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Waters are Rising: What are the Boundaries of the Stream of Commerce?
When a defective product causes harm to a consumer, it is not just the manufacturer of the product who may be held accountable. California law has long established anyone involved in the “stream of commerce” is liable for product defects.
Members in the stream of commerce include: manufacturers, distributors, suppliers, and sellers of goods. (See CACI 1200; CACI 1201; Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 560; and Garcia v. Joseph Vince Co. (1978) 84 Cal.App.3d 868, 874; Anderson v. Owens-Corning Fiberglas Corp. (1991) 53 Cal.3d 987, 100).
In Price v. Shell Oil Co., the court expanded the doctrine of strict products liability to include “lessors” and “bailors” in addition to manufacturers, distributors, suppliers, and sellers. The court’s rationale was, “Lessors of personal property, like the manufacturers or retailers thereof, are engaged in the business of distributing goods to the public.” (Price v. Shell Oil Co. (1970) 2 Cal.3d 245, 251-252).
Who may be considered a “supplier” of a product anywhere along the stream of commerce is not as clearly defined as the other categories. “Suppliers” are mid-stream parties who allow a manufacturer’s product to enter the marketplace. (Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 62).
Recently we have seen claims an inspection/certifying body is strictly liable for product defects when their endorsement is required before the product can enter the market. The argument is the certifying body makes a quality assurance representation by endorsing the product and, therefore, allowing it to enter the market.
However, the certifying body inspects only a limited sample of product. While their endorsement (often in the form of a stamp or seal) remains on every product, they do not have the opportunity to inspect and ensure the quality of each product that leaves the manufacturing plant.
California courts have previously held this may be grounds for a negligence cause of action, but strict products liability requires “direct involvement in supplying the product to the consuming public. (Hanberry v. Hearst Corporation, (1969) 276 Cal. App. 2d 680, at 687).
Courts recognized the most that can be implied from a claim a certifying body has only examined or tested samples of the product is that the general design and materials used were satisfactory. Application of the strict liability doctrine in such a case would subject the certifying body to liability even if the general design and material used in the product was good, but a particular item became defective through some other mishap in the manufacturing process. (Id. at 687).
In sum, the burden is on the plaintiff to show a strict liability defendant is directly involved in the stream of commerce. The question that remains to be seen through practice is whether courts will be willing to dispose of such claims at the onset of suit, or certifying bodies will be forced to defend these claims through the discovery process.
Jonathan R. Ehtessabian is an associate at Neil Dymott and concentrates his practice on professional liability and general civil litigation. Mr. Ehtessabian may be reached at (619) 238-1712 or jehtessabian@neildymott.com