Montana became the first state to ban TikTok this month. You no doubt have seen the press and have read the spirited discussion condemning foreign spies on the one hand and championing First Amendment rights on the other. Litigation has already commenced. But, while all that was developing, you may have overlooked that Montana also enacted a number of tort reform laws that garnered much less attention. Earlier this month, Montana passed a law allowing for greater transparency in litigation financing, a topic we have followed for years (including recently here). Montana has also limited third-party bad faith lawsuits against insurers, which even plaintiff-friendly California banned more than 30 years ago.
We will focus on the new Montana law that is directly in our wheelhouse—reform of product liability lawsuits. On May 4, 2023, Montana’s governor signed Senate Bill 216 into law, and it enacted a number of measures intended to restore some balance to product liability lawsuits in Big Sky Country.
As we read it, SB 216 provides for six significant changes:
First, the law expands Montana’s relatively complex comparative fault regime in a number of ways. It expressly allows a defendant in a strict liability or breach of warranty case to assert that the plaintiff’s damages were caused by a person whom the plaintiff has released from liability. Montana law already held that triers of fact must consider released or settled parties when apportioning fault. That requirement, however, was limited to negligence claims. It now applies to all product liability claims, including those sounding in strict liability and breach of warranty. The law also expressly states that a defendant can raise the plaintiff’s contributory fault, regardless of the legal basis, and the negligence or fault of others.
Second, the Montana law reaffirms that unreasonable misuse of the product is a defense. More significantly, however, it now defines “unreasonable misuse” to include use of the product in a manner that contravenes warnings or instructions appearing on or with the product. In other words, failing to heed warnings or instructions when you should have known about them is now per se “unreasonable misuse” and potentially a complete defense.
Third, it is a defense now in Montana that a product or its labeling could not have been made safer by the adoption of a reasonable alternative available at the time the product was first sold. This is an affirmative defense, so presumably it will be the defendant’s burden to show the absence of a reasonable alternative. We would prefer that it were the other way around, i.e., that the plaintiff has to prove the existence of a reasonable alternative, which is the law in a number of states. Exactly how Montana courts will assign the burden in practice remains to be seen.
Fourth, the Montana law enacts a ten-year statute of repose running from the date the product was first sold or leased to any person. There are, however, a number of twists. The statute of repose is tolled if the defendant seller knowingly or negligently concealed a defect or unsafe condition and the concealment caused the injury. The statute of repose also does not apply if the product is subject to a government-mandated, safety-related recall, so long as the plaintiff’s lawsuit is related to the reason for the recall. This last provision will have little impact in the drug and medical device world, where the vast majority of recalls are voluntary, and not ordered by the FDA. Still, the requirement that the lawsuit relate to the reason for the recall is welcome.
The statute of repose does not apply where the product “causes a respiratory or malignant disease with a latency of more than 10 years,” which we will call the “asbestos exception.” Finally, if the seller has warranted or advertised that a product will last for longer than ten years (“guaranteed to last 15 years, or your money back!”), a plaintiffs has until two years after that time period expires to sue, so long as nothing else (such as the statute of limitations) otherwise bars his or her suit.
Fifth, the Montana law creates a qualified safe harbor for regulatory approval and compliance. Specifically, where products have complied with safety-related regulations or were approved for sale by the government, the Montana law creates a rebuttable presumption that the products are not defective and that the manufacturers of the products were not negligent. This is a big change, because Montana had been one of only two states (the other being Pennsylvania) where compliance evidence was inadmissible in strict liability actions if offered by defendants.
Now, Montana juries must be instructed on the rebuttable presumption of no defect and no negligence where: (a) the product and its labeling complied with relevant mandatory safety rules applicable at the time of manufacturer; (b) the product gained premarket licensing or approval and the seller complied with all agency requirements; or (3) the product was a drug or medical device “approved for safety and efficacy” by the FDA and was in compliance at the time it left the seller’s control and was not recalled or withdrawn. We like that Montana expressly applies the presumption of no defect and no negligence to drugs and medical devices, but we can foresee disputes over the meaning of “approved for safety and efficacy.” We can also foresee Buckman-style preemption coming into play if a plaintiff contends that a drug or medical device was not in compliance because the defendant defrauded the FDA. Even where the presumption of no defect and no negligence applies, it is rebuttable—although with the burden presumably fixed firmly with the plaintiff.
Sixth, the new law attempts to provide protection for retailers, who usually have nothing to do with a product’s design, manufacture, or labeling and are often included in lawsuits only to defeat diversity of citizenship. On the plus side for retailers, the Montana law states that a plaintiff cannot bring a product liability action against a retailer unless there is an independent basis to do so—i.e., the retailer actually had some control over the product’s design, assembly, packaging, etc.; the retailer altered or installed the product; or the retailer made a separate warranty. These provisions all make sense, but they are weakened by what follows. A plaintiff in Montana can still sue a retailer for product liability where the product manufacturer cannot be identified, is not subject to personal jurisdiction, or is bankrupt and judgment proof—potentially converting retailers into insurers for reasons that we cannot articulate. The exception for lack of personal jurisdiction is particularly perplexing because it seemingly applies even if the plaintiff has sued the manufacturer somewhere else. Finally, the statute also preserves a claim against a retailer who had “actual knowledge” of the defect that caused the plaintiff’s injury and sold the product anyway.
The Montana law was effective on passage, and it applies to claims that accrue on or after that date. We will see how this plays out, but are encouraged.