Business Law Day 4

Product Design and the Role of Warnings

• Limits of Engineering: Some products cannot have hazards engineered out because the hazard is essential to the function.

  • Steak Knife Example: A steak knife is made to cut. If it is prevented from cutting, the purpose of the product is defeated. In such cases, the burden shifts from engineering to providing a warning.

• The "Open and Obvious" Standard: The law generally interprets the danger of a knife as "open and obvious." The inherent danger of the knife serves as its own warning, meaning explicit labels are often legally unnecessary for such items.

• Explicit Warnings on Machinery: Unlike knives, power mowers require explicit warnings.

  • Power Mower Example: These machines typically feature approximately half a dozen warnings. Specifically, the exit chute will have a graphic (e.g., a hand being sliced) and a directive: "Never put your hand in here while this is operating."

  • Failure to Warn: If an explicit warning is missing from a known danger area like an exit chute, it can be considered a defect in warnings.

• Organizational Integration: In a business context, individuals responsible for packaging, instruction manuals, and warning labels are critical. They must either be engineers themselves or work extremely close with the engineering and design teams to understand the product's risks.

Strict Liability and Special Categories

• Scope of Strict Liability: This set of rules applies to virtually any manufactured good, including coffee makers, thermoses, blenders, space heaters, and electric blankets.

• Landowners and Occupiers: Owners, renters, or lessees of land have specific responsibilities to visitors. Controlling a property creates a relationship which gives rise to potential liability.

• Dram Shop Laws: These laws apply to bars or any establishment serving alcohol. They impose special liability for "over-serving" patrons.

  • Business Implication: Restaurant chains must train bartenders to cut off intoxicated patrons, regardless of the impact on tips, to mitigate legal risk.

• Medical Malpractice: This is a specialized category of negligence.

  • Standard of Care: A doctor's conduct is not compared to a "reasonable person" but to a mythical average practitioner within their specific field (e.g., a neurosurgeon is compared to other competent neurosurgeons; an orthopedist performing a spinal fusion is compared to other orthopods doing the same procedure).

  • Reasonable Person Test: This is the standard for most individuals. It was historically called the "reasonable man test" before the law adopted broader language.

Negligent Infliction of Emotional Distress (NIED)

• Classification: This is an unintentional subclass of emotional distress, distinct from intentional or reckless infliction.

• The Eggshell Skull Rule Exception: While a defendant usually "takes the plaintiff as they find them" (the eggshell skull rule), this does not apply to purely emotional damages. Courts view purely emotional injuries as too speculative because people vary significantly in emotional resilience.

• The Bystander Rule: To successfully sue for NIED, most jurisdictions require the plaintiff to have been at the site of the accident.

  • Scenario: If you watch someone get mauled by a vehicle, you may have a claim. If you walk by ten minutes later and see the accident scene, the law generally does not cover those damages even if you suffer trauma.

Good Samaritan Statutes and Affirmative Defenses

• Good Samaritan Statutes: These laws protect individuals who act in good faith to help others in an emergency. They were passed to prevent "deep pocket" lawsuits where a helper is sued for making a situation worse because the original at-fault party has no money.

• Duty to Help: Legal obligation to help depends on the relationship. If no relationship exists, there is no legal duty to stop. However, once a person begins to help, they must perform in a "reasonable fashion."

• Affirmative Defenses: These are "Yes, I did the act, but I was entitled to do it" arguments.

  • Consent: Primarily associated with intentional torts. Example: Tackling in a football game. However, a tackle during halftime in retaliation is battery, as it falls outside the scope of game-related consent.

  • Assumption of Risk: Primarily associated with negligence.

  • Privileges: Includes self-defense, defense of others, and defense of property. These are limited to what is "reasonably necessary" to prevent intrusion.

  • Mechanical Traps Warning: You cannot set up a mechanical device (like a crossbow trap in a cabin) to do something you would not be legally allowed to do in person.

Case Study: University General Counsel Simulation

• Fact Pattern: A $21$-year-old male student teacher develops an inappropriate relationship with a $16$-year-old female high school student.

• Tort Analysis (Battery):

  • Elements: injurious or offensive contact that is unconsented.

  • Consent Defense: In Wisconsin, the age of consent is $18$. Because the student was $16$, she is legally deemed incapable of consenting. Therefore, the affirmative defense of consent is unavailable.

• Employment and Agency Law:

  • Issue: Is a student teacher an employee of the university or just a student performing field work?

  • Vicarious Liability: Can the university be held liable for the student's behavior the way a pizza shop is liable for a delivery driver?

Business Waivers: Consent vs. Assumption of Risk

• Scope of Waiver: A waiver has limits. If you join a gym and an employee attacks people with a flamethrower, a standard waiver does not cover that because it is outside the "normal" scope of the activity.

• Boxing Club Example:

  • Consent: You specifically know and agree to the fact that someone will hit you.

  • Assumption of Risk: used for generic negligence (e.g., pulling a muscle while lifting weights). You don't know exactly what might happen, but you accept the inherent risks of the environment.

The Four Elements of Negligence

1. Duty of Care:

   • Usually arises from a relationship (e.g., doctor/patient, driver/driver).

   • Standard: The Reasonable Person.

   • Child Exception: Children under age $7$ are generally deemed incapable of appreciating a duty. Children ages $7$ to $16$ are analyzed by a different standard.

   • Skill Exception: People with higher skills (e.g., race car drivers, physicians) are held to a higher standard based on that skill level. There is never a lower standard (e.g., for mental deficiency) due to social policy.

2. Breach of Duty:

   • Determined by looking at conduct. Intention is immaterial in negligence.

3. Causation:

   • Cause-in-fact: The "But-For" test—chain of events ($A \rightarrow B \rightarrow C$).

   • Proximate Cause: The foreseeability test. If the result was not reasonably foreseeable (e.g., the butterfly flapping its wings causing a typhoon), liability is not imposed.

4. Damages:

   • Includes compensation for physical injury, pain and suffering, and lost wages.

Global Perspectives: New Zealand Analysis Flowchart

• Concept Analysis: While not US law, the New Zealand model follows a similar logical schematic for negligence:

  • Duty of Care: Is there a relationship in an existing category or an analogous one?

  • Standard of Care: Was the child in a "non-adult activity"? (Note: If a child engages in an adult activity like driving, they may be held to an adult standard).

  • Remoteness: Called Proximate Cause in the US.

  • Thin Skull vs. Crumbling Skull Rules: Concepts used to determine the extent of liability for pre-existing conditions.

Risk Management Strategy for Entrepreneurs

• Risk Quantification: Businesses must identify "business killers" (catastrophic losses) versus repetitive small claims.

• Soccer Club Example:

  • Risk points: Stadium safety (fans/fences/razor wire), player injuries, TV contracts, and reputational risk.

  • Mitigation: Buying insurance, building costs into ticket prices, and obtaining waivers.

• Claim Management: Often, it is more cost-effective to settle small claims and get a full release/waiver than to litigate, even if the business is not at fault.

• Entrepreneurial Planning: Successful ventures are rarely reckless; they often involve months or a year of planning and risk analysis before launching.

Product Liability Complaint Structure

• A standard complaint for a defective consumer product typically contains three counts:

  1. Strict Product Liability: Existence of a defect making the product unreasonably dangerous.

  2. Negligence: Failures in the conduct of manufacturing or design.

  3. Breach of Warranty: Based on contract principles.

     • UCC (Uniform Commercial Code): Provides an "Implied Warranty of Merchantability" (it does what it's supposed to do) and "Implied Warranty of Fitness for a Particular Purpose."

     • Disclaimers: Most "warranties" received by consumers are actually "Limited Warranties" that serve as disclaimers and substitutes for the broader legal warranties.

Q&A / Audience Discussion

• Question: What if a bystander who doesn't have an obligation to help tries to help and ends up getting involved?

• Response: If you don't have a relationship that obligates you to stop, you don't have to. However, once you start helping, you must act reasonably. Good Samaritan statutes protect you if you act in good faith and things go wrong.

• Question: Regarding NIED, is there an exception for immediate family members?

• Response: Yes. To satisfy the bystander rule, many states require the plaintiff to be both a bystander (at the site) and an immediate family member. Some extend this to those "conceptually close," such as a nanny of $15$ years.

• Question: Are the waivers you sign at schools or sports teams any good?

• Response: They depend on the scope. A waiver generally covers inherent risks of the activity (competition injuries) but does not cover actions outside of that scope (unrelated violence by an employee).

• Question: What is the age of consent in Wisconsin?

• Response: $18$.