, are not concentrated in a relatively few firms.
Perhaps the most profound policy effect of market share liability transpires in the area of encouraging useful conduct, or avoiding overdeterrence. The consequences of over-deterrence include disincentives for safety to unsafe manufacturers, and a reluctance by “leading edge” companies to introduce new products for fear of potential liability. “By apportioning damages throughout an industry solely on the basis of market shares and irrespective of safety efforts, it enables unsafe manufacturers to spread the burden of their accident costs and thereby creates disincentives for safety.” Further,
it has also been pointed out that imposing the market-share theory in a strict liability tort case gives rise to a form of absolute liability by relieving the plaintiff of proving defendant’s breach of duty and by guaranteeing plaintiff’s proof of causation, which ‘forces an industry into the position of an insurer of a product.
In reflecting on the over-deterrence issue, liability expert Peter Huber asks and answers the question who fled most quickly from the baying tort pack? Those quickest on their feet, of course-the person of action, the company of initiative, the mover, the shaker, and the doer. In characterizing the damper placed on innovation by excessive tort liability, he states in the very markets where the legal pursuit was the most intense … the mood among suppliers became most sullen, hostile, defensive, and then coldly stagnant.
As an example, Huber states “research expenditures by U.S. companies working on contraceptives peaked in 1973 and plummeted 90% percent in the next decade.” Huber quotes the president of a major pharmaceutical company, reflecting on the amount of litigation and asking “who in his right mind would work on a product today that would be used by pregnant women? Society suffers because “it is the innovative and unfamiliar that is most likely to be condemned.”
Empirical evidence on the over-deterrence effect is difficult to find. According to one author, “the inquiry is enormous because virtually every corner of society has been reached by the liability revolution, and frustrating because each story is unique, with much of the evidence anecdotal in nature and hard to document or quantify.” In the pharmaceutical industry, much of the evidence that is available centers around the highly visible areas of contraception and vaccines. It is safe to say, however, that the number of product liability lawsuits filed in the U.S. is increasing at a staggering rate. Between 1974 and 1988 the number of product liability lawsuits filed in federal district courts increased by 983 percent.
Because of the limited availability of concrete evidence, it becomes necessary to infer over-deterrence from certain market characteristics. For instance,
in 1980, experts writing in International Family Planning Perspectives predicted that long-acting hormonal rings, vaginal rings, new injectable preparations, postaglandins to induce early abortions, IUDs causing less bleeding and pain, and cervical caps are in advanced field trials with thousands of women, and should be widely available in the contraceptive industry within the next three to five years.
Though some of these products are now available in Europe, nine years later not one is available in the U.S. A plausible explanation for the availability of the drugs in Europe and not in the United States is the liability crisis.
C. Attempts to Expand Market Share Liability Outside the DES Arena
Courts limit the doctrine of market share liability to DES cases. Innovative plaintiffs attorneys, however, diligently attempt to apply market share liability outside the DES context. Examples of actual attempts at expansion range from vaccines to asbestos and even to a ruptured breast prosthesis. The Sindell court implied that “the market share theory… conceivably could apply to all potentially harmful fungible products made from an identical formula.” Thus, market share liability could conceivably embrace “the manufacturing and marketing of cigarettes, food additives, generic drugs, asbestos, pesticides, aluminum wire, industrial waste, and products that cause environmental pollution.” Fortunately, at this juncture attempts at expansion fail.
A recent New Jersey case illustrates careful reasoning by a court in refusing to expand market share liability. In Shackil v. Lederle Laboratories, the plaintiffs filed a medical malpractice and products liability action arising out of the 1972 inoculation of an infant plaintiff with what is commonly known as the DPT vaccine. The plaintiffs could not identify the specific manufacturer, so attempted to invoke market share liability. In refusing to accept the theory, the court rationalized that the imposition of market share liability would frustrate public policy and public health considerations by “threatening the continued availability of needed drugs and impairing the prospects of the development of safer vaccines. The court also paid heed to the fact that recent market trends threatened the supply of DPT and that due to extreme liability exposure there were only two current producers of the drug. While the Shackil court found no liability, it addresses the potential problems inherent in imposing too much liability on an industry as vital to our health and welfare as the drug industry.
D. Legislative Question
Some commentators suggest a legislative or administrative compensation plan when injured persons cannot identify the specific manufacturer responsible. Suggested alternatives include:
- a limited no-fault product liability fund for plaintiffs unable to identify the manufacturer of a generic product that produced a latent injury;
- suits against the federal agency responsible for regulating the particular industry using the Federal Tort Claims Act and the Administrative Procedure Act;
- ad hoc congressional responses to mass injuries caused by products of unidentifiable manufacturers;
- legislation designed to hold certain industries liable through trade associations for all injuries caused by those industries’ products whenever the manufacturer of an injury-causing product is not identifiable;
- a no-fault compensation system for persons injured by DES which would be funded by a tax imposed upon all manufacturers who produced DES for use as a miscarriage preventative;
- and a toxic tort compensation system not limited to a single industry or a single type of product-injury but designed to deal with the toxic tort problem as a whole.
Schwartz and Mahshigian suggest a particularly appealing legislative solution which grasps the following general principles:
- the tort system should guide recovery when a particular defendant can be identified;
- in non-identification cases, the claimant should be required to show fault, causation, damages, and a good-faith, genuine attempt to identify the manufacturer
- legislation should penalize plaintiffs and counsel who falsely identify a defendant … including defendant’s legal costs and a possible civil fine;
- the legislation should strongly emphasize causation-that the product actually caused plaintiff’s injury;
- and damages should be limited to the claimant’s true excess economic losses, which means no damages for pain and suffering.
Specific provisions of the Schwartz and Mahshigian plan remedy many problems cited in this Note. First, this scheme places the burden of proof on the defendant only when information is in the defendant’s control.211 Second, the plan provides that all manufacturers of DES should contribute to compensation paid to plaintiffs, calling this provision “fairer than the random targeting of defendants that occurs under current judicial theories.” Third, payment by the individual manufacturers “furthers the cause of effective deterrence of (and where appropriate, penalty for) tortious behavior.” Fourth, a properly applied legislative solution would lower the administration costs of the present tort system. Finally, limiting recovery to economic damages lessens the burden on manufacturers. This relief conceivably inures to the benefit of society in the form of lowered prices and increased innovation.
Another attractive legislative solution is the adoption of a federal products liability statute that pays more credence to FDA approval. An Institute of Medicine study recently advocated that, as a general matter, there be no liability for design defect or inadequate warning if the FDA has reviewed and approved the contraceptive product or the warning and has addressed the characteristics of the product that caused the plaintiff’s injury. The defense should not be available if the manufacturer withheld relevant information from the FDA in the approval process or if information developed after approval was not reviewed by the FDA for the purpose of determining whether the product or its labeling should be changed.
The added certainty which a uniform statute provides would allow manufacturers to divert more funds into the research and development area, and would allow the introduction of innovative new products without fear of excessive liability.
Looked at from a societal perspective, market share liability fails horribly. It merely perpetuates the overall liability crisis in America. Society suffers from increased prices, decreased safety, and a reluctance to market beneficial new products. This crisis begs for a return to traditional tort theory.
The New York version of market share liability assumes a perfect world. It requires uniformity to meet its initial goal of averaging. Thus, it only “works” if all fifty states apply the same rationale. Absent uniformity it becomes grossly unfair to defendants. Given that at least six states explicitly reject market share liability, and that only a half dozen others adopt the theory, the prospect of uniformity is slim. Therefore, if one buys into the market share concept, the only way to assure perfect compliance is through comprehensive federal legislation.
The Hymowitz decision allows “offensive” use of market share liability even when the defendant DES manufacturer can prove that it absolutely did not manufacture the particular drug taken by the plaintiff. Extending this logic to its natural conclusion, perhaps a defendant should be able to use market share “defensively” when the plaintiff can identify the culpable manufacturer. Thus, a defendant marketing five percent of the DES produced for use during pregnancy would only be liable for five percent of plaintiff’s damages even when identified as the culpable party. The overall ‘liability of a particular defendant would then coincide perfectly with culpability. To hold otherwise “transforms the market share liability theory into a lottery based on the fortuity of the availability of evidence in a particular case. The outcome, of course, is absurd.
Mike D. Murphy, 1990.
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More DES DiEthylStilbestrol Resources
The California Supreme Court, in the novel and unprecedented case of Sindell v. Abbott Laboratories, eliminated the plaintiffs burden of identification of a negligent party, and thus the causation requirement, in a multiple party tort action. In the course of this decision, the court adopted the “market share” theory of liability which dictated in Sindell that nonidenti iable defendant-manufacturers of the generic drug DES would be liable for the damages in proportion to their share of business in the market. The author thoroughly examines various theories of recovery, such as “alternative liability,” “concert of action” and “enterprise liability,” which the court employed in their formulation of the ‘market share” theory. While in agreement with this decision, the author analyzes the majority and dissenting opinions and notes the benefits and shortcomings of this most controversial development in California tort law.
Until recently, the vast majority of women who had developed cancer due to their mother’s ingestion of the drug diethystilbestrol (DES) during pregnancy were unable to recover damages because of their inability to identify the responsible manufacturer. However, the California Supreme Court, in Sindell v. Abbott Laboratories, has pioneered a new theory of recovery which permits a DES daughter to recover damages without naming a specific manufacturer-defendant. This four to three decision will likely have far-reaching consequences in the field of products liability by in effect removing causation in certain situations as a required element of proof.
California Expands Tort Liability under the Novel Market Share Theory: Sindell v. Abbott Laboratories, Pepperdine Law Review, Volume 8 | Issue 4 Article 4, 5-15-1981.
Before discussing the significance of Sindell with regard to the expansion of manufacturer’s liability, the special nature of DES cases will be noted. Next, both the history and the court’s treatment of each theory of applicable established tort law will also be discussed, in addition to a review of the market share theory, adopted by the Sindell court. Finally, both the advantages and drawbacks of the market share theory, and its potential impact on future cases in the field of products liability will be analyzed.
II. THE FACTS
DES, a synthetic compound of the female hormone estrogen, was approved on an experimental basis in 1947 as a miscarriage preventative. DES was manufactured, promoted, and marketed from 1947 to 1971 by hundreds of drug companies, including the respondents in Sindell. In 1971, as a result of statistical data showing a significant correlation between the use of DES and the subsequent development of cancer in the daughters of mothers who took the drug during pregnancy, the FDA “banned” the use of the drug for the purpose of preventing miscarriages, because of its danger and ineffectiveness.
Presently, several hundred young women whose mothers ingested DES during pregnancy are suffering from a DES-induced cancer known as clear cell adenocarcinoma. Heretofore a relatively rare form of cancer it is believed to strike after a minimum latent period of 10 to 12 years and generally appears in the vagina, cervix and uterus. The vast majority of DES daughters who have not developed cancer are suffering from other abnormalities, the most prevalent being adenoses.
B. The Facts in Sindell
The appellant, Judith Sindell, filed suit against several drug companies for personal injuries sustained as a result of prenatal exposure to DES. Sindell sued on her own behalf and as representative of a class of other women in California similarly situated. The Sindell case is just one of many actions that has been brought in recent years by DES daughters, most of whom have already developed clear cell adenocarcinoma. Sindell, as a result of DES exposure, developed a malignant bladder tumor which was surgically removed. She also continues to suffer from adenoses, which requires that she be frequently monitered by biopsy or colposcopy to insure early warning of further malignancy.
Among Sindell’s allegations were that each defendant knew, or should have known, that DES was carcinogenic at the time of its manufacture and sale, and that the defendants acted in concert in the manufacture and promotion of DES for the prevention of miscarriage without adequate testing or warning, and without monitoring or reporting its effects. Sindell further alleged that each defendant undertook a program to market DES on a “wide-open basis” for the prevention of miscarriage, notwithstanding the fact that it was only conditionally approved by the FDA and that each defendant continued to market DES after learning of its carcinogenic properties. However, in her complaint, and subsequdntly throughout her trial and appeals, Sindell was unable to name a specific manufacturer responsible for her injuries.
The trial court sustained the defendant’s demurrer to the complaint and dismissed the action, primarily because of Sindell’s inability to name the responsible manufacturer. On appeal, the court of appeal reversed the trial court, finding a cause of action under both the alternative liability and concert of action theories. The defendant’s subsequent appeal resulted in the California Supreme Court decision which is the subject of this case note.
C. The Issue Presented
Although many legal issues are involved in DES cases in general, the Sindell court restricted its discussion to the following issue: “May a plaintiff, injured as the result of a drug administered to her mother during pregnancy, who knows the type of drug involved but cannot identify the manufacturer of the precise product, hold liable for her injuries a maker of a drug produced from an identical formula? The California Supreme Court believed public policy required an extension of traditional products liability doctrine to provide for an adequate remedy in such situations. In order to accomplish this extension, the court adopted a novel theory of liability in tort law.
Before discussing the Sindell court’s analysis of this complex legal issue, a brief explanation of the various theories of liability which have permitted plaintiffs to recover despite the inability to name a specific defendant is necessary.
Although DES cases involve several legal problems, such as class action certification, statute of limitations, possible absence of a cause of action for fetal injury prior to viability, and possible absence of a cause of action because the danger of the drug was unknown at the time of manufacture, the Sindell court saw the identification of the manufacturer, or causation issue, as the major problem facing potential plaintiffs.
Because of the significant time lapse between the intake of the DES, the manifestation of the injury, and the time period which elapses before DES is discovered to be the causative agent, most plaintiffs are unable to positively identify the specific manufacturer of the drug ingested by their mothers.
The general rule in tort liability is that the plaintiff has the burden of proof on the issue of causation with the responsibility of showing that his or her injuries were caused by the act of the defendant or by an instrumentality under the defendant’s control. This rule applies whether the injury occurred as the result of an accidental event or from the use of a defective product.
There are several exceptions to this general rule, two of which may be applicable to the Sindell situation. These two exceptions are “concert of action” and “alternative liability. A third basis of liability, “industry-wide” or “enterprise liability, has also been considered in the resolution of DES cases. All of these theories, under certain circumstances, may support a plaintiff’s action even if the responsible defendant is not specifically named or identified, and all were considered as possible solutions by the Sindell court. Thus, each of these theories will be discussed in detail before the adopted “market share” approach is analyzed.
A. Alternative Liability
The unanimous decision of Summers v. Tice best exemplifies the theory that has been termed double fault and alternative liability. This theory states that, where all defendants behave tortiously, but the plaintiff is unable to identify the specific defendant that causes his or her injury, the burden of proof is shifted to each defendant to show that he is not the responsible party. Where the defendants are unable to meet this burden, joint and several liability results.
In Summers, the plaintiff was injured when two hunters simultaneously and negligently fired their guns in the plaintiff’s direction. The plaintiff could not ascertain which of the defendants actually caused the injury, but the court nevertheless held that both defendants were jointly and severally liable. The Summers court refused to apply the concert of action theory, by stating that to do so would be straining that concept. The court developed instead the concept of alternative liability, based on the following policy consideration: if the plaintiff is forced to identify the responsible defendant, there is the possibility that the wrong defendant will be identified, conceivably leaving the injured plaintiff without a remedy. Because of this inequitable result, the burden of proof should shift to the defendants, “each to absolve himself if he can.
This rule of alternative liability developed by the Summers court has been adopted by the Second Restatement of Torts. The Restatement notes that the policy underlying the rule is the injustice of permitting proved wrongdoers, who among them have inflicted an injury upon the entirely innocent plaintiff, to escape liability merely because the nature of their conduct and the resulting harm has made it difficult or impossible to prove which of them has caused the harm.
In formulating the alternative liability theory, the Summers court relied upon the celebrated case of Ybarra v. Spangard. In Ybarra, the plaintiff sustained an injury while unconscious during the course of surgery. The court decided that it would be an unfair burden to require the plaintiff to identify the person or persons who caused his injury, because his inability to identify the specific causative factor was a direct result of actions of the defendants. Therefore, the court, by applying the doctrine of res ipsa loquitur found that an inference of negligence had arisen that required the defendants to explain their conduct.
2. Appellant’s Reliance on Alternative Liability
In Sindell, the appellant placed primary reliance on the Summers and Ybarra decisions to show joint or alternative liability on the part of the defendants. For example, the appellant maintained that the Ybarra decision went one step further than that required of the court in a DES case.
In Ybarra the court may have actually shifted the burden of proof to an entirely innocent non-negligent party. Here we are merely asking the court to follow the doctrine elaborated in Summers and shift the burden of proof to a group of defendants, each and every one of which is a negligent cause of the plaintiff’s inability to identify the specific wrongdoer causing inJury.
The appellant also attempted to compare the Summers fact situation to that of the DES-type of injury. For example, the appellant pointed to the fact that the fungible nature of the shotgun pellets in Summers was what made the identification of the responsible defendant virtually impossible. This was analogized to the situation in Sindell, where the fungible nature of the generic drug DES made it difficult to prove without records which respondent caused the harm to the appellant.
In Summers, the conduct which created the impossibility of identification was the simultaneous discharge of the two defendants’ shotguns. However, in Sindell, the appellant argued that the drug companies, by manufacturing the same drug under a variety of trade names, created a situation in which it was unlikely that any identification could be made. The appellant also contended that the tortious character of the respondent’s conduct in failing to warn of, or discover, the dangers of DES was the major reason why all parties failed to keep better records. Thus, the appellant maintained that the DES injury was an even more compelling situation in which to find liability than that found in Summers.
In developing this theory, the plaintiff relied on Haft v’ Lone Palm Hotel. In Haft, multiple defendants were held liable for the drowning of a young boy and his father in the hotel swimming pool despite the absence of proof of causation. The defendants were held to have been liable for negligence in failing to provide a lifeguard as required by law. Even though there were no witnesses to the accident, the Haft court held that the absence of evidence of causation was a direct and foreseeable result of the defendant’s negligence, and on this basis, shifted the burden of proof to the defendants. Similarly, the appellant in Sindell argued that her inability to identify the responsible manufacturer was a direct and foreseeable result of the defendant’s negligence in their failure to warn consumers of the dangers of DES.
3. Sindell Analysis of Alternative Liability
The Sindell court, in response to the respondent’s allegation that the appellant was in a superior position to identify the responsible manufacturer, stated that neither Sindell nor the drug manufacturers were in a better position to bear the burden of proof of identifying the responsible manufacturer.
The respondents argued that the Summers-Ybarra burden of proof rule was predicated on the defendant’s greater access to information, and since this was not the case in Sindell, alternative liability should not be applied. The court rejected this claim, noting that while “Summers states that defendants are ‘ordinarily … in a far better position to offer evidence to determine which one caused the injury’ than a plaintiff,” this is not necessarily a prerequisite to the shifting of the burden of proof. The court believed that the particular circumstances in Sindell, as in most DES cases, made it virtually impossible for either party to identify the specific wrongdoer.
The court then distinguished the appellant’s reliance on Haft. The court stated that the difficulty or impossibility of the identification of the specific responsible DES manufacturer was not, as argued by the appellant, the result of the respondent’s alleged negligent act of failing to provide adequate warning. Rather, in the view of the court, it was a result of the long passage of time between the act, the ingesting and prenatal exposure to DES, and the resulting subsequent development of cancer.
The Summers theory of alternative liability was rejected by the Sindell court for one major reason: the number of joined and unjoined defendants. In Summers, all parties who were or could have been responsible for the harm to the plaintiff were joined as defendants. However, in Sindell, there were approximately 200 drug companies that might have produced the injury-producing drug that injured the appellant; of these, only five were ultimately joined as defendants.
The court concluded that an application of the Summers rule to Sindell would not be fair to the respondents. The possibility of any of the respondents causing the injury to the appellant was too remote to require each respondent to exonerate itself, especially with the substantial possibility that the actual offending manufacturer might escape liability altogether. Thus, the court refused to apply the Summers theory of alternative liability.
B. Concert of Action
Concert of action is another theory by which a plaintiff may obtain joint and several liability. A typical illustration is that of an illegal drag race in which a bystander is injured by one of the participants. Suppose A, B, and C enter into such a race, and P is injured by A’s car. Under the concert of action theory, P may sue A, B, C or any combination of the three.
Prosser defined the concert of action rule as follows:
All those who, in pursuance of a common plan or design to commit a tortious act, actively take part in it, or further it by cooperation or request, or who lend aid or encouragement to the wrongdoer, or ratify and adopt his acts done for their benefit, are equally liable with him.
Thus, in the above example, all P need do is show that “each defendant he has joined helped plan and facilitate the race, that the participation of each was tortious, and that his injury resulted from the race. It should be noted that the participants of the race may still be held under the concert of action theory even though they did not expressly agree to participate in it; “all that is required is that there be a tacit understanding. . . . It is also noteworthy that the definition of “joint tortfeasors” with relation to concerted action applies not only to those who act in concert to accomplish some common goal or plan and thereby cause injury, but also to “those who order, direct or permit others to do the act, and who give assistance or encouragement. This theory of liability is accepted without dispute in California.
Orser v. George, relied on by the appellant in Sindell, explains the rationale for the use of the concert of action theory as a means to establish the element of causation. In Orser, three defendants were engaged in the tortious conduct of firing their guns in the direction of the decedent. Two of the three were alternately firing a pistol which was later determined to be the weapon that killed the decedent. The third defendant was shooting a rifle, which was not the fatal weapon. The trial court granted the third defendant summary judgment on the basis that he met the alternative liability burden of proof in showing that he was not the responsible defendant. The court of appeal reversed on the issue of whether the third defendant’s tortious conduct in firing the rifle in the direction of the decedent had provided the other defendants with the “substantial ‘assistance and encouragement’ necessary for concert of action liability.
Orser effectively demonstrates the distinction and the added element involved in concert of action as opposed to alternative liability. If a defendant can be shown to have joined with others to facilitate an injurious result, it is irrelevant whether or not he can subsequently meet the burden of proof by showing that he was not personally responsible. Under the concert of action theory, the act of joining in or encouraging tortious conduct is in itself tortious.
The close relationship between concert of action and enterprise liability is shown in Hall v. E. I. Du Pont De Nemours & Co., Inc. Hall involved injuries to thirteen children by dynamite blast caps. The evidence of individual manufacturers was destroyed by the explosions. Alleging that the defendants knew that blasting caps were dangerous and agreed among themselves not to put warnings on the labels, the plaintiffs sued the six major manufacturers of blasting caps and the industry’s trade association. Although Hall was not decided on concert of action, the language used by the court forms a basis for the enterprise theory of liability. Accordingly, Hall will be discussed more fully below.
2. The Sindell Analysis of Concert of Action
The court first addressed the appellant’s charge that the respondent’s parallel- or imitative conduct in their testing and promotion, methods was in itself tortious conduct. The court rejected this contention by pointing out that it is common for manufacturers to borrow testing and sales techniques from other manufacturers in the same industry. Thus, the court refused to set any precedent that might “render virtually any manufacturer liable for the defective products of an entire industry. This was the major reason for the court’s rejection of the concert of action theory, since, in the court’s view, its application in this context would have expanded liability much further than had ever been intended.
The court also distinguished the DES cases from prior concert of action cases cited by the appellant. In particular, the court sought to distinguish Orser. The decision in Orser was based on the encouragement and assistance given by one of the alleged tortfeasors to the other. However, there was no allegation made by the appellant in Sindell that each respondent knew of the other’s tortious conduct, or that they assisted and encouraged one another to inadequately test DES and to provide inadequate warnings in the same manner as in Orser. Thus, the theory of concerted action was rejected.
C. Enterprise Liability
The concept of enterprise liability was first introduced in Hall v. E. I. Du Pont de Nemours & Co., Inc.. Though Hall and its companion cases were decided on other grounds, the court suggested an expansion of the concert of action theory to include corporate entities, and referred to this expansion as “enterprise liability.” In Hall, the defendants had adhered to an industrywide standard with regard to safety design, labelling and manufacture of the blasting caps. Thus, it appeared that the defendants jointly controlled the risk of injury. If shown by the plaintiffs that the caps were manufactured by one of the defendants, the burden of proof would shift to the defendants.
This novel theory of liability was developed and refined by Naomi Sheiner, while a law student at Fordham University for use within the context of DES actions. In DES and a Proposed Theory of Enterprise Liability, Sheiner proposed that enterprise liability “combines the better features of concert of action and alternative liability into one coherent theory. The elements of the theory as outlined in the article are as follows:
- Plaintiff is not at fault for his inability to identify the causative agent and such liability is due to the nature of the defendant’s conduct.
- A generically similar defective product was manufactured by all the defendants.
- Plaintiff’s injury was caused by this product defect.
- The defendants owed a duty to the class of which plaintiff was a member.
- There is clear and convincing evidence that plaintiff’s injury was caused by the product of some one of the defendants. For example, the joined defendants accounted for a high percentage of such defective products on the market at the time of plaintiff’s injury.
- There existed an insufficient, industry-wide standard of safety as to the manufacture of this product.
- All defendants were tortfeasors satisfying the requirements of whichever cause of action is proposed: negligence, warranty, or strict liability.
Once the plaintiff proves these seven elements, the burden of proof as to causation shifts to the defendants, each of which can exonerate itself by showing … that its product could not have been the one which injured this particular plaintiff.
Enterprise liability is similar to alternative liability in that it presumes that one of the defendants caused the plaintiff’s injury, and because of the tortious acts of all defendants coupled with the plaintiffs inability to identify the one who caused the injury, the burden is shifted to the defendant to exculpate himself if he is able. Like concert of action, the plaintiff must prove an additional element in enterprise liability, . . . , one that is derived from the concerted activities of the defendants: the presence of an insufficient industry wide safety standard. In addition to the Restatement’s theory of concert of action and the Summers rule of alternative liability, Sheiner, in developing this proposed theory of liability, relied on both Hall and Ybarra for authority.
The primary rationale that Sheiner advances for enterprise liability is the familiar policy generally found in strict liability cases: “That as between the innocent plaintiff and the tortfeasors, the tortfeasors should bear the cost of the injury. Sheiner relies on the policy considerations of the doctrine of respondeat superior and strict liability, which involve a deliberate allocation of risk to those in the best position to take preventative measures and to absorb and distribute foreseeable costs to the public. In particular, reliance is placed on the landmark decision of Escola v. Coca Cola Bottling Co. , which developed the theory of strict liability in response to the scientific and industrial advances of the time. The Sheiner article suggests that it is now time to advance still another, more far-reaching form of liability.
2. Sindell Analysis of Enterprise Liability
The Sindell court rejected the theory of enterprise liability, at least in form. The court distinguished Sindell from Hall by pointing out that in the latter there were only six manufacturers which represented the blasting cap industry in the United States; there are at least 200 manufacturers of DES, of which only five were named in Sindell. Moreover, in Hall, the defendants jointly controlled the risk of injury through a trade association; however, in Sindell, proof of control of risk would not be shown by such means.
The court also advanced the policy reason that the drug industry, because of its close affiliation with the Food and Drug Administration, should not be held completely responsible for its industry-wide standards, since those standards are dictated by the government. In its analysis, however, the court failed to consider the fact that although the FDA set the standards for the manufacture and distribution of DES, the manufacturers of the drug failed to follow these standards.
Thus, the court rejected, rather summarily, the third theory of liability offered by the appellant. However, as will be seen below, while the court rejected enterprise liability in form, the substance is strikingly similar to the theory of “market share” liability that the court developed sua sponte.
IV. MARKET SHARE LIABILITY
Although the court deemed the three theories of liability advanced by Sindell insufficient to warrant a cause of action, the court nevertheless held that the appellant should not be precluded from recovery. The court stated that the response of the courts can be either to adhere rigidly to prior doctrine, denying recovery to those injured by such products, or to fashion remedies to meet these changing needs. Therefore, based on major policy considerations, the court established a new theory of causation applicable to a limited number of cases.
Primary authority for “market share” liability was Justice Traynor’s landmark concurring opinion in Escola v. Coca Cola Bottling Co. , which over thirty years ago recognized the then traditional standard of negligence as insufficient to govern the obligations owed by the manufacturer to the consumer. As in Escola, the policy argument that the manufacturer is better able to bear the cost of an injury resulting from a defective product was also stressed by the Sindell court. It was reasoned in Sindell that from a policy standpoint, holding a manufacturer liable for defects in their products and for the failure to warn of harmful effects, even in the absence of proof of causation, would provide an incentive for product safety, since the manufacturer would be in the best position to guard against such defects.
Although the Sindell court rejected the theories of alternative liability, concert of action, and enterprise liability, it nevertheless borrowed heavily from each of these theories in its formulation of “market share” liability. In its rejection of alternative liability and concert of action, the court apparently preferred not to expand either of these established tort doctrines to the extent that would be necessary in the Sindell factual setting. In contrast, enterprise liability, which is more of a proposed theory than an established doctrine, was relied on very heavily by the court in the adopted “market share” theory.
The major difference between the three theories of liability proposed by the appellant and the “market share” theory formulated by the court, is that “market share”, rather than imposing joint and several liability, imposes only several liability on the defendants. Accordingly, no manufacturer may be held liable for 100 percent of the judgment. Instead, “each defendant will be held liable for the proportion of the judgment represented by its share of that market unless it demonstrates that it could not have made the product which caused plaintiffs’ injuries.” Although the court uses the term “market share” to literally mean “the proportion of the judgment represented by [that defendant’s] share of that market, the court did not state exactly how a defendant’s share of the market would be determined.
The court recognized that some discrepancy between the “market share” apportioned to a defendant and the actual liability of that defendant is inevitable, primarily because of the passage of time involved. However, the court likened this problem to the inability of a jury to precisely determine the relation between fault and liability under the doctrines of comparative fault or partial indemnity. In practice, it would seem that a defendant’s portion of the market would be more easily defined, because of company records of sales and profits, than a particular defendant’s comparative fault in, for example, a multiple-vehicle accident case, which would necessarily be a more subjective determination because of the lack of factual basis.
The other major problem with the “market share” theory, is that all the potential defendants may not be named. The Sindell court concluded, however, that this was not a major obstacle in this case, since the five named respondents represented approximately ninety percent of the entire market. Thus, there was only a ten percent likelihood that the offending producer would escape liability. The court, therefore, gave the appellant the initial burden of joining a “substantial percentage” of the manufacturers in bringing an action based on “market share” liability. However, the court did not determine what constituted a “substantial percentage,” except to state that in the instant case that the appellant met the burden.
Though the court readily acknowledged the above potential procedural and equitable problems with the theory, it viewed these as relatively minor, considering the alternative of leaving the appellant without a remedy. Thus, it appears that the Sindell court, without specifying it as such, facilitated a type of balancing test in its adoption of “market share” recovery; inconsistencies inherent in the determination of a “substantial percentage” or “market share” are outweighed by the necessity of providing innocent plaintiffs’ with an avenue of recovery.
V. THE DISSENT
A strong dissent, written by Justice Richardson, began by stating that the ramifications of the “market share” theory adopted by the court were virtually limitless, with the “elimination of the burden of proof as to the identification [of the manufacturer whose drug injured plaintiff imposing] … a liability that would exceed absolute liability. Justice Richardson cited briefly the prevailing authority on tort law, as well as other DES cases in support of this position.
The dissent painstakingly examined the majority’s decision, showing, one by one, the problems inherent in the “market share” theory. First, although the court stated that the requirement of proof is satisfied by joinder of those defendants who have together manufactured a “substantial share” of the market, it failed to establish a guideline or method of determining what constitutes a “substantial share. Although the dissent believed that this should have been specifically determined by the court, the dissent did not appear to consider this a major deficiency in the decision compared to the other problems with “market share” recovery.
More significantly, the dissent was concerned with the consequences of what it terms the “unprecedented extension of liability” advanced by the theory. For example, a particular defendant, having a very small share of the relevant market, could “be held proportionately liable even though mathematically it is much more likely than not that it played no role whatever in causing plaintiff’s injuries. This would allow the plaintiff to “pick and choose their targets, with the defendants, who are held to be liable, named according to whatever method the plaintiff chooses, rather than by the possibility or likelihood of liability. While this may be a legitimate concern, it seems more likely that a potential plaintiff unable to identify a responsible defendant would name those companies most readily identified as DES manufacturers, with a corresponding large share of the market, rather than those minor companies who participated in an extremely small portion of the market.
The dissent also pointed out the practical consideration of the disproportionate impact on those manufacturers who are amenable to suit in California, since it is possible that no other state will adopt the market share theory. In this situation, those manufacturers brought to trial in California would be, in effect, jointly responsible for 100 percent of plaintiffs’ injuries although those manufacturers ‘substantial’ aggregate market share may be considerably less.
Finally, the dissent criticized the theory as contrary to the social policy that encourages the development of new pharmaceutical drugs. Justice Richardson reasoned that the decision of liability based on market share would inevitably inhibit, if not the research or development, at least the dissemination of new pharmaceutical drugs. This, he stated, was totally inconsistent with the policy of traditional tort theory as advanced in the Restatement. While Justice Richardson’s view is shared by several authorities, it has been controverted by others. This conflict of opinion will be discussed more fully below.
The dissent concluded by suggesting, in view of the sweeping possibilities of the market share theory as applied to other areas of business and commercial activity, that this extreme departure from traditional tort law should only be undertaken, if at all, by the legislature.
VI. IMPACT OF SINDELL
A. Problems with “Market Share” Liability
Authorities in the field of products liability disagree as to the long-term impact of the Sindell ruling; however, it is generally agreed that the decision, although limited, poses potential procedural problems.
The first apparent problem with the “market share” approach is that all potential defendants need not be named. Only a “substantial share” or percentage of the total possible defendants must be named. This not only raises the practical problem of determining what a “substantial share” of the market is, but also leaves the possibility that the actual tortious manufacturer would not be named. In this situation, the “substantial share” of manufacturers, rather than the responsible tortfeasor, would pay for the plaintiffs injuries.
Although the Sindell court did not believe that this would be a major problem, its failure to give a guideline for determining what is a “substantial share” of a market has created potential problems. The lack of foresight by the court in creating a novel theory of liability without following up on the practical application of the theory has, perhaps unnecessarily, exposed the decision to criticism. A related problem is the failure of the court to explain a method of determining the “market share” of a defendant.
One potential procedural problem not discussed by either the majority or the dissent is whether a finding of “market share” liability may collaterally estop an entire industry from denying liability. Collateral estoppel has recently been ruled a proper pleading vehicle in products liability cases. However, these decisions do not address the possibility of collaterally estopping manufacturers of a generic product who have not personally had their day in court. In view of the generic quality of DES, as well as the limited scope of “market share” applicability, it is doubtful that this issue presents a serious problem.
Apart from the aforementioned procedural problems in Sindell, there are equitable drawbacks inherent in the “market share” theory. One of the most serious of these appears to be the problem with the apportionment of damages. For example, in cases where the plaintiff cannot name the responsible defendant, such as was the situation in Sindell, “market share” liability will be evoked. However, in those cases where the plaintiff is able to name the responsible manufacturer that caused her injuries, it is assumed that the plaintiff will retain the burden of proof as to the single defendant, rather than naming several defendants and proceeding under a “market share” theory For example, in case 1, if the plaintiff is able to identify a specific responsible manufacturer, the plaintiff will retain the burden of proof, with the single defendant paying 100 percent of the judgment. However, in case 2, if the plaintiff is unable to name the responsible manufacturer, she will name several and proceed on the basis of “market share” liability. If one manufacturer is named in both case 1 and case 2, that manufacturer-defendant will be forced to pay 100 percent of one judgment and a market share percentage in another. Thus, this combined liability will force that one manufacturer-defendant to bear a much greater burden than its actual market share.
As pointed out by the dissent, the above example would particularly become a problem if jurisdictions other than California fail to adopt the “market share” theory as advanced by the Sindell court. In this situation, those manufacturers more amenable to suit in California would be held to a disproportionate share of damages.
The final major problem with the “market share” theory is the concern that the pharmaceutical industry may be undermined by, in effect, making it the insurer of all defective drugs of uncertain origin. Critics of the Sindell decision believe, as was stated in the dissent, that the theory will inhibit the dissemination of drugs, which is contrary to the public policy considerations advanced in the Restatement. A close look at the wording of the Restatement cited by the dissent, however, will show that these policy considerations do not apply to the facts of the Sindell case.
The Restatement states that public policy justifies the use of new or experimental drugs, despite medically recognizable risks, and that the manufacturer of such a drug will not be held strictly liable for subsequent injuries caused by the drug. However, this applies to manufacturers who are held strictly liable, and only applies when the drug is properly prepared and marketed, and proper warning given. In contrast, Sindell sued the various respondents for their negligence in failing to properly market, test, and warn of the inherent dangers in the use of DES.
Therefore, it appears that the Sindell court, rather than holding the drug industry liable for all injuries that occur as a result of a drug previously thought to be safe, has only suggested that those manufacturers who are shown to have been negligent in their marketing or testing of a drug should be held liable for the consequences of their negligent acts. Rather than discouraging the dissemination of modern drugs, this policy should serve to encourage their safe testing, marketing, and utilization.
B. Benefits of “Market Share” Liability
The major advantage of “market share” liability is the equitable policy repeated throughout the Sindell decision. It is “preferable to hold liable a negligent defendant who did not in fact cause the injury than to deny an innocent plaintiff a remedy when it cannot be determined which of the defendants is responsible for the harm but it appears that one of them was.” This same general policy is the basis for virtually all of the major advances in the field of products liability in recent years.
Sindell was innocent of any wrongdoing, yet suffered serious injury. Although she could not name the manufacturer that produced the DES that caused her specific injury, she named several manufacturers, and alleged that all of them negligently produced the carcinogenic drug. If the Sindell court had not allowed the appellant to maintain her action, the result would have been that the victims of DES would have borne the cost of their injuries while the tortious manufacturers would have avoided liability. As has been stated so often by the courts, the cost of these injuries is much better borne by the manufacturers, who have the potential to guard against such dangers, than by the innocent victims of their mistakes.
C. The Potential Application of “Market Share”
It is clear that California’s “market share” apportionment theory is affecting almost immediately other DES cases pending in other courts. For example, in May of 1980, only one month after the Sindell ruling, a Cleveland woman settled out of court with four separate DES manufacturers for a total of two million dollars. This immediate result is not unexpected. After the Sindell decision, one defense attorney involved in DES litigation stated that “the Sindell case is a major victory for the plaintiffs’ bar. Especially since California traditionally is in the vanguard of tort litigation, Sindell might represent a watershed in terms of a trend for the future. This seems to be the general consensus among both plaintiff and defense attorneys, especially since the United States Supreme Court has denied the writ of certiorari sought by the Sindell respondents.
If, as is expected, the Sindell decision sparks a rash of suits based on “market share” liability, it may be advantageous for the drug companies to unite, develop a proportional scheme based on the market, and begin to organize efficient and expeditious settlements with DES plaintiffs. Although this type of organization would be enormously expensive and administratively complicated, it would be beneficial to all parties in the long run. A plaintiff would be compensated sooner, and although she would possibly receive a lesser amount of recovery, the legal entangelments of lengthy litigation would be avoided. The defendants, although forced to pay damages in all cases, would save tremendous litigation expenses. This will especially be true if other jurisdictions follow the lead of Sindell, since without the necessity of the plaintiff identifying a specific defendant, defense verdicts would be rare. Finally, the advantage of mass settlement and avoidance of unnecessary and protracted litigation would be beneficial in promoting judicial efficiency by helping to alleviate the existing court backlogs around the country.
In regard to the further application of Sindell to other areas of tort litigation, the repercussions will be necessarily minimal because of the relatively few types of products liability cases that involve serious problems of defendant identification. The Sindell court limited itself in its application of “market share” liability to only cases where a plaintiff has an identification problem due to the generic quality of the product causing the injury. The court further limited the theory by applying it, as an element of causation, only in those cases where the manufacturer is negligent. Thus, the far-reaching impact feared by the critics of Sindell is unlikely to occur.
However, in those few cases that involve the type of identification problems found in DES cases, the application of the “market share” theory will be almost immediate. The most obvious of these cases are the more than 6,000 asbestos cases that are pending around the country. The asbestos cases involve the factually analogous problem of a construction worker attempting to prove not only the identity of each of his employers during the twenty to thirty years of asbestos exposure, but also which manufacturer produced the asbestos products that were purchased by or on behalf of those employers over such period of time. This identity problem, similar to the DES cases, would without a “market share” type of approach preclude any remedy. Like DES cases, asbestos litigation is similarly causing court backlogs throughout the country. Therefore, the judicial system, faced with such a problem, may welcome expeditious approaches to the resolution of these cases as well.
It is clear that Sindell is a substantial expansion of products liability law. It is equally clear that this expansion is necessary to meet the changing needs of society. It has been said that the life of the law is a response to human needs. The Sindell court, in developing the “market share” theory of liability, has expanded the law to adapt to the expansion of technology and industry in today’s advancing society.
Far from stifling the drug industry, the “market share” theory should encourage more responsible testing and care in the development of modern drugs. The Sindell decision does not call for the pharmaceutical industry’s guarantee of fool-proof drugs, rather, it calls for a responsible attitude in their development.
This decision also avails the courts of an expeditious approach to relieve court backlogs in cases where the liability is clear but proof of causation as to a specific manufacturer is not. This decision should be a welcome answer to a practical problem felt by many members of the legal profession in eliminating expensive, time-consuming, and unnecessary litigation.
In conclusion, although some problems exist in the “market share” theory of liability the benefits to be gained from its adoption greatly outweigh any disadvantages. The inequities in the decision are limited to those manufacturers responsible of innocent plaintiffs.
N. Denise Taylor, 1981.
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More DES DiEthylStilbestrol Resources
When California addressed the issue of strict products liability in 1963, it was an established principle of products liability that except in rare cases, the plaintiff had to identify the defendant-manufacturer of the product which caused his injuries to assert a cause of action. This rule was followed in California as recently as 1978, when the court of appeals in McCreery v. Eli Lilly & Co. affirmed the California Superior Court’s grant of a summary judgment to a defendant-manufacturer because the plaintiff could not identify the defendant as the specific manufacturer of the drug which caused her injuries.
Manufacturers’ Liability Based on a Market Share Theory: Sindell v. Abbott Laboratories, Tulsa Law Review, Volume 16 | Issue 2 Article 6, 1980.
In March 1980, however, the California Supreme Court radically departed from this requirement in Sindell v. Abbott Laboratories. The court held that a valid cause of action was stated against five drug manufacturers even though the particular manufacturer of the product which caused injury could not be identified. In Sindell, the court pronounced a new theory upon which non-identifiable manufacturer liability could be predicated. Under the court’s new market share theory, plaintiffs injured by fungible products could bring suit against several manufacturers, who together, produced a substantial portion of that product. Each defendant would then be liable for the portion of the judgment corresponding to their share of the market.
This note will examine the effect and the practicality of the market share liability theory proposed by the court. The various policies underlying traditional products liability law and the market share solution to the identity problem are also examined. Finally, the court’s decision will be analyzed and available alternatives to the market share theory will be suggested.
II. STATEMENT OF THE CASE
The plaintiff, Judith Sindell, brought suit on her own behalf and others similarly situated, against eleven drug companies and others for injuries allegedly resulting from the ingestion of diethylstilbestrol (DES) by their mothers while the plaintiffs were in utero. The defendants were manufacturers who promoted, marketed, and distributed DES between 1941 and 1971. In 1947, the Food and Drug Administration (FDA) authorized the marketing of DES as a miscarriage preventative on an experimental basis and required that it carry a warning label to that effect. The drug was subsequently administered to the plaintiffs’ mothers. The drug was later found to be a possible cause of adenocarcinoma, a rare uterine cancer, and adenosis, a precancerous vaginal and cervical growth. These conditions appeared in daughters who were exposed to DES while in utero. In 1971, the FDA ordered the defendants to cease marketing and promoting DES as a miscarriage preventive. The FDA also ordered the defendants to warn physicians and the public of the potential danger to unborn children if the drug was used during pregnancy.
The plaintiffs predicated their cause of action on various theories of negligence, concert action, alternative liability, and strict products liability. The defendants demurred on the ground that the plaintiffs could not identify the manufacturer responsible for the product which caused their injuries. The trial court sustained the demurrer based on the plaintiffs’ admission that they were unable to make the identification. Consequently, the case was dismissed.
The California Supreme Court reversed the lower court ruling on the appeal involving only five of the original eleven named defendants. The court held that a valid cause of action was stated by proving that the defendants produced a substantial percentage of DES. The manufacturers were liable for a portion of the judgment equal to their share of the market for that drug unless they could prove that they could not have made the product which caused the plaintiffs’ injuries.
B. Issue Presented to the California Supreme Court
The issue, as stated by the court, was whether a plaintiff, injured as the result of a drug administered to her mother during pregnancy, who knows the type of drug involved but cannot identify the manufacturer of the precise product, may hold liable for her injuries a maker of a drug produced from an identical formula?
III. NON-IDENTIFIABLE MANUFACTURER LIABILITY PRIOR TO SINDELL V ABBOTT LABOATORIES
Strict products liability evolved as a device designed to aid the consumer-plaintiff in surmounting obstacles of proof imposed by negligence recovery theories when dealing with injuries caused by a defective product. Strict products liability was justified on the grounds that rapid technological progress had placed distance and complex technology between the consumer and the manufacturer. The consumer was perceived as inadequately prepared to protect himself from defective and injurious products. Conversely, the manufacturer was in better position to prevent defective products from entering the marketplace. Therefore, imposing liability on manufacturers for injuries caused by defective products was deemed an incentive to product safety. The manufacturer could also afford to bear the burden of the loss compared to the injured consumer. The effect of the cost would be minimal because the manufacturer could pass it on to all his consumers as a cost of doing business or he could insure against it.
Increased complexities in the marketplace spawned another problem. Technological improvements and more efficient production practices allowed manufacturers to create and market fungible goods; products which, though made by different manufacturers, could be interchanged with one another. As a result, the injured consumer might not be able to identify the particular manufacturer of the product which caused his injuries. As the number of such cases increased, the problem became more apparent. New theories emerged in an attempt to accord the consumer some remedy when the manufacturer whose product caused injury was not identifiable. Theories such as enterprise liability and non-legal systems such as latent technological injury compensation were proposed. In addition, several established multiple tortfeasor theories such as alternative liability, concert action, and industry-wide liability were used to attack the problem. These theories represent exceptions to the prevailing rule that the plaintiff must identify the manufacturer whose product caused the injuries in question.
A. Alternative Liability
Where two or more tortfeasors are negligent toward the plaintiff and it is not known which defendant caused the harm, all tortfeasors will be held jointly and severally liable under the theory of alternative liability. This theory was introduced in Summers v. Tice in which a plaintiff was injured when two of the hunters he was with negligently fired their guns. The court held that once the plaintiff proved that the defendants were negligent and that the negligence caused the plaintiffs injury, the burden of proof as to causation shifted to the defendants. It then became incumbent upon the defendants to absolve themselves of liability. Under Summers, each defendant was liable for the whole amount of the damages with apportionment to be decided among them. Alternative liability was developed to avoid the unfairness of allowing the defendants to escape liability because the plaintiff was not able to prove which defendant caused his injury when it was certain that one person was responsible. It was especially justified in situations in which the defendants were more capable of producing evidence as to the cause of the injury than the plaintiff.
As the Restatement (Second) of Torts notes, this rule is usually applied when all possible defendants have been joined. In a products liability action involving a number of manufacturers it might not be possible to join all the defendants. One case similar to Sindell in which the court used alternative liability to reverse the lower court’s granting of the defendants’ motion for summary judgment was Abel v. Eli Lilly and Co. The plaintiffs in Abel were also daughters whose mothers used DES during pregnancy. The plaintiffs brought a products liability action against defendants who allegedly comprised a group of all the manufacturers of DES whose products were sold in Michigan during the relevant time period. The court held that a cause of action was stated under several theories, including alternative liability.
The defendants’ main argument was that the plaintiffs could not identify the manufacturer of the product which caused their injuries. The majority and the dissent both agreed that identification of the manufacturer was usually a requirement in a products liability case. The majority, however, did not view the action as an issue of identification, but as a question of the apportionment of damages. Therefore, once the plaintiff proved that the defendants had caused them to suffer a certain amount of damage, the burden of proof as to the apportionment of the damages shifted to the defendants. The court, however did not address the fact that though the defendants, through affidavits, were able to show that of more than 300 companies manufacturing DES at the relevant time, the plaintiffs had joined only those who had sold DES in Michigan.
The court’s holding could produce unfair results for both prospective defendants and prospective plaintiffs. On one hand, with fewer than the total number of possible defendants present, manufacturers whose product may not have caused the injury may be held liable. Conversely, if it is assumed that all the plaintiffs’ mothers ingested the DES while in Michigan, the plaintiffs could argue that joinder of all manufacturers selling DES within the state at the time minimizes the chance that a manufacturer outside the defendants group would have supplied the drug. The defendant’s predicament becomes more apparent, though, if the plaintiffs are not able to satisfy their burden of proof as to some of the defendants. In that event, the risk of an innocent manufacturer being held liable is greater. From the plaintiffs’ perspective though, all DES manufacturers were tortfeasors because they all marketed a defective product. The question remains one of causation and there are strong policy considerations which would dictate that as between a manufacturer who may have caused the injury, and a completely innocent plaintiff, the manufacturer should bear the loss.
Regarding causation, the plaintiffs bear what the court recognized as an extreme heavy burden of proof. The plaintiffs must prove that one or more of the defendants manufactured the DES ingested by the mothers involved. If the plaintiffs fail to prove that it was more probable than not that any one particular defendant manufactured the injury causing DES, they would lose as to that defendant. The plaintiffs would lose as to all defendants, if they could not sustain this burden toward any of them. It is very possible that the plaintiffs would be denied a remedy.
As evidenced, alternative liability as a possible solution to the identification issue in products liability cases involving multiple defendants is not without its problems. The inherent risk of unfairness to the defendants must be carefully balanced against the risk of leaving the plaintiffs without a remedy. There appears to be a general agreement that, without modification, alternative liability is inapplicable to cases such as Sindell.
B. Concert Action
The theory of concert action has also been used to shift the burden of proof on the causation issue from the plaintiff to the defendant. The plaintiff must show that the defendants acted pursuant to a common design, gave substantial encouragement or assistance to another’s wrongful conduct, or, acted wrongfully themselves in giving aid to another’s wrongful conduct. In this regard, agreement may be tacit or express. The purpose behind the theory is to deter harmful group activity.
The application of the theory to a products liability situation was examined in Hall v. EZ Du Pont De Nemours & Co. , under the concept ofjoint control of risk. The plaintiff could prove joint control by the following methods:
- by showing that there existed an explicit agreement among the defendants with regard to warnings and other safety features;
- by showing covert joint action through evidence of parallel behavior sufficient to support an inference of tacit agreement;
- and, by showing that the defendants adhered to an industry-wide safety standard.
The court labeled the first method classic concert of action. Noting that the theory was not limited to any particular mode of cooperation or negligence, the court found that the plaintiff’s allegations concerning the defendants’ knowledge of the blasting caps risk, the feasibility of safety measures, and the cooperation among the defendants, stated a valid cause of action under this theory. The critical factor would be proof that the knowledge of the risks and the safety measures used were shared by the members of the industry and used as a basis for joint decisions.
Concert action was examined in relation to the DES situation in Abel v. Eli Lily and Co . The plaintiffs alleged that the defendants acted in concert to produce and market a defective product without adequate testing or warning. This case, unlike Hall, did not involve a trade association. Nevertheless, the court found that these allegations stated a valid cause of action. Even if it was shown that one defendant did not act wrongfully toward the plaintiff, the rest may be held jointly and severally liable. Proof that one of the defendants was the manufacturer of the defective product would not absolve the others because the basis of the theory is that all defendants, by their cooperative acts, contributed to the harm suffered by the plaintiff.
The main problem with the application of concert action to DES cases is the difficulty of proving cooperative action without evidence of an express agreement. Arguably, courts should infer the existence of a tacit agreement when there is evidence of intentionally synchronized behavior which is part of an overall industry plan which benefits the participants. Such parallel behavior though, may be attributable to factors other than tacit agreement. The role of regulations, especially in the drug industry, may explain the cooperation among industry members. To impose liability based on compelled behavior would penalize the industry for complying with regulations designed to protect the public. This would hardly serve the safety incentive rationale underlying products liability law.
As in alternative liability, the imposition of joint liability under concert action may lead to arbitrary selection of defendants and unfair standards of liability when all possible defendants are not joined. This possibility can be mitigated a number of ways. First, the defendants may implead other manufacturers who they feel are responsible. Second, unlike alternative liability, concert action does not require the joinder of all possible defendants because each defendant has contributed to the harm and therefore is jointly and severally liable. Finally, if the plaintiff joins those defendants who contributed to the major portion of the market, it is not only likely that one of them would be the party responsible for the injuries, but it is likely that as a group, those defendants greatly influenced the entire industry. Therefore, imposition of liability would encourage them to direct the industry towards insuring greater product safety.
Concert action is one possible way to approach the causation issue in DES and similar actions. The primary difficulty lies in proving the existence of a tacit agreement among the members of the industry. This task is complicated by the infusion of government regulations restricting industry activity.
C. Industry- Wide Liability
A third theory, industry-wide liability, has been proposed as a method for dealing with the problem in multiple defendant lawsuits by eliminating the identification requirement. This theory was clearly pronounced in Hall v. EL Du Pont De Nemours & Co.
In Hall the plaintiffs were children who were injured when blasting caps exploded. The incidents took place over a four year period and involved twelve separate accidents in ten different states. The plaintiffs were unable to identify the manufacturer because the explosions destroyed any identifying marks on the blasting caps. The defendants, six blasting cap companies and their trade association, constituted the entire blasting cap industry in the United States.
In deciding whether the defendants’ parallel safety practices could provide a basis for joint liability, the court noted that joint liability was concerned with three problems. The first was the need to deter hazardous group activity. The second was the task of imposing foreseeable losses to those parties in the best position to guard against them. The third problem concerned allocating the burden of proof so as to avoid denying the injured plaintiff a remedy merely because proof of causation was either within the defendants’ control, or totally unavailable.
To deal with these problems, the court proposed a theory of industry-wide liability based primarily on concert action. Under this theory, the plaintiffs can shift the burden of proof on causation to the defendants if they can show:
- that all the manufacturers of a product adhered to an insufficient uniform safety standard;
- that they cooperated in the design and manufacture of the product;
- that the product was defective and caused plaintiff’s injury;
- and that one of the defendants manufactured the product in question.
The plaintiffs’ ability to shift the burden of proof would not be affected by the fact that the blasting caps may have come from outside the United States.
This theory incorporated the concert action principle, recognizing that although the actual harm to the plaintiff was caused in fact by one defendant, it was the conduct of the group as a whole, in devising insufficient safety standards, that caused the harm. Since the defendants were responsible for the inadequate safety practices, holding the group jointly and severally liable was perceived to be the most practical remedy and placed the burden of what the court deemed the inevitable costs of business on those in the best position to take precautions against further injuries.
To benefit from the shift of evidentiary burdens, the plaintiff had to initially prove that the defendants had breached a duty of care toward them and that there was a causal connection between the group created risk and their injuries. The plaintiffs’ burden was satisfied if they proved that it was more probable than not that the injury causing caps were the product of one of the named defendants. Though the shift of evidentiary burdens was a product of alternative rather than concert liability, the court found that the justification of avoiding an unjust result served both theories.
This theory has been criticized for the court’s apparent failure to recognize the problem created by allowing cause-in-fact to be gauged on a standard of probability. Arguably though, the court implicitly recognized this problem by placing the emphasis on the group’s activities rather than the activity of each individual member. Under the concert action theory, the fact that one defendant’s conduct can be proved to be the cause-in-fact of the plaintiffs injuries does not relieve the others of liability. In Hall, the harm was not caused by the failure of the individual members to place adequate warnings on their blasting caps, or by the failure to make the caps more difficult to detonate, but by the manufacturers mutual agreement as to the relevant safety standards. The court in Hall was careful to distinguish its holding, which is predicated on industry safety standard agreements reached in a small concentrated industry, from the case of similar agreements reached in larger decentralized industries. In the latter instance, proving that the entire industry agreed and adhered to uniform safety standards would be much more difficult. Accordingly, the basis on which liabilty would rest would be insufficient.
D. Enterprise Liability
The theory of enterprise liability was proposed to deal with the particular problems of a DES suit. The plaintiff must prove that the defendants all manufactured a generically similar defective product and that the product’s defect caused the plaintiffs injury. The plaintif must also prove that there was an insufficient, industry-wide safety standard as to the manufacture of this product and there must be clear and convincing evidence that one of the defendant’s products caused the plaintiff’s injuries. In addition, the plaintiff must show that the defendants owed a duty to a class of which the plaintiff is a member. Finally, the plaintiffs inability to identify the manufacturer can not be due to his fault. Once these elements are established, the burden of proof shifts to the defendants. To avoid liability it is incumbent on the defendants to prove that they could not have manufactured the product which caused the plaintiffs injuries.
The enterprise liability theory combines principles of alternative and concert liability. It is similar to alternative liability in that it requires the product of one defendant to be the cause-in-fact of the plaintiff’s injuries. Accordingly, a defendant who adhered to the insufficient industry-wide safety standard may escape liability if it can prove that its product did not cause the injuries. Furthermore, both theories cure the plaintiffs inability to identify the manufacturer by shifting the burden of proof on causation to the defendants. Enterprise liability differs from alternative liability in that all possible defendants do not have to be joined in order for causation to be established. The plaintiff need only show by clear and convincing evidence, that one of the manufacturers, all of whom are tortfeasors, manufactured the product which caused his injury. The clear and convincing standard can be met by joining manufacturers whose combined production equals seventyfive percent to eighty percent of the total market. Though alternative liability places responsibility for the total amount of damages on each defendant, under enterprise liability the defendants would be liable only for the amount equivalent to their market share.
Enterprise liability incorporates the concert liability principles by requiring proof of an industry-wide safety standard and the manufacture of a generically similar defective product, both which must contribute to the plaintiff’s injuries. It differs from concert liability in that it does not require any type of express or implicit agreement. Parallel behavior is sufficient in and of itself.
Under enterprise liability, traditional tort policies would be served by placing the loss on the tortfeasor rather than the injured plaintiff. More importantly, however, it aligns legal principles with changes in technology and society by placing the loss on the manufacturer who is best able to absorb and distribute the cost and take preventive measures.
Although the enterprise liability theory attempts to base liability on two recognized theories of joint liability, it has been criticized as deviating too greatly from traditional tort principles and policies because it eliminates the identification requirement. Although it was proposed to meet the needs of DES cases in particular, enterprise liability would have application to other situations as well. Ultimately, its potential effect on manufacturing in general would be significant. The effect of extended products liability has already been felt in increased premiums. Under the enterprise liability theory, increased potential for liability might place the cost of premiums outside the reach of small manufacturers. While the increased liability may provide an incentive for greater product safety, it might also decrease it because no matter how safe one manufacturer tries to make its product, it may be found liable for another’s error. In addition, research and marketing of new products may be inhibited, contrary to the societal interest in encouraging production of new, beneficial products. Finally, because the theory concentrates on large manufacturers, they may be encouraged to organize the industry and effectively shut down smaller manufacturers in violation of anti-trust laws.
Policy considerations also militate against acceptance of enterprise liability. The reason behind the shift of the burden of proof on causation is to achieve a more equitable result. But equity extends considerations to both the plaintiff and the defendant. The mere possibility that a particular defendant might be responsible should not be a fair basis for liability. No doubt the possibility equally exists that the defendant’s product was not responsible for the plaintiff’s injury. The theory may also be unfair to plaintiffs who identify the manufacturer but must accept the consequences of a defendant’s insolvency or unavailability. In this instance, the plaintiff who cannot identify the manufacturer but can pick solvent and available defendants is in a better position.
The policy of loss spreading which supports this theory has been criticized as undermining the whole body of tort law. Fault in some form is still the basis of liability. Enterprise liability, however, would, in effect, eliminate that basis and result in making manufacturers insurers. In addition, the deterrent aspects of products liability law would be defeated by holding a manufacturer liable for a defect that could not have been discovered at the time the product was marketed. Without fault as a basis, liability would be imposed based on injury alone. The denial of compensation should not raise a presumption of injustice because the question is not only one of compensation but of legitimacy.
E. Latent Technological Injury Compensation
The arguments against enterprise liability generally lead to the conclusion that the problem of non-identifiable manufacturers exceeds the court’s ability to fashion a practical remedy. Since any solution to this problem will have effects not only on the substantive legal issues, but on industrial and the economic, concerns it is an appropriate question for legislation. One alternative proposed would be a system for “latent technological injury compensation.” This system would be a governmental branch which would get the necessary operational funds through a tax on manufacturers’ gross sales. The fund would be available to both plaintiffs who could identify the manufacturer and those who could not. Under this system, the statute of limitations would start to run from the date of purchase. Once the statute has run, tort litigation would no longer be an option. The plaintiff would have to apply to an administrative agency to get relief. Recovery would be based on the plaintiffs ability to show that he was injured, that the injury could be traced to a type of product, and that the injury could not have been discovered prior to the running of the statute. The plaintiff could recover damages for bodily injury and lost earnings according to a fixed scale. Pain and suffering would not be compensable. The government agency though would be allowed to seek indemnity from the manufacturer on the basis of fault.
This alternative would more readily satisfy the current societal concern for compensating victims without doing violence to traditional tort law. It also provides a solution to a problem which will occur with increasing frequency as increased technology leads to injuries which require, and, deserve compensation. In addition, the goal of loss spreading is served, especially since the loss is spread among those whose activity generated the harm.
This solution though, requires legislative action which is often tedious and compromising. Also required is the creation of an administrative agency. With the prevailing public opinion and political climate against government expansion, this may not be easily accomplished. Furthermore, the system requires a tax on the gross sales of manufacturers. Unless the economic benefit to the manufacturers in terms of lower damage awards and legal fees is clearly demonstrable, manufacturers would no doubt lobby strongly against such a plan. Finally, the limitations on damages might make the plan unappealing to plaintiffs who, under tort law, might be able to recover not only actual and special damages, but punitive damages as well. Though the system is appealing in its simplicity and rationale, it would have to overcome major obstacles before it would be realized.
As evidenced, the problem posed by fungible products and the problem of a plaintiffs inability to identify the manufacturer has been considered from many angles. Traditional tort theories such as alternative liability, concert action, and industry-wide liability have limitations which render them inapplicable in this situation. New theories based on modifications of these traditional ones, appear to stretch legal principles beyond their limits in order to meet policy justifications. Other theories necessitate legislative action which, though possibly more appropriate, require recognition of the problem by the legislature and a well-reasoned, acceptable and workable solution. What solution will ultimately be adopted is an open issue. Recently though, the California Supreme Court decided to provide its own answer.
IV. DECISION IN SINDELL V ABBOT L4BORATORIES
A. Rejection of Prior Non-Identifable Manufacturers Theories
Before introducing its new theory, the Sindell court rejected the relevance of alternative liability, concert action, and industry-wide liability theories to the situation. Alternative liability was rejected first because all DES manufacturers were not joined as defendants, and, second, because the defendants were in no better position to prove causation the plaintiffs than were. Concert action was not appropriate because the formula for DES is a scientific constant and therefore could not be a basis for a common plan. In addition, the defendants’ reliance on each other’s marketing and promotional techniques was a common practice in the industry. To apply concert action to this situation would be extending the doctrine beyond its limits. Finally, industry-wide liability was rejected for several reasons. First, the blasting cap industry in Hall was much smaller than the drug industry. The Hall court itself noted that this theory, readily applicable to a small centralized industry, might be manifestly unreasonable when applied to a large decentralized industry. Second, in Hall, some of the responsibility for the industry’s safety standards was delegated to a trade association. Such allegations were not made in the present case. Finally, the drug industry safety standards were set to a large degree by the FDA. Therefore, it would be unfair to hold a manufacturer liable for injuries resulting from a drug supplied by another manufacturer simply because it followed standards set by government regulation. Thus, the Hall theory of liability was not applicable to the situation.
B. Policy Considerations
There were policy considerations, however, which justified finding a valid cause of action. To begin, modem industry has developed fungible goods which may injure consumers, but specific manufacturers may not be identifiable. Consequently, a modification of the traditional products liability action was required. The court also noted that the Restatement (Second) of Torts recognized a modification of the Summers rule might be necessary because of the lapse of time and because of other complications resulting from the failure to join all possible defendants. An additional policy argument advanced by the court was that the manufacturers were in the best position to absorb the cost of the injury. Relatedly, it was asserted that manufacturers were better able to guard against the infusion if defective products into the market and that to impose liability would provide incentive for greater product safety. The court finally noted that the most compelling reason for finding a cause of action was that the negligent defendant rather than the innocent plaintiff should bear the loss. These goals could be accomplished under the new theory of market share liability.
C. Market Share Liability
The Sindell court found that although the rule of Summers was inapplicable as traditionally applied, a modification of that theory would be appropriate. The plaintiff was required to allege the existence of a defect and an injury caused by that defect. Causation though, was not measured by the number of defendant manufacturers joined in relation to the total number of manufacturers of that product. The court stated that the appropriate measurement of the possibility that any of the named defendants supplied the injury-causing product was the percentage which the DES sold by each of them for the purpose of preventing miscarriage bore to the entire production of the drug sold by all for that purpose. Therefore, once the plaintiff has shown that the defendants joined in the action were manufacturers who together produced a substantial portion of the DES mothers may have taken, the burden of proof shifted to the defendants to prove that they did not manufacture the product which caused the injuries. The defendants also had the option of cross-complaining against other manufacturers who may have supplied the product which caused the injury. Apportionment of damages was based on the share of the market for which each defendant was responsible.
The court recognized that each defendant’s share of the damages may differ somewhat from its actual share of the market since all manufacturers of the product might not be included and that determining the market share of each defendant might be difficult in itself. This would not invalidate the theory according to the court. Similar problems were encountered and handled adequately with comparative fault. In addition, difficulties in determining market share were problems of proof not pleading. Rejecting the defendants’ argument that it would be unfair to hold them liable for damages caused by another’s product, the court pointed out that with market share liability, each defendant would only be liable for the amount equivalent to the damages caused by the DES it manufactured.
Technological advances in industry have created societal problems. In addition to benefits, the development of new products carries commensurate risks. Discoverable or patent risks are usually dealt with by redesign or additional safety features. Products with known or suspected latent risks carry warning labels. Some latent risks, however, may only surface after a long period of time. In this situation, when the product is put into the marketplace, there is no way to warn the consumer of the hidden danger, or any reason to warrant re-design or to prevent the marketing of the product. Nevertheless, someone is injured. The allocation of responsibility for those injuries and how the injured parties are to be compensated are issues that need to be addressed.
The DES situation is a perfect example of the problem. The plaintiffs were injured by a drug taken by their mothers while the plaintiffs were in utero. Though the drug had passed scrutiny under the available testing standards and procedures required at the initial marketing point, it contained a defect which did not surface until twenty years later and in the next generation of offspring. Because of the passage of time, neither the plaintiffs nor the defendants could prove who manufactured the particular drug that caused the injuries. The California Supreme Court in Sindell v. Abbott Laboratories decided that the courts were the appropriate body to determine the placement of responsibility and its allocation. The court treated the problem as an adversarial one-the consumer against the manufacturer. In reality, because the problem is a societal one, the interests of society would best be served by a solution amenable to both parties, one which a legislature would appear more fit to tailor than a court.
There are certain factors which should dictate that legislative concern be focused on this problem. The first factor is that the solution to the problem will have a profound effect on the current economic structure. The Sindell decision basically establishes a no-fault system of compensation. The manufacturers are not being held liable because they were negligent, either as individuals or in concert toward the plaintiffs. Nor are they liable because the inability to prove identification was their fault, or their particular product caused the plaintifis injuries. These facts cannot be proven. The manufacturers are held liable because they happen to manufacture the same product. The court rejects this as a basis for finding concert action liability, but nevertheless uses it as a foundation for its market share theory. This, in effect, makes each manufacturer of a fungible product an insurer of not only injuries caused by the particular product it produced, but also those caused by similar products of other manufacturers. As a result, insurance premiums for manufacturing are likely to increase or manufacturers will “capture” an insurance company to meet the demands of the increased scope of liability. Larger companies will probably be able to cope with these results. The smaller ones, however, might find the cost of premiums outside their reach. This would leave them vulnerable to potentially devastating lawsuits. In addition, since one of the theoretical foundations of Sindell is that the manufacturer can best distribute the loss among many, it is logical that this will result in higher prices to the consumer. In a competitive market, the large manufacturers will be able to place prices at a more competitively advantageous level. Smaller manufacturers whose operational costs do not have the benefit of high volume, will not. As a result, the smaller manufacturer may be forced out of business. Judicial imposition of liability, with attendantly high awards, may discourage the production of new products and affect marketing practices of the drug industry. Finally, other areas as well as product safety might decrease instead of increase since no matter how safely a manufacturer produces a product it may still be held liable for unpreventable injuries or other manufacturers’ careless manufacturing techniques.
Another indication that a judicial solution such as market share liability is not as feasible as a legislative remedy is the degree of extrapolation the Sindell court had to engage in to justify its decision. The court found no prior legal basis for its new theory. Therefore, a policy justification was the only alternative. The court first noted that the advances in technology created the problem caused by fungible goods and that the court had a choice-to maintain the current doctrine and deny the plaintiff a remedy, or fashion a new remedy to meet the situation. Justice Traynor’s famous concurring opinion in Escola v. Coca Cola Bottling Co. was cited as support. The court noted that, while Justice Traynor was referring to duty, the court’s present problem was causation and liability. Though in some state of confusion, the principle of foreseeability still plays a role in California products liability law. The adaptation the court was trying to justify was the complete elimination of foreseeability as a relevant factor. The drug had passed all available tests. The defect surfaced a generation later. No manufacturer could have discerned that. Therefore, it can hardly be said that the injury was foreseeable.
The court also advanced the Restatement (Second) of Torts as support. Specifically, it pointed to section 433B, Comment h, which states that the rule in Summers may need modification if all defendants cannot be joined or due to the effect of lapse of time. Although the comment declines to forecast the type of cases in which modification would be necessary, it is conceivable that this situation was not one of them. In Summers all possible defendants were joined. It was entirely certain that one of the defendants was responsible. By joining less than the total number of defendants, the basis for liability under the Summers rule is weakened considerably. This weakness was recognized under the enterprise liability theory which also used the market share concept. Enterprise liability minimized the defect by requiring that the plaintiff also prove adherence to an insufficient industry-wide safety standard.
The court’s next and “most persuasive” reason for allowing the cause of action was that as between an innocent plaintiff and a negligent defendant, the tortfeasor should bear the loss. Nevertheless, this is unpersuasive when it is remembered that the court found that neither the plaintiff nor the defendants were at fault for lack of proof as to identification. The court tried to rationalize their decision by noting that the defendants contributed to the problem by marketing a drug with delayed effects. This argument is untenable when it is considered that the defect was not discoverable under the contemporary testing methods. To use this justification as a basis of finding some fault is to require manufacturers to be clairvoyant.
Realizing that these reasons were not sufficient, the court proceeded to broader policy arguments. The first justification advanced was the “deep pocket” theory-the defendants were best able to bear the loss and distribute it among society. Though this is probably true, as the dissent notes wealth should not be a basis for liability. Furthermore, the loss spreading rationale has its own dangers. The second justification for devising a new cause of action was that it would encourage product safety, deter placement of defective products in the marketplace, and, as a result, protect the helpless consumer. This rationale is based, however, if not on fault, then at least on the ground that the defects were discoverable and could be prevented. If the consumer is helpless to protect himself from injuries caused by the delayed effects of a drug with a latent defect, then the manufacturer is also helpless in the sense that it cannot warn or take preventive measures against such a defect.
On these policy bases the court held that a plaintiff states a valid cause of action when the injury is caused by a fungible product and the plaintiff has joined defendants who have together contributed a substantial portion of the market for that product. Causation is to be measured by market share. But this crucial element is left undefined. The court noted that joining defendants who have a combined market share of seventy-five percent to eighty percent has been recommended, but expressly declines to designate any percentage parameters. Since there is no basis for liability except the defendants’ market share of a fungible product, the court’s failure to define this element is a critical error. It is not merely a matter of proof as the majority suggests, but, as the dissent points out, a question of liability. Moreover, the court uses this uncertain element to justify shifting the burden of proof from the plaintiff to the defendants on the issue of causation. The court noted that any unfairness inherent in shifting the burden of proof is minimized by holding each defendant liable only for its share of the product. This logic is hard to accept. The court has recognized that the defendants are in no better position to disprove causation than the plaintiffs are of proving it. A defendant who produced only thirty percent of the total product marketed should not be held liable merely because he cannot prove that he did not market the specific product that injured the plaintiff. Because most defendant’s market share is relatively small, it is more likely than not that a given defendant did not market the product in question. To hold the defendant liable in such circumstances is manifestly inequitable.
Finally, the uncertainty of the market share element is carried through to the apportionment of damages. Rather than making the defendants jointly and severally liable as in alternative liability, the court apportioned the damages each defendant will be liable for on the basis of its market share. The court dismissed the problems caused by this element’s vagueness by pointing out that difficulty in apportionment has been handled adequately in other situations.
With liability based, not on fault, but on production of similar products, the end result of the court’s decision is not a theory derived from established legal principles, but a theory of no-fault compensation founded on a basis of loss spreading and redistribution. As one commentator noted, if redistribution is the major goal, then there is no reason why the court should retain the principles of causation and defect. Redistribution would be frustrated to the extent that the defendant could use those elements to defeat the plaintifis cause of action. If the needs of the plaintiff are decisive, then the most appropriate response is a comprehensive system of first party insurance that compensates each person in accordance with the severity of their injury.
It is possible that a uniform system of compensation is the solution to the problem. Courts resolve individual cases and cannot solve the problems inherent in setting up a major compensation system. That responsibility belongs to a legislature which has the time and the resources to make a proper evaluation of the problem and the possible solutions. Unlike courts, which have been traditionally limited to dealing with a problem on a case-by-case basis, the legislature is empowered, through enactments, to make broader, more uniform changes. Legislative decisions do not rest on the arguments of a limited number of parties concerning a particular fact situation. Considering the potential breadth of the fungible products problem, such a decisional basis is too narrow. By shifting the problem to the legislature, consumer groups as well as manufacturers will have a role in the final plan. The legislature might react more slowly than courts in reaching its decision, and during the decisional process persons will probably suffer from injuries caused by fungible products. In the long run, however, a legislative decision will be more equitable and will reflect the needs of many interest groups. It will also avoid the undermining of judicial principles which have served well in other situations.
Advanced technology has created not only new products, but also new problems. One of these problems is the inability of a plaintiff injured by a fungible product containing a latent defect to identify the manufacturer of the product which caused his injury as required by traditional tort law. The problem is not only one of lack of identification, but also lack of fault because the manufacturer could not have discovered the defect under the current methods of testing. The court in Sindell attempted to solve the problem by judicially devising a basis of no-fault compensation. However, considering the scope of the problem and the role of the courts, the solution to the situation rests more appropriately with the legislature. This body, by providing a forum in which the concerns of all interested parties can be voiced, can devise an equitable and uniform solution without doing violence to valuable legal principles. Though it is recommended that the Sindell theory not be accepted as a viable cause of action, it is hoped that the legislatures will see it as a warning that the problem has reached maturity and requires immediate attention.
Barbara Banker Redemann, 1980.
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Harvard Law Review
Vol. 94, No. 3 (Jan., 1981), pp. 668-680.
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The English case of Winterbottom v. Wright is generally viewed as marking the beginning of product liability law. When Winterbottom was decided in 1842, the industrial sector of society was in its infancy and the courts, in order to encourage industrial development, sought to restrict the tort liability of industrial concerns. In the 140 years since Winterbottom, as the industrial sector has become more powerful, the courts have expanded the liability of manufacturers and generally made it easier for a plaintiff to recover for a product-related injury. This expansion has occurred in response to drastic changes in the market place since pre-industrial times. The direct relationship between manufacturer and consumer has disappeared as more sophisticated methods of manufacture and distribution lengthen the chain of commerce. Also, products have become more complex, reducing the ability of the consumer to evaluate his purchases intelligently. These changes have forced a shift in the judiciary’s view of which parties should be afforded greater protection as a matter of public policy.
Overcoming the Identification Burden in DES Litigation: The Market Share Liability Theorys, Marquette Law Review, Volume 65, Issue 4, Article 4, Summer 1982.
Despite the historical trend toward liberalization of the requirements for recovery in product liability actions, plaintiffs must still establish three elements:
- that the product that injured them was defective;
- that the defect caused the plaintiff’s injury;
- and that the defect was attributable to the party to be held responsible.
The last element – called the identification requirement – requires the plaintiff to specify the particular manufacturer of the product that injured him. Unless the plaintiff can do so, an essential element of his case will be lacking and recovery will be precluded. Traditionally, the rule has been strictly applied even where two or more manufacturers produce an identical product: unless the plaintiff can exclude all but the specific manufacturer of the particular product that injured him, recovery will not lie, even if all manufacturers were clearly negligent
Recently the courts have been faced with a series of cases wherein the wisdom of the identification requirement, when applied to a certain factual context, has been seriously questioned. Most of these cases have been brought by the daughters of women who ingested the drug diethylstilbestrol (DES), prescribed to prevent miscarriage. These daughters allege that their in utero exposure to DES has caused them to develop a variety of serious genital tract disorders. The plaintiffs in these cases have faced numerous roadblocks to recovery, the most serious being their inability to identify the specific manufacturer of the DES their mothers ingested. In earlier DES cases where the identification requirement was strictly applied, plaintiffs were barred from recovery. More recently, however, two courts have shown a willingness to apply a market share theory of liability under which plaintiffs can circumvent the identification requirement in DES cases, thus increasing their chances of recovery.
This comment will assess the unique nature of the DES cases, and analyze and critique the various theories that have been proposed in an effort to assist plaintiffs in overcoming the identification requirement. Particular emphasis will be placed on the market share liability theory and how it can best be adapted to achieve an equitable result in DES litigation.
DES: THE PLAINTIFFS’ DILEMMA
Diethylstilbestrol (DES) is a synthetic estrogen. In 1947, the Food and Drug Administration (FDA) authorized the marketing of DES for use as a miscarriage preventative, but only on an experimental basis, with the requirement that the drug contain a warning label regarding its experimental status. Between 1947 and 1971, hundreds of pharmaceutical companies marketed DES, and it was prescribed for millions of pregnant women. In 1971, statistically significant relationships between the use of DES and the subsequent development of genital tract cancer in the users’ daughters were reported in the medical literature. In that same year, the FDA banned the marketing and promotion of the drug for use as a miscarriage preventative is on the basis of its apparent danger and ineffectiveness.
Estimates of the number of “DES daughters” – women whose mothers took DES during pregnancy – range from five hundred thousand to three million. In lawsuits against DES manufacturers, plaintiffs have alleged that DES causes a variety of gynecological disturbances including structural deformities, adenosis and clear-cell adenocarcinoma, the form of cancer linked to DES in earlier studies. Estimates of the actual number of suits filed range up to one thousand, and many of the major drug companies have been brought in as defendants.
The plaintiffs in these cases have been able to present a strong case that the drug manufacturers were negligent in the marketing and testing of DES. Justice Mosk in Sindell v. Abbott Laboratories stated that:
During the period defendants marketed DES, they knew or should have known that it was a carcinogenic substance, that there was a grave danger after varying periods of latency it would cause cancerous and precancerous growths in the daughters of the mothers who took it, and that it was ineffective to prevent miscarriage. Nevertheless, defendants continued to advertise and market the drug as a miscarriage preventative. They failed to test DES for efficacy and safety; the tests performed by others, upon which they relied, indicated that it was not safe or effective. In violation of the authorization of the Food and Drug Administration, defendants marketed DES on an unlimited basis rather than as an experimental drug, and they failed to warn of its potential danger.
Plaintiffs have faced a raft of difficulties in the DES suits, however. These include problems in meeting the requirements for class action certification, the possible inability to establish a cause of action for fetal injury prior to viability, and the running of the statute of limitations in jurisdictions where the cause of action is deemed to accrue at the time of actual injury, rather than at the time the injury is discovered. Clearly, however, the plaintiffs’ most serious problem has been their inability to identify the specific manufacturer of the DES that caused them harm. Several factors have given rise to this problem. First, the sheer number of DES manufacturers (between approximately one hundred and three hundred firms) makes identification difficult. Second, the genital tract cancer associated with DES (adenocarcinoma) has a ten to twenty year latency period. With the passage of time, prescription or purchase records which might identify the source of the DES to which the plaintiff was exposed – whether those records were possessed by the plaintiff’s mother, the mother’s doctor, or the mother’s pharmacist – are likely to have disappeared. Third, even if prescription records were still available, it could not be said with certainty that the drug brand specified on the prescription blank was the actual brand sold to the plaintiff’s mother. DES is a fungible drug produced by many firms, and it was once a common practice of pharmacists to fill prescriptions for DES with whatever brand they had on hand, whether or not that brand was the one specified on the prescription blank.
For the above reasons, plaintiffs argue that strict adherence to the identification requirement in DES cases is unfair. Plaintiffs have proposed three alternate theories of liability – a “concert of action” theory, an “enterprise liability” theory, and an “alternative liability” theory – under which they might recover notwithstanding the difficulties posed by the identification requirement. These three theories, and the courts’ responses to them, are discussed below.
THE CONCERT OF ACTION THEORY
Section 876 of the Restatement (Second) of Torts recognizes three factual patterns in which a concerted action theory might be applied to hold multiple defendants jointly and severally liable. In the first, all defendants act tortiously toward the plaintiff according to a common plan or design. Thus, for example, if A, B, C and D went together to E’s house with the common intent to commit a robbery, and A broke down E’s door, B tied E up, C beat him and D converted his property, A, B, C and D would be jointly and severally liable for the total damages caused by their own and each other’s torts. In the second fact pattern, one or more defendants give substantial assistance or encouragement to another defendant, knowing that the latter’s behavior is tortious. Thus, for example, where A urges B to throw a rock at C, and B does so, injuring C, both A and B are jointly and severally liable for C’s damages, even though A’s behavior, separately considered, was not tortious. In the third fact pattern, two or more defendants participate in a joint activity, and any one defendant is jointly and severally liable for the results of the united effort if his act, considered separately, is tortious, irrespective of his knowledge that his act or the acts of the others is tortious. For example, each of a number of trespassers who are jointly excavating a ditch is liable for the entire harm caused thereby, although none believes that he is trespassing. Prosser summarizes the concerted action doctrine as follows:
Those who, in pursuance of a common plan or design to commit a tortious act, actively take part in it, or further it by cooperation or request, or who lend aid or encouragement to the wrongdoer, or ratify and adopt his acts done for their benefit, are equally liable with him. Express agreement is not necessary, and all that is required is that there be a tacit understanding ….
The gravamen of the plaintiffs’ charge of concert in the DES cases is that the defendants relied upon each other’s inadequate tests and took advantage of each other’s promotional and marketing techniques. For example, plaintiffs note that in 1941, twelve drug companies submitted a joint clinical file pursuant to their request for FDA approval of DES.
The Sindell court went on to state that there is no allegation here that each defendant knew the other defendant’s conduct was tortious toward the plaintiff, and that they assisted and encouraged one another to inadequately test DES and to provide inadequate warnings…. There was no concert of action among defendants within the meaning of that doctrine.
Historically, the concerted action theory developed to discourage tortious group behavior by expanding the scope of liability for a tortiously caused injury: it was not created specifically to aid plaintiffs in overcoming the identification requirement. The concerted action theory typically is applied in situations in which, unlike in the DES cases, a particular defendant is already identified as the factual cause of the plaintiff’s harm, and the plaintiff merely wishes to extend liability to those acting in league with that defendant. For example, the theory has been applied in illegal drag race cases to hold all participants jointly and severally liable even though only one participant actually struck the plaintiff. In cases such as these where the concert of action theory has been applied, identification of the defendants has rarely been an issue.
For the above reasons, plaintiffs have rarely been successful’in suing on a concert of action theory in DES litigation. Outside the DES area, the concerted action theory has never been successfully applied to avoid the identification requirement in product liability cases.
THE ENTERPRISE LIABITY THEORY
A second theory under which plaintiffs have attempted to avoid the identification requirement in DES cases has been termed “enterprise liability.” Numerous different theories have appeared under this general rubric. This comment adopts the theory of enterprise liability first suggested in Hall v. E.L DuPont de Nemours & Co. That case involved twelve separate accidents in which thirteen children were injured by dynamite blasting caps. Evidence identifying the manufacturer of the caps was destroyed in the explosions. The defendants were the six major domestic manufacturers of blasting caps and their trade association, which comprised virtually the entire blasting cap industry in the United States. Several Canadian manufacturers, however, could have supplied the caps. The plaintiffs alleged that the failure of the blasting cap industry as a whole to place a warning on individual blasting caps created an unreasonable risk of harm which resulted in the plaintiffs’ injuries.
Despite the plaintiffs’ inability to identify the specific manufacturer of the blasting caps that caused their injuries, the Hall court held that the defendants were not entitled to a dismissal for plaintiffs’ failure to state a claim. The court noted that there was evidence that the individual defendants had adhered to industry-wide safety standards and had in effect delegated duties of safety investigation and design, such as labeling, to a trade association. The court reasoned that this evidence could support a conclusion that all the defendants jointly controlled the risk, and if such control were shown, the issue of who caused the injury would become secondary to the fact that the enterprise or industry as a whole engaged in joint, hazardous conduct. Under these circumstances, if plaintiffs could show by a preponderance of the evidence that the caps were manufactured by one of the joined defendants, the burden of proof as to causation would shift to the defendants, allowing a specific manufacturer to exculpate itself only if it could show that it did not manufacture the caps that injured the plaintiffs..
The theory of enterprise liability suggested in Hall is predicated largely upon the existence of industry-wide standards or practices adhered to by a group of defendants. When the standards can be shown to be deficient, identification of a specific defendant decreases in importance, since the standards themselves can be conceptualized as the primary causative agent. Each industry member contributes to the plantiff’s injury by adhering to, and therefore perpetuating, the standard, which results in the manufacture of the defective product.
The enterprise liability theory is distinguishable from the concerted action theory in that, under the latter theory, defendants cannot exculpate themselves by showing that they did not manufacture the injury-producing product. Indeed, the very purpose of the concerted action theory is to extend liability beyond manufacturers to those who render substantial encouragement or assistance to them. Also, under the enterprise liability theory, proof of an express agreement or “tacit understanding” is not required, as it is in the concert cases: the joint, parallel activities of the industry members in adhering to the safety standard substitutes for this requirement. Finally, unlike the concerted action theory, the enterprise liability theory was specifically formulated to aid plaintiffs in overcoming the difficulties posed by the identification requirement. This purpose becomes clear from an examination of the procedural history of the Hall case. When the plaintiffs in Hall amended their complaint to name a particular manufacturer alleged to have caused their injuries, the court held that “the amended complaint .. .does not preserve the joint [enterprise] liability aspects of the case.
The existence of industry-wide standards for drug manufacturing would seem to render the DES cases ripe for the application of the enterprise liability theory. For several reasons, however, this theory has generally not been successfully applied in the DES litigation to date . First, the promulgation of standards for drug manufacturing is largely uncontrolled by the drug manufacturers themselves. The Federal Food and Drug Administration regulates many phases in the testing, manufacturing and marketing of drugs, including the contents of warning labels. While adherence to FDA standards cannot insulate a manufacturer from liability, to the extent that compliance with these standards is compelled by the federal government it would be unfair to impose liability on a drug manufacturer simply for following the standards, when the plaintiffs are unable to identify that manufacturer’s product as the cause of their injuries.
A second factor militating against enterprise liability in DES litigation is the large number of defendants involved (between one hundred and three hundred). The Hall case involved only six manufacturers, representing the entire blasting cap industry. The court cautioned against applying the enterprise liability theory in cases involving large numbers of defendants, stating that what would be fair and feasible with regard to an industry of five or ten producers might be manifestly unreasonable if applied to a decentralized industry composed of thousands of small producers. As the number of manufacturers increases, joint control and awareness of the risks at issue, and joint capacity to reduce those risks, becomes more difficult to imply as a predicate to liability.
Finally, it should be emphasized that the enterprise liability theory, as explicated in Hall, does not allow a plaintiff to avoid the identification requirement in toto. The plaintiff is still required to show that at least one of the joined defendants manufactured the injury-producing product, which most plaintiffs in the DES cases simply cannot do.
THE ALTERNATIVE LIABILITY THEORY
The most promising theory advanced by DES plaintiffs in an effort to avoid the identification requirement has been termed “alternative liability.” This theory is based on the celebrated California case of Summers v. Tice. In Summers, two hunters negligently and simultaneously shot in the plaintiff’s direction, injuring his eye. Neither the plaintiff nor the defendants could determine which hunter had injured the plaintiff, and only one could have done so. The California Supreme Court held that when two negligent tortfeasors independently harm a plaintiff, and the plaintiff, through no personal fault, cannot prove which tortfeasor caused the harm, the burden of proof as to causation shifts to the defendants, who will be held jointly and severally liable unless able to prove that one defendant did not cause the plaintiff’s injury. This holding represented a policy determination that an innocent plaintiff should not go remediless simply because the plaintiff is faultlessly unable to determine which of two negligent tortfeasors caused the injury. The holding was also based on the presumption that under the circumstances in Summers, the defendants are often in a “far better position” to offer evidence on the causation issue. Section 433B(3) of the Restatement (Second) of Torts has codified the Summers rule.
As a means of avoiding the identification requirement in DES litigation, the alternative liability theory, as explicated in Summers, is ostensibly superior to the concert of action and enterprise liability theories. Unlike the concerted action theory, alternative liability was specifically formulated to aid the plaintiff in overcoming the identification requirement where its imposition would be unfair. Also, to prove concerted action, the plaintiff must show an express agreement or “tacit understanding” among the defendants: no such requirement exists under the alternative liability theory, which can impose joint and several liability on defendants who act independently. In addition, unlike the enterprise liability theory, alternative liability requires no showing that the defendants adhered to an inadequate industry-wide safety standard for which the industry itself bore primary responsibility.
The facts in Summers are superficially similar to the facts in the DES cases. As one commentator has noted:
Many of the elements of the Summers fact pattern are present in the DES cases. Defendants’ manufacturer of dangerous pills for the unwary public can be compared to the hunters shooting in the direction of their companion. In each situation, all defendants are tortfeasors owing a duty of care to the injured plaintiff. In both the DES cases and Summers, the tortious nature of each of the defendants’ conduct was identical and created the same type of risk. Neither the plaintiff in Summers hit by a bullet nor the DES daughter who developed cancer is at fault for being unable to identify the one who caused his injury.
Arguably, then, the Summers rule should operate in the DES cases to shift the burden of identification to the defendant manufacturers and to impose upon them joint and several liability if they fail to discharge that burden. As with the other theories plaintiffs have presented, however, numerous factors militate against the application of the alternative liability theory to DES litigation, particularly as that theory was developed in Summers.
In civil cases, a plaintiff must generally prove liability by a “preponderance of the evidence, interpreted as a mathematical probability of greater than fifty percent. Where the alternative liability theory is applied to a situation involving only two defendants, as in Summers, the probability of causation for each defendant is still only fifty percent, which is less than the civil standard. This is tolerated under the theory in light of the policy determination that, under certain circumstances, the requirement that a plaintiff show at least a fifty one percent likelihood that a particular defendant harmed him will be relaxed when the plaintiff can establish a one hundred percent probability (i.e., a certainty) that at least one of a group of tortfeasors harmed him.
The fairness of this policy is contingent upon two factors. First, the group of tortfeasors to whom the identification burden, and potential joint and several liability, is shifted must be small enough so that the probability that any one tortfeasor in fact injured the plaintiff does not become inequitably low. In Summers, only two tortfeasors were involved, with a fifty percent possibility of causation. Consider an analogous situation, however, involving ten tortfeasors. There, the probability that any one defendant injured the plaintiff diminishes to ten percent, considerably less than the civil standard. The precise point at which such probabilities diminish to where the inference of causation, and the imposition of joint and several liability, becomes inequitable is of course a debatable issue. In the DES litigation, however, the most conservative estimates of the number of tortious DES manufacturers hover around one hundred, which would establish a mere one percent probability of causation for each individual defendant. Clearly, this level of probability provides neither a rational nor an equitable basis upon which to infer causation or impose joint and several liability. In this circumstance, a defendant who had only a one percent probability of being the causal tortfeasor could potentially be held liable for the plaintiff’s entire damage assessment – a patently unfair application of the alternative liability theory.
The fairness of the policy underlying alternative liability is also contingent upon complete joinder of all tortious defendants. Complete joinder, which would ensure that the negligence of at least one of the tortfeasors was causal, constitutes the quid pro quo for relaxing the civil standard of proof of causation as applied to each single defendant. It also guarantees that the actual causal party will not escape liability.
In the DES cases, however, complete joinder is a practical impossibility; hence the application of alternative liability is again contraindicated. Even if all DES manufacturers could be joined, the presumption, implied by the alternate liability theory, that all defendants would possess an equal probability of being the causal party is dubious at best. Some manufacturers held a greater share of the DES market than others, and thus were more likely to have supplied the drug to a particular plaintiff. Under the alternative liability theory, however, market share would have no bearing upon the assessment of probabilities related to the identification issue. Neither would it bear upon the issue of damage assessment: in those states that provide for equal contribution among negligent defendants, each DES manufacturer would be equally liable for the plaintiff’s damages despite its share of the relevant market.
Finally, it should be noted that in the Summers case, from which the alternative liability theory was derived, the events took place simultaneously in a single location with the defendants in each other’s presence. This allowed them a reasonable opportunity to identify the causal party, which was doubtless a factor in the court’s decision to shift the identification burden. By contrast, the defendants’ conduct in the DES cases occurred over the entire United States over a period of years. This fact, in conjunction with the lack of documentary evidence of identification, virtually eliminates any way for DES defendants to exculpate themselves by inculpating other defendants. Given the basic wisdom of the policy underlying alternative liability, the defendants’ evidentiary problems should not prevent the shift of the identification burden to them, especially where innocent plaintiffs are faced with essentially the same problems. However, the Summers practice of both shifting the evidentiary burden and imposing joint and several liability raises the potential, in the DES cases, for damage apportionments grossly disproportionate to the defendant’s probability of causation. Primarily for this reason, the alternative liability theory, as explicated in Summers, has not been successfully applied in the DES litigation to date.
THE RESPONSE OF COURTS: INDUSTRY-WIDE MARKET SHARE LIBILITY
If the plaintiffs in the DES cases were confined to the above theories of liability, recovery would doubtless be precluded. Nonetheless, sound policy reasons exist for not denying recovery in DES litigation. Foremost among these is that advanced in Summers: as between innocent plaintiffs and negligent tortfeasors, the latter should bear the cost of injury. This policy factor is particularly applicable when, as in the DES cases, the plaintiffs are not at fault for their inability to obtain recovery under traditional tort doctrines.
Various economic criteria also support shifting the tort losses to the DES defendants. The DES manufacturers are best able to absorb these losses by distributing them among the public as a cost of doing business. The losses would be appropriately allocated, via increased prices, to that segment of the public that benefits most by the drug industry’s activities, that is, drug consumers. The drug industry is apparently in good financial health, and individual manufacturers are able to insure against drug-related losses.
The drug manufacturers are also in the best position to discover, warn against and prevent defects in their products. Drug consumers are virtually helpless to protect themselves from drug-related injuries and must rely almost wholly upon the manufacturers’ representations of safety. Shifting the losses to the DES defendants would also provide incentive for safer manufacturing practices.
The contradiction in the DES cases between the above policy factors supporting recovery, and the inadequacy of traditional tort doctrines in providing recovery, forces a “crisis” in the tort recovery system. The response of courts could be either to stick to traditional doctrines and deny recovery or to fashion new remedies that are more equitable given changed social, technological and economic conditions. In taking the latter course, Justice Traynor, in Escola v. Coca-Cola Bottling Co., urged the adoption of strict liability over traditional standards of negligence in product liability actions. The changed relationships between manufacturer and consumer which gave rise to his opinion are even more evident in the modern era. Referring specifically to the DES litigation, one commentator has noted that:
Technological advances and current market conditions now allow an entire industry to manufacture a complex fungible product; modern scientific research can link contact with this product to harmful effects after a significant lapse of time. Since these advances now make identification of the injury-producing product inaccessible to the consumer, themanufacturer’s obligation to the consumer can only be met by some new form of liability.
The California Supreme Court, in Sindell v. Abbott Laboratories, fashioned just such a “new form of liability,” termed market-share liability, as a means of avoiding the identification requirement in DES litigation. Under the market share liability theory, if a plaintiff who is unable to identify the manufacturer of the DES which injured her is able to join as defendants manufacturers that together account for a “substantial” market share of the DES her mother might have taken, the burden of proof as to which manufacturer actually supplied the injury-producing DES would be shifted to the defendants. A particular defendant could exculpate itself by showing that it could not have produced the DES to which the plaintiff was exposed. Each defendant that failed to do this would be held liable for a proportion of the plaintiff’s judgment corresponding to its percentage share of the market.
The Advantages of the Market Share Approach
Two practical advantages of the market share theory to DES plaintiffs, in addition to the elimination of the identification burden, are evident. First, the plaintiff need prove neither concerted action nor adherence to a defective industry-wide safety standard. Second, complete joinder, a necessity under the alternative liability theory, is not required under the market share approach.
Numerous theoretical advantages also accrue under the market share theory. This approach provides a much more accurate measure of the probability that a particular defendant caused the harm than the Summers alternative liability theory provides. Under the Summers theory, causation probability is treated purely as a mathematical function of the number of defendants joined; thus, where two defendants are present, the causation probability is fifty percent; with four defendants, twenty-five percent. The problem with this approach is that there is simply no rational connection between the number of defendants joined and the probability that any one defendant caused the plaintiff’s injury. There is clearly a rational connection, however, between market share and causation probability, at least in the context of the DES cases. Obviously, the more prevalent a particular manufacturer’s DES was in the marketplace, the more likely that a particular plaintiff ingested that manufacturer’s drug.
The market share approach also provides a more rational means of apportioning damages than the joint and several liability imposed by the other theories. Since each defendant is liable only for that proportion of the plaintiff’s damages corresponding to its percentage share of the DES market, each defendant’s damage assessment is more closely related to the probability that it caused the plaintiff’s harm. Curiously, under the market share approach, a particular defendant’s aggregate liability in the total number of DES cases is arguably the same as it would be if identification in all cases could be made. As one commentator explains:
If X Manufacturer sold one-fifth of all the DES prescribed for pregnancy and identification could be made in all cases, X would be the sole defendant in approximately one-fifth of all cases and liable for all the damages in those cases. Under [market share] liability, X would be joined in all cases in which identification could not be made, but liable for only one-fifth of the total damages in these cases. X would pay the same amount either way. Although the correlation is not, in practice, perfect, it is close enough so that defendants’ objections on the ground of fairness lose their value.
Delimiting the defendant’s liability via market share also provides a quid pro quo for holding the defendant liable where its probability of causation is less than the civil standard of proof, here defined as a mathematical probability of greater than fifty percent. Thus, for example, it becomes tolerable to hold a defendant liable where its probability of causation (that is, market share) is only ten percent – much lower than the civil standard – since its damage assessment will be correspondingly limited.
Problems with the Market Share Approach
Market share liability represents a novel and creative solution to the plaintiff’s identification problems in DES litigation. The theory, however, is subject to numerous criticisms, on both operational and public policy grounds.
Although under the market share approach joint and several liability is eliminated, the plaintiff is still able to recover one hundred percent of the damages. Since the plaintiff need join only defendants which together represent a substantial, rather than a complete, share of the DES market, each defendant may be held liable for a portion of the plaintiff’s damages that substantially exceeds the defendant’s market share. For example, assume that the plaintiff joined two defendants, each with thirty-five percent of the DES market. Assume further that their combined market share, seventy percent, is deemed “substantial” by the court, which results in the shift of the identification burden to the defendants. Since the plaintiff is entitled to full recovery, if the defendants cannot satisfy the identification burden, each will be liable for fifty percent of the plaintiff’s damages, rather than the thirty-five percent that represents their respective market share.
The discrepancy between the market share and damage apportionment percentages will vary according to the actual combined market shares present in individual cases: the discrepancy decreases as the aggregate share approaches one hundred percent and disappears at that point. Of course, the combined market shares present in individual cases will depend greatly upon how individual courts define a “substantial” share of the market since, presumably, a plaintiff will be motivated to join defendants only up to the point where a substantial market share is represented in her case. The Sindell court did not define the point at which combined market share percentages become “substantial,” a question with which trial courts will have to grapple in future DES litigation.
Difficulties also arise under the market share theory in the definition of the relevant DES market. Market share data may simply be unavailable, particularly for the time periods when plaintiffs’ mothers first ingested DES. Also, DES was used for various purposes other than to prevent miscarriage, and it may be difficult to determine what percentage of DES was sold for use by pregnant women. In addition, a troublesome question arises concerning the geographic scope of the relevant DES market: should it be restricted to a particular state, city or even pharmacy, where the plaintiff’s mother purchased, or might have purchased, DES? While recognizing these problems, the Sindell court did not indicate how they might be resolved or which party would have the burden of defining the relevant market.
Ironically, the market share approach may operate to treat plaintiffs who cannot identify the causal manufacturer more favorably than those who can. In the ordinary tort case where a single causal defendant is identified, the plaintiff’s damages will be recoverable solely from that defendant, who may or may not be solvent. This would presumably be the case where a particular DES defendant was identified as the causal party: the plaintiff’s damage recovery would be restricted to that defendant alone, and the plaintiff assumes the risk that the defendant can respond financially. Where the plaintiff cannot identify the causal manufacturer, however, the market share theory literally imposes industry-wide liability, substantially reducing the risk that the plaintiff will be without a solvent defendant. The theory therefore operates to “punish” those plaintiffs who are able to satisfy traditional tort doctrines by identifying the causal manufacturer. The theory also operates to expose defendants to double liability, once to plaintiffs who can identify them as the causal party, and once again to plaintiffs who cannot.
The dissent in the Sindell case felt that the market share theory represented an unwarranted and unprecedented extension of liability. As Justice Richardson stated, under the market share theory,
recovery is permitted from a handful of defendants each of whom individually may account for a comparatively small share of the relevant market, so long as the aggregate business of those who have been sued is deemed “substantial.” In other words, a particular defendant may be held proportionately liable even though mathematically it is much more likely than not that it played no role whatever in causing plaintiff’s injuries …. The majority rejects over 100 years of tort law which required that before tort liability was imposed a “matching” of defendant’s conduct and plaintiff’s injury was absolutely essential.
The dissent additionally claimed that
“market share” liability… represents a new high water mark in tort law. The ramifications seem almost limitless, a fact which prompted one recent commentator, in criticizing a substantially identical theory, to conclude that “elimination of the burden of proof as to identification [of the manufacturer whose drug injured plaintiff would impose a liability which would exceed absolute liability“.
Courts have expressed concern that changes in the tort law might overly enlarge a manufacturer’s duties and extend liability too far. The Defense Research Institute has suggested that product liability law can continue to function effectively only if present theories of recovery are not extended further. The Institute notes that unmitigated extensions of liability for defective products may have an effect opposite to that intended: instead of improving consumer protection and making damage reparations more certain, recovery will be diminished because of lack of money. Extending the liability of drug manufacturers may have the additional undesirable effect of “chilling” research and development efforts channeled toward the development of new or experimental drugs. The recent enactments of product liability statutes restricting the scope of a manufacturer’s liability 16 may be a response to the fear that product liability has been, or will be, extended too far.
CONCLUSION AND SUGGESTIONS FOR CHANGE
The criticisms leveled at the market share theory have merit and deserve attention. They are insufficient, however, to impeach the basic soundness of this approach, at least as applied to the DES line of cases.
Uncertainties in the determination of market share, and discrepancies between market share and liability, are indeed inevitable under this theory; however, lack of complete precision in the determination of liability is a problem that is ubiquitous in the law of torts and hardly restricted to the market share theory. For example, juries cannot be expected to precisely correlate fault and liability in applying the doctrine of comparative negligence or partial indemnity. As the court stated in Summers, where a perfect division of liability among tortfeasors cannot be made, the trier of fact may make it the best it can.
Fears that the market share theory will generally lead to counterproductive extensions of product liability ignore the unique factual circumstances out of which the theory arose and to which it was narrowly adapted. In the DES cases, all the defendants were shown to have been negligent; market share data was used solely to apportion liability, not to prove negligence. Further, the plaintiffs’ injuries were uniquely traceable to a single product, rendering market share a reasonably good estimate of the harm done by individual manufacturers. More importantly, plaintiffs were injured by a product which masked its harmful effects for many years, making identification of the causal tortfeasor impossible. Courts can and should use great caution in extending the application of market share liability to cases where these distinguishing factual circumstances are absent.
Minor modifications in the market share theory could go far toward ameliorating the remaining inequities that exist in its application. One possible modification would be to limit a defendant’s liability to its exact percentage share of the market, which would eliminate the discrepancies between market share and damage apportionment percentages that result under the “pure” form of the theory. The defendant’s damage liability would thus be maximally correlated with its probability of causation. Of course, plaintiffs would no longer be guaranteed recovery of one hundred percent of their damages, since recovery would be restricted to that percentage of plaintiff’s damages that corresponded to the aggregate market share of all defendants joined. Clearly, however, this would motivate plaintiffs to join as many defendants as possible, which would help assure that the plaintiff’s damages would be more equitably distributed among all tortious defendants. Another possible modification in the market share theory would be to broaden its applicability to plaintiffs who can identify the causal DES manufacturer. …
Randy S. Parlee, Summer 1982 .
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More DES DiEthylStilbestrol Resources
In Sindell v. Abbott Laboratories, the California Supreme Court allowed a cause of action against a group of manufacturers of the drug diethylstilbestrol (DES) even though the plaintiff was unable to identify which manufacturer had supplied the drugs that plaintiff’s mother had taken to prevent a miscarriage. The decision is an attempt by the court to provide victims of latent product defects a means of recovery where they would otherwise be unable to establish causation because of prolonged delay in injury manifestation. In doing so, Sindell departs from traditional common law recovery requirements and raises numerous problems in its application.
Part I of this Note briefly describes the case. Part II discusses existing tort theories which the Sindell court could have adopted to allow a cause of action for DES induced injuries and explains why these theories were not suitable. Part III analyzes the market share cause of action created by the court, examining problems in defining the essential requirements of the theory and potentially faulty factual assumptions upon which the action is based. Part IV examines the market share action from a broader perspective and considers its impact on conflicting social policies that the court failed to expressly consider. It concludes that Sindell’s market share approach to liability may produce significant undesirable social costs.
Sindell v. Abbott Laboratories: A Market Share Approach to DES Causation, California Law Review, Volume 69 | Issue 4 Article 12, July 1981.
Plaintiff Judith Sindell brought a class action suit against eleven drug manufacturers for personal injuries sustained as a result of prenatal exposure to DES marketed by the defendants. The complaint alleged that the manufacturers had negligently manufactured, marketed, and promoted DES as a safe drug without adequate testing or monitoring and that they had collaborated in marketing DES, relied upon each other’s tests, and adhered to an industrywide safety standard. Additionally, the complaint predicated liability on theories of strict liability, violation of express and implied warranties, fraud, misbranding, conspiracy, and lack of consent. The trial court sustained the defendants’ demurrers and dismissed the action on the basis that the plaintiff could not identify which DES manufacturer had produced the drug to which she had been exposed.
The supreme court reversed the trial court’s dismissal of plaintiff’s action. Justice Mosk, writing for the majority, announced a new cause of action which dispensed with any requirement that plaintiff identify the particular manufacturer that supplied DES to plaintiff’s mother. Rather, each defendant would be liable for the portion of plaintiff’s damages equal to that defendant’s percentage share of the DES market. The court reasoned that when the producers of a substantial share of the market are joined as defendants in all such cases, each defendant’s total liability will be roughly equal to what would be the case if perfect identification were possible in all cases.
In reaching the conclusion that a new approach was necessary, the court examined three other possible theories of liability: “alternative liability” based on Summers v. Tice, “concert of action” liability, and “enterprise liability” based on Hall v. E.Z Du Pont de Nemours & Co. Although the court drew inspiration in part from all three theories, which shared an underlying policy goal of protecting plaintiffs in the face of unidentifiable tortfeasors, and described the market share approach as a modification of the rule of Summers, it concluded that none of them alone was adequate for a fair judicial treatment of the DES problem.
ANALYSIS OF EXISTING THEORIES
One of the basic rules of American tort law is that a plaintiff cannot recover absent a showing that injury resulted from some act or omission of the defendant. 6 Over the years,, however, courts have recognized the potential inequity in leaving a plaintiff uncompensated simply because fortuitous circumstances render identification of the tortfeasor impossible. As a result, a number of exceptions have emerged.
In the landmark case of Summers v. Tice, the California Supreme Court established the principle of alternative liability. Summers was injured when two hunters negligently shot in his direction. Although it was impossible to determine whose shot actually caused the injury, the court held both defendants jointly and severally liable for all the damages. The court observed that if Summers were required to establish identity, both defendants would likely escape liability since it was equally probable that either one was responsible. In order to put the loss on the culpable shooters rather than on the innocent plaintiff, the court shifted the burden of proof of identifying the wrongdoer to the defendants, “each to absolve himself if he can.”
The Sindell court held, however, that liability could not properly be imposed in the DES context solely on the basis of Summers. Unlike Summers, the Sindell defendants come from a large ill-defined class of as many as two hundred companies which produced DES for a variety of uses under at least seventy different trade names. If the probability that any one of the defendants supplied the injury-causing drug is measured by taking the reciprocal of the number of possible tortfeasors, then the possibility that the actual supplier of DES to Sindell’s mother was before the court is quite small. The court concluded that it would be unfair to require each defendant to exonerate itself when there was a substantial likelihood that none of the defendants joined in the action actually made the DES that caused the injury. The court asserted that there was “no rational basis on which to infer” that any of the manufacturer-defendants supplied the drug to plaintiff’s mother. Yet if the plaintiff actually joined producers of more than ninety percent of the DES market as she alleged, then there was a ninety percent chance that one of the defendants was the actual supplier. In this instance, the court’s rejection of alternative liability based on the great number of DES manufacturers is not convincing.
There is, however, another reason for avoiding a blind acceptance of alternative liability for DES litigation. Summers imposed joint and several liability, holding each of the hunters liable for the full amount of damages, since the two were equally likely to have caused the injury. In a DES case there are often many defendants who supplied widely varying amounts of the drug. To treat large and small producers as equal contributors to the harm suffered by plaintiff seems manifestly unfair.
Concert of Action
A second theory advanced by Sindell and by other DES plaintiffs is known as concert of action. The classic concert of action case is the illegal drag race in which a bystander is injured by one of the participants. The person may sue any or all of the participants and they are jointly and severally liable for her injuries. All the plaintiff need allege is that each defendant acted pursuant to a common design or gave substantial assistance or encouragement to an actor whose conduct caused the harm. An express agreement is not necessary; a tacit understanding will suffice, and this may be shown by the parallel actions of the defendants.
Although concert of action is not expressly designed to eliminate the identification problem, it can apply to situations in which the immediate injury-causing agent is unknown. If the tortious event is the group activity itself, then any participant will be liable regardless of whether plaintiff can point to the immediate wrongdoer. For example, if plaintiff is not sure which driver in the illegal drag race caused the injury, she may still proceed to sue some or all of the participants. The action, however, is limited by the requirement of showing some sort of understanding by which all the defendants are implicated in the tortious act.
The Sindell court rejected the use of a concert of action theory to impose liability. While the court recognized considerable parallel acts among industry members, it held that application of concerted action to the DES context would represent too great an expansion in the doctrine. Some of the parallel acts among industry members were dictated by Food and Drug Administration (FDA) regulations. The court refused to imply a tacit understanding from the defendants’ compliance with federal regulations controlling the manufacture of DES or from conformity to industry marketing practices. Moreover, there was no basis for finding that each defendant knew other defendants were acting tortiously toward the plaintiff, nor that they assisted or encouraged one another to inadequately test DES.
The federal district court case of Hall v. E.1 du Pont de Nemours & Co. is the basis of a third theory called enterprise liability. Thirteen children injured by exploding blasting caps in separate accidents brought suit against six blasting cap manufacturers and their trade association. The evidence showed that the defendants, constituting virtually the entire industry, had adhered to an industrywide safety standard, had delegated safety design and investigation to the association, and had cooperated on an industrywide basis in the design and manufacture of blasting caps. These facts showed that the defendants contributed to the risks in a manner akin to concerted action. Therefore, if the plaintiffs could establish that the caps were produced by any of the defendants, then the burden of proof to identify which defendant caused the injury would shift to the defendants.
The supreme court rejected the enterprise liability theory suggested by Hall. That case had specifically recognized that its holding should be limited to an industry comprising only a small number of units, all or most of which were joined in the suit. In Sindell, the court was faced with approximately two hundred manufacturers of DES, of whom only eleven were joined, in contrast with the six blasting cap defendants who made up nearly the entire industry in Hall. Moreover, the defendants in Hall had delegated safety standards to their trade association whereas the DES manufacturers had not. The Sindell court also observed that the federal government plays a pervasive role in formulating criteria for the testing and marketing of new drugs, and that it would be unfair to impose liability on a manufacturer who did not supply the drug to plaintiff simply because it had followed FDA standards. But while this unfairness was sufficient to prevent the application of enterprise liability theory, the court noted that adherence to those FDA standards would not absolve a manufacturer of any liability to which it would otherwise be subject.
ANALYSIS OF THE MARKET SHARE LIABILITY THEORY
Having concluded that existing tort mechanisms were not suited to providing recovery in the DES context, the Sindell court fashioned a new theory to allow DES daughters a cause of action for their injuries. Stressing the gravity of the injury and the ability of the common law to adapt to the changing structure of society, the court pointed to several broad policy arguments favoring imposition of liability. Assuming for purposes of appeal that all DES defendants were negligent, the court adopted the Summers rationale that as between culpable defendants and an innocent plaintiff, defendants should bear the loss caused by their own conduct. Furthermore, defendant manufacturers were better able to guard against defects, to warn the public of side effects, and to insure against losses resulting from introducing defective products into the stream of commerce. The court believed that this was particularly true with respect to drugs since the consumer is virtually incapable of recognizing and protecting against any defects. Additionally, although less clearly articulated, the court felt that the mere fortuity that a defect does not manifest itself for a prolonged period, thus making it difficult or impossible for plaintiffs to identify the supplier, was not a principled reason for shielding the defendant from liability.
Under the new theory each manufacturer is liable for a percentage of plaintiff’s damages based on its market share of the DES production used for prevention of miscarriages. To take advantage of this new approach to causation, plaintiff must join the producers of a substantial share of the DES market. If the defective drug caused plaintiffs injuries and if all defendants produced the drug from an identical formula, then plaintiffs suit will not be barred for failure to identify the particular manufacturer of DES in her case. A manufacturer can escape liability, however, by demonstrating that it could not have made the product that caused plaintiffs injuries.
The court argued that market share liability would produce the same result as would occur if every DES plaintiff could identify a particular manufacturer. In a world of perfect identification, a producer of twenty percent of DES sold would be a sole defendant in approximately twenty percent of all cases. Under the market share approach, the same supplier would now be a defendant in all DES cases but would be liable only for twenty percent of the damages. The process of matching percentages serves as a fairness justification for the decision because liability is limited to what would hypothetically occur if identification were possible. Total costs, including all administrative costs, under Sindell could potentially be much greater than costs in identification suits, because each manufacturer will be a party to more suits under the market share approach than in a perfect identification world. The court, however, focused only on matching liabilities, rather than total costs, and concluded that although in practice the correlation would not be perfect because market shares were probably impossible to determine exactly, any variation was within the limits commonly tolerated by the law.
Although the Sindell approach has superficial appeal, it leaves many unresolved questions. The court ignored the extreme practical difficulties in actually defining market shares empirically by dismissing them as “largely matters of proof.” In making joinder of a substantial share of the market a condition of bringing suit, the court provided little guidance for determining when the requirement would be met. The extent of liability under the market share theory is equally unclear: the joined defendants may be liable for one hundred percent of plaintiff s damages or merely for the aggregate amount of their respective market shares.
How is a Market Share Defined?
In order to calculate market shares, the scope of the market itself must be defined in terms of the time period, the geographical area covered, and the range of identifiable product forms included. The only market factor mentioned by the court was time-if a manufacturer could prove that it did not sell DES during the period of time that plaintiff’s mother purchased the drug, then that manufacturer could be dismissed from the suit. The reason for considering this factor is that market share is used as a theoretical proxy for the likelihood that a defendant supplied the product which allegedly injured plaintiff.
A similar analysis can be made with respect to geographical area. Theoretically, each DES plaintiff should sue only those producers who supplied the drug to an area in which plaintiff’s mother lived when plaintiff was in utero. Whether the appropriate area is local, state, regional, or national in scope depends on the structure of the DES market and the methods of distribution of DES. For producers who supplied only limited areas, a decision as to relevant market size will determine who is a proper defendant in many cases. For example, a supplier only to Detroit would not be liable to any plaintiffs exposed outside of the Detroit area. However, such a producer would have large liability for suits brought by plaintiffs exposed to DES in Detroit.
Use of a nationwide market has several advantages over other market sizes. First, calculation of market shares will be less complicated for a national market than for a state or local market because geographical data is very scarce . Second, national shares will be less likely to generate inconsistent case by case determinations of the relevant market size and the associated percentage breakdown of damages. Third, the DES market is dominated by a few very large producers who sold DES throughout the country-it has been suggested that five or six suppliers made ninety percent of the total DES production. Thus, percentage market shares for the industry leaders may not vary greatly with respect to market size.
However, when small local producers are included, the national market approach may result in unfair distributions of damages. Suppose defendant D is a small local producer of DES who supplied sixty percent of the Detroit market and that the national giants furnished the remaining forty percent. If plaintiff uses national shares, the D’s maximum liability will be very small because the sixty percent share of the Detroit market will be a very small share of the national market. At the same time, the large companies will pay the bulk of the damages even though the odds are low that plaintiff’s mother used their products in Detroit. The goal of having market share liability mimic what would occur in the hypothetical world of perfect identification suggests that the Detroit case be resolved on a Detroit area market.
A California resident who was exposed to DES in Detroit, however, may not be able to obtain jurisdiction over the Detroit-only supplier. By failing to join a sixty percent supplier in her California suit, plaintiff will not meet the requirement that she sue makers of a substantial share of the relevant market. Even if she could proceed, she would only get forty percent of her damages if each company is only liable for its relevant market share percentage of the award. If the joined defendants are forced to pay all of the damages, however, they will not be able to compel contribution by supplier D in Detroit unless Michigan also recognizes the market share theory of liability; having failed to get contribution from defendant D, the suppliers of forty percent of the Detroit market would pay much more than their share of liability.
There is nothing in Sindell, however, that requires courts to follow any specific definition of market size. Each court can define the scope of the market to fit the needs of a particular case. A court could start with a national market and put the burden on each defendant to show that it could not have made the DES which injured the plaintiff. A local supplier would be dismissed from cases if it could show that none of its product reached outlets in the area in which the plaintiff’s mother lived.6 The hypothetical plaintiff from Detroit may recover much less than her entire damages under this approach if she cannot obtain jurisdiction over the local supplier, but this will occur only if the large companies can succeed in proving the domination by a local producer. This is hightly unlikely because of the strong market position held by the leading drug companies.
Another potential market factor is the identifiable physical characteristics of the product. Plaintiffs mother may be able to remember taking a pill of a certain size, shape, or color. Where this is true the relevant submarket could be defined to include only those manufacturers who produced pills with that particular physical characteristic. Use of such submarkets, however, will cause defendant manufacturers of pills with unique and memorable physical characteristics to be sued more often than other producers. They will be liable for one hundred percent of plaintiffs damages in all cases where the feature is remembered, and also for their market share in cases where no identifying features are recalled. Thus, the goal of matching actual liability with the results expected in a world of perfect identification will not be met if suits based on special submarkets are permitted.
The same possibility of double exposure exists when some plaintiffs can identify the manufacturer of DES that supplied the drug to their mothers. If identification results from one supplier having more detailed records or having used a more direct distribution system to pharmacies, then that supplier will be a defendant more often, assuming that both market share and traditional theories of liability coexist. Only if identification suits are randomly distributed over all manufacturers will the distortion not occur. Because it is likely that identification will be predicated on market behavior unique to specific producers, the existence of both market share suits and traditional suits poses the threat of double liability for some defendants.
There are two ways to avoid this double liability. The first is by adjusting damages among producers after all suits have reached final resolution-a complicated and unlikely event since no court would have authority to make post hoe readjustments of liability. The other solution is to use market share apportionment exclusively and therefore preclude DES suits tied to identification of product characteristics. Even plaintiffs who could identify a particular manufacturer as sole defendant would be forced to rely on the market share approach otherwise a few easily identifiable producers will pay more than their share. Precluding suits based on traditional theories, however, creates several problems. Plaintiffs who fail to obtain jurisdiction over a substantial share of the relevant market may go remediless even though they can identify and obtain jurisdiction over the specific DES producer that supplied the drug. Any other reason for a court’s dismissal of a market share based action will result in the same unfairness to all plaintiffs who could have proceeded on traditional theories of liability.
The Sindell decision does not hold, however, that market share liability is the exclusive remedy for DES plaintiffs. It allows the new approach where defendants “produced a drug from an identical formula and the manufacturer of the DES which caused plaintiff’s injuries cannot be identified.” Where identification is possible the plaintiff may proceed against the identified producer. The tone of the decision suggests that the court would be more willing to tolerate the possibility of imposing excess liability on some suppliers than to deny plaintiffs a cause of action. Furthermore, in breaking new ground in tort causes of action the court should be reluctant to preclude old approaches without more information about whether there will be any significant overlap of market share suits and identification suits.
The Measure of Damages
The court did not clearly specify how each defendant manufacturer’s damages would be measured. One possible approach would make each defendant jointly and severally liable for all of plaintiffs damages. Thus a plaintiff would be compensated for all her injuries regardless of how many manufacturers are joined as defendants because plaintiff could collect her entire judgment from any defendant. A second approach would impose liability solely on the basis of each defendant’s share of the DES market. This pro rata distribution of liability has two consequences:
- a plaintiff will recover only that percentage of her total damages which is equal to the sum of the market shares of the defendants joined in her suit,
- and a plaintiff will bear the risk of a defendant’s insolvency because other defendants will not be forced to pay more than their respective market share percentages of damages.
For example, if a plaintiff joined eighty percent of the market and one defendant with a ten percent market share was insolvent, plaintiff’s recovery would be seventy percent of her total damages. In contrast, the joint and several approach would yield a recovery of one hundred percent of the damages, which could be collected from any of the remaining solvent defendants. Although there is language in the Sindell opinion supporting both approaches to liability, this Note concludes that pro rata liability is more consistent with the logic underlying the market share cause of action than is joint and several liability.
There are several indications in the opinion that the court would impose joint and several liability on DES suppliers.
- First, the Sindell pleadings allege that defendants are jointly and severally liable under each of the several theories offered in the complaint. Since the majority does not unambiguously delete this feature from its new theory, one might infer that joint and several liability is required by the decision.
- Second, the dissent draws that inference; presumably the majority would have forthrightly dispelled this implication if it were not true.
- Third, the Sindell decision is based on an expansion of Summers v. Tice, which imposed joint and several liability on the defendant hunters.
The court’s reference to the availability of third party impleader also implies that joint and several liability was intended. If each defendant can be held liable for plaintiff’s total damages, or some variable portion thereof, then defendants will have a strong incentive to join other producers to share the liability. On the other hand, if each defendant is liable only to the extent of its market share percentage of the damages, then it will have little incentive to join other producers since its dollar amount of liability will be the same regardless of the number of defendants.
Moreover, joint and several liability is consistent with the substantial share joinder requirement. The rule that plaintiff must sue producers of a substantial share of the DES market avoids the possibility that a lone defendant might shoulder an entire judgment for lack of success in obtaining contribution from other producers. Both third party impleader and the joinder requirement serve to spread liability among as many defendants as are solvent and amenable to jurisdiction in California.
In describing the market share cause of action, however, the court several times said that damages were to be apportioned in relation to their market share. In answer to the Sindell defendants’ arguments contesting the fairness of the decision to impose liability, Justice Mosk stated:
Most of their arguments, .. are based upon the assumption that one manufacturer would be held responsible for the products of another or for those of all other manufacturers if plaintiff ultimately prevails. But under the rule we adopt, each manufacturer’s liability for an injury would be approximately equivalent to the damages caused by the DES it manufactured.
Since the measure of each defendant’s liability would be its percentage market share of plaintiffs damages and since no defendant is to be responsible for another producer’s product, the Sindell decision requires that market share function as an absolute limit to each defendant’s liability. In contrast, joint and several liability could result in some defendants paying a greater percentage than their market share would dictate. Therefore, the most direct language in the decision concerning liability points to the pro rata market share approach as the appropriate measure of each defendant’s share of the successful plaintiff’s damage recovery.
Moreover, pro rata market share liability is more consistent with the goal of the Sindell decision to reproduce what would occur if identification were possible in all cases. The producer of twenty percent of the market held liable for twenty percent of the damages in all DES suits should pay the same amount as would be paid if twenty percent of plaintiffs could identify that same supplier and recover one hundred percent of their damages. To hold that same supplier jointly and severally liable for one hundred percent of the damages in one hundred percent of all DES suits could increase liability above the total amount that would be imposed in the hypothetical world of perfect identification. Although joint and several liability could generate a result similar to pro rata market share liability when all defendants are solvent and before the court, the court should have held that each supplier’s maximum liability is fixed by its market share in order to ensure that no producers incur excess liability.
The rejection of joint and several liability requires that the court’s remarks about third party crossclaims be re-evaluated. If each defendant is liable only for its market share percentage, then defendants will have little incentive to join other producers except in the rare case in which a defendant will be able to prove that another producer in fact supplied a plaintiffs mother with DES. Thus, third party complaints seeking indemnification are not essential for the Sindell theory. However, since the court very much wanted to ensure that as many DES suppliers as possible would be defendants, its mention of crosscomplaints against additional producers probably reflected the goal of holding the entire industry liable for DES injuries. That goal is more directly served by the substantial share joinder requirement.
The Substantial Share Requirement
Under Sindell, plaintiffs must sue manufacturers of a substantial share of the DES market in order to state a cause of action. The court declined to give a numerical definition to “substantial,” despite the dissent’s criticism that lack of a precise definition left the issue openended. Perhaps the court simply wished to avoid making the new approach too inflexible by specifying a fixed percentage. A more critical issue is why the court imposed the requirement at all.
The court mentioned several reasons for the substantial joinder requirement. First, it noted that joining producers of a large aggregate market share would reduce the likelihood that “the offending producer would escape liability.” This argument reflects the court’s desire to keep the Sindell theory similar to older, well-established notions about tort liability. In Summers v. Tice, for example, the court knew that one of the two hunters fired the shot that hurt the plaintiffs and hence the actual offender would not escape liability.
The court’s second reason for the joinder requirement is that it diminishes the “injustice of shifting the burden of proof to defendants.” Having the major producers in court will facilitate the determination of the dimensions of the relevant market. The greater availability of market information in court will presumably yield a more thorough and accurate picture of DES distribution. The composition of the relevant market may thus indicate which defendants were less likely to have caused the plaintiffs injuries. If a supplier can prove that it did not sell any DES within the relevant market, then it will not be held liable. Furthermore, if a supplier can prove that another defendant in fact made the DES which injured the plaintiff, it will again be relieved of any liability. Thus, the presence of many manufacturers in court will give each one a better opportunity to show that it did not supply the drug to the plaintiff’s mother.
Third, the court argued that the presence of a substantial share of the market “provides a ready means to apportion damages among the defendants.” Although the court again did not elaborate on its underlying reasoning on this point, the argument suggests that having the main suppliers together will simplify the calculation of the market shares that form the basis for each defendant’s liability and will avoid inconsistent determinations which could result from separate actions. Furthermore, dividing the damages in one action will involve lower costs for the parties and the courts than would occur if each producer were sued in a separate case.
The substantial joinder requirement serves other functions which the court did not discuss. It will prevent plaintiffs from forcing settlements against companies with high name recognition, yet small DES production. Because such a company produces very little DES, its market share and hence its ultimate liability would be small, but its litigation expenses as the sole defendant would be substantial. Plaintiffs might be able to force settlements on these defendants if there were no joinder requirement. The potential for forced settlements is much less when there are many defendants because small market share producers can expect the major suppliers to handle much of the defense.
The requirement also serves as a substitute for the element of causation which the plaintiff must show in traditional tort actions. The court has excused DES plaintiffs from identifying the particular supplier whose drug caused her injury, and in effect has apportioned responsibility for all DES injuries to all suppliers. Thus the joinder rule ensures that most of the causal elements are accounted for in court.
Analogizing substantial share joinder to causation raises the issue of how much the plaintiff must prove to satisfy her burden of proof. In order to show that she has joined a substantial share of the market, plaintiff will have to produce some evidence concerning DES production at the time her mother took the drug. If the showing of substantial market share requires plaintiffs to identify approximate market shares for each defendant, Sindell actions may be extremely difficult to maintain. At this time the data is extremely scarce and defendants are likely to be the only ones possessing production and sales figures. Plaintiffs therefore will have to conduct extensive and costly discovery, and if market share data is wholly nonexistent, plaintiffs’ causes of action would be precluded.
The court did not explore how accurate the market share apportionment must be for plaintiffs to recover under this theory. It did say that “the difficulty of apportioning damages among the defendant producers in exact relation to their market share does not seriously militate against the rule we adopt.” Further, it noted that where the data is scarce the jury is to divide the liability “the best it can.” Although these statements indicate that the court will not insist on precise accuracy in determining market shares, the plaintiff must still provide some reasonably good figures on DES production and its ultimate uses in order for the trier of fact to make an estimate. Furthermore, because the logic of the decision depends on market share liability reproducing what would occur in a world of perfect identification, a minimum standard of accuracy is necessary for this goal to be achieved. Otherwise, liability will be arbitrarily divided among defendants and there will be no correlation with what would happen if producers could be identified.
POTENTIAL SOCIAL COSTS OF THE DECISION
The thrust of the analysis in Part III has focused on the court’s failure to define the central elements of market share, substantial share, and the nature of liability and has noted the dependence of the approach on the existence of adequate market data and of the availability of sufficient insurance coverage. This Note has suggested solutions to some of these issues with respect to the DES problem. If the decision is subsequently applied to defective products in other industries in which, unlike the drug industry, market control is not centralized in a few large firms subject to nationwide jurisdiction, precise definition of market share and substantial share will become crucial to the decision’s fairness. Whether market share liability should be applied in other contexts, therefore, cannot be answered solely on the basis of whether the theory operates fairly in the DES context. Before applying Sindell to other industries, this Note cautions that the market structure of those industries must be evaluated to determine if special obstacles to fairness might exist.
Sindell’s potentially enormous reach may both inspire positive developments in the product safety area and pose significant social policy problems that the court might not have considered carefully. On the one hand, the decision promotes several broad policies underlying all of tort law. It will result in loss spreading by imposing liability on companies that can insure against such losses and that can pass along losses to those who use the product by increasing prices. In addition, the decision will encourage investment by manufacturers in product safety. Finally, the decision marks a commendable attempt at prohibiting fortuitous circumstances from shielding a negligent defendant from liability which in fairness it should bear.
On the other hand, however, Sindell’s impact on the drug industry and specifically on consumers of pharmaceutical products may not be consistent with other competing social policies. Sindell may have two types of impact on the drug industry and consumers. First, and most importantly, imposing liability for DES injuries nearly a decade after the FDA banned use of DES as a miscarriage preventive will require drug companies to spread their losses over other product lines. This means that drug prices in general will rise, including those for safe, beneficial drugs. Moreover, since part of this increase will result from increased insurance costs, and since insurance rates are set on a nation-wide basis, drug prices will be adversely affected throughout the country. Sindell therefore will conflict with the social policy of minimizing increases in health care costs, especially if market share liability results in higher administrative costs than would traditional forms of recovery in a world of perfect identification.
Not only might drug prices in general rise, but actual consumption may be curtailed as consumers respond to price increases by purchasing less. This price response of consumers is one of the justifications for imposing liability on producers because use of dangerous products is discouraged. Price increases, however, cannot be confined to DES because it is no longer used as a miscarriage preventive. To the extent manufacturers spread DES liability costs to other drugs, consumption in general may be discouraged. Sindell therefore may have a socially undesirable effect on consumption of safe, beneficial pharmaceuticals which by definition are socially useful.
The second adverse impact Sindell may have is to deter the rapid development and marketing of new drugs. The decision will encourage longer periods of testing than was customary when DES was first marketed because manufacturers will have more economic incentives to eliminate unsafe drugs. Longer testing, however, is not beneficial in and of itself. The cost from delay in marketing due to extra testing, in terms of continued suffering and lives lost, must be weighed against the likelihood that adverse side effects of the drug will be discovered through longer testing. A negligence standard theoretically forces manufacturers to strike the proper balance. Sindell, therefore, to the extent it simply avoids the identification problem and imposes liability for negligent behavior should encourage striking the proper balance. The problem that Sindell poses, however, is that manufacturers may tend to overvalue liability risks and engage in excessive testing if market share liability results in greater liability than what liability would be if perfect identification were possible. As the Sindell court itself recognized, long run matching will not be perfect. How imperfect it will be depends upon a number of factors, including whether joint and several liability is imposed and how the industry market is actually found to be structured within an area. Under the best possible scenario long run matching may be quite good. However, one may also envision scenarios in which lower court interpretations of the ambiguities left by Sindell, in combination with real world facts different from those assumed by the Sindell court, create major distortions in matching.
This problem of overtesting may be avoided by the incentive Sindell supplies for manufacturers to keep better records and thus avoid market share liability altogether. Whether this actually happens, however, will depend on whether it costs more to test than it does to keep records. Large producers may have to keep extremely detailed records if they are to escape market share liability. This is because small producers may have an incentive to not keep any records or differentiate their product in any way from those of large producers, in the hope that in market share actions they would not even be sued since their small market share would not make joining them worthwhile. Keeping detailed records, however, may be both complicated and exceedingly costly given the present structure of the drug distribution system with its thousands of physicians, pharmacies, and middlemen. This could be especially true with respect to nonprescription drugs since there is presently no control over who purchases them. However, since nonprescription drugs tend to have less medical value, marketing delay due to prolonged testing may not be particularly socially detrimental. With respect to prescription drugs, though, Sindell may result in an undesirable deterrent to marketing and development.
The Sindell case constitutes a major development in tort law. To the extent its market share approach to liability results in manufacturers bearing the cost of their negligent conduct, the decision should be applauded. At present, however, it is difficult to determine what the outcome will be. Unless market shares are properly defined and reliable market share data found to exist, the decision could result in wholly arbitrary assignment of liability. Moreover, there appears to be a basic conflict, which is not likely to be resolved, between liability based on market share, and traditional identification liability. Furthermore, unless damages are measured on the basis of pro rata liability rather than joint and several, serious distortions in long run matching between market share liability and what liability would be in a world of perfect identifiation may result. Since the existence of long run matching goes to the very heart of the decision’s fairness, proper resolution of the measure of damages issue is extremely important.
Depending on how these questions are resolved, Sindell may prove to have serious negative effects both on consumption of safe, beneficial pharmaceuticals and on the lag time between such medications’ development and ultimate marketing. The Sindell decision, therefore, while potentially a vital and commendable step forward in the protection of consumer interests, could conceivably prove under a “worst case” scenario to be a nightmare for both consumers and the pharmaceutical industry. At the very least, the California Supreme Court should hasten to explicate the difficult issues surrounding practical application of market share liability.
Richard P. Murray, 1981
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More DES DiEthylStilbestrol Resources
In recent years, courts have encountered serious problems in applying products liability law to fungible defective products. While some plaintiffs injured by fungible products have identified the culpable manufacturers and successfully litigated their claims, other injured parties have faced serious threshold identification difficulties. The nature of fungible products is such that litigants may be unable to identify the manufacturer who supplied the injury-causing product. Unless this problem of identification is overcome, the injured plaintiff is barred from presenting a valid cause of action. Consequently, traditional products liability law theories have offered an inadequate basis for compensation to many plaintiffs injured by defective fungible products.
Market Share Liability: A New Method of Recovery for D.E.S. Litigants, Catholic University Law Review, Volume 30 Issue 3 Spring 1981 Article 8, 1981.
Litigation involving diethystilbestrol (DES) illustrates the current problems in applying traditional products liability law to fungible defective products. Originally distributed in 1947 to prevent complications during pregnancy, DES was later recognized as a cause of vaginal abnormalities in the daughters of women who took the drug. Many of these daughters are now seeking to recover damages from drug manufacturers for injuries sustained as a result of the maternal ingestion of DES during pregnancy. These plaintiffs claim that the pharmaceutical companies negligently manufactured and marketed DES without adequate testing; however, most have been unable to identify the specific manufacturer of the DES ingested by their mothers. As a result, plaintiffs have been forced to proceed under one or more of three existing theories of liability applied when the identity of the injury-causing defendant is uncertain: alternative liability; concert of action; or industry-wide liability.
Courts, however, have generally been unwilling to apply these theories to DES cases. Among the reasons given for finding these theories inapplicable to DES cases are the number of defendants involved in the suits, the failure of all potential guilty parties to be joined as defendants, and the unique characteristics of the pharmaceutical industry. As a result, most plaintiffs have been left with no means of recovery under current products liability theories.
The California Supreme Court has recently proposed a solution to this dilemma in Sindell v. Abbott Laboratories. In this case, the plaintiffs brought a class action against eleven pharmaceutical companies, seeking damages for injuries sustained as a result of their mothers’ consumption of DES during pregnancy. Although the plaintiffs failed to identify the specific manufacturers of the DES actually taken by their mothers, they suggested that liability could be based on one of the three traditional theories of liability. The court refused to apply any of these theories, but it enunciated a new basis for liability upon which the action could be tried. Basing its decision on a modification of the alternative liability theory, the court held that the plaintiffs would be allowed to recover upon a showing that the manufacturers, in the aggregate, produced a substantial percentage of the drug causing the plaintiffs’ injuries. Under the ruling, each manufacturer would be liable for damages proportionate to its share of the market unless the manufacturer could demonstrate that it did not produce the drug which induced the plaintiffs’ injuries. The court concluded that under this approach, each manufacturer’s liability would approximate the damages caused by its product.
The controversial theory of liability espoused in Sindell represents a dramatic breakthrough for DES victims. Moreover, this theory of market share liability could extend to cases which involve other fungible products and an unidentifiable manufacturer. Under this theory, plaintiffs need prove only that the defendants were manufacturers of the same defective product which caused their injury and that the joined defendants represent a substantial portion of the market for the product in question. Plaintiffs need not prove which individual defendant manufactured the specific injury-causing product, nor must they rely on an expanded judicial interpretation of the traditional theories of liability to support a valid cause of action. Essentially, the Sindell court made a policy decision to forgo rigid adherence to prior doctrines and instead to design a remedy which could meet the needs of modern plaintiffs injured by fungible products like DES.
This Note will examine the various theories upon which DES plaintiffs have advanced their claims prior to Sindell and will explain why these theories have not provided plaintiffs with a recognized cause of action. It will then examine the theory of market share liability enunciated in Sindell and assess it in conjunction with the policy considerations underlying products liability law. Finally, this Note will conclude that the theory of market share liability is a novel yet well-founded approach to litigation involving fungible defective products, consistent with the prior doctrine of products liability law, and represents a necessary expansion of tort liability in today’s complex industrial society.
HISTORY OF DES
In 1947, the Food and Drug Administration (FDA) approved the distribution of DES on an experimental basis for use in the prevention and treatment of complications during pregnancy. This approval was based on two studies attesting to the safety and effectiveness of DES in preventing pregnancy problems. Between 1947 and 1952, approximately eighty five companies manufactured DES. In 1952, the FDA declared that DES was no longer a new drug and was considered safe for general use. This declaration meant that any manufacturer could market the drug without submitting additional data to the FDA concerning its safety and effectiveness. By the end of that year, no fewer than 191 companies were manufacturing and distributing DES.
In 1971, two medical studies associated an increase in a rare form of vaginal cancer called adenocarcinoma with the maternal ingestion of DES during pregnancy. Pursuant to these findings, the FDA required that pregnancy be listed by the manufacturers of DES as a contraindication to the use of the drug and that all other estrogens include a warning on their labels concerning the association between DES and vaginal cancer. Additional studies have since confirmed this association. Although DES is no longer used during pregnancy, it is still prescribed for treatment of unusual menopausal symptoms and of certain kinds of cancer of the breast and prostate.
It is estimated that between one-half million and three million women were exposed to DES between 1947 and 1971. A large number of these women remain unaware of that exposure and of the potential complications. Although only a small percentage of DES daughters have contracted adenocarcinoma, the vast majority of the DES women suffer from adenosis and must be constantly monitored by a physician.
THEORIES OF LIABILITY PRIOR TO SINDELL
It is estimated that more than one thousand DES cases are presently pending nationwide, with most of the major pharmaceutical companies joined as defendants. Prior to the Sindell decision, few DES plaintiffs had succeeded in presenting a valid cause of action against the drug companies for injuries sustained from the maternal ingestion of the drug. Various procedural barriers such as the statute of limitations, failure to obtain class action certification, in personam jurisdiction, and the nonapplicability of the successor-liability doctrine, resulted in early dismissal of many cases. Some plaintiffs, including Ms. Sindell, have had difficulty asserting a valid cause of action under one of the traditional theories of liability because causation is difficult to establish when no specific manufacturer of the injury-causing product can be identified. A review of the theories of alternative liability, concert of action, and industry-wide liability provides a foundation to determine whether the market share liability theory presented in Sindell is a consistent development in products liability law.
The alternative liability theory is one which provides a plaintiff with a means to hold more than one defendant liable when the specific source of the injury is uncertain. Under this theory, a plaintiff who cannot identify which one of multiple defendants caused an injury may shift the burden of proof to the defendants to show that they were not responsible for the plaintiff’s injuries. The theory is applied to cases in which the plaintiff proves that each defendant acted tortiously and that the harm suffered by the plaintiff resulted from the conduct of one of the defendants. Alternative liability is premised upon the rationale that proven wrongdoers should not escape liability merely because a plaintiff is unable to identify which defendant actually caused the injury. When the burden of proof is shifted, each defendant has the opportunity to exonerate himself by submitting proof that he could not have caused the plaintiffs injury. Shifting the burden of proof in such situations is justified by the presumption that a defendant would normally be in a far better position than the plaintiff to offer evidence establishing that another defendant caused the injury. Traditionally, this theory has been limited to cases where all of the potential tortfeasors have been joined as defendants and where the conduct occurred simultaneously and created substantially the same risk. These requirements preclude the possibility that one who actually caused the harm to the plaintiff might escape liability by not being joined as a defendant in the action.
The classic illustration of the alternative liability theory is embodied in Summers v. Tice. In that case, each of the defendants had simultaneously and negligently shot in the direction of the plaintiff during a hunting expedition, and each was forced to bear the burden of proving that the shot which injured the plaintiff was not fired by him. In holding both defendants jointly and severally liable, the California Supreme Court made a policy determination that a plaintiff should not go without a remedy merely because the defendants’ tortious acts made it impossible for the plaintiff to identify the specific party responsible for causing the harm.
The alternative liability theory has also justified shifting the burden of proving causation in other situations. In Ybarra v. Spangard, another California case, the plaintiff suffered paralysis of his shoulder while undergoing an appendectomy. The court determined that it would be an unfair burden to require the plaintiff, since he was unconscious on an operating table when the injury was sustained, to identify the particular defendant who inflicted his injury. The plaintiff was allowed to join as defendants all those medical personnel responsible for his safety during the operation, and to infer negligence under the doctrine of res ipsa loquitur. The court then shifted the burden of proving causation and disproving negligence to the individual defendants. Once again, the court’s justification for this shifting of the burden of proof was its determination that the plaintiff should not go remediless merely because he could not identify the specific cause of his injury under the circumstances created by the defendants’ conduct.
Furthermore, alternative liability may be used in situations where the plaintiff has suffered indivisible injury through defendants’ independent tortious actions. Multiple automobile collisions are a common example of this situation, as illustrated by Eramdjian v. Interstate Bakery. There the plaintiff was involved in a motorcycle accident, and as he was lying unconscious on the street was subsequently run over and crushed by a truck. The California Court of Appeals held that each defendant must bear the burden of establishing that his acts did not cause the plaintiffs injuries. The court concluded that the wrongdoer should bear the burden of explaining circumstances where he would otherwise escape liability. As these cases illustrate, the alternative liability theory provides a plaintiff with the means to present a valid cause of action when the defendants’ negligence is clear but when there is doubt as to the issue of causation.
Concert of Action
The second theory under which causation may be proved in situations where the identity of the injury-causing defendant is uncertain is concert of action. This theory is applied where a plaintiff seeks to recover damages for injuries caused by a defendant who, by express or tacit agreement, encouraged, cooperated, or actively participated in a common plan or design to commit a tortious act. The plaintiff may elect to sue one, all, or any combination of participants, each being jointly and severably liable for plaintiffs injuries. Imposition of joint liability is justified by the court’s determination that the causative tortious event was the concerted action in which each of the defendants participated, rather than the actual infliction of injury to the plaintiff.
The most common illustration of concerted action is an illegal drag race where each participant is held liable for any injuries sustained by an innocent bystander, whether or not the particular defendant in fact injured the plaintiff. In Bierczynski v. Rogers, for example, two drivers were participating in such a race when one of their automobiles struck an oncoming automobile driven by the plaintiff. The court held that regardless of which defendant’s automobile actually collided with the plaintiffs, participation in an illegal drag race proved negligence and therefore both participants were liable for injuries sustained by an innocent third person. Similarly, in Sprinkle v. Lemley, the concert of action theory was applied to hold two physicians liable, each for the negligence of the other. The two physicians were held liable for plaintiffs ischemic contracture which resulted from the treatment of a fractured leg. The court noted that the concert of action theory was applied correctly because the acts of one physician were not independent of the other when both physicians treated the patient in concert.
To establish concert of action, the conduct of the defendants must be shown to constitute an agreement to participate in the commission of a tortious act; mere knowledge by one defendant of another defendant’s actions is insufficient. Moreover, each defendant must intend to act in furtherance of the tortious act. Thus, in Duke v. Feldman, the fact that a wife watched her husband assault a third person and subsequently drove him away from the scene was insufficient to impose liability on the wife in an action for civil assault. Absent evidence that she assisted her husband or encouraged the assault, the wife could not be considered a participant in a design to perpetuate the tortious action.
The rationale underlying the concert of action theory is probably more the deterrence of hazardous group behavior than the solution of the problem of identifying the actual injury-producing party. Nevertheless, the theory effectively obviates the need to identify the actual defendant who caused a plaintiff’s injury by holding each defendant liable for substantial encouragement of a tortious act.
The Theory of Industry-Wide Liability
The theory of industry-wide liability is the most recent exception to the general requirement that a plaintiff must identify the actual party causing his injury in order to present a valid cause of action. This theory was suggested in Hall v. El Du Pont De Nemours & Co. , where the court held that there are certain circumstances in which an entire industry may be liable for harm caused by its operations.
The Hall case, commonly known as the “blasting cap case,” arose when the parents of children injured by exploding dynamite blasting caps sought to recover from the manufacturers. The individual blasting caps were neither labeled nor marked with any warning of the potential danger, and the plaintiffs alleged that the defendants, six manufacturers and their trade association, consciously agreed to establish an industry-wide practice of omitting such warnings. This practice, together with the failure of the defendants to take other safety precautions, allegedly created an unreasonable risk of harm which resulted in injuries to their children. The United States District Court for the Eastern District of New York reasoned that under such limited circumstances, industry-wide liability may be imposed. The court stressed that the evidence established that the defendants had jointly controlled the risk through their adherence to an industry-wide standard of safety, and that some functions of safety, including labeling, had been delegated to their trade association. Furthermore, although all the defendant-manufacturers had participated in joint creation of the risk, the specific defendant manufacturing the injury-causing blasting cap could not be identified because the evidence was destroyed in the explosion. In such circumstances, the court reasoned, a shifting of the burden of proof of causation could be justified.
The theory of industry-wide liability combines elements of classic concerted action and alternative liability for use in situations where neither theory would be applicable by itself. The concept of “joint control of the risk” by the defendants in industry-wide liability evolves from the required “agreement” between the defendants in concert of action cases. Under both theories, each defendant’s participation in the tortious event may be regarded as the cause-in-fact of the plaintiffs injury. Liability is imposed on each defendant to deter hazardous group behavior in the future. Joint control of the risk, however, may be proved by evidence of an independent adherence to an industry-wide standard or custom, although such adherence is insufficient to constitute a tacit agreement under the concert of action. This evidence is sufficient to shift the burden of proving causation to the defendants, so that, as in alternative liability, a guilty rather than an innocent party would bear the loss from the failure to meet the burden of proof.
The theory of industry-wide liability is consistent with the general policy considerations of products liability law: namely, to compensate for injuries caused by the use of a defective product and to discourage manufacturers from producing unsafe products. Furthermore, industry-wide liability promotes the theory that losses to society caused by such activity should be internalized by the responsible party to further the social policies of conservation of resources and fair distribution of the cost of accidents among society’s members.
SINDELL v ABBOTT INDUSTRIES: THE NEED FOR A NEW THEORY OF LIABILITY
In 1976, Judith Sindell initiated a class action in a California trial court for personal injuries resulting from her mother’s ingestion of DES during pregnancy. The plaintiff filed her complaint against eleven drug manufacturing companies, and sought to recoVer general damages in the amount of $1,000,000 and punitive damages in the amount of $10,000,000. She also sought equitable relief in the form of an order compelling defendants to inform the public of the risks inherent in DES exposure and to establish appropriate clinics for treatment of DES daughters.
The plaintiff proceeded under eight causes of action, each alleging that the manufacturers were jointly liable because they had acted in concert and in reliance upon each other’s testing and marketing methods to exploit the drug. Since the plaintiff could not identify the manufacturer of the injury-causing drug, the complaint suggested that liability be based on alternative liability, concert of action, or industry-wide liability.
In a well-reasoned and thorough opinion, the California Supreme Court did not apply these theories to the facts of the Sindell case. The court, however, declined to bar the plaintiff from recovery and proceeded to enunciate a novel theory under which Ms. Sindell could proceed with her cause of action. This theory, based upon each manufacturer’s market share of the defective product, will be referred to as “market share liability.”
In Sindell, the plaintiff first claimed to have a valid cause of action under the doctrine of alternative liability. Essentially, the plaintiff averred that the manufacturers had acted tortiously in marketing, manufacturing, and promoting DES, and that this conduct had resulted in injury to the daughters of women who had ingested the drug. Additionally, she argued that had the manufacturers provided adequate warnings to those who ingested the drug, documentation would have existed which, in the case of potential injury resulting from the use of the drug, would have eliminated the uncertainty in identifying the specific manufacturer. Under these circumstances, the plaintiff maintained that the burden of proof should shift from the innocent plaintiff to the negligent defendants. This shift would require the defendants to exonerate themselves by presenting evidence establishing that they could not have manufactured the specific drug ingested by the plaintiffs mother.
The plaintiff sought to analogize her case to Summers v. Tice. In both cases, the defendants committed negligent acts, the plaintiffs were innocent, and the fungible nature of the injury-causing substance made it impossible for the plaintiff to identify which of the negligent defendants had caused the actual damage. Since the plaintiff argued that the manufacturers’ negligence in failing to provide warnings on the drug’s label directly created the identification problem, she contended that application of the theory of alternative liability was even more appropriate here than in the Summers case, where the identity problem was due to the defendants’ simultaneous shooting, not itself tortious conduct.
The plaintiff also compared her case to Haft v. Lone Palm Hotel, where the plaintiff was uncertain as to the cause of the drowning of his son in the defendant’s hotel pool. The Haft court ruled that the lack of evidence of causation was due to defendant’s failure to provide a lifeguard as required by law. The court then shifted to the defendant the burden of proving causation-that its action was not the cause of the boy’s death. In so doing, the court stated that the absence of definite evidence on the issue of causation was a direct and foreseeable result of the defendants’ negligence, and that, under the circumstances, the defendant should bear the burden of proof.
Ms. Sindell asserted that her case presented a similar situation since the defendants’ negligence in not properly labeling the drug as experimental, and in failing to discover or warn of the dangers of DES, had resulted in the plaintiffs mother’s failure to keep adequate records or to remember the identity of the manufacturer which had supplied the DES. Ms. Sindell also addressed economic considerations, contending that the defendants realized cost savings and increased sales through their improper labeling and manufacturing of DES. Accordingly, the plaintiff argued that, as a matter of policy, all customers of the drug companies rather than one particular user of DES should bear the burden of loss resulting from these economies. In presenting this argument, the plaintiff again relied on Haft, in which the court had stated that the burden of the loss should be borne by the entire group benefiting from the cost savings realized by not employing a lifeguard rather than by one particular guest.
After arguing initially that an appropriate situation existed for application of alternative liability, the plaintiff confronted the substantive problems associated with the theory’s use. First, she asserted that the burden of proof should shift to the defendants regardless of their lack of knowledge on the subject of causation. According to the plaintiff, the issue was not whether the defendants had knowledge of the cause of the injury but whether the plaintiffs inability to identify the defendant responsible for her injury was due to the defendant’s conduct in marketing the drug. Second, the plaintiff contended that the alternative liability theory did not require all potential defendants to be before the court, for if a defendant could exonerate himself as a causative factor, he could do so regardless of the number of defendants joined in the action. Moreover, the plaintiff asserted that liability under the theory was joint and several and that the plaintiff could select the party or parties against whom to execute the judgment. Accordingly, an individual defendant’s potential liability would be arguably the same regardless of the number of codefendants in the action.
Finally, the plaintiff argued that even if Summers required all potential defendants to be before the court, the modification of the equitable idemnity rule by the California Supreme Court in American Motorcycle Association v. Superior Court of Los Angeles County rendered this prerequisite unnecessary. After American Motorcycle, the defendants named in the suit could join all other appropriate defendants, thereby gaining the opportunity to recover from their codefendants, according to their percentage of negligence. Consequently, she argued that defendants’ ability to seek indemnity from other jointly liable defendants strengthened her contention that she should not have to bear the undue burden of naming more than a small number of defendants.
The California Supreme Court declined to accept the alternative liability theory presented by the plaintiff. The court first addressed the defendants’ contention that the theory could not be applied because the manufacturers were not in a better position to offer evidence to determine which one caused the injury. However, the court correctly pointed out that the factual circumstances of the Summers case itself precluded an explanation of the cause of the plaintiffs injury. Thus, although defendants are ordinarily in a better position to offer evidence of causation, application of the alternative liability theory is not foreclosed when they cannot offer such evidence.
The court did find, however, that the alternative liability theory as previously applied could not be the basis for liability in this case. According to Judge Mosk, in applying the traditional theory of causation, the possibility that one of the five defendants joined in the action was actually the supplier of the DES given to the plaintiffs mother was too remote. In support of this conclusion, the court noted that the theory had previously been limited to situations in which all potentially guilty parties were before the court. Without this limitation, the offending party might not be named and therefore could escape liability altogether. Thus, the court concluded that in the Sindell case, where any one of 200 companies could have produced the particular drug ingested by the plaintiffs mother, only five of whom were before the court, application of the alternative liability theory was precluded.
The plaintiff next contended that she could recover under the concert of action theory, alleging that her injury was caused by a tacit understanding among the defendants to act in concert to market, manufacture, and promote DES as a miscarriage preventative. The plaintiff relied on Orser v. George in asserting that under the concert of action theory, her claim was valid even though the possibility existed that none of the named defendants had manufactured the DES actually ingested by her mother. In Orser, a wrongful death action, decedent was killed by a pistol fired by one of defendant’s two companions. The court reversed a summary judgment and held that the rifle-carrying defendant could be found liable for the decedent’s injuries on a concert of action theory. There was evidence in the record that defendant possibly knew that his companions’ conduct breached a duty of care owed to the decedent, and that the defendant substantially assisted or encouraged such tortious conduct.
The Sindell plaintiff argued that as in Orser, no one defendant could be shown to have been the actual cause of the plaintiffs injury; nevertheless, each could be found to have substantially encouraged the tortious conduct of the others. Emphasizing that there existed a common and mutually agreed upon formula for DES, that the drug was marketed by each defendant as a safe and effective product, and that each defendant knew of its generic nature, the plaintiff contended that these facts were sufficient to satisfy the requirements of Orser to proceed under the concert of action theory.
The court found the facts before it inappropriate for application of the concert of action theory. It rejected plaintiff’s argument that the conduct of the defendants, collaborating in and relying upon each other’s inadequate testing and marketing methods and failing to give warnings concerning the hazards of DES, constituted a tacit understanding among the defendants to commit a tortious act against the plaintiff. The court noted that DES was produced from a common and mutually agreed upon formula in compliance with the requirements set forth in the United States Pharmacopoeia and not as a concerted tortious action. The court found further that parallel testing and marketing techniques were characteristic of the drug industry and that a decision rendering such conduct concerted action would be an unjust expansion of the theory. The court distinguished the cases cited by the plaintiff by noting that they involved situations where only one plaintiff was injured; the tortious conduct was by a small number of individuals over a short span of time; and each defendant either directly participated in or encouraged and assisted in the act causing the injury. In Sindell, however, millions of women were allegedly injured; the tortious conduct occurred over a quarter of a century and involved approximately 200 individual drug manufacturers; and there was no evidence that each defendant directly participated in or encouraged and assisted a concerted tortious act.
The plaintiffs final argument alleged that a valid claim existed under the industry-wide theory of joint liability. The plaintiff asserted that there was a considerable risk involved in manufacturing and marketing DES, and that this risk was jointly controlled by the drug manufacturers. Specifically, the plaintiff stated that all DES manufacturers knew of the risk involved in distributing an experimental drug and that the manufacturers tacitly agreed to omit the required FDA warning labels on DES packages. She also asserted that the entire drug industry adhered to an inadequate standard for testing the drug. Furthermore, she contended that the DES manufacturers’ method of promotion encouraged pregnant women, physicians, and pharmacists to rely on the generic nature of the drug and to prescribe it interchangeably. The plaintiff concluded that each manufacturer had benefited from exploitation of the drug by all other manufacturers and that sales of DES had been boosted throughout the industry. In presenting this final argument, the plaintiff relied on Hall v. El Du Pont De Nemours & Co. Essentially, the plaintiff claimed that the facts evidenced parallel behavior among the drug manufacturers and an inference of tacit cooperation as well as independent adherence to a tortious industry-wide standard of behavior. The plaintiff concluded that this joint control of the risk should shift the burden of proving causation to the defendant manufacturers.
The theory of industry-wide liability, termed by the court a “novel approach to the problem, was similarly rejected for a variety of reasons. As interpreted by the court, this theory of liability would be applied when each manufacturer in a particular industry adheres to a standard found to be negligent by a court and also found to be the cause of the plaintiffs injuries. The Sindell court emphasized that the number of producers in the industry and the degree of joint control of the risk are important factors in deciding whether to apply this theory. Thus, in Sindell, where no allegations existed that safety functions had been delegated to a trade association and where the industry was decentralized, the application of the industry-wide theory of liability would be unreasonable. Furthermore, the drug industry itself is regulated by the FDA and the industry standards are defined by the FDA standards to a considerable degree. The court concluded that it would be unfair to impose liability on a manufacturer who did not supply the injury-producing drug because it followed the accepted drug industry standards.
THE SINDELL SOLUTION: THE THEORY OF MARKET SHARE LIABILITY
Having rejected the three prongs of Ms. Sindell’s argument, the California Supreme Court nevertheless stated that it would be unfair to allow her to go without a remedy. It began its formulation of a theory on which the plaintiff could proceed by noting that the policy considerations argued by the plaintiff, together with the court’s view that legal theories should adapt to changes in society, justified the court’s formulation of a novel approach.
The court first recognized that, in contemporary industrial society, there is an ever increasing number of fungible goods available to the consumer. Use of these fungible goods, which often cannot be traced to a specific manufacturer, can leave an injured consumer remediless because identification is impossible and current tort theories cannot be applied. As the court noted, the response by the judicial system to this gap in tort liability can be either to deny recovery or to respond to the changing circumstances by fashioning new theories of recovery through the adaptation of the rules of causation and liability. The court chose the latter alternative and proceeded to modify the alternative liability theory to encompass the situation where the fungible nature of the injury-producing product rendered identification of the manufacturer impossible.
Initially, the court needed to develop a method to decrease the likelihood that the manufacturer actually responsible for the injury would escape liability. It noted that the great probability of the responsible party escaping liability, when only five of a possible 200 defendants were joined in the action, rendered shifting the burden of proof according to the alternative liability doctrine as previously applied impossible. The court determined, however, that rather than approaching the issue of causation in the traditional manner of measuring the possibility of a particular defendant causing the injury by the number of possible defendants, it would measure the likelihood that one specific defendant supplied the injury-producing drug according to the market share of the particular manufacturer. Thus, by the plaintiffs joining the manufacturers with the largest percentage of the market, the probability that the guilty manufacturer would escape liability was significantly decreased. The problem of proving causation was satisfied by becoming a probability rather than a remote possibility. The court noted that this theory could be applied where the plaintiff had joined manufacturers that, in the aggregate, represented a substantial share of the market.
The court then used the market share concept to formulate the extent of liability for which each manufacturer would be responsible. In holding that each defendant would be liable for the proportion of the judgment represented by its share of the market, the court stated that this approach, although not immune from minor discrepancies in the correlation between market share and liability, would render each manufacturer’s liability an approximation of its responsibility for the injuries caused by its own production of the drug.
The market share liability theory developed by the Sindell court was founded upon the policy determination that “as between an innocent plaintiff and negligent defendants, the latter should bear the cost of injury.” The court found that, under the circumstances of the case, neither the plaintiff nor the defendants could be attributed with the failure of providing evidence as to which DES manufacturer actually caused the plaintiffs injuries. The court stated, however, that the conduct of the drug manufacturers in marketing DES “played a significant role in creating the unavailability of proof.” Furthermore, the court asserted that the pharmaceutical industry, through insurance and risk distribution, was better able to absorb the cost of injuries suffered by the plaintiff. The imposition of liability on manufacturers in this case would encourage vigilance in detecting and publicizing the harmful effects of a product. It would also provide compensation for injuries suffered by an unaware and “virtually helpless” consumer. The court concluded that these factors, along with the important policy considerations of products liability law, were determinative in their decision to create a new theory of liability upon which the plaintiff could present a valid cause of action.
CRITICAL ANALYSIS OF THE MARKET SHARE LIABILITY THEORY
On October 14, 1980, the Supreme Court of the United States denied a petition for a writ of certiorari to review the California Supreme Court’s decision in Sindell v. Abbott Laboratories. In filing this petition, the pharmaceutical companies termed the imposition of market share liability as “wholly arbitrary and irrational” and contended that destructive liability and anticompetitive consequences would result from the imposition of this theory. Another critic referred to the decision in Sindell as being “one step further towards the dawn of the age of ‘absolute’ products liability. The criticisms of the Sindell decision, as well as the practical effect of the imposition of market share liability, warrant examination in order to determine the viability of market share liability as a means of closing the gap in products liability law where the identification of the manufacturer of the injury-causing product is virtually impossible.
The first contention raised by the pharmaceutical companies in their petition was that the Sindell decision created unworkable and irrational procedural devices which, in effect, eliminate proof of causation in violation of due process and equal protection. Proof of causation is an essential element in every products liability case, and it serves to prevent the imposition of liability based on pure speculation or conjecture. Accordingly, the pharmaceutical companies maintained that “to establish causation by the joinder of a substantial share of a given market where identification of the responsible party is not now possible” is unreasonable and, in actuality, is a violation of due process. In support of this argument, the companies asserted several arguments as to why the decision is unreasonable. To illustrate this assertion, the manufacturers pose the following hypothetical:
Defendants before the court might consist of Manufacturer A with 40% of the market, Manufacturer B with 4% of the market, and Manufacturer C with 0.4% of the market. Since even plaintiffs would not dispute that the statistical correlation between DES exposure and clear cell adenocarcinoma does not exceed 1.4 per 1,000, there is no way to determine whether sales by the 4% or 0.4% market share defendants might have resulted in any injuries whatsoever. A’s presence does not in any way increase the likelihood that either B or C was the responsible manufacturer.
The manufacturers assert that a particular defendant’s liability will almost always exceed its market share because, although only 44.4% of the market is joined in the hypothetical, the defendants are jointly and severally liable for 100% of the injuries sustained by the plaintiffs. However, the manufacturers failed to point out that they are afforded the opportunity to join the other pharmaceutical companies, not joined in the action, which may have supplied the DES actually ingested by the plaintiff’s mother. Accordingly, if a particular defendant does not wish to absorb the market shares of nonparty DES manufacturers, it may proceed against such manufacturers by way of third party complaint for contribution in accordance with their respective market share. Thus, although Manufacturers A, B, and C may be held liable for more than twice their market shares, they need not bear this total amount unless they forgo the procedural devices available to them.
Second, the manufacturers contended that once a defendant exculpates itself from liability or a plaintiff succeeds in identifying the manufacturer responsible for her injuries, the defendants would bear disproportionate measures of liability. The manufacturers stated that a particular defendant may be found responsible for the entire amount of one plaintiffs injuries upon proof of causation and other elements of the case, and may still be liable for a percentage of another plaintiffs claim. The manufacturers contended that these two cases together would expose a defendant to liability greater than that of its market share.
Each plaintiffs claim, however, is a separate cause of action and each defendant’s liability is determined independently. The fact that a manufacturer is found to be the sole cause of a plaintiffs injury in one cause of action should have no effect on another plaintiffs claim under the market share liability theory. Furthermore, the manufacturers’ contention that this theory would discourage a plaintiff from offering evidence of one manufacturer’s liability is unjustified because even if such evidence did exist, it would most likely be discoverable by the manufacturer and used to exculpate itself from any liability.
The manufacturers next argued that the definitions of the product market and the geographical market would be construed arbitrarily by the courts because the drug was dispensed in such a wide variety of quantities throughout the United States. Leaving factual determination of a defined market to the courts may present a problem in the application of the market share liability theory to particular cases, but definitional problems exist in all areas of law. For example, in the area of antitrust enforcement, courts are called upon to define the relevant market in a particular fact situation. The definition of the relevant market by the court may well determine whether a corporation has violated antitrust regulations. As in the application of antitrust laws, the determination of the “product market” and the “geographical market” in DES cases will be a matter for the court to adjudge according to the particular fact situation and evidence presented. A judicial analysis of the factors to be considered in defining the relevant market for application of the market share liability theory will most likely develop on a case-by-case basis.
The manufacturers also argued that the Sindell court failed to consider adequately the fact that its decision may render the pharmaceutical companies uninsurable and that many firms in the industry, especially the smaller ones, would not be able to absorb the costs of litigation and “random liability” associated with the market share liability theory. These economic considerations have been of major concern to the business and legal communities where courts have contemplated any expansion of products liability law. Although the manufacturers may have overstated the severity of the problem in their petition, it is clear that many pharmaceutical companies may suffer serious financial loss because of the Sindell decision.
One of the manufacturers’ most persuasive arguments against the market share liability theory is that the pharmaceutical industry will be unable to obtain liability insurance for its products. This problem of products liability insurance has increased in recent years, especially within the pharmaceutical industry. The major factor contributing to the increase in cost of liability insurance is the corresponding increase in the number and size of successfully litigated claims by products liability plaintiffs. The drug manufacturers asserted that the market share liability theory would render the insurer unable to determine the scope of exposure for a particular manufacturer if that manufacturer could be compelled to litigate and compensate a plaintiff for injuries sustained by an industry product not directly attributed to the insured manufacturer.
Several solutions have been proposed for dealing with the problems of products liability insurance. First, consumers may be able to absorb the increase in the cost of liability insurance of the manufacturer through an increase in the price of the product. As for those firms that cannot increase their prices because of the competitive market, there exists the option of organizing a collective insurance company to insure against products liability claims asserted against the founding firms. Small firms may also choose to become self-insured by establishing a reserve fund to protect against the risks of its product. Another alternative is for companies, especially those who manufacture products like DES which have the potential for causing injury years after consumption, to purchase claims-made policies rather than the standard occurrence policies for its products. Still another alternative exists in the form of legislative action which may limit the amount of a particular liability claim; make direct governmental insurance available to those industries producing high-risk or fungible products; or allow a periodic payment system for compensation to a successful products liability claimant.
These economic considerations were also noted in the dissenting opinion in Sindell. Justice Richardson stated that the application of the “deep pocket” theory of liability under these circumstances would result in two separate rules of law which would be determined by the wealth of the defendant. Moreover, the dissent stressed that Sindell has the effect of making the pharmaceutical industry “an insurer of all injuries attributable to defective drugs of uncertain or unprovable origin” and this effect could spread to other industries. Recent commentators have expanded on the criticisms expressed in the dissenting opinion, contending that the Sindell decision has created a system of ‘no-fault’ products liability that will result in costly, complicated litigation in many types of products liability suits.
Essentially, such economic considerations are justified and should be given careful study by judges and legislators. The capacity of defendants to bear the loss is one factor traditionally taken into consideration, as are effects on the development of the industry and insurance consequences. However, other factors are given consideration when determining the relative ability of the parties to absorb the injury caused by a defective product, and economic considerations alone should not be the determinative factor when deciding whether a plaintiff may proceed with a cause of action in a products liability case.
The second prong of the manufacturers’ argument in their petition for writ of certiorari was that the court’s decision in Sindell was invalid as contrary to federal drug policies encouraging the development and growth of the pharmaceutical industry, and that imposition of liability under this theory would create an undue burden on interstate commerce. The manufacturers asserted that the immediate effect from the imposition of this “random, destructive liability would be to discourage the development and distribution of new drugs and result in anticompetitive trends. They argued that smaller firms would be unable to continue manufacturing generic drugs under the increased burdens of insurance and litigation costs, and that these increased costs would erect barriers for new firms considering entering the pharmaceutical industry. Essentially, the manufacturers stated that such discouragement of the development of new drugs and discrimination against interstate commerce renders the Sindell decision invalid on a constitutional basis.
There is presently no concrete evidence to determine whether the market share liability theory will result in any of the consequences asserted by the manufacturers. An argument can be made that the drugs which are not produced, or which are delayed in being marketed because of the expansion of liability, may be those which a manufacturer suspects may be harmful to a consumer. Furthermore, those companies that cannot compensate for injuries caused by their product should not be allowed to manufacture and market their products. It can also be argued that there is an important state interest in providing adequate compensation to those citizens injured by defective products. The Sindell decision will likely survive the constitutional challenge that it imposes an undue burden on interstate commerce because the sole objective of the decision is to preserve the health and welfare of citizens and not to protect the economies of the situation.
Another criticism of the Sindell decision is that it represents a radical departure from prior tort liability theories. Justice Richardson, in his dissent, asserted that the majority now expressly abandons the foregoing traditional requirement of some causal connection between the defendants’ act and the plaintiffs’ injury in the creation of its new modified industry-wide tort. Justice Richardson reached this conclusion after analyzing the established principles of causation, stressing that there was no proof in the instant case that the drug manufacturers were responsible for the plaintiffs’ injuries. Furthermore, he alleges that the market share theory will result in the imposition of liability on pure conjecture, that plaintiffs will be able to select the defendants against whom they wish to proceed, and that the majority’s decision will result in “broad and ominous ramifications . . . equally threatening . . . to many other areas of business and commercial activities.
A careful analysis of the historical development of products liability law, especially in California, will show that the Sindell decision is a logical expansion of liability based on the policy determination that “as between an innocent plaintiff and negligent defendants, the latter should bear the loss. In the landmark case of Summers v. Tice, the practical effect of the California court’s decision to shift the burden of proof to the defendants was to impose liability on each defendant. Since both defendants shot simultaneously in the direction of the plaintiff, there was no reason to believe that either defendant could have known which bullet caused the injury to the plaintiff. Similarly, the defendant hotel owners in Haft v. Lone Palm Hotel were no more capable of proving the circumstances of the child’s death than was the plaintiff. These cases are but two illustrations of the broad judicial interpretation given to the requirement that the plaintiff prove a reasonable connection between the negligent act of the defendant and the injury sustained. There is no overriding policy reason why such a broad interpretation of causation should not be applied to areas where a product, rather than the acts of a person, has caused the injury to the plaintiff.
Moreover, the extent of Sindell’s applicability to other industries must be examined. It is feasible that any industry now manufacturing fungible goods may be subject to liability under the market share liability theory. Such industries would most likely include those producing chemical and other pharmaceutical products, agricultural goods, cigarettes, and asbestos. The devastating effects some commentators have predicted would be significantly lessened, however, if judicial application of the theory were to be prudent and appropriate to the fact situation.
The market share liability theory should be applied primarily in cases where the passage of time or some other unusual circumstance renders impossible the identification of the manufacturer of the injury-causing product. Since the overwhelming majority of products liability cases are reported within two years after the date of the occurrence of the injury, this limitation would allow the theory to be applied in only a small number of cases. Moreover, it should be imperative that plaintiffs have no feasible method of ascertaining the identity of the manufacturer, and that this situation is in no part due to the plaintiffs calculated oversight. Sufficient evidence is usually available to the vast majority of products liability claimants to discover the identity of the manufacturer of the injury-causing product. For example, the purchasing records of a chemical substance alleged to have caused injury may divulge the identity of one or more manufacturers who may have supplied the area in which the plaintiff resided at the time of the injury. In cases where there is some degree of loyalty to a particular brand of product, as with cigarettes, a plaintiff should not be allowed to forgo inquiry by the defendants as to the brand of cigarettes the plaintiff normally consumed. Furthermore, if a reasonable person should have known the identity of the product consumed, the plaintiff should not be allowed to plead ignorance and proceed under the market share liability theory.
In addition, the plaintiff should be required to prove that every manufacturer joined in the action under this theory is at fault for marketing a defective product. Injury alone, regardless of the severity, cannot impose liability. Courts should not apply the market share liability theory unless the plaintiff proves that the joined defendants breached their duty to market a safe product or to provide sufficient warnings as to the harmful effects of the product.
Finally, it must also be noted that the market share liability theory as applied in Sindell would allow the joined defendants to join other drug manufacturers who may have produced the injury-causing drug. Without this procedure, plaintiffs would be able to target and litigate against specific manufacturers, thereby allowing other potential defendants to avoid liability. Moreover, these targeted manufacturers may subsequently be liable for all damages awarded to plaintiffs under this theory. It is apparent that unless a similar procedural device exists in the jurisdiction, courts should forgo the application of the market share liability theory or risk a disproportionate number of manufacturers absorbing all litigation and liability costs.
The market share liability theory as espoused in Sindell v. Abbott Laboratories is a dramatic breakthrough in products liability law. As in prior situations in which courts have expanded liability, the case presented a unique fact situation in which traditional doctrines could not be readily applied. The California Supreme Court responded to this situation, as it has done in the past, by formulating a new theory of liability rather than leaving the injured plaintiff without a remedy. The policy determination that, as between an innocent plaintiff and negligent defendant, the latter should bear the loss, has once again given rise to an expansion of liability in products liability law. The feasibility of implementing the market share liability theory remains to be seen. Only through a case-by-case determination of the application of the theory can its consequences be realized. Moreover, any adverse effects produced by the application of the theory may well be offset by the fact that many plaintiffs, once barred from recovering for injuries sustained from defective fungible products, are now able to present valid causes of action to proceed against manufacturers of fungible goods.
Patricia A. Meagher, 1981.
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More DES DiEthylStilbestrol Resources
Dynamic changes in products liability have occurred during the past several decades. The courts, focusing on consumer protection, have expanded producers’ liability by moving away from the privity doctrine and toward strict liability for manufacturers. A current effort to protect consumers through products liability law involved a series of DES cases, in which the plaintiffs proposed “intra-industry joint liability.” This theory of products liability allows plaintiffs to hold entire industries liable for injuries caused by defective products of unknown origin. The number of plaintiffs involved in these cases and the likelihood that other plaintiffs will adapt the theory to different types of cases give the implications of intra-industry liability a continuing interest.
Market Share Liability for DES (Diethylstilbestrol) Injury: A New High Water Mark in Tort Law: Sindell v. Abbott Laboratories, 26 Cal. 3d 588, 607 P.2d 924, 163 Cal. Rptr. 132, cert. denied, 101 S. Ct. 285 (1980), Nebraska Law Review, Volume 60 | Issue 2 Article 9, 1981.
There are four possible bases for intra-industry liability: concerted action, alternative liability, industry-wide liability, and market share liability. Each would allow a plaintiff to collect substantial damages from multiple defendants without proof that any particular defendant caused the plaintiff’s injuries. Eliminating the plaintiff’s burden of proving which manufacturer’s product injured the plaintiff virtually guarantees that plaintiffs will prevail on the causation issue.
In Sindell v. Abbott Laboratories, the California Supreme Court discussed intra-industry liability for adverse effects of drugs and adopted the market share liability theory for DES injuries. Although the majority purported to shift only the burden of proving causation from the plaintiff to the defendants, the effect of its adopting the intra-industry joint liability concept (or, more specifically, the market share doctrine) is to guarantee that the plaintiff will prevail on the causation issue. By departing from traditional tort doctrine and effectively eliminating causation as an issue, market share liability thus represents a new high water mark in tort law. This Note will analyze Sindell and the various approaches taken to overcome the obstacle of product identification in DES cases. In addition, it will examine the legal, social and economic ramifications of intra-industry joint liability.
The plaintiff in Sindell brought a class action suit which sought to hold several major drug companies jointly and severally liable for injuries she had sustained as a result of her mother’s use of DES as a miscarriage preventative while she was pregnant with the plaintiff. The complaint alleged that DES had caused her to develop precancerous and cancerous tumors and lesions, but it did not identify the specific manufacturer of the DES ingested by her mother. The trial judge sustained the defendants’ demurrers on the ground that the plaintiff failed to identify which defendant had manufactured the drug responsible for her injuries.
The California Court of Appeals reversed the trial court’s decision, concluding that the plaintiff had alleged facts sufficient to state a claim against the defendants. These included allegations that the defendant drug companies had collaborated in testing, marketing, and promoting DES and that they had agreed to a common formula for the drug in order to permit filling prescriptions with a brand other than that prescribed. Pointing to these allegations, the court concluded that the theories of concerted action and alternative liability were available to the plaintiff.
FOUR THEORIES OF INTRA-TNDUSTRY LIABILITY
The appellate court in Sindell identified two theories which would support joint and several liability of the defendants. Under the first theory, concerted action, a person would be liable for harm resulting from the tortious conduct of others if he assists or encourages that conduct, and either has breached a duty owed the plaintiff or has knowledge that the others’ conduct constitutes a breach of duty.
Under the second theory, alternative liability, all negligent defendants would be liable for the plaintiff’s injuries if it is possible to ascertain which defendant actually caused the injuries and if it is fairly certain that the injuries were caused by one of them. The appellate court relied on a well-known California case, Summers v. Tice, in which two negligent hunters were held jointly and severally liable for the plaintiffs injuries, where it was fairly certain that the shot came from one of them, but it was impossible to tell which hunter had fired the particular shot. The burden of proving causation was shifted to each defendant to exculpate himself if possible. The Summers court concluded that it would be unfair to leave the plaintiff remediless in the face of the defendants’ concurrent negligence.
Although not relied upon by the appellate court in Sindell, two other theories of liability have been proposed as bases for intraindustry liability: industry-wide and market share liability. The industry-wide liability theory was suggested first in Hall v. E.I. Du Pont De Nemours & Co., Inc. , which involved children who were injured by the explosion of dynamite blasting caps. The manufacturer of the blasting caps could not be identified because their markings had been destroyed in the explosion. The plaintiffs sued six American manufacturers of blasting caps and the industry trade association, alleging concerted action. The court decided that a cause of action existed under the concerted action allegation because all of the manufacturers had agreed to not place warnings on the blasting caps although they knew that the caps were dangerous. The court also determined that the defendants jointly controlled the risk because they had delegated some safety functions to a trade association. The court concluded that imposing industry-wide liability upon the manufacturers joined in the action was justified because they were aware of the risk and jointly controlled it. The Hall theory of industry-wide liability grounds each manufacturer’s liability for all injuries caused by its product upon industry-wide adherence to a specified standard of safety. The industry standard itself becomes the cause-in-fact of the plaintiff’s injury. Each industry member contributes to the plaintiff’s injury by adhering to the standard, thereby perpetuating the resulting manufacture of an unidentifiable injury-producing product.
The market share liability theory is an extension of the Summers doctrine. Using an undiluted Summers rationale, it is inappropriate to shift the burden of proving causation to the defendants where there is a possibility that none of them made the product which injured the plaintiff. However, the market share theory alters this doctrine by shifting the burden of proof to the defendants if the plaintiff joins the manufacturers of a “substantial share” of the type of product which caused the plaintiff’s injury. Under the market share theory, each manufacturer’s liability is equivalent to its percentage of total sales by all manufacturers of the product. Thus, a manufacturer’s liability should correspond to its responsibility for the injuries caused by its own products.
Although the California Supreme Court rejected the appellate court’s reasoning, it affirmed the outcome of the case on a different basis: market share liability. The supreme court concluded that the concerted action and alternative liability doctrines, as interpreted by the appellate court, could not be applied to hold the Sindell defendants liable. The court reasoned that the defendants’ parallel or imitative conduct in relying on each others’ testing and promotion methods described a common practice in the industry, not a concerted action. The formula for DES is a scientific constant which a manufacturer producing the drug must follow by law. For these reasons, and because application of the concerted action theory to Sindell would expand the doctrine beyond its intended scope, the court found no concert of action among the defendants.
The supreme court also rejected the alternative liability theory. While in Summers v. Tice there was a fifty percent chance that one of the two defendants was responsible for the plaintiffs injuries, the court noted in Sindell that any one of two hundred companies which manufactured DES might have made the product which injured the plaintiff. Therefore, there was no “rational basis upon which to infer that any defendant in the action caused plaintiff’s injuries, nor even a reasonable possibility that they were responsible. The court found the chance that any one of the five defendants supplied the DES to plaintiff’s mother was “so remote that it would be unfair to require each defendant to exonerate itself.” The court, therefore, did not use the alternative liability doctrine to relieve the plaintiff’s burden of proving which drug manufacturer caused her injuries.
The supreme court also discussed two other bases of liability: industry-wide and market share liability. It declined to apply the former theory, but concluded that adoption of the latter doctrine was warranted.
The court rejected industry-wide liability because the large number of producers of DES would create practical problems of management. In addition, it would be unfair to impose liability upon a manufacturer for injuries resulting from the use of a drug manufactured within standards suggested or mandated by the government.
The supreme court did adopt the market share doctrine as the basis for the defendants’ liability. Although it perceived that some discrepancy in the correlation between the market share and liability is inevitable, the court concluded that policy reasons nevertheless warranted application of the market share theory. The policy reasons presented by the court were:
- A change in the rules of causation and liability is necessary to fashion remedies that meet the changing needs arising from our complex, industrialized society;
- between an innocent plaintiff and negligent defendants, the latter should bear the cost of injury;
- defendants are better able to bear the cost of injuries resulting from the manufacture of a defective product;
- and holding drug manufacturers liable for defects provides an incentive for product safety.
The majority did not define what constitutes a “substantial share” of the DES market, but it did reject a suggested requirement of seventy-five to eighty percent. Therefore, from the majority’s viewpoint, it appears that a “substantial share” is something less than seventy-five percent.
Is Market Share Liability an Extension of, or a Break from, Traditional Tort Law?
According to the Sindell majority, the DES cases are merely a factual variant upon the theme composed in Summers v. Tice; hence, the shift in the burden of proof inherent in market share liability does not completely lack precedent.
However, according to the dissenting justices, the Summers case differs so fundamentally from the DES cases that its precedential value is suspect. In Summers the entire class of responsible parties was before the court; however, only some of the potential defendants were joined in Sindell. “Furthermore, the negligence of the defendants in Summers caused the plaintiff’s inability to identify the tortfeasor.” Conversely, in Sindell the plaintiff’s inability to satisfy the identification requirement resulted from the passage of time. Thus, the dissenters’ suspicions of an unprecedented extension of liabilty seem well-founded. The majority in Sindell argued that the plaintiffs cause of action was based on a reason similar to that advanced in Summers: as between an innocent plaintiff and negligent defendants, the latter should (Summers), or are better able to (Sindell), bear the cost of the injury. This “deep pocket” theory of liability, however, should not play a role in the legal analysis of the case because a defendant’s wealth is an unreliable indicator of fault. In addition, a system priding itself on ‘equal justice under law’ does not flower when the liability… aspect of a tort action is determined by a defendant’s wealth.
Adoption of the market share doctrine seems unfair if one considers that the theory imposes liability upon manufacturers who may have had nothing to do with causing the injury. Such an inference of fault approaches the imposition of liability on the basis of injury alone. Allowing courts to infer fault in this manner transforms manufacturers into insurers of societal safety. Also, such a broad extension of liability may diminish the money available for recovery.
In addition to the problems involved in imposing liability under the market share theory, allocation of liability is similarly perplexing. Assuming that no state other than California will adopt the market share doctrine because of its radical departure from traditional tort principles, California courts will allocate liability only to those manufacturers who are amenable to suit in California. Accordingly, as an eventual result of Sindell, California producers of DES may be held liable for 100 percent of a plaintiff’s injuries despite the fact that their aggregate share of the market may be considerably less. Similarly, DES victims would recover unevenly under the market share theory. California plaintiffs are in a better position than are out-of-state plaintiffs to recover fully for their injuries because California plaintiffs can pick and choose their defendants. For example, if the producer which actually caused the injury is now insolvent, a California plaintiff may recover by joining in the action other manufacturers of the same product. Conversely, in other states which still require identification a plaintiff may have a judgment which is valid but unenforceable because of insolvency.
Practical Implications of the Market Share Approach
In view of the legal, social, and economic consequences of the market share theory, it is essential to consider its practical implications. Market share liability would pervasively affect product safety and research and development of new products, and it also could have a detrimental impact on free competition.
Theoretically, market share liability would promote product safety because manufacturers of similar products would find it advantageous to join in establishing higher industry safety standards. However, it is also possible that the market share doctrine would decrease product safety because manufacturers would feel that despite whatever extra precautions are taken during production, they still could be held responsible for injuries resulting from the careless manufacturing practices of others. In addition, if manufacturers are liable regardless of fault, products liability judgments may become a mere business expense. If it is less costly to pay tort claims than to improve safety, producers may not bother to correct an injury-causing product. Market share liability, therefore, loses sight of one of the principal goals of the tort system: to reduce the number of injuries.
Adoption of the market share doctrine may prove to be similarly shortsighted as a matter of social policy concerning the promotion of research and development of new products. Although one commentator maintained that current drug research is duplicative and wasteful, public policy favors the research and development of new pharmaceuticals. The market share theory could hamper this research and development because each new discovery would be a potential source of liability. If policymakers want to encourage the development and marketing of new pharmaceuticals, they must absolve manufacturers of liability arising from dangers hidden prior to the marketing of the new drug. Furthermore, if the drug industry is required to anticipate side effects or medical complications which might surface a generation after ingestion, pharmaceutical research laboratories would be burdened with the duty to predict the future.
Free competition is one of the most important underpinnings of the American standard of living. However, it also could suffer from the Sindell decision. The market share theory suggests the socialistic concept of centralized authority for redistributing private resources. If all producers were held liable for similar products manufactured by the various members of the industry, the larger producers would have an incentive to organize the industry and to attempt to set quality-control standards. Dissenting marginal producers could be driven out of the market, leaving the largest manufacturers in control. If so, the market share liability doctrine would affect the economic structure of American industry extensively.
A NEW APPROACH TO THE INTRA-INDUSTRY LIABILITY PROBLEM
The Sindell majority referred to Justice Traynor’s opinion in Escola v. Coca Cola Bottling Co.,11o which recognized the need to adapt tort principles to changing and complex methods of mass production and marketing. One cannot quarrel with the need for some alteration in the present system of compensating plaintiffs injured by defective products. The theory of intra-industry joint liability, which eliminates proof of causation, is an attempt by the courts to keep pace with society. While market share liability is a worthy effort at balancing the rights of producers and consumers, the problems inherent in the market share theory warrant a search for an alternative solution.
Many commentators have proposed no-fault schemes of products liability to replace our current system. Others have suggested a limited no-fault version to be administered by an administrative tribunal. However, the problems that would arise from these systems make such changes undesirable. There are, undoubtedly, more satisfactory alternatives for apportioning losses from DES injuries than no-fault or market share liability. Yet, such an apportionment exceeds judicial competence. It is the province of the legislature, not the judiciary, to weigh the various economic, social, and political factors involved in such a complex policy determination.
Several minor legislative changes might result in better apportionment of DES losses. Partial governmental liability has been suggested, relying upon the belief that government approval of DES should carry with it some financial responsibility. Another suggestion is to limit the amount of damages a plaintiff could recover; this would decrease a manufacturer’s exposure in individual cases in order to offset its overall expanded liability. A legislature also might boost funding for the agencies responsible for regulating manufacturing. Banning sales of products which violate statutory quality and safety standards would spur manufacturers to develop safer products. Agency scrutiny, if properly funded, would deter irresponsibility in the research and development of new products without substantially inhibiting such undertakings.
While minor changes in the system will aid plaintiffs today, major alterations are needed to cope with the increasing number of plaintiffs who cannot locate or even identify the manufacturers of injury-causing products. Perhaps the most satisfactory solution would be congressional action to establish a framework for uniform loss apportionment. This would eliminate the market share doctrine’s problems of uneven distribution of recovery and unfair allocation of liability.
For example, a scheme similar to the Federal Deposit Insurance Corporation (FDIC) could be instituted, whereby each manufacturer deposits into a federal fund a percentage of its gross sales. Such a plan could be called Manufacturer’s Deposit Insurance Corporation (MDIC) and would function as follows: Each manufacturer of a designated product would pay into the fund a percentage of its gross income from sales of that product according to a flexible rate assigned to the product. Federal administrators could increase the rate for a manufacturer found negligent in its manufacturing practices or could revoke its manufacturing license. Plaintiffs could collect from the fund for injuries and losses attributable to defective products without proving that the defect was foreseeable or that the manufacturers had “joint control of the risk.” The only producer identificaton required would be that the product is American-made.
MDIC would balance the positions of both manufacturers and consumers. If products became defective, or if unforeseeable flaws were discovered, the fund could buy back the products, or pay the resulting injury claims, or both. Hence, a manufacturer would not face bankruptcy because of an unexpected imperfection in its product. Research and development of new products would flourish under MDIC because the introduction of a new product would not be inhibited by the threat of liability. Because contributions to the fund would be proportional to each producer’s gross sales, marginal producers could still compete with large manufacturers, and free competition would remain as the mainstay of the American economy. MDIC would allocate liability more equitably than would the market share doctrine because manufacturers of all states (rather than just California) would contribute to the payment of claims. The fund’s cost would become a business expense imposed concurrently with the manufacture of a product; consequently all producers would bear responsibility for injuries caused by their products, even those occurring after bankruptcy.
MDIC offers advantages to consumers as well as to producers. Under this plan, recovery for injuries or losses would be allocated among plaintiffs in all fifty states. In addition, a plaintiff could collect compensation for her injuries regardless of whether the producer at fault is currently solvent. The absence of a manufacturer identification requirement would allow recovery for plaintiffs who previously were unjustly denied compensation for their injuries or losses because of their inability to match the injury-causing product with a producer. Under MDIC, product safety and quality standards would be policed by federal administrators. Such supervision and the threat of lost sales or a rate increase would deter negligent production practices.
MDIC would include all manufacturers and would not discriminate against certain industries. It would allocate liability fairly and distribute recovery evenly. The MDIC system for compensation would not sacrifice deterrence as a control on product safety.
The market share doctrine is an attempt to resolve equitably the question of intra-industry joint liability. Although market share liability is not the appropriate solution, the California Supreme Court’s decision in Sindell is instructive. Several unsettling questions raised by the appellate court in Sindell were answered by the supreme court. First, it reaffirmed the Hall “joint control of risk” requirement for industry-wide liability. Second, it held that alternative liability could not be asserted in DES cases. Some queries, such as the due process ramifications of market share liability, remain unresolved and may require consideration by the United States Supreme Court.
Sindell will affect manufacturers throughout the country. Any producer dealing in interstate commerce can reasonably expect that, at some point, its product will reach California. It is difficult to predict fully the effect on products liability law; however, Sindell certainly is a landmark in the struggle to solve the producer identification problem.
Legislatures should aid the courts in adapting traditional tort doctrines to modern technology. Minor changes in the present system will aid plaintiffs and judges today, but major alterations are imperative for the future. In this regard, MDIC may be a viable alternative solution to the problem of intra-industry joint liability. Legislative changes in the future will not assist the courts in making today’s decisions concerning the producer identification problem in products liability cases. However, Sindell may encourage the search for more equitable solutions to the problem of intra-industry joint liability.
Barbara J. Koperski, 1981
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