On Feb. 1, 2011, Wis. Stat. section 895.047 became effective, changing Wisconsin products liability law in several key respects. In particular, subdivision (2) created new rules with respect to the liability of a seller or distributor in a products liability strict liability case.
What are the tactics and considerations for both plaintiffs and defendants when handling products liability claims in Wisconsin?
The Law
Wis. Stat. section 895.047(2) provides as follows:
A(2) LIABILITY OF SELLER OR DISTRIBUTOR.
(a) A seller or distributor of a product is not liable based on a claim of strict liability to a claimant unless the manufacturer would be liable under sub. (1) and any of the following applies:
1. The claimant proves by a preponderance of the evidence that the seller or distributor has contractually assumed one of the manufacturer’s duties to manufacture, design, or provide warnings or instructions with respect to the product.
2. The claimant proves by a preponderance of the evidence that neither the manufacturer nor its insurer is subject to service of process within this state.
3. A court determines that the claimant would be unable to enforce a judgment against the manufacturer’s or its insurer.
(b) The court shall dismiss a product seller or distributor as a defendant based on par. (a) 2. if the manufacturer or its insurer submits itself to the jurisdiction of the court in which the suit is pending.
Applying Section 895.047(2)
Section 895.047(2) appears to be loosely based on the Model Uniform Product Liability Act (MUPLA).
Like Wisconsin’s statute, section 125 of MUPLA excludes sellers/distributors from liability, but contains an exception for those situations where the seller/distributor may be the only solvent party.
The Wisconsin courts have provided no real guidance on how section 895.047(2) should be applied or interpreted, despite the fact that the law has been in effect for over seven years.
Limiting Liability for Sellers and Distributors
The plain language of the statute, however, makes it clear that the law is intended to relieve sellers and distributors from legal liability in products liability cases, except in certain limited circumstances.
Those circumstances include:
1) contractual assumption of the manufacturer’s duties to manufacture, design, or provide warning;
2) the manufacturer and its insurer are not subject to service of process within the state; and
3) the claimant would be unable to enforce a judgment against the manufacturer or its insurer.
The statute further provides that the court shall dismiss a product seller or distributor as a defendant based upon par. (a) 2, if the manufacturer or its insurer submits itself to the jurisdiction of the court in which the suit is pending.1
The law, on its face, presents a number of tactical considerations for both plaintiffs’ counsel and defense counsel to contemplate when suing or defending a seller or distributor.
To Join or Not To Join?
Given the legal liability defenses now available to sellers or distributors pursuant to section 895.047, plaintiff’s counsel must make a threshold decision to join the seller or distributor as a party defendant. Because the legal liability defenses available to a seller or distributor are not always apparent in a given case until after suit is commenced and initial discovery is completed, sellers and distributors are still being joined in products liability cases on a fairly routine basis in Wisconsin.
Michael Gill, Minnesota 1982, is a partner with Hale, Skemp, Hanson, Skemp & Sleik La Crosse, where he focuses on civil trial work.
Craig Steger, Ave Maria 2005, is a partner with Hale, Skemp, Hanson, Skemp & Sleik La Crosse, where he practices in the areas of personal injury, products liability, criminal defense and employment law.
In many instances, it will be difficult to ascertain whether or not there is a contractual relationship between the manufacturer and the seller or distributor that delegates to the seller or distributor the responsibilities enumerated in section 895.047(2)(a)1 without discovery.
The contractual relationships between a manufacturer and a seller or distributor are rarely available to a claimant prior to suit, unless one of the potential defendants voluntarily provides that information to claimant’s counsel.
Given the language of the statute, the claimant should be permitted to discover whether or not the seller or distributor has contractually assumed any of the manufacturer’s duties by requesting production of the relevant contractual documents early on in discovery.
Jurisdictional Defenses
Jurisdictional defenses available to the manufacturer and its insurer may be somewhat easier to investigate prior to suit.
Most large manufacturers will have sufficient business ties to Wisconsin so that jurisdiction is readily apparent. If claimant’s counsel is presenting a claim against a large publicly held corporate entity that is known to deliver large quantities of its product into Wisconsin, the need for joinder of the seller or distributor should be greatly reduced, if not eliminated.
If claimant’s counsel has adequate time to do so before the Statute of Limitations expires, suit could be commenced without the joinder of the seller or distributor. If, thereafter, unanticipated jurisdictional defenses are raised by the manufacturer and its insurer, plaintiffs’ counsel would have the opportunity to amend the Complaint to include the seller or distributor in the suit, so as to preserve Wisconsin jurisdiction for the claim.
It would be rare, but not inconceivable, that the seller or distributor might be subject to the jurisdiction of the Wisconsin courts, but not the manufacturer.
Enforceable Judgement?
The third exception to the “no liability” rule for a seller or distributor is if the court determines that the claimant would be unable to enforce a judgment against the manufacturer or its insurer. If the claim is being presented against a large corporate entity manufacturer that has substantial assets that are well documented publicly, it is unlikely that any court would refuse to dismiss a seller or distributor, out of concern that a judgment may not be enforceable in the future.
Likewise, if the manufacturer has liability insurance with very substantial limits available to it, and there is no reservation of rights with respect to coverage, there would be no reason for the court to refuse a request for a dismissal of the seller or distributor.
If the claim is against a manufacturer that does not have conspicuous net worth or large insurance limits, plaintiffs’ counsel may err on the side of joining the seller or distributor to assure that there is a collectible defendant if a substantial judgment is obtained.
Keep in mind that a civil lawsuit can take several years – or even longer if there are appellate proceedings – to reach a point when a final judgment is entered. The financial health of a manufacturer is certainly susceptible to change over the course of time, so that a manufacturer that is solvent and well positioned to respond to a judgment when suit is commenced could be in a completely different financial position four to five years later, after all appellate proceedings are concluded.
The statute provides no guidance on how the court is to determine whether or not the claimant would be unable to enforce a judgment against the manufacturer or the insurer. Is that determination based upon current information only, or does the court take into account the risk of changed circumstances down the road?
Unless there are insurance limits available to the manufacturer that are more than adequate to indemnify against any judgment the claimant may obtain, it is anticipated that claimant’s counsel would oppose any effort to dismiss the seller or distributor except in those cases where the manufacturer is truly too big to fail.
Having to Wait for Discovery
In summary, most claimants are likely to continue to join sellers or distributors in products liability actions because in many instances the legal liability defenses that are available to sellers or distributors cannot be unearthed until initial discovery is completed.
The risk of unnecessarily joining the seller or distributor for a claimant is likely limited to a judgment for taxable costs in favor of the seller or distributor.
The law does not eliminate seller or distributor liability across the board, so a claim for relief can still be stated against a seller or distributor, but the legal liability defenses now available to sellers and distributors provide a disincentive for claimant’s counsel to include them as defendants if the manufacturer is clearly subject to the court’s jurisdiction and clearly in a position to respond to a judgment in favor of the claimant.
How Does a Seller or Distributor Get Dismissed?
It is clear that one of the purposes of section 895.047 is to relieve sellers and distributors from the burden of defending products liability litigation simply because they sold the product. Subparagraph (b) states that the court shall dismiss the seller or distributor as a defendant based upon par. (a) 2 if the manufacturer or its insurer submits to the jurisdiction of the court.
Therefore, if the only basis for joinder of the seller or distributor is a concern about jurisdiction over the manufacturer or its insurer, a seller or distributor is entitled to dismissal if the manufacturer or its insurer submits to the jurisdiction of the court.
As of now, no Wisconsin court has held that it is necessary for the claimant/plaintiff to plead one of the exceptions to “non-liability” under section 895.047(2), and the statute does not require that one of the exceptions be pled. It is therefore unlikely that a seller or distributor will be able to obtain dismissal on the pleadings.
Defense counsel representing a seller or distributor may allege, however, that the claim against the seller or distributor fails to state claims upon which relief may be granted. Such a defense would be alleged on the premise that none of the exceptions to “non-liability” are applicable.
Keep in mind the recent changes to the Rules of Civil Procedure, which create a stay of up to 180 days if a motion to dismiss for failure to state a claim upon which relief may be granted is made as part of the responsive pleading. Such a motion raised by defense counsel may initially prevent the claimant from conducting initial discovery needed to determine if one of the exceptions under section 895.047(2) will apply to the defendant seller or distributor.2
Summary Judgment Motion
At this time, it would appear more likely that the sellers’ or distributors’ path to dismissal will be by summary judgment motion.
Unless the claimant can produce, by a preponderance of the evidence, proof that the manufacturer’s duties to properly manufacture, design, or provide warnings or instructions have been contractually assumed by the seller or distributor, the seller or distributor should be entitled to dismissal, unless the manufacturer and its insurer have jurisdictional defenses or the court determines that a judgment against the manufacturer or its insurer is unenforceable.
Note that subparagraph (2)(a) 3 uses the term “enforceable,” rather than “unable to satisfy.” Does this mean that so long as the manufacturer is a going concern and subject to execution of the judgment the seller or distributor is entitled to dismissal, even if the manufacturer is financially unable to satisfy the judgment? This language of the statute has yet to be interpreted.
No Guidance on Obtaining Dismissal
The Wisconsin courts have provided no guidance to counsel for the seller or distributor on how to obtain dismissal under section 895.047.
MUPLA does provide a procedure for the dismissal of a seller or distributor, but it has yet to be adopted or commented upon by the Wisconsin courts. Under MUPLA, a seller or distributor would be allowed to make a motion for dismissal if the action is based upon a theory other than the seller or distributor’s own negligence.
The burden of proof would then shift to the claimant to establish that one of the exceptions to non-liability would be applicable. Such a procedure would seem to be consistent with the language of subsections (a)(1) and 2, in that the statute provides that the claimant must establish by a preponderance of the evidence that the seller or distributor has contractually assumed duties that would create liability, or that the manufacturer and its insurer are not subject to the jurisdiction of the court.
Which Court Procedure?
The unanswered question at this time is what procedure the court would employ to determine whether or not the claimant would be able to enforce a judgment against a manufacturer or its insurer.
As noted above, if there are ample insurance limits available and there is no reservation of rights being raised by the insurer, the court would likely conclude that the judgment is enforceable.
If a manufacturer is self-insured, however, or if there is a large portion of the potential claim that may not be covered by insurance, how does the court determine if the claimant will be able to enforce the judgment at some future date? Who has the burden of proving that a judgment will be enforceable under such circumstances and what is the relevant proof? Can the claimant conduct discovery to determine the financial position of the manufacturer to determine if the judgment is enforceable?
All of these questions remain unanswered at this point in time, and until there is further guidance on the interpretation of this statutory section, counsel for a defendant seller or distributor will need to be prepared to argue these points on a case by case basis in the trial courts.
Conclusion: Full Impact Yet to be Measured
Section 895.047(2) greatly changed Wisconsin products liability law with respect to sellers or distributors of products.
The full impact of this law has yet to be measured by the courts. But, at a minimum, claimant’s counsel must now weigh whether or not to join a seller or distributor when filing suit, and defense counsel must be vigilant in utilizing the defenses now afforded to sellers or distributors for the benefit of their clients.
Endnotes
1 Wis. Stat. §895.047(2)(b) (emphasis added).
2 See Wisconsin Act 235, revising Wis. Stat. section 802.06.
