Class actions alleging economic loss on the rise, professor says

By Annie Hunt | Feb 5, 2016

LOS ANGELES (Legal Newsline) — Though products liability cases alleging personal injury may be on the decline, the amount of products-related class action lawsuits filed by consumers claiming economic loss has increased, a Michigan State University law professor says.

For example, a California woman recently filed a class action lawsuit against Daikin Industries for an allegedly faulty heating, ventilation and air conditioning (HVAC) unit. She hopes to represent a class consisting of every Californian who has Daikin coils in his or her HVAC unit, claiming the coils have a tendency to corrode quicker than the company claims.

The complaint says the presence of the coils has diminished the value of the homes owned by members of the class. Class action lawsuits filed by consumers alleging economic loss are becoming more prevalent, says Nicholas Wittner, a law professor at MSU.

“The number of products liability may have declined, but the cases involve higher damages. Class actions for economic loss, following recent highly publicized incidents like the GM ignition switch recall, have mushroomed, dramatically so,” Wittner said.

Under California products liability law, the state Supreme Court has set out requirements for establishing a defect in a product according to consumer expectation tests, risk/benefit tests, etc., but there is no federal products liability law, Wittner said.

The Federal Trade Commission takes the reins at a federal level with what it calls “industry guides” along with federal consumer protection laws.

The evaporation coils function to absorb heat from the surrounding air in the HVAC units. Park-Kim argues that Daikin used copper tubing for the coils that is susceptible to formicary corrosion, causing microscopic holes in the tubing and subsequent refrigerant leaking.

Attorneys representing Joanna Park-Kim filed the suit on Nov. 6 in a Los Angeles Superior Court, but on Dec. 9, the defendant filed to have it removed to a federal court due to the size of the class and damages sought.

In addition to the GM ignition switch case, the Volkswagen emission scandal and Takata airbag recall have drawn attention to class action suits involving products liability.

In December, a judge rejected Takata’s bid to remove a class action lawsuit that would impact millions of car owners with faulty airbags. The company has agreed to undisclosed settlements for six of the eight deaths that were allegedly caused by the airbag malfunction.

As for Volkswagen, the German carmaker is facing more than 500 lawsuits from consumers, including several class action proposals involving economic loss tied to the scandal.

Whether the class action has member commonality or if it is an issue of product depreciation, litigation becomes complicated and costly with large classes and a high volume of lawsuits, Wittner said. Corporate legal compliance programs work to make the laws better for consumers and easier for manufacturers to comply.

“They are essential to promote safety and help avoid civil and criminal penalties, as well as reduce the potential for product liability risk. That importance is underscored by the new project by the American Law Institute to prepare 'Pinciples of the Law: Corporate Compliance and Enforcement,'" Wittner said.

"That project will provide assistance to corporations and other entities who are either establishing or evaluating the adequacy of existing compliance programs."

The federal government also offers assistance in products liability cases.

“The Department of Justice last November, in remarks by Leslie Caldwell, also are instructive in understanding what the government views as robust programs when it comes to deciding whether to prosecute or settle criminal proceedings,” Wittner said.

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