United States: Product Liability: The Upside Of Recalls And Greater Industry Oversight

In the field of product liability, recent developments are bringing new challenges to defendants—and creating new avenues for fighting litigation.

For example, when companies face complaints about their products, they often resist the idea of a recall because of the potential for bad publicity and recall-triggered lawsuits. But in some cases, says Rachel Raphael, a partner in Crowell & Moring's Mass Tort, Product and Consumer Litigation, and Product Risk Management groups, "a recall may actually be an effective tool for dispensing with product-liability lawsuits early in the proceedings.

"There have been a number of recent court decisions where voluntary recalls have led to the dismissal of class action lawsuits, based on either prudential mootness or the primary jurisdiction doctrine," Raphael continues. For example, in 2022, plaintiffs filed a class action against Ford Motor Co. for an alleged engine defect in certain vehicles. However, a month before the suit was filed, Ford had issued a voluntary recall under the supervision of the National Highway Traffic Safety Administration that instructed customers to bring their vehicles into dealerships for free repairs or reimbursement of any costs they had incurred. As a result, in Pacheco, et al., v. Ford Motor Co., the U.S. District Court for the Eastern District of Michigan granted Ford's motion to dismiss in its entirety based on the prudential mootness doctrine because the recall was already addressing the plaintiffs' claims.

Similarly, in Charlton v. LG Energy Solutions Michigan Inc., LG Energy Solutions Michigan faced a class action suit in California federal court for potential problems with its residential storage batteries—but it had conducted a voluntary recall nearly a year earlier, overseen by the U.S. Consumer Product Safety Commission. The court ruled that because the recall program remedied the battery defects in question, there was no live case or controversy, and the plaintiff therefore had no Article III standing.

The recent spate of such rulings suggests that product liability defendants should at least consider product recalls as a defensive weapon. Most circuit courts have now adopted the prudential mootness doctrine, and as of yet, no circuit or district court has rejected it in such cases.

New challenges on the regulatory front

Although voluntary recalls may benefit product liability defendants in the face of litigation, recent regulatory developments may create new challenges. At the end of 2022, Congress passed the Modernization of Cosmetics Regulation Act (MoCRA), which gives the U.S. Food and Drug Administration more regulatory power over the cosmetics industry. "This is the most significant expansion of the FDA's authority to regulate cosmetics in nearly 85 years," says Raphael.

Under MoCRA, the FDA will have the power to require cosmetics companies to register their manufacturing and processing facilities, meet certain labeling standards, submit lists of products and ingredients, and conduct recalls—actions that could increase the likelihood of litigation in various respects. MoCRA also requires cosmetics companies to maintain records of adverse events, report serious adverse events to the FDA, and provide access to safety records.

Rulemaking for MoCRA is still underway, but it is clear that the act's requirements will open the door to potential litigation. "Things like the mandatory reporting of serious adverse events will mean that product safety information is publicly available under the Freedom of Information Act that ordinarily would not be revealed until discovery. Consumers [and more specifically, their attorneys] are likely to take advantage of this access to information to figure out what their next lawsuit is," says Raphael.

MoCRA should also have significant upside for cosmetics companies. For example, once the FDA releases its guidance, companies should have a clearer road map for what suffices in terms of safety and substantiation testing. With the FDA having more regulatory authority over the cosmetics industry, companies facing product-related lawsuits might be able to turn to the primary jurisdiction doctrine as a defense, asking courts to dismiss or stay proceedings pending FDA review.

Cosmetics companies might also consider voluntary recalls (and the doctrine of prudential mootness) as a defensive tactic. "With MoCRA, there is now an agency that they can coordinate with to oversee a recall or remedial action," says Raphael. "As a result, courts may be more willing to defer to the FDA and moot the litigation."

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