A recent opinion in the District of New Jersey has reinforced the long-standing notion that retailers, along with any other person or entity in the stream of commerce, are subject to strict liability for defects in the products they sell.

In DeGennaro v. Rally Manufacturing, 09-cv-443 (D.N.J.), the plaintiff alleged injury when a lead-acid battery he purchased at a Pep Boys store in Ocean Township, New Jersey exploded in his hand and against his body. DeGennaro sued both the manufacturer, Rally, and the retailer where he purchased the battery.1

The plaintiff's theory included a claim that the use of heat-sealed packaging was inappropriate because it failed to properly ventilate the batteries. Pep Boys filed a motion for summary judgment on the product liability claims, seeking to take advantage of the safe harbor provisions of New Jersey Products Liability Act, N.J.S. 2A:58C-9.

The decision against Pep Boys relied heavily on two factors: (1) the expertise of Pep Boys in the industry and (2) knowledge of Pep Boys management (evidenced by email exchanges) of prior incidents.

Implications of DeGennaro Decision

When a conversation about potential defects in products being sold occurs, it is essential that the retailer "close the loop" on such discussions, including potentially discussing the issue with outside litigation counsel who is familiar with related product liability issues. However, the expertise issue could be far-reaching.

The plaintiff's expert opined that it was common knowledge amongst those in the automotive industry that lead-acid batteries must be ventilated, and therefore, packaging the battery in heat-sealed plastic was an open and obvious defect. The court specifically noted this issue as one of the factors it relied upon.

This places a heavy burden on retailers who are "experts" in their respective industries to become familiar with the products they sell and the packaging in which they are delivered, thereby ensuring that there are no obvious defects in the product. Such retailers would not be confined to the automotive industry, as it is easy to see how the holding could be expanded to other "expert" retailers, such as hardware and other specialty retailers. Further, it is likely that this opinion will be cited in other aspects of product liability actions, including failure to warn cases, and it is unknown how the courts will treat those claims.

Safe Harbor Provision not Applicable

Pursuant to the New Jersey Products Liability Act, N.J.S. 2A:58C-1 et seq., any actions brought "for harm caused by a product" are consolidated under the Act, "irrespective of the theory underlying the claim." N.J.S. 2A:58C-1(b)(3). The only exception is a claim for breach of express warranty. Id.

The act provides a safe harbor by way of a dismissal of all claims against an entity that falls within the definition of a "product seller." "Product seller" is defined as "any person who, in the course of a business conducted for that purpose: sells, distributes or otherwise is involved in placing a product in the line of commerce." N.J.S. 2A:58C-8. Product sellers, as they are defined by the act, are able to take advantage of the safe harbor provision and obtain dismissal if (1) they identify a manufacturer against whom relief may be obtained, and (2) they do not fall within one of the stated exceptions to the provision.

The safe harbor provision has three exceptions. First, the seller will remain liable if it exercised some significant control over the design, manufacture, packaging or labeling of the product. Second, the seller cannot obtain a dismissal if it knew or should have known of the defect in the product that caused the injury. Finally, if the seller created the defect in the product, it will remain liable. Neither the first nor the third exception applied in DeGennaro, but there was some evidence that Pep Boys knew of the propensity for explosion of the lead-acid batteries manufactured and packaged on behalf of Rally.

Based upon the evidence that Pep Boys "knew or should have known" that the battery purchased by plaintiff had the propensity to explode, the court opined that Pep Boys would not be permitted to take advantage of the safe harbor provision.