United States: California Supreme Court Adopts Sophisticated Intermediary Doctrine For Products Liability Claims

Webb v. Special Electric Co., Inc., 2016 Cal. LEXIS 3591 (May 23, 2016). The California Supreme Court formally adopted the sophisticated intermediary doctrine in regard to product liability claims. The court overturned the trial court's improper judgment notwithstanding the verdict (JNOV) on a products liability claim wherein the plaintiff alleged defendant Special Electric breached its duty to warn. The case called into question the scope of a supplier's duty to warn downstream users when the supplier distributes materials that are eventually used in finished products. The court held that a supplier can discharge its duty to warn only if it (1) provides adequate warnings or sells to a sophisticated buyer and (2) reasonably relies on the buyer to warn end users of the harm. Id. at *3.

During the 1970s, Special Electric brokered the sale of crocidolite asbestos, a highly toxic form of asbestos, to Johns-Manville Corporation. Johns- Manville manufactured pipes that contained trace amounts of asbestos, and sold the pipe to various distributors, where it was eventually handled by warehouse workers. Plaintiff William Webb handled the pipes when he was a warehouse worker, between 1969 and 1979, and was diagnosed with mesothelioma in 2011. Webb filed lawsuits against multiple defendants and ultimately went to trial against Special Electric and two other defendants.

Prior to jury deliberation, Special Electric moved for nonsuit on the duty to warn claim and a directed verdict on the strict liability claim, contending that it had no duty to warn a sophisticated purchaser about the health risks of asbestos. The judge deferred ruling on the motions and the jury returned a verdict finding Special Electric liable for failure to warn and negligence. Special Electric then requested a ruling on its nonsuit and directed verdict motions. The trial court treated the motions as seeking JNOV, granted them, and entered judgment in favor of Special Electric. The state court of appeal reversed for both procedural and substantive error and, as to the latter, held that there was substantial evidence in support of the jury's original verdict. The California Supreme Court granted review and affirmed the appellate court's ruling. Prior to this case, the California Supreme Court had not addressed how the sophisticated intermediary doctrine applies in California.

The California Supreme Court first noted that a manufacturer of hazardous materials has a duty to warn about the known and knowable risks associated with the product. Id. at *21. However, the court also acknowledged that it is often difficult or impossible for a supplier of raw materials to directly warn consumers at the end of the stream of commerce when finished products contain hazardous materials. Thus, "the [sophisticated intermediary] doctrine originated in the Restatement Second of Torts" to relieve suppliers of the duty to warn if the supplier "has exercised reasonable care to ensure 'that the information will reach those whose safety depends on their having it.'" Id. at *22 (citing RESTATEMENT SECOND OF TORTS § 388, cmt. n). While the court had previously acknowledged the existence of this defense, it had not had opportunity to apply it.

The court formally adopted the sophisticated intermediary doctrine as described in the Restatement. Id. at *24–25. Under this rule, a supplier may discharge its duty to warn end users when it

  1. provides adequate warnings to the product's immediate purchaser and
  2. reasonably relies on the purchaser to convey appropriate warnings to downstream users who will encounter the product. Id. at *25.

Because the doctrine is an affirmative defense, the court noted that the supplier will bear the burden of proof. Id. With regard to the first prong of the doctrine, the court noted that the supplier must give adequate warnings to an intermediary about particular hazards but, in narrow exceptions, the intermediary's sophistication may take the place of actual warnings. Id. at *26. Specifically, the supplier must demonstrate that "the buyer was so knowledgeable about the material supplied that it knew or should have known about the particular danger." Id. Special Electric argued that it could rely on Johns-Manville's sophistication and expertise with asbestos products to discharge Special Electric of its duty to warn ultimate users. The court rejected this assertion, holding that the sophistication of the purchaser alone is not sufficient to avert the duty to warn. Id. at *28. Rather, it held that the supplier must have sufficient reason for believing the intermediary's sophistication will operate to protect the user. Id. at *28–29.

As to the second prong of the doctrine, the court determined that the supplier must also show that it "actually and reasonably relied on the intermediary to convey warnings to end users." This determination is a question of fact to be decided by a jury. Id. at *30. Courts examine three factors in evaluating this requirement:

  1. gravity of the risk,
  2. likelihood the intermediary will convey the warning, and
  3. the feasibility and effectiveness of the supplier to convey the warning directly to the user. Id. at *31.

The "gravity" factor encompasses the character of the harm and the likelihood that it will occur. The court stated that "[t] he overarching question is the reasonableness of the supplier's conduct given the potential severity of the harm." Id. at *32. The likelihood that an intermediary will provide the warning focuses on the reliability of the intermediary and is evaluated by an objective standard based on what a reasonable supplier would have known under the circumstances. Id. at *32. The third "feasibility" factor looks at what the supplier can realistically accomplish. Id. at *34. For example, raw materials suppliers face different challenges in providing warnings than manufacturers of finished products. Thus, the feasibility (or infeasibility) of providing direct warnings should be considered in the analysis. Id. at *35.

Applying these standards to the case at issue, the court found that Special Electric had arguably forfeited the sophisticated intermediary defense by not presenting it to the jury. Id. at *36. However, even if the defense had been preserved, the court found that the record did not establish that Special Electric had discharged its duty to warn through the sophisticated intermediary doctrine. The court found disputed evidence as to whether Special Electric provided consistent warnings to Johns- Manville about the asbestos and whether Johns- Manville was aware of the particularly dangerous risks of crocidolite asbestos, rather than the risks of asbestos in general. Id. Furthermore, the court found the record devoid of evidence to establish that Special Electric actually and reasonably relied on Johns-Manville to warn end users about crocidolite asbestos. Id. at *38. For these reasons, the California Supreme Court affirmed the court of appeal's ruling overturning the JNOV. Id.

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