Product liability issues can make headline news, and solicitors working in this area agree that there is an awful lot at stake. Grania Langdon-Down reports


The recent worldwide recall of millions of toys by Mattel has had a huge fall-out – affecting everything from the company’s reputation and sales, to the international tarnishing of the ‘Made in China’ label, to the suicide of the Chinese factory boss where the problem with lead in the paint used on some of the toys prompted their recall.



The price of getting it wrong and putting a defective toy, drug or food product onto the market is so immense, it is turning litigators into risk assessors as companies try to mitigate the impact.



Product safety issues make headline news. Cadbury Schweppes came under intense scrutiny after a salmonella scare forced it to recall a million chocolate bars – resulting in a £1 million fine for food and hygiene offences – alongside the personal stories of people who have suffered debilitating reactions to drugs or medical devices.



Shane Sayers, head of City firm Kennedys’ product liability department, acts for both large manufacturers and insurers. ‘Up until a few years ago,’ he says, ‘companies felt they had discretion whether or not to withdraw a product and decisions were often made on a less-than-cautious basis. They would try to convince themselves that it was worth riding out the storm and settling the few claims that came in on a without-prejudice basis.’



However, he says: ‘The combination of European and domestic legislation, which has taken away a lot of discretion from manufacturers and distributors, the growth in product recall insurance and increased media interest in reporting product safety issues has driven everyone down a path where product recall is now much more of an issue than product claims.’



And, given the costs involved in a recall can far exceed – by many hundreds of times – the amount a company may have to pay out in claims, it is not surprising that litigation lawyers are increasingly being drawn into risk assessment and risk-management issues.



‘Ten years ago, that side of the business was left to the commercial lawyers,’ says Mr Sayers.



Paul Burnley, head of DLA Piper’s corporate defence group in Leeds, agrees. ‘I am a litigator, but I am increasingly being asked to review crisis-management plans and look at the traceability of goods,’ he says.



‘It is no longer just a case of deciding whether or not a product is safe but what the public perception will be, particularly in the food industry where a product may be recalled even if it is not unsafe.’



Rupert Casey, partner in City firm Macfarlanes’ commercial group, specialises in product recall issues for brand owners. ‘The issue of the moment is that the drive to outsource manufacturing to cheapen the base costs is leading people to take greater risks with the quality of their products,’ he says. ‘The further overseas you send the manufacturing, the more difficult it is to keep an appropriate level of quality control.’



The headache of then correcting a mistake is so much worse than any benefits you may get from suing those responsible, he says. ‘Most contracts will say you can only claim for direct losses – you can’t sue for loss of profit or indirect losses, such as loss of goodwill. But the ripple effect goes far wider than those direct losses, including losing a march on the market and the consequences on your share price.’



For claimant lawyers, the big issue in product liability is inevitably funding, particularly for group actions. The Legal Services Commission (LSC) has an annual budget of £3 million for multi-party actions which are likely to cost more than £1 million in legal aid or where the total inter party costs are likely to exceed £5 million. It has funded four such actions in 2006/7.



Mark Harvey, partner and head of harmful products at south Wales firm Hugh James, is leading the national group litigation on behalf of several hundred people who allege withdrawal reactions through their use of the anti-depressant drug Seroxat. The LSC was going to withdraw funding but that was overturned by the funding review committee.



Mr Harvey says: ‘I have spent more time fighting the LSC than I have fighting my opponents. I accept they have a very difficult job to do with limited funding, but it’s like being in a boxing ring – every time you think you are near to giving your opponent a bloody nose, the referee in the form of the LSC shoves you back into your seat again.’



But it is not all gloom. ‘I and others have been very successful in settling some cases,’ he says. ‘However, the successes seem to be driven by the company’s public relations and commercial interests, and some companies are just so big – they aren’t interested because their sales far exceed anything that will arise out of litigation.’



He finds it ‘very frustrating’ that the US system of contingency fees, class actions, punitive damages and no adverse costs orders mean cases there are investigated, prosecuted and ‘the victims have their day in court’, when cases involving the same product here have not even got off the starting block.



Sapna Malik, partner with London firm Leigh Day & Co’s complex claims department, agrees. The firm has been working on cases involving the anti-inflammatory drug Vioxx, withdrawn from the market after clinical trials suggested that it increased the risk of heart attacks. US claimants have been awarded millions of dollars in compensation (although the maker, Merck, has also successfully defended some product liability claims), but UK claimants cannot get public funding or insurance cover for their cases to be run here. ‘Our “no win, no fee” system falls short of providing access to justice,’ she says.



However, class actions are a developing area of law. City firm Lovells last month launched an international class actions unit which includes partners with product liability expertise. Some US claimant specialists have set up shop in London, while the European consumer affairs commissioner has proposed new rules of ‘collective redress’ so that representative bodies can aggregate claims on a pan-European basis. Changes to funding, such as third-party funding and contingency fees, are also up for discussion here.



Mr Sayers points out that the prospect of mass actions is already more advanced in England than anywhere else in Europe. ‘Despite that, only a relatively small number of group cases are ever brought. In the rest of Europe, it is almost non-existent. There is scope there for quite aggressive criminal action which can lead to civil liability, but they are even less developed than us in terms of potential class litigation.’



Dealing with a multi-party action can take over a practitioner’s working life, as Tim Roper, head of the personal injury department of south-west firm Wolferstans, knows only too well. He is the sole solicitor representing the claimant cohort in the multi-party action against the supplier of the anti-epileptic drug Vigabatrin. He and his team of three fee-earners are working exclusively on this case, which arose in 1998 when a local Plymouth man came to see him because he thought the drug had caused him visual problems.



Granted public funding to investigate that initial case, Mr Roper says: ‘The LSC has backed me every step since then. We now have about 180 claims and the case has been listed for trial in autumn 2008.’



He says that product liability is a very difficult area to work in because there is so much at stake. ‘You need to know a lot of science,’ he says. ‘You need to be able to put together a team of the best people, including counsel and experts, and manage them and make sure you have sufficient resources to deal with specific issues such as disclosure – which is a huge matter as you are bombarded with documentation.’



It is that element of David and Goliath in taking on some very big companies that appeals to many claimant specialists. Ms Malik says: ‘You want to fight your clients’ battle. You feel their frustration although you always have to remain professional – sympathetic but not emotional.’



Sallie Booth, partner at national firm Irwin Mitchell, also specialises in group actions. She is currently investigating claims by people affected by Cadbury’s contaminated chocolate bars. ‘The law is complicated, with the EC product safety directives and the Consumer Protection Act,’ she says. ‘There are often causation issues, particularly with drug cases, and you are facing huge companies with very deep pockets – I sometimes wonder why I am doing it.



‘However, it is also a very exciting area in terms of profile because group actions are often associated with product recalls and large-scale events.’



For Mr Sayers, the appeal lies in the diversity of the work and its international aspect – ‘the idea of acting as a virtual counsel advising companies across a number of jurisdictions is fascinating’.



The work is certainly stimulating, agrees Mr Burnley. ‘The time scales involved when a safety issue arises are so tight. You are dealing with the law, the stance of the regulators, the reputational side, the media, sorting out resources, and all within a matter of hours. You need very good people skills because those involved can be pretty emotionally raw, good legal and PR skills and, more than anything else, lateral thinking – it’s no good just looking at the regulations. And, crucially, you mustn’t panic.’



For Mr Harvey, two key requirements are ‘thick skin and doggedness – it is deeply frustrating to see American citizens getting billions of dollars in compensation from companies while UK citizens get nothing’.



Grania Langdon-Down is a freelance journalist