Last week, the California Court of Appeal in Pfeifer v. John Crane, Inc. reached defense-unfriendly results on two matters: the sophisticated user defense in product liability cases and punitive damages.
Limiting the “sophisticated user” defense. Pfeifer held that selling products that everybody at the time thought were safe, to a sophisticated purchaser, may nevertheless result in liability for failing to warn the purchaser’s employees of a risk not known at the time.
The California Supreme Court adopted the “sophisticated user” defense in Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56. In Johnson, the “sophisticated user” was the injured plaintiff, and his knowledge of the alleged risks was held sufficient to bar any “failure to warn” liability of the product supplier. “[N]o one needs notice of that which he already knows.”
In Pfeifer, the defense attempted to extend this doctrine to bar “failure to warn” liability where the product is sold to a sophisticated purchaser/plaintiff’s employer – in this case, the U.S. Navy. This position is supported by language in, if not the precise factual holding of, Johnson.
Pfeifer rejected this attempted extension, holding that “in actions by employees or servants, the critical issue concerns their knowledge (or potential knowledge), rather than an intermediary’s sophistication. . . . [T]he intermediary’s sophistication is not, as a matter of law, sufficient to avert liability; there must be a sufficient reason for believing that the intermediary’s sophistication is likely to operate to protect the user, or that the user is likely to discover the hazards in some other manner.”
Pfeifer suggested some ways a defendant could mount a successful “sophisticated intermediary” defense: if there was evidence that (a) warnings were issued to the intermediary; (b) the defendant reasonably believed that the intermediary would warn the users; (c) the employees knew or should have known of the dangers, in view of their experience or training; or (d) the specific dangers were so “readily known and apparent” to the intermediary that it would be expected to protect its employees.
Punitive damages awarded for relying on tests done by experts? Pfeifer held that punitive damages could be imposed for reasons including that the manufacturer did not independently test a product everyone at the time thought was safe. “During Pfeifer’s period of service, the Navy studies appear to have classified defendant JCI’s gaskets and packing as ‘non-dusty.’ ” The question then is, why would JCI, or anyone else for that matter, think to warn the Navy (or its sailors) about a product for which the Navy had done its own “studies” and found the work to be “non-dusty.” Or more troubling still, how can JCI be found liable for failure to warn, and even found subject to punitive damages, for not warning about the uses of a product that experts in the field determined to be “non-dusty”?
Pfeifer offered other questionable rationales for punitive damages. For example, Pfeifer held that “the OSHA regulations effectively obliged JCI to determine whether its products were exempt from the OSHA warning requirement.” This threatens to elevate OSHA regulations into a prima facie basis for awarding punitive damages. Pfeifer also unfortunately conflated the very different risks from “handling raw asbestos” and work with the largely, if not completely, bonded material in gaskets at issue.
To read the opinion, click here.
This decision is not yet final. It may be altered upon rehearing, or ordered withdrawn from publication, or review may be granted by the California Supreme Court.