Companies That Exclusively Package and Label Manufactured Products Can Be Found Strictly Liable for a Consumer's Injury Caused by the Product

The New Jersey Appellate Division recently concluded that a company may be held strictly liable for packaging and/or labeling a defective product. Smith v. Alza Corp., 948 A.2d 686, 2008 N.J. Super. LEXIS 123 (App. Div. 2008). Specifically, the court determined that a company devoted to packaging and/or labeling a product is a "manufacturer" and not a product "seller" as defined by the New Jersey Product Liability Act ("PLA"), N.J.S.A. 2A:58C-1 to -11. By determining that a company exclusively devoted to packaging and labeling a product is a "manufacturer," the court precluded the company's ability to seek immunity as a "seller" under the PLA. See N.J.S.A. 2A:58C-9. The product liability seller immunity provision was found to be limited to retailers who do not have any significant responsibility for the alleged product defect.

Plaintiff was an Alabama resident who brought a products liability action in New Jersey against numerous defendants, including a New Jersey-based company that labeled and packaged the product in question. That product was an over-the-counter diet drug containing phenylpropanolamine (PPA). The trial court granted the defendant summary judgment, finding that the defendant qualified for immunity as a "seller" as defined by the PLA.

On appeal, the court considered whether or not a company exclusively devoted to packaging or labeling a product is a "seller" or a "manufacturer." The PLA provided the framework under which the court analyzed the facts of the case. The plaintiff suffered a hemorrhagic stroke allegedly as a result of consuming the diet drug Acutrim. Plaintiff's theory was that the PPA contained in Acutrim caused plaintiff's hemorrhagic stroke. The Acutrim package contained the words "safe, effective weight loss works all day," and the label on the package identified the active ingredient as being PPA. The court emphasized that there were not any warnings on the Acutrim label about the allegedly known associated risks of PPA. On appeal, the plaintiffs claimed that the defendant company was a "manufacturer": therefore, the defendant company was not entitled to immunity exclusively reserved for product sellers.

The Appellate Division analyzed the definitions of a "manufacturer" and "product seller" as described in the PLA. The definition of a "manufacturer" and a "product seller" both identify "persons" who package and label products. The Appellate Division harmonized the confusion between the two definitions by finding that "if every packager or labeler qualifies for the 'product seller' immunity, their inclusion in the definition of 'manufacturer,' to whom strict liability may attach, would be rendered inoperative." Furthermore, the court found the seller immunity section to exempt entities that package or label "incidental or ancillary to their primary business of selling the product at issue."

The court relied upon the distinction that the company did not make the product available to consumers. Since the defendant company only shipped a product after labeling it and packaging it to distribution centers for ultimate sale, the court declined to find that the company actually sold the product. The specific facts of this case led the Appellate Division to conclude that seller immunity should be available only to retailers and wholesalers who do not have any significant responsibility for the alleged product defect. This conclusion was deemed to be in accord with the legislative purpose and design of the PLA, "which is to impose strict liability upon entities within the chain of distribution." See Becker v. Tessitore, 356 N.J. Super. 233, 247 (App. Div. 2002).

The focus on the chain of distribution of an allegedly defective product was at the heart of the court's opinion. Future cases are likely to evaluate fact patterns in an attempt to satisfy the definitions of "manufacturer" and "product seller" as defined in the PLA. Irrespective of the particular facts that may arise in future cases, this opinion seems to insulate only those companies that are strictly making available, i.e., "selling," products to consumers. Therefore, a new trend may develop where companies whose primary business is packaging and/or labeling products will look to shift and avoid liability vis-à-vis product manufacturers.