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A popular riddle about our perception of reality asks: “If a tree falls in a forest but there is no one there to hear it, does it make any sound?” Courts increasingly are faced with its products liability equivalent: If a product has a possibility of malfunctioning but never actually does so, can the consumer who bought it recover damages because the product is “defective”? Most courts have decided against recovery in these so-called “unmanifested defect” cases because there is no actual injury. Nevertheless, as plaintiffs have become more creative with their legal theories, some courts have refused to dismiss such claims. Federal and state courts have solidly refused to certify products liability class actions for personal injuries because individual issues predominate, and thus the class action bar has searched for new ways to bring class actions that do not present such manageability problems. One recent trend has been for lawyers to identify a product for which the manufacturer has issued a customer advisory about a potential malfunction, and then file a class action on behalf of all of the product’s purchasers. Such pleadings typically exclude from the class anyone who actually experienced personal injury or property damage as a result of the alleged defect, thereby avoiding challenges to the adequacy of the class representatives. What is left is a class of people whose product has not malfunctioned or caused them any recognizable injury at all. Instead, the plaintiffs’ theory of recovery is that because the product may fail at some point in the future, its present value is diminished and it is worth less than the perfect product the plaintiff allegedly paid for. One class was certified on theory of diminished value That was the theory of recovery in Daffin v. Ford Motor Co., 458 F.3d 549 (6th Cir. 2006). In Daffin, the plaintiff alleged that the accelerator in certain car models had a propensity to stick because of carbon buildup. The plaintiff’s theory was that, as a result of this “defect,” each purchaser received a car that was worth less than a car that conformed to the promises allegedly contained in the warranty. The class definition included all purchasers except those who had experienced a personal injury arising from the problem. The trial court certified a statewide class for breach of express warranty, reasoning that the common issues were “whether the throttle body is defective, how much the defect reduces the value of the car, and whether Ford is in breach.” Id. at 551. The 6th U.S. Circuit Court of Appeals affirmed the class certification, holding that Ford’s argument that a customer who never experienced a malfunction could not state a claim for breach of express warranty was a “merits” issue that should not be reached at the class certification stage. Id. at 553. But many courts that confront the unmanifested-defect issue treat it as a fundamental question of standing to sue that courts must address up front. For example, in Harrison v. Leviton Manufacturing Co., 2006 WL 2990524, No. 05-CV-0491-CVE-FHM (N.D. Okla. Oct. 19, 2006), the plaintiff claimed that one type of electrical receptacle was inferior to another type of electrical receptacle because it degraded faster and generated excessive heat, increasing the risk of electrical fires in class members’ homes. The defendant moved to dismiss, arguing that the plaintiff had not pleaded an actual injury sufficient to confer Article III standing on the plaintiff to sue. The court agreed, noting that the plaintiff had not pleaded any personal injury or damage to his home, nor had he pleaded that any such injury was imminent. And even though his alleged damages were the cost of replacing the receptacles, he had not actually replaced the receptacles or incurred any substitution costs. As such, he did not have an “injury in fact” sufficient to confer standing to sue under Article III of the U.S. Constitution. Other courts, in analyzing unmanifested-defect claims, treat the complaint’s failure to allege a product malfunction and resulting injury as the failure to plead an essential element of the claim. In the oft-cited case of Briehl v. General Motors Corp., 172 F.3d 623, 628 (8th Cir. 1999), the court observed that: “Under each of the theories the Plaintiffs invoke…damages constitutes an essential element of the cause of action. Where, as in this case, a product performs satisfactorily and never exhibits the alleged defect, no cause of action lies.” Courts are usually reluctant to allow speculative claims Much judicial reluctance to allow suits for defects that have not actually resulted in a product malfunction lies in the same desire to avoid speculative claims that has led many courts to reject claims for risk of future harm, fear of future disease and medical monitoring. In holding that plaintiffs whose medical devices exhibited no contamination had no standing to sue, the Alabama Supreme Court recently observed that many courts hold that a person who has been exposed to hazardous substances cannot sue without a present manifestation of physical injury, and this rule exists to avoid “significant unforeseen and unforeseeable consequences” that are best left to the legislature, not the courts. Houston County Health Care Authority v. Williams, No. 1021253, 2006 WL 3462148 at *12 (Ala. Dec. 1, 2006). Another court-in rejecting a claim that the class’s motorcycles had suffered “diminished value” because a small number of that model had experienced failure of the rear cam bearing-held that the “injury” was simply “too uncertain and speculative to constitute a legally cognizable tort injury.” Tietsworth v. Harley-Davidson Inc., 677 N.W.2d 233, 237 (Wis. 2004). The court analogized to its statute of limitations jurisprudence: “In the context of deciding when a claim accrued for purposes of the statute of limitations, we generally have held that a tort claim is not capable of present enforcement (and therefore does not accrue) unless the plaintiff has suffered actual damage. Actual damage is harm that has already occurred or is ‘reasonably certain’ to occur in the future. Actual damage is not the mere possibility of future harm.” Id. at 239 (citations omitted). Similarly, a New York court-in affirming dismissal of unmanifested-defect claims-reasoned that public policy required rejection of a theory that would make manufacturers indemnifiers for losses that may never occur. See Frank v. DaimlerChrysler Corp., 741 N.Y.S.2d 9, 17-18 (N.Y. App. Div. 1st Dep’t 2002). Such a result would, according to the court, “undoubtedly have a profound effect on the marketplace” and improperly “increase the cost of manufacturing, and therefore the price of everyday goods to compensate those consumers who…fear certain products might fail.” Id. at 17. Judge Frank Easterbrook has analyzed the issue in terms of achieving optimal deterrence by passing on to manufacturers the costs of physical injuries arising from defects in their products, but not providing incentives for excess precautions. In re Bridgestone/Firestone Inc. Tires Products Liability Litigation, 288 F.3d 1012 (7th Cir. 2002). He posited that “[i]f tort law fully compensates those who are physically injured, then any recoveries by those whose products function properly means excess compensation,” which would induce manufacturers to overspend to reduce the risk of defects. Id. at 1017 and n.1. Does tort-based rule apply to other causes of action? Some courts and commentators have suggested that the tort-based rule requiring physical or personal injury should not apply to contract and statutory causes of action that are based on a customer’s expectations. For example, in Wilson v. Style Crest Products Inc., 627 S.E.2d 733 (S.C. 2006), plaintiffs brought a class action claiming that the anchor system for their mobile homes was defective because it might fail in high winds. They sued on a variety of theories. The court affirmed summary judgment dismissing all of their causes of action. But Justice Costa Pleicones dissented regarding the breach of implied warranty of merchantability claim, noting that “a plaintiff who asserts breach of warranty must prove only that his contractual expectations were not met.” Id. at 738. He explained that “goods either conform to the contract upon delivery or they do not….[They] do not become non-conforming only upon causing injury.” Id. In his opinion, whether the goods were merchantable upon delivery should have been determined at trial, with any remedies being governed by the Uniform Commercial Code. Similarly, a Florida court reversed the dismissal of an unmanifested-defect claim involving allegedly defective seat belts based on the language of Florida’s Deceptive and Unfair Trade Practices Act. Collins v. DaimlerChrysler Corp., 894 So. 2d 988 (Fla. Dist. Ct. App. 2004). The act defined “actual damages” as the difference in market value between the product in the condition it was delivered and the product in the condition as described in the contract. Id. at 990. Thus, the court reasoned, a “diminished value” claim could proceed through such a comparison despite no actual product malfunction. But see In re Canon Cameras Litigation, 237 F.R.D. 357, 360 (S.D.N.Y. 2006) (“A plaintiff who purchases a digital camera that never malfunctions over its ordinary period of use cannot be said to have received less than what he bargained for when he made the purchase.”). Unmanifested-defect claims no doubt will continue to present the “tree falling in the forest” conundrum for litigants and judges well into the future. But ultimately courts can be expected to be skeptical of claims that a person who enjoyed the entire useful life of a product without a malfunction has suffered a legally cognizable injury. J. Russell Jackson is a partner at New York’s Skadden, Arps, Slate, Meagher & Flom and teaches products liability at Brooklyn Law School.

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