As product liability claims arising from the overheating or combustion of electronic cigarettes, vaporizers, vape pens, and other electronic nicotine delivery system (ENDS) products (“e-cigs”) become more common, it is important for those in the chain of distribution of these products to consider ways to limit their exposure to these claims. One way is to consider their potential liability for the total amount of any judgment obtained by a plaintiff and how this might be impacted by the percentage of fault attributed to them and the other parties to the suit, as well as non-parties. State laws vary widely in how damages are allocated in product liability suits involving multiple defendants, which can significantly impact the outcome of the lawsuit and the defendants’ exposure. This client alert provides an overview of these concepts and discusses the law in several specific jurisdictions.
Joint and Several Liability - Overview
In cases involving tort liability, some states apply a pure joint and several liability rule, under which every defendant is liable to the plaintiff for the entire amount of the award.1 In these jurisdictions, a plaintiff can choose to collect the full amount of the award from any defendant found liable as if they were singularly responsible.2 For example, if a plaintiff in an e-cig lawsuit obtains a $100,000 judgment against the retailer and distributor, and the retailer is found to be only 10% at fault, it could still be responsible for paying the entire $100,000 judgment. This can create an incentive for plaintiffs to pursue defendants with deep pockets (or insurance) regardless of their degree of culpability.
It then becomes the responsibility of the defendants to determine amongst themselves their respective portions of liability and payment, through claims for contribution against other joint tortfeasors. Often, a defendant that was only at fault for a small fraction of the harm winds up paying most or all of the award because the other defendants cannot satisfy a judgment. For example, if the defendant “mom and pop” retailer has no insurance or significant assets, while the defendant distributor has insurance, the distributor could be left paying the entirety of an award, even if it is determined that the retailer was mostly to blame. Similarly, the retailer or distributor could also have more exposure if the product manufacturer is a foreign company that the plaintiff decides not to sue.
Other states apply a pure several liability rule, under which each defendant is liable to pay a percentage of damages that corresponds to their percentage of fault. So, if a plaintiff obtains a $100,000 judgment against a retailer and distributor, and the retailer is found to be 75% at fault, while the distributor is found to be 25% at fault, they’re only responsible for paying those respective amounts of the judgment ($75,000 and $25,000). Pure several liability is generally considered more equitable to defendants because one party is not necessarily responsible for the entire amount of the judgment regardless of their degree of culpability. This in turn can make recovering on a judgment more difficult for plaintiffs because they must collect from numerous parties, and it is more likely that one of the parties may be unable to pay.
To balance the inequities involved with each rule, many states have adopted hybrid rules.3 Some of these include distinctions regarding allocation of economic versus non-economic damages, or have percentage “thresholds” of fault for defendants to be jointly and severally liable. For instance, if an e-cig retailer is found to be only 10% at fault, it would not be jointly and severally liable in these states.
Many states’ laws also provide that if a plaintiff settles with one defendant in an action, that defendant waives its right to contribution from the other defendants. On the other hand, the remaining defendants are entitled to a setoff for the settlement amount, which would be subtracted from the jury’s damages award.
The differences in how states treat joint tortfeasors can lead to dramatically different results for the parties involved. Accordingly, it is critical for e-cig manufacturers, distributors, and retailers, as well as their insurers, to understand these issues early on in a product liability suit, as well as in connection with contracting with other parties in the chain of distribution.
Georgia and Florida
In Georgia and Florida, an award for damages is apportioned among liable parties based on their percentage of fault.4 Multiple defendants are not jointly liable for the total award. Accordingly, if a large manufacturing company or distributor is brought into a case along with a smaller “mom and pop” shop, it will only be held liable based on its percentage of fault, regardless of the smaller defendant’s ability to pay.
In addition, in some states, a portion of fault can be attributed to the plaintiff and non-parties if the defendant can prove its fault by a preponderance of the evidence.5 For example, in Georgia, if a defendant successfully apportions fault to nonparties (such as a foreign battery manufacturer), then the plaintiff will be unable to collect that portion of his or her damages during that particular action. This incentivizes plaintiffs to join all parties that may be liable to them.
As a result, in states like Georgia and Florida, a defendant is less at risk of being shouldered with the entirety of a damages award if it is not the only liable party.
California has a hybrid rule. Defendants are jointly liable for the entire amount of economic damages.6 Economic damages are defined as any “objectively verifiable monetary loss.”7 This includes, among other things, medical expenses, lost wages and earnings (both past and future), and damage to real and personal property.
For non-economic damages, defendants are liable only for their own apportioned percentage of fault.8 Non-economic damages are defined as subjective non-monetary losses such as pain and suffering, and emotional distress. This can be the bulk of the award in a product liability case, as it is often calculated by juries based on taking a multiple of the plaintiff’s economic damages (e.g. 3x the medical expenses and lost wages).
In New York, defendants are generally jointly and severally liable. However, if a joint tortfeasor is responsible for fifty percent or less of the total liability, the defendant’s liability for non-economic damages is capped at its apportionment of liability.9 So, assume the jury determines the distributor is 20% at fault and the retailer is 10% at fault, with non-parties liable for the rest (70%). If non-economic damages are awarded (such as pain and suffering), each defendant is liable only for their percentage amount of those damages. However, in New York, non-parties’ culpability is not considered when apportioning fault if the plaintiff can prove that he or she was unable to obtain jurisdiction over the party, such as a foreign manufacturer.10
Given the potential significant impact of joint and several liability principles on defendants’ exposure, companies in the supply chain for e-cig products should be familiar with the relevant law in the states in which they are sued or are conducting business. If named in a lawsuit, understanding these issues early on in the case is critical in connection with developing a defense strategy.
In addition, for companies doing business in states with pure joint and several liability statutes or similar plaintiff-friendly statutes, companies should consider attempting to limit their potential exposure in other ways, such as through indemnification provisions in contracts with their suppliers or asking to be named as an additional insured to their suppliers’ insurance policy.