What are the initial litigation related steps you should take if you are facing a product liability claim or threatened claim?

Product Liability

India Small Flag India

As first steps upon the threat or initiation of a product liability claim, the nature of the alleged defect and the injury caused must be evaluated, including identifying factors such as the presence of a stand-alone defective product, or defects across products supplied. It is also imperative to identify if the defective products fall under a regulated sector where industry specific regulations, like the FSSA and the Drugs Act, may be applicable. Sector specific statutes may also prescribe remedial procedures, involving mandatory or voluntary recalls of the defective products, and require disclosures to a regulatory body.

Responsible parties must also devise a strategy to mitigate the damage caused, implement preliminary remedial measures, such as repairs, replacement or compensation, and manage consumer expectations. Potentially affected consumers should be notified of the remedial measures, which could comprise of a recall exercise and consequent replacements of their defective products.

Product liability claims in one jurisdiction could also trigger global recall requirements across other jurisdictions. We see global entities make a recall in select jurisdictions without being aware that news of such recall could have ramifications in other jurisdictions as well. Voluntary strategic actions with a view to limit potential liability due to defective products must be undertaken across jurisdictions. Responsible parties must therefore act swiftly to prevent escalation of loss and product liability claims.

Japan Small Flag Japan

The important initial step is to collect all related facts and circumstantial evidence related to the accident. For example, if a claimant argues that a fire occurred due to a defect in the product, one will need to collect a report regarding the cause of fire from the fire station, etc., pictures of the burned products and the place of fire, etc. As there is no discovery system for civil procedures in Japan, collecting evidence is one of the most important initial steps to take.

Turkey Small Flag Turkey

A distinction must be made between a claimant who is not a consumer and a claimant who is a consumer. In the first case, the general courts have jurisdiction. In the second case:

  • where the amount of the dispute (claim, damage or product value) is less than TL5,650 (approximately €870), the county consumer arbitration panels have jurisdiction;
  • where the amount of the dispute is between TL5,650 and TL8,480, the province consumer arbitration panels have jurisdiction; and
  • where the amount of the dispute is over TL8,480, the consumer courts have jurisdiction.

According to the Code of Civil Procedures (6100), the parties need not be represented by an attorney in order to file a case. In addition, consumers are exempt from paying the court fee (regulated under the Charges Law (492)); they must pay only for the court mail expenses and expert expenses, totaling around €200.

South Korea Small Flag South Korea

The amended Product Liability Act enacted on April 19, 2018, includes a punitive damages provision. In light of the change in the product liability Act, an entity that is facing a product liability claim or threatened claim should immediately take necessary measures to correct the defect and mitigate serious damage.

Australia Small Flag Australia

There are a number of litigation related steps that a company can take if facing a product liability claim or threatened claim in Australia. Some steps which should be considered include:

  • Litigation Hold: there are potentially serious consequences if a document which is relevant to any actual or reasonably anticipated litigation is not retained or destroyed. These include the risk of adverse findings in future legal proceedings (including drawing of adverse inferences) to fines/gaol. Putting in place a "litigation hold" when facing an actual or threatened claim is a sensible early step.
  • Communication Management: ensure that internal communications and documents in respect of the claim are managed in a way that maximises the prospects of later claiming privilege over that material. Ensure that external communications are managed to ensure that statements are not made that will impact the prospects of defending the claim.
  • Consider Pre-filing requirements: Recently, there has been significant legislative activity in the area of ‘pre-litigation protocols’, which are mandatory steps a potential litigant must undertake before commencing civil proceedings. These protocols oblige litigants to pursue a range of alternative dispute resolution steps before commencing proceedings. Consider whether pre-filing requirements exist in the jurisdiction in which the claim is brought, and if they do, the obligations they impose on both the plaintiff and defendant.
  • Consider Service or Jurisdictional Issues and Summary Disposition: any challenge to the jurisdiction of the court in which the claim is made must be considered at an early stage. Defendants should also give consideration to whether the an application for summary disposition could be brought. While seldom successfully used to strike out the entirety of a pleading, interlocutory procedures exist for parties to move to strike out the whole or any part of a pleading where the court determines that the pleading discloses no reasonable cause of action has a tendency to cause prejudice, embarrassment or delay, or is otherwise an abuse of court process.

France Small Flag France

When faced with a product liability claim or when being threatened with a claim, the following steps should be taken:

  • Get a clear understanding of the scope of the claim and the evidence produced by the claimant;
  • Identify if the alleged defective product is manufactured by the defendant;
  • Collect information and evidence to demonstrate that the product is not defective;
  • Assess whether the damage(s) of the claimant is due to the product defect;
  • Assess whether the damage(s) of the claimant is related to the lack of compliance with the precautions for use indicated in the product information leaflet;
  • Assess whether the precautions for use indicated in the product information leaflet were detailed enough to prevent the damage(s) from occurring;
  • Assess risk of mass litigation.

Brazil Small Flag Brazil

The first step consists in understanding if the product effectively presents a flaw. The supplier must obtain all technical information regarding the defect and evaluate (i) if it is able to cause damages to the consumers; and (ii) if so, to what extent.

The next step consists in working in a strong defence line capable of showing the inexistence of supplier’s liability.

In parallel, if the product presents risks to consumers’ health and/or security, based on the provisions of the Consumer Protection Code, we would recommend the client to immediately communicate the authorities and start a recall campaign in order to remove the product from the market.

China Small Flag China

When the possibility of a potential product liability suit emerges, the producers/sellers should first and foremost ensure that they are well-prepared in evidence gathering.

In determining whether a product is free of defect and whether there is causal link between the defect and the ensuing damage, PRC courts rely heavily on reports issued by court-appointed appraisal institutions. The absence of such reports would significantly expand the courts’ discretion in fact finding, and PRC courts are generally more inclined to favor the infringed party, rather than the producer/seller, in product liability suits.

Producers/sellers are therefore advised to conduct on-site investigation and preserve evidence as soon as it becomes aware that an accident has taken place. The days immediately following an accident is often critical in setting the stage for a successful product liability case. The producers/sellers should make their best attempt to maintain control of the product in question and gather any evidence concerning the manner in which the product was used by the infringed party and the nature and scope of the resulting damage. This would be helpful to ensure that the subsequent appraisal would be conducted on a well-informed basis.

United Kingdom Small Flag United Kingdom

Deciding how best to defend a (potential) product liability claim will always depend on the facts of the particular case.

The following steps are intended to be a broad checklist for a defendant facing a potential product liability claim:

  • Check the limitation period applicable to the claim, given that different causes of action have differing limitation periods.
  • Check the defendant has been correctly identified. A claimant may seek answers from the retailer/distributor when it is actually the manufacturer which has the primary liability for the damage caused. Additionally, if there is a group structure, a defendant should check the claim is against the correct entity.
  • Notify other entities in the supply chain which may face liability as a result of the claim.
  • Check the initial evidence. It is important to check that the claimant has provided evidence of damage caused.
  • Check your insurance policies to confirm whether there is a policy to cover this claim and if there is, make the required notification. Insurers usually require notification at an early stage.
  • Consider the requirements of the civil litigation pre-action protocol which must be followed before a claim in the English Courts can be formalised. There are specific rules for claims of personal injury.

Germany Small Flag Germany

Firstly, a lawyer should be consulted because product liability proceedings in German courts are generally subject to the obligation of a lawyer (this means legal proceedings require the services of a lawyer in order to be effective). The same is recommended when a company is faced a threatened claim in order to jointly develop a strategy (active or passive) and to assess whether or not authorities or customer groups potentially affected by the defective product must be informed.

Besides this, companies should always carefully examine whether the claimed product defect could also have occurred in other products. If this is the case, it is the responsibility of the manufacturer to take all necessary and reasonable measures to avert damage because of its product monitoring obligations.

United States Small Flag United States

Upon receiving a claim or threatened claim, a defendant shall take the necessary steps to preserve relevant evidence to avoid any negative spoliation inference. See, e.g., Emerald Point, LLC v. Hawkins, 294 Va. 544, 556-59 (2017).

The defendant should also begin to develop the necessary evidence to properly respond to a plaintiff’s complaint. In Virginia, a defendant must file a responsive pleading within 21 days after service of process. Va. Sup. Ct. R. 3:8. If the defendant chooses to answer the complaint, an attorney may face sanctions for asserting affirmative defenses that lack a sufficient factual basis as the ability to reserve an affirmative defense is likely unavailable. See Ford Motor Co. v. Benitez, 273 Va. 242, 251-52 (2007). However, Va. Sup. Ct. R. 3:18 allows for the affirmative defenses of contributory negligence and statute of limitations to be pled generally.

Denmark Small Flag Denmark

Provided the claimant or the defendant respectively does not have an in-house legal department, parties would normally consider instructing an attorney.

The both the claimant an the defendant may also consider whether to apply to the court for permission to take evidence out of court in order to quickly seize and preserve evidence.

Russia Small Flag Russia

Along with ensuring that proper legal support is secured, the primary steps could be limited to obtaining proper knowledge of the stage of such litigation proceedings (namely, in Russia a party may be involved to the proceedings after these are commenced against another respondent) and preparation of the tactically and substantially grounded reply to a claim.

There is a list of the procedural requirements as to the format and content of the statement of claim that are to be complied with in order for the statement of claim to be accepted by the court. At the same time, no such strict requirements are prescribed in relation to the reply to the statement of claim. The main aim of the reply is to address the points and circumstances raised in the statement of claim.

No specific terms with respect to filing the pleadings are applied. However, in practice Russian courts often do specify a fixed term or date for filing the reply to the statement of claim.

Participants of the civil proceedings are entitled to file additional documents and present additional evidence during the proceedings in the court of the first instance. These additions may supplement the content of both the statement of claim and the respective reply.

Austria Small Flag Austria

There are a number of issues to be tackled at the same time. This is best to be undertaken by a team of experts:

Thus typically the first step is to immediately commission an internal investigation as to the validity of the claims made or threatened against your company both from a technical and a legal perspective. Austrian law does not provide for a discovery proceeding, thus the result of said investigation will stay confidential (as long as they are not seized as part of a criminal investigation or leaked in any way).

If the product or certain batches of the product really are defective, a product recall (under the relevant Austrian and EU regulations) is to be issued immediately. The financial risk (and possibly even risks under criminal law) is substantive if this is not tackled immediately.

At the same time, in case a company has insurance against product liability claims, a notification of claim is to be filed within the relevant contractual deadline (those can be quite short, e.g. 7 days).

If there is any risk that one of the company’s officers and directors might have some personal liability risk on their hands, a precautionary notification of claims is to be filed in regard to a possible Directors and Officers Liability insurance the Director or Officer or the company itself might hold.

If any damage is covered by a product liability insurance policy, your insurance company typically has the right to decide on which way to go forward (i.e. from a quiet settlement to fighting the claim until all legal remedies are exhausted).

From a bird’s eye perspective if you face a small number of claims but internally see a rather large risk for additional claims, a quiet settlement including an NDA might make sense. If there already is a big public awareness for your product’s (supposed) faults and you are possibly facing a large number of claims it is often a sound strategy to fight each claim and wait until the damage of limitation has run out before settling with all those that sued you. The correct strategy however is very dependent on the situation at hand and at the end of the day a typical business decision.

Updated: April 11, 2019