In Kim v. Toyota Motor Corp., No. S232754 (August 27, 2018) the California Supreme Court broke with 40+ years of intermediate court of appeal precedents barring manufacturers from using evidence of their compliance with industry custom and practice to prove their design was not defective. Rather, the Court held, such evidence is no longer categorically inadmissible, but neither is it categorically admissible. Admissibility depends on the nature of the evidence and the purpose for which it is offered.
The new, nuanced (to say the least) treatment of custom evidence in risk-benefit design defect cases is a welcome, and somewhat surprising, statement of flexibility and realism in product liability cases– two characteristics that animated the Court’s reasoning.
Prior to Kim, it was settled in the lower courts (with one exception, Howard v. Omni Hotels Mgmt. Corp., 203 Cal.App.4th 403 (2012)) that custom evidence is inadmissible in a strict liability case when offered by a defendant. The rule flowed from two related original premises of California strict products liability. First, the now discredited notion that California law must erect and maintain an impermeable barrier between the concepts of negligence and strict liability. That wall has been crumbling for decades, though its morbidity is frequently ignored, and it is occasionally summoned to justify a ruling. Second, the notion that the unerring focus in a strict liability case must be on the condition of the product, not the reasonableness of the manufacturer’s design conduct. That distinction is somewhat whimsical, but durable.
Kim recognizes the infirmity of the strict liability-negligence barrier, noting that there is not much difference between risk-benefit weighing and “a traditional negligence inquiry.” And the Court considers the product-conduct distinction still viable, but too simplistic to bar categorically evidence relevant to evaluation of the challenged design.
The claim in Kim was that the failure to include Vehicle Stability Control (VSC) as standard equipment in a 2005 Toyota Tundra light truck was a design defect under the risk-benefit test. Toyota had offered VSC as an option only, though it had been standard equipment on some more expensive vehicles. Plaintiffs unsuccessfully sought in limine to exclude industry custom evidence. At trial, a Toyota product planning witness testified that no other light trucks on the market in 2005 offered VSC as standard or optional equipment. Toyota offered it as an option because (1) truck buyers were price-sensitive and unenthusiastic about VSC, and (2) consistent with industry practice, Toyota would “phase-in” expensive new technology by offering it initially as an option.
Toyota prevailed at trial and the Court of Appeal affirmed. The Supreme Court accepted discretionary review solely to determine whether admission of the custom evidence was reversible error, and affirmed, holding that the custom evidence was properly admitted.
Preliminarily, the Court distinguished industry custom evidence from two adjacent concepts, which were not at issue. One was evidence of compliance with Federal Motor Vehicle Safety Standards, the regulations governing vehicle design. The other was “state of the art” evidence, proof of what is technologically achievable or “what can be done.” Industry custom, in contrast, deals with “what is done” within the relevant industry.
The Court found that there was no real question regarding the relevance of two particular types of industry custom evidence, industry technical standards and “industry experience.” Assuming the technical standards are based on valid research and testing, they are relevant to evaluating issues of “safety, feasibility, cost and functionality.”
“Industry experience” is evidence that competitors had explored but abandoned the alternative design for risk-benefit oriented reasons. The Court recognized its obvious relevance to the jury’s own risk-benefit consideration.
The core issue for the Court was “true industry custom evidence: evidence that ‘nobody does it,’ that ‘every body does it,’ or that the defendant’s product is no more dangerous than others on the market.” In holding such evidence admissible depending on the circumstances, the Court first noted that it saw no material difference between this evidence and evidence of industry technical standards. Both “illuminate” the risk-benefit design challenges recognized in Barker v. Lull Eng’g Co., 20 Cal.3d 413, 418 (1978) – “the relative complexity of design decisions and the trade-offs that are frequently required in the adoption of alternative designs.”
The Court also suggested a “good for the goose, good for the gander” rationale, noting repeatedly that plaintiffs themselves had introduced custom evidence to argue that (1) Toyota had offered VSC as an option solely to gain a competitive advantage, and (2) the reasons VSC was standard in many SUVs dictated the same decision in light trucks. The Court reasoned that industry custom evidence is a “two-way street.” Where the defendant’s design is an outlier, or fails to conform to industry standards or custom, plaintiffs readily exploit that fact as evidence of a defect. Similarly, the defendant should be able to show that the proposed alternative design is not standard, to support an inference that its omission does not compromise safety. At least in some cases, the competitors’ design choices might reflect their own independent risk-benefit balancing “and thus shed some light on the appropriate balance of safety risks and benefits.”
The Court stopped short of giving any concrete guidance on when the evidence would not be admissible. It noted generally, “in some cases the relationship between industry design practices and consideration of the Barker [risk-benefit] factors may be sufficiently attenuated to warrant exclusion of the evidence.” It also cautioned that such evidence “may not … be introduced simply for the purpose of showing the manufacturer was acting no worse than its competitors,” i.e., acting unreasonably. These two inadmissibility shoals are hardly Scylla and Charybdis; able counsel should be able to navigate safely between them.
The Court also reminded that the evidence could be excluded if overly prejudicial, or admitted subject to a limiting instruction. And the Court reiterated that the evidence cannot be dispositive.
The prior rule barring custom and practice evidence, like many other aspects of California products liability law (for example, much of the lower courts’ consumer expectations jurisprudence), often injected an element of the surreal. In the modern, vigorously competitive marketplace, safety sells, and the independent reluctance of a large swath of the industry to adopt a particular design feature or technology does indeed “shed light” on the wisdom of the design. It’s a step forward into the real world for the California courts to finally recognize that and allow juries to take industry design practice into consideration, for whatever it happens to be worth.
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