Marketing Defects and Warranties

Kenneth Ross

Manufacturers of medical devices and providers of services concerning these devices can be held liable for injury, damage or economic loss suffered by a purchaser and a third party such as a patient or health care professional based on all aspects of its products and services. This includes the product or service itself, all written materials that accompany the product, and all oral and written statements made before and after sale. As a result, manufacturers and service providers must provide a reasonably safe product, competent services, and written and oral statements that do not diminish the quality or safety of the product or service, or confuse the customer into doing something that results in injury, damage, or loss.

There are many legal theories on which a purchaser or third party can sue a manufacturer or provider of services for damages caused by things they have said or not said. These include breach of warranty, breach of contract, fraud, fraudulent concealment, misrepresentation, negligence, and strict liability.

These types of lawsuits have become more common as products have become safer and fewer accidents occur, and plaintiffs’ lawyers have looked for other claims surrounding the sale of a product. These claims can even, in some cases, be brought by the entire class of people who purchased the product. The so-called “no-injury class action” is usually based on some representation by the manufacturer before sale, and the dashed expectations of customers as to things such as performance, safety, quality, or durability. Even without provable damage, settlements have exceeded hundreds of millions of dollars with at least one involving a design defect in computer chips in Toshiba laptops exceeding $2 billion.

Medical devices are subject to potential liability under the common law theories discussed below as well as the advertising and promotional regulatory requirements of the FDA.

Examples

Describing some examples of past litigation will be helpful in illustrating how expansive the theories can be and how easy it is, in some situations, to bring such a suit.

  • For many years, there has been litigation over the alleged deceptive marketing of “light cigarettes.” The theory is that the tobacco companies engaged in false advertising and other deceptive practices by misrepresenting light cigarettes as safer than regular cigarettes. The cases are being filed as class actions under state unfair business practice laws. Recently, a court, in multidistrict litigation, ruled that plaintiffs can go forward with their claims for unjust enrichment and other relief.

  • One of the original drug products liability cases (Toole v. Richardson-Merrell, 1967) resulted in liability because the drug was advertised as “virtually non-toxic,” “safe,” and free of “significant side effects.” In addition, the marketing of prescription drugs directly to consumers, which is a fairly recent phenomenon, has been the subject of a great deal of litigation. The typical allegation is the failure to adequately warn the user while the defense is the “learned intermediary doctrine,” which is under attack because of this direct marketing. The way in which the product is advertised and marketed and the disclaimers and safety precautions that are provided to consumers is the basis of these cases.

  • A case from 1990 involved Johnson & Johnson baby oil. The injury occurred when a baby swallowed the baby oil and it got into his lungs. The mother was not alarmed because she knew that baby oil was safe. Unfortunately, it was not safe in lungs and a severe injury resulted. The plaintiff’s human factors expert said that the product label, which used the term “pure and gentle,” perpetuated a belief that the product was very safe and benign in all foreseeable situations.

Allegations of marketing defects, while not usually the primary focus of most products liability cases, have been used by plaintiffs when necessary. Even if not specifically alleged, marketing statements have been an integral part of many claims, especially those involving failure to warn or instruct. And with the advent of the internet and extensive websites set up by manufacturers and product sellers, there are many more opportunities for a manufacturer to slip up and say or show something that may create a problem in the event of an incident.

Theories of Liability

Unlike a typical products liability case, there are many more marketing defect theories that can be alleged. I want to quickly describe the full range of possible theories.

Strict Liability and Negligence

Many of these marketing cases are brought primarily under the theories of strict liability or negligence. The allegations are that the product is defective in its design or warnings and instructions and, in addition, that the product did not meet the consumer’s expectations as to safety, quality, or durability. The marketing literature might be a piece of evidence that, for example, shows the product being used inconsistently with the way it is described in the instructions and the user relies on the picture and is injured. Or, there is nothing wrong with the marketing literature and there is just some inadequacy in the warnings or instructions, either in something they said or didn’t say. Or, the advertising refers to the product as “rugged” and “solid” and that forms a basis for expectations about how strong it is and what type of misuse it can withstand. In this situation, the marketing defect claims would be part of a typical defect claim and the plaintiff would rely on strict liability or negligence and not try to use breach of warranty, fraud or misrepresentation, all which can be harder theories to prove.

Manufacturers are required to provide adequate warnings and instructions to the purchaser to allow them to use the product safely and correctly. Injury, damage, or loss resulting from inadequate or incorrect information can be the basis for a products liability lawsuit against the manufacturer. Warnings and instructions usually accompany the product and possibly are included in some of the literature that the manufacturer uses to sell the product. Under these theories, any oral or written statements made by anyone in the supply chain can also be used to argue that the warnings and instructions were inadequate, confusing, or inconsistent, or that the marketing literature undermined the severity of the warnings provided with the product.

Breach of Contract

If there is privity of contract or the plaintiff is a third-party beneficiary of a contract, an injured party can sue for breach of contract and base the claim on oral or written statements made during the sales process or the warranties in the contractual documents. The damages could be based on injury or damage, but usually would include a claim of economic loss. The contractual terms and conditions should govern the potential liability and recoverable damages except for implied warranties that have not been disclaimed.

Express Warranty

In both contracts and marketing/sales, warranties can be created by operation of law under the Uniform Commercial Code (UCC). Express warranties are created by the following:

    • Any affirmation of fact or promise made by the seller to the buyer that relates to the goods and becomes part of the basis of the bargain.

    • Any description of the goods that is made part of the basis of the bargain.

    • Any sample or model that is made part of the basis of the bargain.

  • The above create an express warranty that the goods shall conform to the fact or promise, description or sample or model. It is not necessary that the seller use formal words such as “warrant” or “guarantee” or that he or she have a specific intention to make a warranty. However, it is necessary that these involve “the benefit of the bargain,” which means that they occur at the time of or before the purchase is consummated. In other words, the purchaser will say that they relied on these statements, sample or model to purchase the product and to use it.

An express warranty can be created by any written or oral statement or even by the appearance of the product. These statements are included in the sales and marketing literature, catalogs, website, and all statements by sales people.

While terms and conditions usually attempt to limit any express warranty to “defects in workmanship and material” or only warrant that the product “conforms to the specifications in the catalog,” the purchaser will seize on any inconsistent or expansive language to argue that additional express warranties were provided and that he or she relied on them to buy and use the product. If express warranties are deemed to have been created, this could be a problem as courts have said that a seller can’t generally disclaim them.

So sellers need to be aware of everything that is expressly said about the product: marketing and sales literature by the manufacturer and everyone else in the supply chain and every oral statement by anyone that ultimately gets to the purchaser either before sale or even after sale as long as they occurred before the accident or product problem.

Even advertising issued after an accident can adversely impact your defense. The problem arises if your defense is that the plaintiff was using the product unsafely. That is hard to argue if your advertising shows a user using the product in the same way.

Implied Warranty

The UCC also creates an implied warranty of merchantability and fitness for a particular purpose. These warranties are implied in every sale of a product that is subject to the UCC unless they have been disclaimed. Most terms and conditions disclaim these warranties, however, it is possible that the terms and conditions may not govern the sale and these warranties will not be disclaimed.

Since these are implied warranties, the scope of their applicability is governed by the UCC. The definition of “fitness for a particular purpose” has some relevance. This UCC section says:

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is …an implied warranty that the goods shall be fit for such purpose.

Many written statements assist the purchaser in determining the type of product to buy. Therefore, even if this implied warranty is disclaimed, it is possible that there will be an express warranty that the goods are fit for the purpose expressed in a company’s written material. And, in many situations, this implied warranty will not have been effectively disclaimed. In addition, if the purchaser expressly tells the sales personnel what the product will be used for and confirms with these personnel that the product to be purchased is the correct one to buy, a warranty could arise, be it express or implied.

Misrepresentation and Fraud (Common Law and Statutory)

Theories alleging liability for injury, damage, or loss caused by intentional or negligent misrepresentation have also been used. Intentional misrepresentation involves statements that are intended to induce action by another, such as to use a product in a certain way. These statements are alleged to create an unreasonable risk of injury in that they are false or the person making them does not have the knowledge he or she claims to have.

Negligent misrepresentation involves giving false information to another that causes injury or damage from actions taken by another person in reliance on that information. The negligence can occur by the person failing to exercise reasonable care in determining the accuracy of the information or by failing to exercise reasonable care in the way in which the information is communicated.

Misrepresentation and fraud cases carry a heavy burden of proof and that is probably why most plaintiffs, in a typical products liability injury case, most likely rely more on strict liability, negligence, and breach of warranty than on misrepresentation or fraud.

However, there is another avenue that has been utilized by plaintiffs for decades. Every state has some form of consumer fraud statute that can be separately used to allege fraud and deceptive trade practices. These laws are based on the Uniform Deceptive Trade Practices Act or Uniform Consumer Sales Practices Act. The elements necessary to prove are much less than common law fraud and a successful plaintiff is usually also entitled to treble damages and attorney’s fees. In general, the uniform law provides:

The act, use, or employment by any person of any deception, deceptive act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived, or damaged thereby, is declared to be an unlawful practice.

Many of the state statutes don’t require actual injury or damage in order to recover. And some courts have allowed a nationwide class action to proceed based on an alleged violation of these state statutes.

Medical Device Advertising and Promotion

The FDA regulates all labeling for all medical devices and advertising for all “restricted” medical devices.

FDA issued a draft guidance in May 2009 which describes in detail the regulatory scheme and guidelines on what FDA staff look for in their review of advertising and promotion and what factors manufacturers should consider when drafting this material. It is called “Guidance for Industry: Presenting Risk Information in Prescription Drug and Medical Device Promotion” and it can be accessed here

Some of the considerations in this guidance deal with consistent use of language appropriate for the target audience, use of signals, framing risk information, hierarchy of risk information, and considerations of quantity and format.

The FDA Device Center (CDRH) has recently increased the number of personnel in its advertising/promotion enforcement office. The head of that office said in 2010 that she would like to develop guidance specific to device advertising and promotion. She also said that the agency has growing concerns about medical practitioners promoting the off-label use of devices and is interested in learning if manufacturers are encouraging such promotion. Of course, a lot of the activity of this office has been and will be concerned with direct-to-consumer (DTC) advertising of medical devices which the FDA believes is growing.

Preventive Techniques

Advertising and promotional literature and videos serve as the most significant conduit of product representations. However, with medical devices, representations by sales personnel during sales calls and during in-service training presentations will also result in many potentially vulnerable statements.

Given the wide range of medical devices that companies manufacture and services they provide, it is difficult to articulate clear guidelines on what to say and not to say when advertising and selling products. However, let me try to provide some of my thoughts based on over 30 years of experience.

Of course, you should first abide by any FDA requirements or guidances. These are not fully comprehensive nor do they usually preempt potential liability, therefore, you should try to employ some of the preventive techniques I discuss below.

The first rule is the old saw, “say what you mean” and “mean what you say.” Many problems in this area are caused by unclear, unsupported and incorrect statements caused by unclear or incorrect thinking. If you want to promise that the product will perform in a certain way, then be sure it can do it. There really is no defense if a product is used as you advertised and it doesn’t work the way it should work. This may result in a disgruntled purchaser and no claim. But it could just as easily result in a warranty claim, a personal injury case, or a class action based on some misrepresentation.

Therefore, the first rule is that if you clearly say or promise something that is material to either the purchaser’s decision to buy the product or helps with the safe use of the product, it better be clear and correct. Lawyers who review these representations might have a difficult time commenting on these factual assertions in your advertising and marketing unless they are very knowledgeable about the product and your company. Despite that, while lawyers should not make you justify each and every fact, they can point out statements that seem too good to be true or suggest where you should have documented substantiation for the claim.

Puffing is different and is legally acceptable. Puffing is not viewed as an expression of a fact but instead as an opinion about a product’s performance or attributes. As a result, “puffery” does not constitute an express warranty. So phrases like “never lets you down” or “strong” or “finest product of its kind available today” or “premium quality” have all been deemed acceptable puffing or opinion and not a factual assertion that can be the subject of a lawsuit. This, of course, does not mean that a customer may not be able to sue over some puffing that resulted in injury or damage.

Of course, it is up to the judge or jury as to whether they believe it is fact or opinion. And a purchaser who believes the puffery and suffers a problem might sue you. So, you should try to anticipate how customers will react to everything you say, be it fact or opinion, and determine if they will use the product in an unsafe or incorrect way or think it is stronger or lasts longer than it does or buy it for an inappropriate use. If they will rely on puffing or facts and it could result in injury, damage, or loss, think how you will defend the statement and if in doubt, soften or limit the language.

In your literature and advertising, statements that should always raise a question are absolutes or clear statistical statements that can be challenged even if they are not facts. Puffery may allow you to claim that your product has the best quality, but saying it is the “strongest” or “safest” on the market can be objectively tested and challenged by a customer or a competitor. Or a user could think the product can be subjected to forces that ultimately result in product failure and injury. In addition, while using terms like “virtually” and “almost” are very good at indicating that the product is something other than the absolute best of whatever you are selling, use them sparingly as they can unnecessarily detract from the message and make it unclear.

For example, if you say your product will last for 10 years under normal use, this may constitute an express warranty no matter what your contract says. And, if it fails before 10 years, you can defend by arguing that it did not experience “normal use.” But, unless you defined abnormal use, it may be difficult to defend.

In addition, you want to be sure that safety and proper operating procedures are dealt with consistently between the instructions and any advertising or promotional literature showing the device in use and representations made by sales and service personnel. It would not be unusual for a health care professional or a patient to use a device as it is depicted in promotional literature as opposed to the instruction manual. In fact, I once had a client where a nursing text showed my client’s medical device being used unsafely. We had to request that the publisher fix it for the next edition of the text.

Conclusion

The marketing and advertising personnel need to talk to the sales force and to the engineers so that the story, as told by all of them, is accurate and appropriate. Lawyers should educate their clients about how to decide what to write and how to write and what and when to send to the lawyers for their review. As has been my experience, lawyers are many times contacted just before some deadline and given a very short time to review advertising literature. This is very difficult and forces the lawyer to approve almost anything despite their misgivings.

Analyzing a company’s potential risk in this area is useful in establishing appropriate procedures for creating and reviewing written literature and for creating guidelines on how a product is to be sold. Doing this will help satisfy customers whose products work as promised and help health care professionals and patients use the product safety and correctly. This will all result in lower risk to the manufacturer and product seller.‚Äč

Kenneth Ross

Kenneth Ross is Of Counsel to the Minneapolis office of Bowman and Brooke LLP where he practices in the areas of product safety and liability prevention and advises manufacturers, product sellers and insurers on ways to identify, evaluate and minimize the risk of products liability and contractual liability. These guides do not constitute legal advice and are very general. You should consult competent legal counsel or Medmarc Loss Control before acting on any of the information in these guides.

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