Revisiting Liability of Non-Manufacturing Sellers and Importers
The explosion of growth in Internet sales, as well as the higher cost of manufacturing goods in the United States, has resulted in an overwhelming number of products, especially consumer products, being manufactured overseas, especially in Asia. Many companies, in turn, place their labels on goods manufactured overseas by some other entity, but these “apparent manufacturers” are simply importers, and not true manufacturers. As anyone who has tried to obtain service of process over a Chinese manufacturer can attest, it is nearly impossible in most instances. This has made it increasingly difficult to hold foreign manufacturers, or anyone else in the chain of distribution, accountable for harm caused by defective products under Michigan’s product liability statutes.
Under Michigan law, an injured consumer was traditionally not required to prove a non-manufacturing seller’s negligence in order to recover for a breach of implied warranty of merchantability. In 1996, however, the Michigan legislature enacted sweeping “tort reform” that included major changes to Michigan’s product liability landscape. See Michigan Product Liability Act (“MPLA”), MCL § 600.2945 et seq. One of the most significant revisions was that a non-manufacturing seller could not be held liable for a defective product unless the plaintiff was able to show that “[t]he seller failed to exercise reasonable care, including breach of warranty, with respect to the product and that failure was a proximate cause of the person’s injuries.” MCL 600.2947(6)(a). In other words, the defendant must be “independently negligent.” Torts: Michigan Law and Practice § 8.1 (Linda Miller Atkinson et al. eds., 2000).
While the statutory language “failed to exercise reasonable care, including breach of warranty,” initially caused some confusion as to whether these were independent claims, it is now settled that negligence and breach of implied warranty claims do not stand alone. See Curry v. Meijer Inc., 286 Mich. App. 583, 593; 780 NW2d 603 (2009)(noting that “the language is about as clear and unambiguous as it could be,” Id. at 592, the Court stated that “a breach of implied warranty claim is a type of, and not separate from, a breach of reasonable care claim.”).
It is interesting to note that the MPLA does not expressly define “manufacturer” or “seller.” Courts, however, have assumed that a distributor falls within the definition of a non-manufacturing seller. “We assume without deciding that a distributor, who is not the ultimate seller, falls within the scope of Mich. Comp. Law. § 600.2947’s definition of “seller.” Dreyer v. Exel Industries, S.A., 326 Fed.Appx. 353, 358, n.3, 2009 WL 1184846 (6th Cir. (Mich.)).
The irony, of course, is that the Consumer Product Safety Commission (“CPSC”), the federal agency charged with protecting the public from unreasonable risks of serious injury or death from more than 15,000 types of consumer products, includes importers in its definition of “manufacturer.” The Consumer Products Safety Act defines a “manufacturer” as “any person who manufactures or imports a consumer product.” 15 U.S.C. § 2502(11). In 1976, the CPSC issued a policy statement reiterating that “under the Act, importers are made subject to the same responsibilities as domestic manufacturers.” 16 C.F.R. §1009.3 (1976).
Under current Michigan law, a manufacturer of a product that complies with a government regulation or standard promulgated by a federal or state agency responsible for reviewing the safety of the product, enjoys the rebuttable presumption that the product is not defective. MCL § 600.2946(4). The conundrum is that many products that are regulated by the CPSC have strict standards for compliance imposed upon manufacturers (including, by definition, importers), yet under Michigan law, an importer may be considered to be a non-manufacturing seller.
THE NEED FOR IMPOSITION OF “APPARENT MANUFACTURER” LIABILITY
With so many consumer products being manufactured by non-descript foreign entities, yet labelled by domestic importers, it is time that Michigan courts adopt “apparent manufacturer” liability in order to adjust to the realities of the global economy and allocate the risk of defective products to those entities most able to bear it.
Michigan courts have recognized that “the individual consumer’s tort remedy for products liability … derives either from a duty imposed by law or from policy considerations which allocate the risk of dangerous and unsafe products to the manufacturer and seller rather than the consumer. Such a policy serves to encourage the design and production of safe products.” Neibarger v. Universal Coops, Inc., 439 Mich. 512, 523; 486 NW2d 612 (1992). Our Supreme Court has recognized “the societal policy rationale that those injured by defective products should be compensated for their injuries[,]” and that “manufacturers can most effectively distribute the costs of injuries.” Prentis v. Yale Mfg. Co., 421 Mich. 670, 682; 365 NW2d 176 (1984).
In Seasword v. Hilti, Inc., 449 Mich. 542; 537 NW2d 221 (1995), the plaintiff was injured while using a drill manufactured by Hilti, A.G., a foreign company. The plaintiff sued the defendant, Hilti, Inc., on the theory that the defendant held itself out as the manufacturer of the product. The Supreme Court rejected the “holding out,” or “apparent manufacture” theory of liability, reasoning:
We believe, however, that Michigan’s existing theories of seller liability and related tort doctrines, including piercing the corporate veil and successor liability, as well as laws of agency, fraud, and misrepresentation, preclude the need for an apparent-manufacturer doctrine and diminish the doctrine’s utility. Because nonmanufacturing sellers in Michigan continue to be answerable for design defects under existing tort theories, we find it unnecessary to adopt an additional theory under which nonmanufacturing sellers could be accountable for injuries caused by an allegedly defective product. Id. at 546-47. (Emphasis in original).
The Court acknowledged the important policy reasons behind the “apparent manufacturer” doctrine, but held that the product liability laws, circa 1995, adequately protected the injured consumer.
Accordingly, while the apparent-manufacturer doctrine serves important interests, not the least of which are accountability, protecting consumer expectations, and deterring abuse of corporate structures to evade tort liability, we believe that those objectives are adequately accomplished by existing laws and therefore do not necessitate an apparent-manufacturer doctrine. Thus, we decline to supplement our current products liability jurisprudence with the apparent-manufacturer doctrine. Id. at 547.
Seven months after the Seasword decision, the product liability laws experienced the seismic shift we live with today. Since the rationale for declining to adopt the apparent manufacturer doctrine has disappeared, and if accountability and protecting injured consumers’ rights remain viable objectives, Hilti, supra., at 547, then it is time that the doctrine be revisited and adopted.
1. The author has had two cases in recent years where, after complying with the requirements of the Hague Convention, and waiting almost one year, the Embassy in China responded that “the address for the entity was not detailed enough.” The address was the same one listed on the Chinese manufacturer’s website and provided by the importer.
2. A non-manufacturing seller can also be held liable for breach of express warranty, if it was a proximate cause of the injury. MCL 600.2947(6).
3. Where a retail seller assembles a bicycle for sale, which later causes injury, the seller may be liable for negligent assembly. The seller who simply sells a product in a box, which later causes injury due to product defect, likely has no liability.
4. “Apparent manufacturer” liability is based on 2 Restatement of Torts, 2d, § 400, p. 337, which states: “One who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were the manufacturer. . . . This theory simply permits a fact-finder to “transfer” the manufacturer’s liability to that separate entity holding itself out as the manufacturer. When the doctrine applies, the non-manufacturer is, in reality, substituted for the manufacturer.”