Product Liability - USA

A claim of 'unjust enrichment' is sometimes included among the theories of recovery pleaded in a product liability action.(1) Pursuant to that theory, a product user seeks recovery from the defendant product manufacturer of all proceeds from the sale of the allegedly defective product, claiming the money made from selling the product unjustly enriched the defendant.(2) Another sort of unjust enrichment claim has been asserted by insurers, governmental bodies, union funds and healthcare payers, in actions by those entities to recover expenses (eg, Medicare costs, asbestos or lead-abatement costs or healthcare premiums) that they paid on behalf of their members, allegedly resulting from injury to those members from the use of the manufacturer's product.(3)

Definition(4)

Broadly defined, 'unjust enrichment' is "the retention of a benefit conferred by another, without offering compensation, in circumstances where compensation is reasonably expected".(5) A claim for unjust enrichment ordinarily comprises three elements:

• a benefit conferred on the defendant by the plaintiff;
  
  
• knowledge by the defendant of the benefit; and
  
  
• retention of the benefit under circumstances where it would be unjust to do so without payment.(6)

There is no requirement of privity between the plaintiff and defendant in order to pursue a claim for unjust enrichment.(7)

Element 1: Benefit to Defendant

The question of whether the plaintiff conferred a benefit on the defendant is often decided by determining whether the defendant had a duty to provide that which the plaintiff ended up providing.(8) The question generally arises in cases in which an insurer asserts that a product manufacturer or seller was unjustly enriched because the insurer paid for expenses, allegedly caused by the product, which the manufacturer or seller should have paid.(9)

Tobacco litigation
For example, after union welfare funds had paid out alleged smoking-related healthcare costs to their members, several such funds brought suits seeking reimbursement of those costs from tobacco manufacturers under, among others, an unjust enrichment theory.(10) The union funds argued that paying costs allegedly arising from the manufacturers' allegedly fraudulent marketing and manufacturing had unjustly enriched the manufacturers.(11) In three such lawsuits the federal District Court for the District of Columbia dismissed the unjust enrichment claims as a matter of law because the union fund plaintiffs "fail[ed] to explain where the tobacco manufacturers' duty to pay these medical costs arose, and fail[ed] to show that this 'duty' is legally cognizable". Therefore, the court found, the funds could not have "conferred a legally cognizable benefit upon" the manufacturers.(12) In the absence of an underlying duty to pay for the costs, the manufacturers received no benefit from the union funds' payment of those costs.(13)

A similar result befell unjust enrichment claims in an action by individual citizens who claimed that their higher medical-insurance premiums unjustly enriched tobacco manufacturers because those increased premiums represented a cost the manufacturers, not the individuals, should have been forced to bear.(14) The Sixth Circuit affirmed the dismissal of the claims in that action, holding: "Plaintiffs have not 'enriched' defendants because defendants have no legal duty to smokers to pay their medical costs."(15)

An unjust enrichment claim brought by the state of Texas, seeking recovery of costs of medical care and other benefits paid to citizen smokers, also failed where the court found the state conferred no benefit on the tobacco companies.(16) The court ruled that Texas's expenditures could not be said to have unjustly enriched the tobacco companies because "the alleged benefit enjoyed by defendants is too attenuated and indirect to find support under the theory of unjust enrichment as enunciated in Texas".(17)

Firearms litigation
Suits against firearms manufacturers have included unjust enrichment arguments alleging that the costs of law enforcement paid by city governments amount to a benefit conferred on the gun maker.(18) Some of these allegations have survived motions to dismiss.(19) The rationale for these decisions, although not sharply articulated, appears to be that governmental expenses related to the societal consequences of illegal gun use could be considered a 'benefit' to gun manufacturers should the facts show the gun marketing and sales methods employed amounted to wrongdoing.(20) If so, the expenses should have been borne by the manufacturers, and the fact that they were not establishes that those manufacturers received an unjust benefit.(21) However, similar allegations brought by cities in other jurisdictions have been dismissed.(22) In those decisions the municipal expenditures were found not to be a benefit to the defendant firearms manufacturers, because the defendants' actions were found to be too remote from the alleged injuries.(23)

Lead paint and asbestos litigation
In at least two actions plaintiffs seeking to recover from lead paint manufacturers the money spent on medical monitoring for lead poisoning were not permitted to pursue their unjust enrichment claims because the court found no underlying duty to pay for such expenses.(24) The same was found true in an action alleging that a supplier of asbestos products had a duty to pay for asbestos abatement.(25) The rationale in both such cases was that where an underlying duty does not exist, there is no unjust enrichment to remedy. However, a different result occurred in actions by the city of New York demanding indemnification and restitution from manufacturers allegedly unjustly enriched by asbestos and lead paint abatement expenses the city had paid.(26) In those actions the defendants' motions to dismiss the actions were denied.(27) While the decision allowing the claims based on unjust enrichment to proceed has been criticized as being "hard to explain" because the court seems to have suggested the existence of a duty on the part of the defendant manufacturers that did not previously exist,(28) it appears to hold that the city, in removing lead and asbestos from its buildings, performed a duty the manufacturers of those products should have fulfilled, thus conveying a benefit on those manufacturers.(29)

Similarly, the Eastern District of Pennsylvania, noting that "duty is a flexible concept" and employing what it called a "less restrictive interpretation of 'duty'", refused to dismiss a restitution claim by the city of Philadelphia seeking lead abatement expenses, finding that, even though there was no statutory duty imposed upon the lead paint manufacturer, the manufacturer did have a general duty to avoid gross negligence.(30) The city properly stated a claim when it alleged that its clean-up effort satisfied the manufacturer's duty, thereby unjustly enriching the manufacturer.(31)

Element 3: Not Unjust Enrichment to Retain Benefit

Many unjust enrichment claims in product liability cases have failed because, in the absence of an underlying wrong, courts have found nothing unjust about the defendant's retention of whatever benefit it received.(32) For instance, where a plaintiff allegedly conferred a benefit on a pharmaceutical manufacturer in the form of paying an unnecessarily high price for medicine, caused by the manufacturer's failure to inform the plaintiff about an existing, cheaper, alternative dosage, there was nothing unjust about the manufacturer receiving the higher price, because the court found that the manufacturer was prohibited, pursuant to federal regulations, from providing alternatives (including the alternative dosage) to a doctor's prescription.(33) In yet another suit, an action in California alleging injury from cigarettes, there was nothing unjust about the manufacturer receiving cigarette revenues, in light of a state statutory immunity from product liability suits.(34)

Some courts have found that it is not unjust for a manufacturer to retain a benefit when certain equitable defences are present. Various courts view unjust enrichment claims as being claims in equity, dismissing them based on the doctrine of unclean hands(35) or on the rule that a claim in equity will not lie where a remedy at law is available.(36) Yet other courts have specifically rejected the notion that an unjust enrichment claim sounds only in equity.(37) However, even in those jurisdictions in which an unjust enrichment claim is characterized as an equitable one, adequate remedies at law provided by both product liability statutes and deceptive consumer sales statutes may render the claim duplicative and therefore untenable.(38)

Comment

Claims of unjust enrichment have been employed by plaintiffs in various product liability actions. For the most part, however, such claims do not survive, with plaintiffs instead being limited to pursuing statutory or other more conventional product liability remedies.

For further information on this topic please contact Mary T Yelenick or Christian A Fletcher at Chadbourne & Parke LLP by telephone (+1 212 408 5100) or by fax (+1 212 541 5369) or by email (myelenick@chadbourne.com or cfletcher@chadbourne.com).

Endnotes

(1) See, for example, Liggett Group Inc v Affiliated FM Ins Co, No 00C-01-207, 2001 Del Super LEXIS 350, *35 (Del Super Ct September 12 2001) (listing cases and claims); see also, for example, McCauley v Purdue Pharma LP, 331 F Supp 2d 449, 452 n 6 (WD Va 2004); Lewis v Lead Indus Assoc, 793 NE 2d 869, 876-77 (Ill App Ct 2003).

(2) See, for example, Ziegler v Sony Corp, 849 A 2d 19, 23 (Conn Super Ct 2004) (unjust enrichment claim seeking allegedly unjust profits from sale of defective DVD players); In re Bridgestone/Firestone Inc ATX ATX II & Wilderness Tires Prod Liab Litig, 205 F RD 503, 519 (SD Ind 2001) (unjust enrichment claim seeking excess revenues from car and tyre manufacturers due to sale of defective tyres) rev'd 288 F 3d 1012 (7th Cir 2002); Bober v Glaxo Wellcome PLC, 246 F 3d 934, 936 (7th Cir 2001) (unjust enrichment claim seeking allegedly unfair profits made by pharmaceutical manufacturer by charging more than double for double dosage of medication); Coghlan v Wellcraft Marine Corp, 240 F 3d 449, 454 (5th Cir 2001) (unjust enrichment claim in no-injury product liability suit seeking, from boat seller, amount paid for boat that was allegedly greater than true value of boat).

(3) See, for example, Steamfitters Local Union No 420 Welfare Fund v Philip Morris, Inc, 171 F 3d 912, 937 (3d Cir 1999) (listing cases and claims).

(4) "Unjust enrichment cannot be precisely defined" - 1 Dan B Dobbs, Law of Remedies, Section 4.1(2) (2d ed 1992).

(5) See Black's Law Dictionary 1573 (8th ed 2004).

(6) See White v Smith & Wesson, 97 F Supp 2d 816, 829 (ND Ohio 2000); see also Nova Info Sys v Greenwich Ins Co, 365 F 3d 996, 1006-07 (11th Cir 2004) (applying Florida law); Berry & Gould, PA v Berry, 757 A 2d 108, 113 (Md 2000); Desert Miriah, Inc v B & L Auto, Inc, 12 P 3d 580, 584 (Utah 2000); Serv Employees Int'l Union Health & Welfare Fund v Philip Morris Inc, 83 F Supp 2d 70, 72 (DDC 1999), rev'd on other grounds, 249 F 3d 1068 (DC Cir 2001). Some states do not include knowledge by the defendant of the benefit as an element of the claim. See Oregon Laborers-Employers Health & Welfare Trust Fund v Philip Morris Inc, 185 F 3d 957, 968 (9th Cir 1999) ("Under Oregon law, to state a cause of action for unjust enrichment, plaintiffs must show that they conferred a 'benefit' on defendants and that it would be unjust for defendants to retain that benefit"); In re Bridgestone/Firestone, 205 F RD at 530 ("In order to prevail on their unjust enrichment claim, under either Tennessee or Michigan law, plaintiffs will have to demonstrate that (1) [defendants] received a benefit at the expense of the plaintiffs and (2) it would be inequitable or unjust for [defendants] to retain that benefit") rev'd on other grounds, 288 F 3d 1012; New Jersey Carpenter's Health Fund v Philip Morris, Inc, 17 F Supp 2d 324, 344 (D NJ 1998) ("To establish unjust enrichment, a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust"); HPI Health Care Svcs, Inc v Mt Vernon Hosp, Inc, 545 NE 2d 672, 679 (Ill 1989) ("To state a cause of action based on a theory of unjust enrichment, a plaintiff must allege that the defendant has unjustly retained a benefit to the plaintiff's detriment, and that defendant's retention of the benefit violates the fundamental principles of justice, equity and good conscience"). Other jurisdictions, incorporating the equitable defence that a remedy in equity will not lie where an adequate remedy at law exists, use five elements: (i) an enrichment; (ii) an impoverishment; (iii) a relation between the two; (iv) an absence of justification for them; (v) an absence of a remedy at law. See TL James & Co v Traylor Bros, 294 F 3d 743 (5th Cir 2002) (applying Louisiana law); Schroeder v Buchholz, 622 NW 2d 202 (ND 2001); LaSalle Nat'l Bank v Perelman, 82 F Supp 2d 279, 294-95 (D Del 2000). Note also that unjust enrichment is not a standalone claim at all in some jurisdictions. See Coleman v Conseco, Inc, 238 F Supp 2d 804, 813 (SD Miss 2002) (finding that under Mississippi law, unjust enrichment is not an independent, compensable tort).

(7) See Zeigler, 849 A 2d at 21 (rejecting the holdings of Parker v Colgate-Palmolive Co, No X08-CV-030193798 (Conn Super Ct August 8 2003) and Granito v IBM, No X07-CV-020080440 (Conn Super Ct April 16 2003), which found direct payment by consumer to manufacturer required for unjust enrichment claim); Larkin Enters v Manafort Bros, 2002 Me Super LEXIS 137, *4-6 (Me Super Ct September 12 2002) ("After years of confusion by the bar...recent case law has carefully identified the elements of an unjust enrichment claim" and, despite argument to the contrary, "lack of privity of contract...do[es] not bar an action for unjust enrichment") (denying defendants' motion to dismiss).

(8) See, for example, Lewis, 793 NE 2d at 874 ("In order for a cause of action for unjust enrichment to exist, there must be some independent basis which establishes a duty on the part of the defendant to act and the defendant must have failed to abide by that duty"); Perry v Am Tobacco Co, 324 F 3d 845 (6th Cir 2003); Rivera, 283 F 3d at 315; Ganim v Smith & Wesson Corp, 780 A 2d 98 (Conn 2001); Serv Employees, 249 F 3d at 106; Oregon Laborers, 185 F 3d at 957 ("Without a legal obligation on the part of the defendants to pay, the payment by plaintiffs [for medical expenses of smokers] did not 'benefit' defendants"); Steamfitters, 171 F 3d at 937; Colfield v Am Tobacco Co, No Civ-S-98-1695, 1999 US Dist LEXIS 18315, *6 (ED Cal May 6 1999) ("an unjust enrichment claim depends on a finding that the defendant is somehow at fault"); Laborers Local 17 Health & Benefit Fund v Philip Morris Inc, 7 F Supp 2d 277 (SD NY 1998), modified 191 F 3d 229 (2d Cir 1999); State of Texas, 14 F Supp 2d at 971-72; cf McDermott v City of New York, 406 NE 2d 460, 462 (NY 1980) (when manufacturer did breach a duty by providing a defective garbage truck, city's claim against it for indemnify could survive because settlement the city paid to injured sanitation worker could have unjustly enriched the manufacturer).

(9) Such claims have been asserted in cases related to pharmaceuticals (eg, see Rivera v Wyeth-Ayerst Labs, 121 F Supp 2d 614 (SD Tex 2000) (health plan seeking members' drug expenses from pharmaceutical manufacturer) rev'd 283 F 3d 315 (5th Cir 2002)), firearms (eg, see Ganim, 780 A 2d 98 (Conn 2001) (city seeking costs of law enforcement from gun manufacturers); City of Cincinnati v Beretta USA Corp, CCH Prod Liab Rep P15,880 (Ohio Ct App 2000) (same) rev'd 768 NE 2d 1136 (Ohio 2002); City of Boston v Smith & Wesson Corp, 12 Mass L Rep 225 (Mass Super Ct. 2000) (same)), tobacco (eg, see Perry, 324 F 3d at 845 (health insurance subscribers seeking price of increased insurance premiums from tobacco companies); State of Texas v Am Tobacco, 14 F Supp 2d 956, 971-72 (ED Tex 1997) (state seeking costs of medical care and other benefits to citizen smokers from tobacco companies); Serv Employees, 83 F Supp 2d at 72 (union welfare funds sought recovery of participants' smoking-related healthcare costs from cigarette manufacturers), modified, 249 F 3d 1068; Oregon Laborers, 185 F 3d at 957 (same); Steamfitters, 171 F 3d at 937 (same); Laborers Local 17, 7 F Supp 2d at 277 (same)), and lead-based paint (eg, see City of New York v Keene Corp, 505 NY S 2d 782, 784 (Sup Ct 1986) (city seeking to recover from lead paint manufacturers costs of lead paint abatement in city buildings), aff'd 129 NY S 2d 1019 (App Div 1987)).

(10) Serv Employees, 83 F Supp 2d at 72, modified, 249 F 3d 1068; Oregon Laborers, 185 F 3d at 957; Steamfitters, 171 F 3d at 937; Laborers Local 17, 7 F Supp 2d at 277.

(11) See, for example, Serv Employees, 83 F Supp 2d at 72.

(12) Id.

(13) Id; see also Oregon Laborers, 185 F 3d at 957 ("Without a legal obligation on the part of the defendants to pay, the payment by plaintiffs [for medical expenses of smokers] did not 'benefit' defendants"); Steamfitters, 171 F 3d at 937; Laborers Local 17, 7 F Supp 2d at 294.

(14) Perry, 324 F 3d at 846.

(15) Id.

(16) Texas v Am Tobacco Co, 14 F Supp 2d 956, 971-72 (ED Tex 1997).

(17) Id.

(18) Ganim, 780 A 2d at 98; White v Smith & Wesson Corp, 97 F Supp 2d 816, 829 (ND Ohio 2000) (City of Cleveland); City of Cincinnati, CCH Prod Liab Rep P15,880; City of Boston, 12 Mass L Rep at 225.

(19) City of Cincinnati v Beretta USA Corp, 768 NE 2d 1136 (Ohio 2002); White, 97 F Supp 2d at 829; City of Boston, 12 Mass L Rep at 225.

(20) See City of Cincinnati, 768 NE 2d at 1149 ("Although a municipality cannot reasonably expect to recover the costs of city services whenever a tortfeasor causes harm to the public...the misconduct alleged in this cases is ongoing and persistent [and] may justify the recoupment of such governmental costs").

(21) Id.

(22) See James v Arms Technology, Inc, 820 A 2d 27, 34 (NJ Super Ct App Div 2003); Ganim, 780 A 2d at 98.

(23) See Ganim, 780 A 2d at 98, 129-30.

(24) Lewis, 793 NE 2d at 870; In re Lead Paint Litig, No A-1946-02T3, 2005 WL 1994172 (NJ Super Ct App Div August 17 2005) ("Plaintiffs do not, and could not, claim that defendants had the independent duty to pay the costs assumed by plaintiffs").

(25) Bd of Ed v A, C & S, Inc, 546 NE 2d 580 (Ill 1989).

(26) City of New York v Keene, 505 NY S 2d at 784 (finding city and its board of education adequately pleaded claims seeking asbestos abatement costs from asbestos manufacturers and installers); City of New York v Lead Indus Ass'n, Inc, 644 NY S 2d 919, 926 (NY App Div 1996) (finding city adequately pleaded claims seeking lead paint abatement costs from manufacturers and their trade association).

(27) Id. The city continues to pursue the action involving lead paint, successfully striking the manufacturers' defences based on the city's duty to warn of the dangers of lead paint, see City of New York v Lead Indus Ass'n, 660 NY S 2d 422, 423-24 (NY App Div 1997), but in 1999 it dropped all the claims except those relating to two housing projects and the case has remained dormant since 2002. See "Understanding Lead Pigment Litigation: State by State Breakdown", www.leadlawsuits.com/index.php?s=press_kit (follow "New York" hyperlink). A similar action by the state of Rhode Island is currently in trial, see id (follow "Rhode Island" hyperlink), the court having denied the defendants' motion to dismiss the state's claim for, among other things, unjust enrichment. See Rhode Island v Lead Indus Ass'n, No 99-5226, 2001 RI Super LEXIS 37 at *50-51 (April 2 2001). Notably, however, the court views the case not as a product liability case, but rather as a nuisance action. See Rhode Island v Lead Indus Ass'n, No 99-5226, 2001 RI Super LEXIS 95 at *3-4 (RI Super Ct June 3 2005) ("First, and of some significance the present case is not a product liability case... No amount of argument by defendants will result in a reclassification of the nature of this case").

(28) See Andrew Kull, "The Source of Liability in Indemnity and Contribution", 36 Loy LAL Rev 927, 939-40 (2003) (hypothesizing that the basis for such decisions was a court's notion of "simple fairness") ("[S]ome American courts have been willing to enforce a legal obligation that will not be found in any law book. They have held that one person may be under a legal obligation to pay money to another because simple fairness (and nothing else) requires him to do so").

(29) See City of New York v Keene, 505 NY S 2d at 784, aff'd 129 NY S 2d 1019; City of New York v Lead Indus, 644 NY S 2d at 926; see also Indep Sch Dist No 197 v WR Grace & Co, 752 F Supp 286, 304 (D Minn 1990) ("Grace has been unjustly enriched to the extent the plaintiff is required to abate a hazard created by defendant").

(30) City of Philadelphia v Lead Indus Ass'n, 1992 US Dist LEXIS 5849 (ED Pa April 23 1992).

(31) Id.

(32) See Bober, 246 F 3d at 934 (where court found no underlying deception or improper labelling by defendant manufacturer, defendant was not unjustly enriched by money received for its product).

(33) Id.

(34) Colfield, 1999 US Dist LEXIS 18315 at *6.

(35) Goodwin v Anheuser-Busch Cos, No BC310105, 2005 WL 280330 (Cal Super Ct 2005) (finding illegal use of alcohol by plaintiff prevents any unjust enrichment claim in product liability action against alcoholic beverage producer); see also Clay v Am Tobacco Co, 188 F RD 483 (SD Ill 1999) (in refusing to certify nationwide class of smokers, noting differences in applicability of unclean hands doctrine in different jurisdictions).

(36) Coghlan, 240 F 3d at 449 (existence of express contract precludes unjust enrichment claim against manufacturer of boat); Sec Homestead Ass'n v WR Grace & Co, 743 F Supp 456, 462 (ED La 1990) (restitution claim for costs of asbestos abatement fail because numerous other remedies available); see also Delahunt v Cytodyne Techs, 241 F Supp 2d 827, 841-42 (SD Ohio 2003) ("At this point in the litigation, however, it is unclear whether the plaintiff is entitled to a legal remedy under the tort and contract theories she asserts in her complaint. If, after further discovery, it becomes clear that she is not entitled to recover damages under those theories, then she will be entitled to seek recovery pursuant to the unjust enrichment doctrine")

(37) See Hanley v Trendway Corp, 1995 WL 103748, at *2 (ND Ill 1995) ("Illinois courts have rejected the argument that an action for unjust enrichment should always be dismissed where the plaintiff has a full and adequate remedy at law"); Partipilo v Hallman, 810, 510 NE 2d 8, 11 (Ill App Ct 1987) (holding unjust enrichment is an action at law, not in equity).

(38) See above note 36.