The Decline & Fall of Privity

One of the fastest-growing branches of U.S. litigation is product-design liability suits against manufacturers, claiming that faultily designed products caused serious injuries or deaths. "This explosive field has grown tenfold in the last ten years--and that's on the conservative side," says Lawyer Craig Spangenberg, partner in a Cleveland firm that specializes in such cases. Spangenberg is all for it: "There's no reason why American industry can send a rocket to the moon and not design a can opener that's safe."

In a warning aimed at the nation's designers, on the other hand, the trade journal Product Engineering worriedly argues that more and more "blame is being pinned on the design engineer." In theory, engineers have always been vulnerable to negligence claims; in fact, they have rarely been sued because the firms employing them make a more tempting financial target. Even so, the legal situation is fluid enough to give designers ample cause for worry about the future. Main reason: a spate of recent court decisions that have eroded the old doctrine of "privity" while enhancing the new doctrine of "strict liability."

New Assumptions. Privity was the traditional idea that there had to be a direct relationship between two parties before there could be an "implied warranty"--or a breach of it. If a man bought a toy that later exploded in his child's face, he had a breach-ofwarranty action only against the toy store, not the toy manufacturer, with whom he had no direct relationship. This so-called "citadel of privity" was notably undermined in a New York case that stemmed from the 1959 crash of an American Airlines Lockheed Electra into the East River during an instrument approach to La Guardia Airport. Mrs. Anneliese Goldberg, whose daughter was among the 63 victims, filed suit, claiming that the accident was caused by a faulty altimeter that had registered a height of 500 feet when the plane was at ground level.

Privity seemed to bar the suit: the dead daughter had had no direct connection with either the altimeter maker or Lockheed, the airplane manufacturer. Even so, the New York Court of Appeals ruled in 1963 that Mrs. Goldberg could sue Lockheed, though not the altimeter maker, thus conspicuously dispensing with privity. (Ironically, Mrs. Goldberg decided not to sue Lockheed, simply settled out of court with American Airlines for some $10,000.) In the Goldberg case, relaxing the privity requirement also imposed "strict liability" on the manufacturer. Under this principle, the plaintiff is not obliged to show that the manufacturer lacked foresight or was actually negligent in causing the defect. The plaintiff need only show that the product was faulty and that the injury occurred. In short, consumers are now entitled to assume that more and more products will work safely, as advertised, when normally used.

Share the Rap. So far, leading personal-injury lawyers doubt that individual engineers need be overly alarmed about the new legal risks, which are still mainly aimed at manufacturers. Manhattan Lawyer Harry H. Lipsig foresees suits against engineers in only two general situations: 1) where the manufacturer has gone out of business, or is financially weaker than the engineering firm; 2) where the plaintiff finds the engineer in a more convenient jurisdiction than the manufacturer, as when a U.S. engineer designs a machine that is then built abroad.

A distinct feature of the new liability trend is to "shift the risk" to the defendant who can insure against it on the largest scale. Detroit auto engineers would probably not be held personally liable, for example, since the theory is that big auto companies can take out insurance against defective design and spread the cost among hundreds of thousands of purchasers, each of whom is charged a few more cents for his new car. In addition, today's wise manufacturer ignores his own heady advertising and urges customers to return defective products for repairs, thus giving him the information he needs to improve designs and avoid suits.

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