Way back when – before Restatement (Second) of Torts §402A (1965) crystallized the concept of strict liability – courts around the country were poking around, trying to come up with viable theories of what we would now call “product liability.” One method that gained some traction, prior to the advent of strict liability, was to strip contractual implied warranty of its historical requirement that the buyer and seller have been in “privity” (that is, that they dealt directly with each other). New York was one of the states that started down that road. In Goldberg v Kollsman Instrument Corp., 191 N.E.2d 81 (N.Y. 1963), the court held 4-3 that the manufacturer of a “thing of danger” (not otherwise defined, but in Goldberg, an airplane part that allegedly caused a crash) could be liable for breach of implied warranty without being in contractual privity with the plaintiff. Id. at 83 (“at least where an article is of such a character that when used for the purpose for which it is made it is likely to be a source of danger to several or many people if not properly designed and fashioned, the manufacturer as well as the vendor is liable, for breach of law-implied warranties, to the persons whose use is contemplated”). This was problematic, because until §2-318 was amended in 1975, New York’s UCC hadn’t done away with privity in all personal injury cases.
But along came strict liability, and New York’s tentative steps down the road of privity-less implied warranty were largely forgotten. Nobody paid much attention to warranty in the Empire State until the Court of Appeals held that strict liability and implied warranty were “not identical” in Denny v. Ford Motor Co., 662 N.E.2d 730, 739 (N.Y. 1995), in that strict liability utilized a risk/utility approach whereas implied warranty focused on consumer expectations. Id. at 736. While this distinction “may have little or no effect in most cases,” it can in some. Id. at 738.
And so we come to Dixon v. Ford Motor Co., No. 14–CV–6135 (JMA) (ARL), slip op. (E.D.N.Y. Sept. 30, 2015). Obviously, Dixon isn’t a drug or medical device case. Rather, it’s a class action alleging purely economic loss from the defendant’s alleged sale of cars that let exhaust fumes into the passenger compartment. The absence of any personal injury claims meant that the “no privity” amendment to New York’s UCC didn’t apply. Thus, “Defendant is correct that the general rule in New York is that, absent privity, a plaintiff cannot recover damages for economic loss based upon breach of implied warranty.” Slip op. at 8. Plaintiff, however, dredged up the old Goldberg “thing of danger” exception to privity and claimed that even though not seeking any personal injury damages, the purported potential exposure to exhaust fumes (focusing mostly on carbon monoxide) created a “risk” of injury that implicated Goldberg. Id. at 8.
The problem was that Goldberg was moribund. Not a single New York appellate decision had applied it in the last fifty years since strict liability had been adopted. Only a smattering of federal cases had done so. Slip op. at 8-9. Dixon decided to apply our favorite Erie principle in declining to bring Goldberg into the twenty-first century:
In interpreting New York law, a federal court sitting in diversity must follow the substantive law set forth by the Court of Appeals. Where the substantive law of the forum state is uncertain or ambiguous, the job of the federal courts is carefully to predict how the highest court of the forum state would resolve the uncertainty or ambiguity. [S]ee also Day Zimmermann, Inc. v. Challoner, 423 U.S. 3, 4 (1975) (“A federal court in a diversity case is not free to engraft onto those state rules exceptions or modifications which may commend themselves to the federal court, but which have not commended themselves to the State in which the federal court sits.”).
Dixon, slip op. at 8-9 (other citations and quotation marks omitted).
Goldberg, the Dixon decision pointed out, was a personal injury case. Slip op. at 9. Probably due to the amendment to the UCC, “in the more than 50 years since Goldberg was decided, no New York state court has adopted [its] ‘thing of danger’ exception or followed a similar approach in purely economic loss cases.” Slip op. at 9. Rather, “New York state courts have stressed that Goldberg was a personal injury case.” Id. Equally important, “numerous New York state court decisions have rejected economic loss claims based on a lack of privity in situations where the product at issue was clearly dangerous.” Id. (citations omitted). The few contrary federal decisions didn’t offer any reasoning why Goldberg – after going uncited for so long – should be expanded into non-personal injury cases. Therefore, “this Court concludes that, under New York law, there is no ‘thing of danger’ exception to the privity rule for implied warranty claims that involve purely economic loss.” Dixon, slip op. at 10.
Since the same purveyors of no-injury class actions also target our clients with the same sorts of baseless litigation, we thought our readers would like to know about Dixon. Privity doesn’t exist in the prescription medical product realm, so the Dixon reasoning should eliminate such actions in such cases in New York.
There are other aspects of Dixon – express warranty (pp. 5-7), third-party beneficiary (pp. 10-12), Magnuson-Moss (p. 12), and consumer protection (pp. 13-17) – but they’re not very pertinent to drug/device litigation.
Postscript on things New York related. We’ve probably never linked to a plaintiff-side source before (except to criticize it), but the summary of New York product liability decisions from 2002-2015 – more than 500 cases – available on the Rheingold, Valet website is a valuable resource for anyone (plaintiff or defendant) looking to familiarize him/herself with this body of law. Too bad they don’t seem to update it.