Assessing a Trade Association's Tort Liability Risk

Issue: April 2011

Assessing a Trade Association's Tort Liability Risk

By Herbert G. Smith II, Esq., and John B. Williams III, Esq.

When assessing potential sources of legal liability for trade associations, threats from products liability litigation probably is not one of the first topics that comes to mind. This is so because causes of action in products cases are often founded on theories of both warranty and tort law, claims that do not normally find their way into complaints filed against trade associations or other organizations outside of the stream of design and production. However, to an increasing degree, trade associations have found themselves targets of products liability litigation lawsuits in state and federal court. Understanding how this can happen and what theories plaintiffs have relied upon to bring products cases against trade association defendants can provide valuable information for developing a strategy to avoid-or successfully defend against-these types of lawsuits.

Historically, plaintiffs have alleged traditional products liability claims against trade association defendants on theories such as negligence, strict products liability, and breach of actual or implied warranties. However, these claims often failed with respect to trade associations because the plaintiffs could not prove that the association defendants had any hand in manufacturing the product in question, were in the chain of distribution, or had any specific duty to the plaintiff. While trade associations typically are able to avoid these more traditional types of products liability lawsuits, plaintiffs have nonetheless found some success in suing trade associations, along with their manufacturer members, under theories such as misrepresentation/concealment, conspiracy, and negligence under the Good Samaritan doctrine. With few exceptions, the success or failure of these cases has turned on the trade associations' release of information to the public and the control the associations exercise over their members.

Misrepresentation/Concealment
Trade associations have been sued for either misrepresenting or concealing data that allegedly would have affected a consumer's decision to use a product. A well-known example of such a case comes from the tobacco industry litigation, where several tobacco companies, along with their trade associations, were alleged to have known of the dangers of cigarette smoking but hid those dangers from the public. Other industries, such as lead-based products manufacturers and pool and spa manufacturer associations, have defended against similar allegations based on negative research that was not released to the public.

In misrepresentation/concealment cases, plaintiffs typically must prove that the defendant had a duty to the plaintiff to provide the information in question, and that the plaintiff relied on the information he/she received from the defendant. This is a difficult bar to overcome, as courts have repeatedly found no legal duty from a trade association to the general public, or have held that the plaintiff did not rely on statements made by the defendant association. However, courts have noted a significant difference between fraudulent and negligent concealment. When an association knowingly conceals or misrepresents data, a court is more likely to find liability even if the nexus between the plaintiff and defendant is not strongly defined. Therefore, a trade association's success on a misrepresentation claim may hinge on how and why the allegedly false information was or was not released to the public.

Civil Conspiracy
Products liability plaintiffs also have attempted to sue trade association defendants under a theory of civil conspiracy. To state a viable claim, often the plaintiff must prove: a combination between two or more persons to commit an unlawful act, an act in furtherance of the unlawful act, and damages to plaintiff. Conspiracy has become an often used tool for plaintiffs who are unable to prove a duty to the public on the part of the trade association, but who can show that the association worked in concert with manufacturers or other entities that did have a duty to the public in a way that harmed the plaintiffs. Because cases involving trade associations typically involve multiple defendants coordinating their actions, a conspiracy claim is a not uncommon addition to a products liability lawsuit.

Negligence Through the Good Samaritan Doctrine
The "Good Samaritan" doctrine arose from the concept that if a person undertakes a certain action, usually to assist another, they have a duty to not perform that action negligently. This doctrine has become a common basis for negligence claims brought against trade associations. In Good Samaritan products liability claims brought against trade associations, plaintiffs frequently argue that the association undertook a specific duty to the general public when they advertised, advocated for, or performed research about their particular industry. Good Samaritan cases are often successful against trade associations that perform standard setting for their industry. On the other hand, if a trade association does not promulgate standards for the industry to follow-and thereby arguably does not undertake a duty to the public-plaintiffs have difficulty proving an undertaking for purposes of the doctrine.

Heightened Risks in the Products Liability Arena
Based on past products liability cases, trade associations have an increased risk of liability if they purport to undertake a duty to consumers or employees within their industry, set standards, exert control over members of the association, make statements not supported by actual research, or commission research but then fail to publicize substantive, unfavorable results.

• Undertaking a Duty to Consumers/Employees: Claiming any type of duty to the general public as a whole or to particular members of the public, such as employees within the industry, can expose a trade association to a wide range of products liability lawsuits. A simple reference to "the needs of the consumer" by a trade association has been held in the past to mean that the trade association assumed a duty to the public to provide accurate safety information it had in its possession. However, a review of the cases shows that trade associations that were not deemed to have specifically undertaken a duty to the public have successfully avoided liability for negligence actions, even when those associations produced suggested standards or guidelines that ultimately were used in their respective industries.

   

• Standard-Setting/Control: When trade associations become the rule makers for their particular industry or exert control over association members, their tort liability may increase. This appears to be the case because courts have reasoned that trade associations that exert control over their members have become more involved in the production and marketing of the allegedly harmful products and therefore have breached a duty to the public. The clearest example of this comes from a number of blood bank cases in the late 1990's. In these cases, the American Association of Blood Banks (AABB) set national standards for blood donations, blood storage, and transport. That, along with the fact that the AABB exerted strict control over its members, led the courts to hold the association to a higher level of duty to the public than trade associations that did not exert the same level of control over their industry. As a result, the courts found the AABB potentially liable for promulgating standards that did not adequately ensure the safety of blood donations. Once a trade association crosses the line from merely suggesting methods of conducting business to mandating certain policies and enforcing their use, they become standard-setters in their industry and could face increased court scrutiny in products liability cases.

   

• Making Statements Not Supported by Actual Research: While this category may seem more intuitive than the others, it is still worth noting. If a company spokesperson releases a statement on the trade association's behalf and the claims made in the statement are later revealed to have little to no factual backing, this person's statement could create liability for the trade association under claims of fraudulent or negligent misrepresentation. One who negligently gives false information can be subject to liability for physical harm caused by actions taken in reasonable reliance upon that information, whether the negligence was in failing to ascertain the accuracy of the information, or the matter in which it was communicated.