California Supreme Court Says Use of Industry Custom and Practice Evidence Is a “Two-Way Street” in Products Liability Actions

RobertWrightJAT updated 150106_024_1a_webFeatured Expert Contributor, Mass Torts—Asbestos

By Robert H. Wright, a Partner with Horvitz & Levy LLP in Los Angeles, CA, with Partner John A. Taylor, Jr. Mr. Taylor was counsel of record on an amicus brief filed by the Alliance of Automobile Manufacturers in Kim.

In 2016, the California Supreme Court granted review in Kim v. Toyota Motor Corporation to determine whether, in a strict products liability action, evidence that a product’s design conforms with industry custom and practice is relevant and admissible.  Several appellate decisions in California had previously held that such evidence is categorically inadmissible, but the lower appellate court in Kim had taken a more nuanced approach, saying, in effect, “it all depends.”

Manufacturers awaited Kim with some anxiety, given that California is now the world’s fifth largest economy, other states look to California law for guidance on products liability law issues, and recent personnel changes on the court made the outcome in the case somewhat unpredictable.

The manufacturing industry therefore breathed a collective sigh of relief when, in August 2018, the California Supreme Court finally issued its decision in Kim, after considering briefing from the parties and nearly a half dozen amicus briefs from industry groups, business organizations, and the defense bar. 

In its 5-2 decision, the court acknowledged that manufacturers cannot offer such evidence to show their design conforms with industry custom and practice, and for that reason they are not liable for the harm.  But the court held that evidence of industry custom and practice may be relevant for other purposes, “including the jury’s evaluation of whether the product is as safely designed as it should be, considering the feasibility and cost of alternative designs.”

By industry custom and practice, the Supreme Court addressed “what is done” within the relevant industry, rather than state-of-the-art evidence concerning “‘what can be done’ under present technological capacity.”  The court held that “evidence of other manufacturers’ design decisions” may aid the jury’s understanding of the complexities and trade-offs of a particular design “in determining whether the manufacturer has balanced the relevant considerations correctly.”  Most significantly, the Supreme Court’s decision expressly disapproved the several intermediate appellate court decisions that had held such evidence is always irrelevant, and thus inadmissible, to the risk-benefit analysis.

In retrospect, the procedural background of the case, and the industry custom and practice evidence that the plaintiff’s counsel had themselves presented during trial, made it an unlikely vehicle (no pun intended) for preservation of those earlier decisions.

The plaintiff, William Jae Kim, was driving his 2005 Toyota Tundra in the mountains on the Angeles Forest Highway.  On a curve, Kim lost control of the truck, which ran off the road and down a cliff, rendering him a quadriplegic.  Kim and his wife sued Toyota for strict products liability, alleging the truck was defective because it lacked vehicle stability control (VSC)—which he claimed would have prevented the accident.  Toyota had offered VSC as an option on the Tundra (and was the first pickup truck manufacturer to do so), but it was not standard equipment and Kim’s Tundra did not include it.

Before trial, the Kims’ counsel sought to preclude Toyota from presenting any evidence comparing the Tundra’s design to that of its competitors.  But the Kims argued they should be able to present evidence that none of Toyota’s competitors opted to offer VSC as standard on their pickup trucks, to show that Toyota chose not to offer VSC as standard equipment for marketing rather than safety reasons.

Consistent with that strategy, during trial the Kims presented testimony from a Toyota product planning manager to show Toyota included VSC on other vehicles but not the Tundra, supposedly disregarding safety risks because it saw no competitive advantage of including VSC as standard equipment when no other pickup truck manufacturer was doing so.  On cross-examination of the same witness, Toyota was permitted to elicit testimony reiterating that in 2005 no other pickup truck manufacturer offered VSC as standard equipment, and that the decision to offer VSC as optional equipment was consistent with the industry practice of phasing in expensive, emerging technology by initially offering it only as an option. The jury rendered a defense verdict in favor of Toyota.

The Kims argued on appeal that the admission of evidence regarding custom and practice required reversal for a new trial because such evidence is always irrelevant and inadmissible to the defense of a strict products liability claim.  The intermediate appellate court rejected that argument, holding that such evidence may be relevant and admissible, depending on the purpose for which the party seeking its admission offers the evidence.  The California Supreme Court granted review to “resolve the tension among the Court of Appeal decisions” on that issue.

The amicus brief we prepared for the Alliance of Automobile Manufacturers pointed out that the plaintiffs were trying to have it both ways by arguing that plaintiffs in design-defect cases should be allowed to offer custom and practice evidence when it favors them (e.g., to establish the feasibility of a particular design), but defendant manufacturers like Toyota should be absolutely precluded from presenting precisely the same evidence.  In its decision, the California Supreme Court adopted that theme, expressly noting that “the rule is a two-way street.”

The court further observed that “the best illustration of this point is the fact that the Kims themselves introduced precisely this type of evidence at trial in an effort to bolster their argument that Toyota designed the Tundra without standard VSC because it valued profits over safety.”  The court noted that “having elicited the evidence themselves, the Kims are hardly in a position to object to its admission.”

In expressly disapproving all prior California appellate decisions that had held or suggested industry custom and practice evidence was always inadmissible in a products liability action, the California Supreme Court joined “the majority of states that have permitted the admission of evidence of industry custom and practice as relevant to, but not dispositive of, the existence of design defect under risk-benefit balancing tests.”  The court concluded that a jury “may consider whether the manufacturer has complied with industry technical standards, in evaluating whether, on balance, the design is defective.”

The concurring opinion in the case—authored by a pro tem justice sitting by designation due to a vacancy on the court—shows how badly the decision might have gone for manufacturers.  The concurrence chided the majority for retreating “from what was heretofore a largely consistent general rule” of exclusion.  In the concurrence’s view, the rule should not be a “’two-way street.’”  Rather, “[e]vidence of noncompliance with custom and practice is admissible to show the technological and practical feasibility of an alternative design, whereas evidence of compliance cannot prove a negative—that the design was not negative.”

Only the concurrence’s conclusion that no different outcome would have occurred had the trial court given “a proper limiting instruction” on the consideration of industry custom and practice evidence saved the two concurring justices from offering a full-throated dissent.

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