Alert - Sophisticated Users Failure to Warn

February 1, 2014
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In a recent California appellate court decision, Pfeifer v. John Crane, Inc., the Second Appellate District opined on the “sophisticated intermediary” defense. In a unanimous decision, the court held that when a manufacturer provides hazardous goods to a “sophisticated” intermediary that supplies the goods to its employees or servants, the supplier is subject to liability for failure to warn of the hazards, absent some basis for the manufacturer to believe that the ultimate users know or should know the hazards. 

 

Plaintiff William Pfeifer and his wife sued John Crane, Inc. (“JCI”), the Navy, the federal government and 30 other suppliers of products containing asbestos after he was diagnosed with mesothelioma. Plaintiffs alleged negligence, strict liability and loss of consortium against JCI. 

 

During pre-trial proceedings, JCI proposed jury instructions on the “sophisticated user” defense.  JCI argued that it was not liable for failing to warn Mr. Pfeifer of the hazards of asbestos while he served in the Navy because the Navy had greater knowledge of the hazards than did JCI. The court concluded that a supplier can be liable for failure to warn when a supplier sells a product to a purchaser who is already aware of the dangers of the product, unless it can show that it had a sufficient basis for believing that the ultimate users of the product would be aware of the product’s dangers. The trial court rejected JCI’s instruction when it determined that JCI failed to (1) offer evidence that it reasonably believed the purchaser would warn the end users, (2) offer evidence that the plaintiff already knew or should have known of the dangers or (3) show that the dangers were so “readily known and apparent” to the purchaser that it would be expected to protect the end users. The court granted a directed verdict as to the defense at trial.

 

The jury returned special verdicts in favor or the Pfeifers finding that Mr. Pfeifer suffered $3.2 million in economic damages and $4 million in noneconomic damages, and Mrs. Pfeifer was awarded $1.05 million in noneconomic damages.  JCI was allocated 70% of the comparative fault and the jury awarded punitive damages to the Pfeifers of $14.5 million. The court of appeal affirmed. 

 

The decision in Pfeifer v. John Crane, Inc., confirms that employees of a sophisticated user are, by virtue of their employment, not deemed to be sophisticated users. The Court said “in actions by employees or servants, the critical issue concerns their knowledge (or potential knowledge), rather than an intermediary’s sophistication. [T]he intermediary’s sophistication is not, as a matter of law, sufficient to avert liability; there must be a sufficient reason for believing that the intermediary’s sophistication is likely to operate to protect the user, or that the user is likely to discover the hazards in some other manner.” Thus, the intermediary's sophistication does not shield the manufacturer or supplier from liability to the intermediary's employees. It is the employee’s knowledge, or lack thereof, that dictates whether or not a supplier can be liable for failure to warn. 

 

The Court gave examples of what a defendant could show to support a claim that the sophisticated intermediary's employee should likewise be considered sophisticated, e.g., the supplier reasonably believed the intermediary would warn the ultimate user, the employees themselves should have known of the dangers in view of their own training, and specific dangers were "readily known and apparent" to the intermediary, such that it would be expected to protect its employees. In these situations, unlike the situation in Pfeifer v. John Crane, Inc., an employee may be deemed a sophisticated user.