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The German American Trade Association
- A Not For Profit Organization -


                                                                                                                                                                             

Protection from Product Liability

When a foreign company sells its products in the United States, it is inevitably subject to U.S. product liability regulations. This applies even if the local subsidiary sells the products under its own name, or if the parties agreed that the delivery of the products is subject to foreign law.  As long as the company can be regarded as “manufacturer”, it is subject to potential lawsuits in the United States.

The possible effects of product liability cases are widely known through press and media:  Here $2 million dollars for a canary that has allegedly been dried in a microwave oven, there $6 million dollars for an elderly lady who found that McDonalds’ coffee was too hot.  All of these cases are always being decided by a lay jury.  Since the jurors are not deciding about their own money, they are typically quite generous.  A foreign company with “deep pockets” is always welcome.

What makes this scenario particularly bitter for foreign corporations is the unfair American civil law system, which – statistically proven – puts foreign companies at a disadvantage. While the plaintiff usually conducts his lawsuit free of charge on a contingency basis, the company must bear its entire legal expenses, even if it wins the case.  Furthermore, the economic implications of a product liability law suit may be far reaching.  You may remember the so-called jerk-forward-cases, in which an Audi (of course only in America) allegedly moved forward in parking gear, crushing the driver against the garage door.  As a consequence, Audi lost almost its entire U.S. market share over a 5-year term and never fully recovered.

Throughout the entire market entry process, we closely cooperate with specialized product liability attorneys to protect the company against this extremely undesirable scenario.

The company must implement certain internal measures to prevent product liability cases from occurring.  In addition to fulfilling the requirement of introducing only save products to the U.S. market, the manufacturer must adjust owners and installation manuals, brochures, maintenance instructions, the website and advertising materials to U.S. standards. In almost all cases, warning labels, disclaimer language and other measures will have to be included and the documentation increases by about 30% in length and scope. Warning signs and labels must also be placed on the products themselves.

The afore-mentioned measures are primarily lawsuit prevention tools. If the products have been adjusted, the likelihood of an injury is being reduced and the risk of a lawsuit decreases.  In addition, it is becoming harder for a plaintiff to find a contingency attorney who will file the case for him. When the attorney recognizes that the company did its homework, he is less likely to take on the case, because the changes of winning a substantial judgment are being diminished. Finally, even if the worst case scenario occurs and a claim has been filed, the chances of winning it are far better if the documentation complies with U.S. regulations.

For legal adjustments of product liability related documentation, GATA recommends the New York based law firm of H. Roske & Associates LLP, which is specializes in the representation of German-speaking companies in America and product liability measures [www.hr-ny.com].