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Picture this: A manufacturer hires a criminal defense lawyer to keep a corporate officer out of jail by creating reasonable doubt about his conduct regarding an allegedly defective product. Is this a bad dream, or has criminal law invaded product liability law? Criminalizing product liability law is an odd concept because manufacturers have historically defended product liability cases in the nation’s civil courts. Indeed, the large body of product liability law across the country provides plaintiffs with ample civil remedies, including potentially huge punitive damages, if they can prove by a preponderance of the evidence that the alleged design defect or warning defect proximately caused the harm in an outrageous manner. See generally, Allowance of Punitive Damages in Products Liability Cases, 13 A.L.R. 4TH 52 (2000 supp.); See also, Rachuch v. Celotex Corp., 887 F.2d 393 (2nd Cir. 1989) (applying New York and Federal law); Fischer v. Johns Manville Corp., 103 N.J. 643 (1986); Stambaugh v. International Harvester Co., 435 N.E. 2d 729 (Ill. 1982); Wangen v. Ford Motor Co., 294 N.W. 2d 437 (Wis. 1980); Strum, Ruger & Co. v. Day, 594 P.2d 38 (Alaska 1979); Toole v Richardson-Merrill, Inc., 251 Cal. App. 2d 698 (1967). Yet, in the wake of the Firestone tire recall, Congress has been considering whether to impose severe criminal sanctions on manufacturers for product defects. See, Defective Product Penalty Act of 2000, S. 3070, 106th Cong. (2000); Motor Vehicle and Motor Vehicle Equipment Defect Notification Improvement Act, S. 3059, 106th Cong. (2000). While such an effort failed in the waning days of its last session, Congress did enact the Transportation Recall Enhancement, Accountability and Documentation Act (TREAD), signed by President Clinton on Nov. 1, 2000, to impose stiff new criminal penalties on motor vehicle manufacturers that mislead federal agencies about product defects. See, Transportation Recall Enhancement, Accountability and Documentation Act, H.R. 5164, 106th Cong. (2000) (enacted); Pub. L. No. 106-414 (signed by President Clinton on Nov. 1, 2000). The legislation amends the Federal Motor Vehicle Safety Act, 49 U.S.C.A. 30101 et seq. The New Jersey punitive damages statute, N.J.S.A. 2A:15-5.17, provides that “when punitive damages are awarded, the court shall refer the record to the county prosecutor and to the Attorney General for investigation as to whether a criminal act has been committed.” The statute clearly shows that the county prosecutor and attorney general are not obligated to prosecute a criminal action, only investigate one. One narrowly tailored federal law gives the Consumer Product Safety Commission the discretion to assess criminal penalties in connection with defective products. The Consumer Product Safety Act, 15 U.S.C.A. 2068-2070 (2000), provides for criminal penalties up to $50,000, or up to one year of imprisonment, for any person who manufactures for sale, offers for sale, distributes for commerce or imports into the United States a product not in conformity with applicable consumer product safety standards or who fails to furnish information, records or inspections under the statute. There is a significant difference between imposing criminal penalties on a manufacturer for intentionally concealing a product defect from a federal regulatory agency and assessing criminal sanctions against a manufacturer for the mere fact of the defect. Although Congress ultimately chose to toughen criminal penalties on the automotive industry for misleading the federal government, the recent debates on the TREAD bill make it patently clear that Congress, particularly the U. S. Senate, is ready, willing and able to punish manufacturers criminally if they manufacture or distribute defective products. See, 146 CONG. REC. S. 8635 (2000) (statement of Sen. McCain); 146 CONG. REC. S. 10273 (2000) (statement of Sen. McCain); 106 Markup S. 3059 (Sept. 20, 2000) (statement of Sen. Hollings), LEXIS 106 Markup S. 3059. Since the national elections held on Nov. 7, 2000, did not result in new congressional leadership, it is anticipated that when Congress reconvenes in January 2001, it will revisit the issue of criminal penalties for product defects, and not necessarily limit the reach of new legislation to the automotive industry. TREAD The TREAD legislation imposes the following reporting requirements on manufacturers: � Manufacturers must report any safety recalls or safety campaigns to the secretary of transportation that relate to motor vehicles or motor vehicle equipment sold in foreign countries, if a substantially similar product is sold in the United States. Pub. L. No. 106-414 � 3(a)(1). � Manufacturers must periodically report information to the secretary of transportation to aid in identifying defects related to motor vehicle safety. Such information includes data on claims submitted to the manufacturer for serious injury or death, consumer satisfaction campaigns and consumer advisories or recalls. Pub. L. No. 106-414 � 3(b). Information that must be reported includes any information that relates not only to an actual defect but to any possible defect. As to criminal penalties, the TREAD bill � Imposes criminal penalties on any officer or director of a corporation who makes a false or misleading statement concerning the safety of a product with the specific intent to mislead the secretary of transportation. Such a person will be subject to criminal fines, or imprisonment up to 15 years, or both. Pub. L. No. 106-414 � 5(b)(1)(a)(1). [TREAD's criminal penalties for false statements or misrepresentation are more onerous than the provisions of other parallel federal statutes. Generally, federal law provides that any person who knowingly or willfully falsifies, conceals or covers up a material fact, or makes a false statement or representation of material fact to the government, faces fines or imprisonment of up to 5 years, or both. 18 U.S.C.A. 1001 (2000).] � Provides for a “safe harbor” provision to exonerate a corporate officer if (1) at the time of the violation, such person does not know that the violation would result in an accident causing death or serious bodily injury; and (2) the person corrects any improper reports or failure to report within a reasonable time. Pub. L. No. 106-414 � 5(b)(1)(a)(2). [The secretary of transportation is required to promulgate regulations defining "a reasonable time" and the appropriate form of corrections within 90 days of the legislation's enactment, or by Jan. 31, 2001. Pub. L. No. 106-414 � 5(b)(1)(a)(2)(B).] � Requires a prosecutor to prove that a false statement was made and the accused made the statement (1) with the specific intent to mislead the secretary of transportation, and (2) regarding defects that could cause death or serious bodily harm. � Provides that the Justice Department may only prosecute a violation of TREAD at the request of the secretary of transportation. Pub. L. No. 106-414 � 5(b)(1)(b). SENATE PERSPECTIVE Although TREAD substantially increases criminal penalties for false reporting, it otherwise does not represent a novel approach to the manner of reporting or the scope of the reports themselves. So why should product manufacturers be concerned? The answer is simple: If Congress had more time to debate the issue before adjourning to allow members to campaign in advance of Election Day, it might have chosen to pass Senate legislation designed to impose criminal sanctions not for false reporting, but for the manufacture and distribution of defective products. Ultimately, however, to prevent a protracted debate, and in the interest of time, the Senate acceded to the more modest TREAD bill, which was originally introduced in the House. What would the Senate legislation have accomplished? For example, a bill introduced by Sen. Dianne Feinstein, D-Calif., would have made it a federal crime to manufacture and sell a product knowing that it was “dangerous to human life and limb beyond the reasonable and accepted risk associated with such or similar products lacking such a flaw.” Defective Product Penalty Act of 2000, S. 3070, 106th Cong. (2000) at �2. Sen. John McCain, R-Ariz., the chairman of the Senate Commerce Committee, substituted the Feinstein bill with a version, equally far-reaching, that would have established specific criminal penalties for manufacturers that knowingly introduce into interstate commerce any motor vehicle or motor vehicle equipment with a defect that causes death or serious injury. S. 3059 � 10(b)(1)(a)-(b). Under the McCain bill, if the sale were to result in serious bodily injury, the manufacturer would face a fine of up to $10,000, imprisonment up to 5 years or both. S. 3059 � 10(b)(1)(c). If the sale were to result in death, the manufacturer would be subject to a fine of up to $50,000, imprisonment for up to 15 years or both. The Feinstein or McCain legislation, if enacted, would move product liability law away from an historical risk-utility analysis and toward a system devoted to the unenviable task of determining the mens rea of a corporate officer who may, or may not, be acting on behalf of the corporation. For purposes of establishing criminal mens rea, “the brain of the corporation consists of those directors who supervise and manage the corporation.” W. LaFave & A. Scott, Handbook on Criminal Law, �3.10 (2ND edition, 1986). Under the Senate legislation, manufacturers would be subject to criminal liability, not just punitive damages, if they knowingly brought a defective product to market resulting in injury or death. Unfortunately, the Senate legislation provides no standards to determine how the “knowing” requirement could be met. Must the conduct be willful, or will recklessness or even a higher form of negligence suffice? No one knows how such a provision might eventually be interpreted. Clearly, there is a substantial risk that criminal sanctions might be used to punish manufacturers for conduct that the risk-utility analysis and the threat of punitive damages have adequately deterred. Indeed, product liability law has not traditionally concerned itself with criminal intent, but rather with whether the product’s design or lack of warning comports with the state of the art, industry standards and notions of reasonableness. Whereas the design of civil law is to compensate a plaintiff for harm caused by a defective product and to sanction outrageous conduct through punitive damages, criminal law is designed to punish those who have committed an offense against society and deter similar conduct in the future. Yet, in cases where there is not outright lying to the federal government, it can be said that punitive damages make it unnecessary to resort to criminal sanctions because the punitives effectively punish the manufacturers of defective products and advance the societal goal of product safety. Companies that have been hit with punitive damages will attest to their deterrent effect. See Fischer v. Johns-Mansville Corp., 193 N.J. Super 113 (App. Div. 1984), aff’d, 103 N.J. 643 (1986) (“punitive damages are allowable in exceptional and egregious instances for the purposes of punishing the tortfeasor and deterring both him and others from like conduct”). See also, Simpson v. Pittsburgh Corning Corp., 901 F.2d 277 (2nd Cir. 1990). Product manufacturers in all industries should be aware of TREAD — and the debate that preceded its enactment. Although TREAD applies only to motor vehicles and motor vehicle equipment, future congressional legislation may address other industries. When Congress reconvenes in January 2001, it may revisit the Senate legislation, whose debate was short-circuited by the immediate need to address the Firestone controversy before the approaching fall elections. Although the Senate Commerce Committee, which has jurisdiction over this legislation, has not officially set its agenda for the next session of Congress, its chairman, Sen. John McCain, has stated that he is committed to revisiting this issue after Congress reconvenes in January 2001. See146 Cong. Rec. S. 10273 (2000). The TREAD bill is a warning to all manufacturers to be alert to efforts to criminalize product liability law. If anything, the TREAD debate proves that Congress will not hesitate to wed criminal law with product liability law. Whereas the TREAD bill limits criminal sanctions to intentionally deceiving the federal government, Congress may go much further and subject manufacturers to criminal sanctions for introducing defective products into the stream of commerce. Christopher P. DePhillips is counsel at Porzio, Bromberg & Newman, in Morristown, NJ. He defends manufacturers in product liability and toxic tort litigation. Jennifer A. Schettino is an associate with the firm and also concentrates in product liability and toxic tort litigation.

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