Accounting for Risk Disparity: An Alternative to Market Share Liability

Abstract

Market share liability emerged as a response to the problematic diethylstilbesterol (DES) litigation of the 1980s, during which plaintiff daughters were unable to identify the specific defendants responsible for their injuries. California was the first state to devise a market share liability system for apportioning damages among DES producers. Adopting a variation of the underlying policy of Summers v. Tice, the Supreme Court of California in Sindell v. Abbott Laboratories held that, as between a negligent defendant and an innocent plaintiff, the former should bear the costs of injury notwithstanding lingering tortfeasor identification issues. Several state courts have adopted components of the Sindell framework. Plaintiffs advancing market share liability theories beyond the DES context have largely failed. Market share liability has been rejected in litigation involving asbestos, cigarettes, breast implants, benzene, and toxic chemicals. Courts have typically held that substances of diverse variety, such as asbestos, fail the Sindell fungibility requirement, while finished products like cigarettes are easily identified by brand and do not create the tortfeasor identification problem posed by the DES market. A significant exception to this trend is the limited application of market share liability to Factor VIII blood products. Factor VIII is a protein that occurs naturally in human blood and regulates clotting and coagulation. Commercial Factor VIII was formerly acquired from private blood donors and then fractionalized to remove plasma. It was then processed and supplied to hemophiliacs to prevent uncontrollable bleeding. During the 1980s, numerous Factor VIII products became contaminated by the human immunodeficiency virus (HIV). Similar to the DES cases, plaintiffs suffering injury through contaminated Factor VIII are often unable to identify the specific manufacturer(s) responsible for their harm. Extended latency periods between exposure and knowledge of injury are also common. Additionally, like DES, HIV contamination is often detected long after a Factor VIII user has contracted the virus. This Note advocates an alternative to market share liability for fungible products that produce disparate consumer risks by using the Factor VIII litigation as a starting point. Part II highlights the distinctions between DES as a uniformly toxic substance producing a net reduction in social utility and products such as Factor VIII, which create positive or negative utility based on the care exercised by particular defendants during the production process. Part III examines the market-based inefficiencies that are likely to result from applying market share liability to products like Factor VIII. Part IV proposes an alternative model for apportioning liability among a class of defendants responsible for producing functionally interchangeable goods that generate dissimilar levels of consumer risk. The model advanced herein seeks to ensure full victim compensation while creating incentives for firms to reduce product risks. This will be achieved by a three-phase system for assigning damages. Phase 1 will permit defendants to exculpate themselves from the lawsuit by disproving causation. Phase 2 will replace the national market used by market share liability regimes with a sub-market representing the relative culpability of the non-exculpated defendants. Phase 3 will modify the sub-market liability apportionment by awarding damage discounts to those defendants that have effectively reduced product risks without qualifying for full exculpation.