Aviation Products Liability: The impact of Product Liability Law on Aviation in the US - Essay Example

Aviation Products Liability: The impact of product liability law on aviation in the USA The single case that has stirred the most controversy in small aircraft aviation products liability is Cleveland v. Piper Aircraft Corp.1 This case involved a 1983 New Mexico crash of a small single-engine airplane called the Super Piper Cub.2 In May of 1986, a jury awarded $2.5 million to the plaintiff. However, the trial judge reduced the damages to $1,042,500, plus post- judgment interest and costs. The Tenth Circuit reversed and remanded for a new trial. The case came before the Tenth Circuit again after the second trial with Piper raising the issue of whether federal aviation law preempted state common law claims, or more specifically, whether a manufacturers compliance with federal aviation statutes and regulations should be a complete defense to individual state common law claims.3 The Tenth Circuit affirmed the trial courts decision not to grant summary judgment to Piper based on that defense.4 Concerned manufacturers, pilots, and legislators criticized the award for several reasons.5 In fairness to the Cleveland jury, one would have to have been at the original trial to know the factors influencing its decision.6 Deciding aircraft accident cases becomes even more difficult if the crash involves a small passenger aircraft, and if innocent third parties, either on the ground or in the aircraft, are injured. In cases where no one was negligent but people are injured, the ultimate legal question remains: “Who should pay?” Section 402A of the Restatement (Second) of Torts provides the basic rule for “strict liability” standard for defective products cases.7 Essentially, section 402A permits an individual who is injured by a product to receive compensation from the seller, manufacturer, or distributor of that product without regard to “fault” in producing, selling, or distributing the product. Also, under section 402A whether the manufacturer, seller, or distributor used the utmost care in the production and sale of the product is irrelevant.8 Liability under section 402A is predicated upon the fact that the product was “defective” at the time it was sold. If the defective product has injured someone, it does not matter if the “defect” is a singular flaw in one particular unit or a design flaw in an entire product line. Policies behind the adoption of this no-fault “strict liability” standard reflect the concern for harm to the unsuspecting individual. If an increasingly mechanized society benefits from these products, and a certain number of the products are bound to be defective, then all of society should share the cost of compensating the individual victim. Thus, the cost of litigation is “internalized” into the overall price of the product. This method of cost spreading, however, is open to criticism. First, critics of strict products liability tend to question whether courts provide the most efficient way of spreading the cost of injuries caused by defective products. Included in the price of compensating the innocent victim are attorneys contingency fees, court costs, and insurance company profits. Critics of the cost-spreading function of strict products liability law argue that the higher price of the product includes compensation for many other parties besides the actual injured victim and that, consequently, it is more cost effective for the occasional victim to insure himself individually than for all purchasers to pay the higher price.9 Second, there is the problem of what to do about certain highly useful products that, by their very nature, impose a large risk of injury to consumers while serving an extremely beneficial purpose for society as a whole or for certain consumers. Many pharmaceutical products fall into this category, particularly when the drug is potentially life-saving but only used by a small number of consumers. The litigation and insurance costs stemming from production of these high risk, high utility products could be so great that manufacturers are driven out of the market or the product becomes exorbitantly expensive. Critics of section 402A argue that some products require greater protection from the current state of strict products liability laws. Almost unanimously, critics blame strict products liability for the near demise of small aircraft manufacturing in the United States and call for changes in the law. Almost as a chorus, they proclaim a direct causal relationship between the advent of strict products liability claims and the rapid decline of small airplane manufacturing. Because of the perceived direct causation between the decline in aircraft sales and the expansion of products liability, every person in the aviation community, from the aviation machinists unions to the manufacturers, joined together to call for national reform in aviation products liability law. Manufacturer figures showed that the price of aircraft had rapidly increased in proportion with the cost of insurance, and these figures, along with the rapid decrease in sales, corresponded with the increase in products liability judgments. The question left unanswered by products liability critics, however, is why the same products liability laws that caused a decline in the manufacture of small aircraft did not cause a similar decline in the number of other products sold such as automobiles. The advocates of aviation products liability reform argue that the cost of aviation products liability insurance pushed the price of the small airplane above the cost that the average buyer was willing to pay, thus collapsing the market. This proposition makes at least two broad assumptions: (1) that the price at which demand for aircraft began to rapidly decline was somewhere within the range of products liability costs; and (2) that there was an expanding market for small airplanes at a cost which did not include the added cost of products liability insurance. Make both of these assumptions, and pent-up demand for small aircraft will rapidly increase once strict products liability is eliminated. However, both assumptions are interrelated and depend upon a number of additional premises.10 The first assumption depends upon the premise that there is a certain low price at which large numbers of purchasers would buy small aircraft; and that, as the price increases, the quantity demanded for small aircraft would decline so rapidly that the price would become so high and the quantity demand so low as to make the aircraft practically, if not totally, unmarketable.11 To put the blame on the manufacturers products-liability insurance costs, the price at which the quantity of new aircraft demanded drops to the point of unmarketability must lie somewhere between the price difference caused by (1) the cost of producing an aircraft without the products liability cost and (2) the cost of producing the same aircraft with the products liability cost included. If, on the other hand, the quantity demanded for small aircraft drops to the point of unmarketability, some point below the price of an aircraft without the cost of products liability insurance included, then the blame for the demise of small aircraft manufacturing may lie with other factors besides products liability costs. Even if the price lies within the added price range, it may not lie within the “strict liability” portion of the insurance cost included in the price of each aircraft. There should always be some manufacturers liability insurance cost inherent in the price of an airplane. Even the strongest proponent of aviation products liability reform could not reasonably advocate releasing aircraft manufacturers from all liability for consumer injury. Manufacturers must be held responsible for the safety of their products. In some circumstances, a poorly manufactured car is unsafe, but more likely it is just a “lemon”; however, a poorly manufactured aircraft is a timebomb waiting to explode.12 Very few parts of a small aircraft can fail without the result being catastrophic. Therefore, even if aircraft manufacturers were made immune to “strict” or “no fault” liability and could only be liable for negligence, the aircraft manufacturers product- related insurance costs would still be higher because of the greater possibility of damage, injury or death from aircraft accidents. Courts would probably expect aircraft manufacturers to conduct far more rigorous testing prior to releasing aircraft into the market place than is required of other types of product manufacturers because aircraft manufacturers can foresee greater harm or injury from less rigorous testing. Even at the lower “negligence” liability standard, the aircraft manufacturer would still be liable for some actions and would have to insure against those losses. Insurance costs would still be included in the price of every aircraft sold. If the quantity of new aircraft demanded decreased sharply in the price range that includes even a reformed “negligence” level liability cost, without “strict” liability costs, then only reform immunizing manufacturers from aircraft manufacturing liability would make a real difference to the small aircraft market. The second broad assumption naturally follows: that the market for small aircraft would have continued to expand had products liability costs not been added. Instead of scapegoating strict products liability law, what is needed is a concerted plan to expand the demand outward by eliminating the other factors. A concerted effort by the aircraft industry is required to improve safety, lower costs and make flying more user-friendly. If greater aircraft use and enjoyment by a larger segment of the population is the solution to increasing the demand for small aircraft, then many proposals are available to bring about this solution. Some of these proposals have recently been enacted. Some need to be expanded further, however, if small airplane flying and ownership is once again going to be within the reach of the average consumer. Stressing aviation products liability reform without stimulating demand is focusing on the result rather than the cause of the problem. Unfortunately, products liability reform appears to be at the top of the agenda. Because of the correlation between increased products liability recoveries and the decline in sales of small aircraft, the most strongly advanced solution to this problem has been called by those favoring aviation products liability reform.13 Those calls were at least partly answered last year when President Clinton signed into law the General Aviation Revitalization Act of 1994. Representative Jim Hansen (R-Utah) and Rep. Dan Glickman (D-Kan.) co-authored the bill. The reform was backed by Republicans, Democrats, manufacturers, labor unions, and pilots organizations such as the Aircraft Owners and Pilots Association and the National Air Transportation Association. Essentially, the Act provides a statute of repose limiting the liability of general aviation aircraft and components in accidents occurring more than eighteen years after the aircraft left the manufacturer or after the component was installed. Besides written warranty agreements, exceptions to the new law include situations where the claimant proves that the manufacturer withheld vital, claim-related, safety information from the FAA. The Act also allows claims by certain third parties including passengers who are being transported during a medical emergency, persons injured on the ground, and persons in other aircraft.14 According to the section of the House Report authored by the Committee on Public Works and Transportation, lesser judicial products liability protection is required because the FAA, with its corrective regulatory powers, already insures the safety of the older aircraft fleet. The Report also cited National Transportation Safety Board (NTSB) data showing that only one percent of general aviation accidents are caused by defects in manufacturing or design. This portion of the House Report also states that a claimant who files a strict products liability suit for an aircraft that is more than eighteen years old is unlikely to succeed. Finally, the House Report notes that the purpose of the Act is to stifle frivolous litigation aimed at forcing a cost-avoiding settlement by the manufacturers. On the other hand, the statute of repose exempts from protection defective components installed within eighteen years even if installed on an aircraft more than eighteen years old. Whether the aircraft manufacturer that approves the new component can be liable along with the component manufacturer is, however, questionable.15 It remains to be seen how the Revitalization Act will withstand a Constitutional equal protection challenge, as it denies a remedy to only one class of claimants (aviation claimants), particularly when the Act eliminates a cause of action for those claimants simply because the defect was not discovered before the eighteen year cutoff.16 An example of this challenge might occur where, through a progressive defect, a hidden wing structure suffers from a catastrophic fatigue failure that occurs within the reasonable service life of the aircraft but after the eighteen-year limit. Because of this fear that the Act might be unconstitutional, and because of the possibility that the new law was underinclusive by arbitrarily denying remedies to injured parties, a few witnesses testified against the Revitalization Act at the house committee hearings.17 Influenced by this adverse testimony, the Judiciary Committees assessment of the Revitalization Act was more guarded.18 The Judiciary Committees portion of the House Report on the Act cautioned that tort law (or common law) was historically “judge made law,” and was “ultimately grounded in the experiences of the legal system and values of the citizens of a particular State.” The Committee further noted that, for prudential reasons, “Congress has chosen to tread very carefully when considering proposals . . . that would preempt State liability law.” However, citing extreme regulatory agency oversight in this area of safety, the “unique nature of the general aviation industry,” and the safeguards put into the bill in the form of exceptions, the Judiciary Committee ultimately found “exceptional considerations” that merited the limited federal intervention, and therefore approved the bill. Manufacturers and aviation magazines lauded the passage of the act and found immediate evidence of its success in increased manufacturing figures for the first half of 1994, presumably made in anticipation of passage of the Act. Manufacturers proclaimed that the passage of the new law reduced liability for a large segment of the operational general aviation aircraft fleet. Cessna Aircraft Vice President Dave Franson announced the creation of “a single engine task force” and promised production of 2,000 new planes a year starting in 1996. In spite of the jubilation among the Acts supporters, some recognized that passage of the General Aviation Revitalization Act was not the final solution to the small aircraft industrys problems. Several of these other solutions to the industry decline are already in various stages of planning and implementation. The FAA, for example, recently announced a “General Aviation Action Plan” designed to improve safety and pilot usability of the system. 19The plan outlines five general areas of attack: safety, services, research and development, access, and affordability. First, the FAA will make an increased effort to promote training, remedial education, and safety for pilots, mechanics and flight instructors. Second, the FAA is trying to make its services more standardized and predictable throughout the country. Third, the FAA is promoting the quick introduction of new technologies such as Global Position System (GPS) navigation. Fourth, the FAA is trying to reduce the decline in the number of public landing sites. Finally, without sacrificing safety, the FAA would like to eliminate regulations that impose unnecessary costs. A general aviation aircraft industry turnaround depends ultimately upon gaining the interest of an adequate number of consumers. Providing aircraft at a reasonable price is undoubtedly a factor in attracting those consumers. Aviation products liability is part of that price. What is not known, however, is how much of an effect the limiting or elimination of the “strict liability” portion of the total products liability cost will have on marketability, either because it may not fall in a significant price portion of the demand curve or because there is a lack of demand caused by other factors. The General Aviation Revitalization Act will lower the litigation costs of manufacturers. It remains to be seen, however, whether those lower costs will actually decrease prices over time and whether those lower prices will actually have a significant effect on demand. It also remains to be seen whether it is done at the expense of consumer safety and consumer rights. The intent of the Act is admirable, in that it purports to “revitalize” general aviation; however, consumer safety and consumer rights are apparently taken away without anything offered in return. Products liability law may be an expensive method of encouraging safety and spreading the cost of defective products, but tort reform that simply limits remedies without providing alternative solutions to those underlying policy problems is like damming the river to keep it from flooding--someone else just gets flooded upstream. The courts provided products liability law because a few individuals were forced to bear the cost of increasing industrialization, and no other branch of government was providing a solution. The courts may not be the best remedy for the problem, but limiting the remedy does not make the problem go away. True, tort reform should focus on solving the policy problems that initially triggered the court involvement rather than just on limiting that involvement. There is no doubt that the special treatment afforded the aviation industry will save manufacturers money. However, although the limited effect of the new law may not undermine safety to any great extent, it is questionable whether a significant improvement of the plight of small aircraft manufacturing will actually occur. General aviation is plagued by other problems that make small airplane flying and ownership unattractive to large numbers of consumers. Various plans are being implemented to solve some of those problems, but first we must ask the question of whether society really wants to put more aircraft into the sky. For government to stimulate a specific industry simply for industrys sake does not make sense. Legislators have apparently focused on small aircraft manufacturing in the hope of providing cheaper aircraft in greater numbers to more people. The happy result might be greater social mobility, more jobs, and more exports; however, without careful management, the down-side could be congested airways, more accidents, and more innocent victims. Once again, the question is “Who will pay?”. The answer to this question may not be in the area of torts or tort reform but, instead, may be found in technology. References: 49 U.S.C.A. S 40101(2)(b)(1)-(4) (Supp. 1995) 985 F.2d 1438 (10th Cir.), cert. denied, 114 S. Ct. 291 (1993) Ariz. Rev. Stat. Ann. S 12-551 (1992) Boswell & Coats at 553-71 Campbell R. McConnell, Economics (9th ed. 1984) Carr v. Beech Aircraft Corp., 758 F. Supp. 1330 (D. Ariz. 1991) Cleveland, 985 F.2d at 1440-41. Colo. Rev. Stat. Ann. S 13-80-107 (West 1989) Driver v. Burlington Aviation, Inc., 110 N.C. App. 519, 430 S.E.2d 476 (1993) Edward L. McKenna, General Aviation Fortunes Boosted by Senate, FAA, Inside DOT & Transp. Wk., Mar. 18, 1994, 1994 WL 2696453. Edward L. McKenna, General Aviation Fortunes Boosted by Senate, FAA, Inside DOT & Transp. Wk., Mar. 18, 1994. Ga. Code Ann. S 51-1-11 (1982) George L. Priest, Can Absolute Manufacturer Liability Be Defended?, 9 Yale J. on Reg. 237, 242-43 (1992). H.R. Rep. No. 103-525(II), 103d Cong., 2d Sess., 5 (1994) Heath v. Sears, Roebuck & Co., 123 N.H. 512, 464 A.2d 288 (1983) John H. Boswell & George A. Coats, Saving the General Aviation Industry: Putting Tort Reform to the Test, 60 J. Air L. & Com. 533, 542-47 (1995). Kelemen v. Rimrock Corp., 207 Conn. 599, 542 A.2d 720 (1988) Lance M. Harvey, Note, Cleveland v. Piper Aircraft Corp.: The Tenth Circuit Holds that the Federal Aviation Act of 1958 Does Not Preempt State Common Law Claims for Negligent Design, 46 Baylor L. Rev. 485 (1994). Restatement (Second) of Torts S 402A (1965). Robert M. Jenney, General Aviation Needs More Than Tort Reform, Aviation Wk. & Space Tech., Oct. 3, 1994, at 58. Shari L. Pitko, Comment, Aviation Law: Preemption of State Law Tort Claims by the Federal Aviation Act--Do State Law Tort Claims Survive the Attack?, 33 Washburn L.J. 234 (1993) Stuart M. Speiser & Charles F Krause, Aviation Tort Law S 1:3-4 (1978) Trinity River Auth. v. URS Consultants, Inc., 889 S.W.2d 259 (Tex. 1994) Whigham v. Shands Teaching Hosp. & Clinics, Inc., 613 So. 2d 110 (Fla. 1993) Windle Turley, Aviation Litigation SS 1.01-1.23 (1986) Read More