The Third Circuit Court of Appeals has once again affirmed that federal courts sitting in diversity and applying Pennsylvania law to product liability cases should look to Sections 1 and 2 of the Restatement (Third) of Torts, not the standards set forth in Section 402A of the Restatement (Second) of Torts. As a result, there continues to be uncertainty in this area of the law, and “forum shopping” between state versus federal court in Pennsylvania becomes even more of a strategic decision.

Three Third Circuit decisions have now predicted that if the Pennsylvania Supreme Court were confronted with this issue, it would adopt the Third Restatement of Torts with respect to product liability actions, rather than continue to apply the Second Restatement. At the federal district court level, there has been a split among federal court judges - some holding that the Second Restatement should apply because the state Supreme Court has not affirmatively adopted the Third Restatement, while other district court judges have held that the Third Restatement must apply because the Third Circuit’s prediction that the Supreme Court would adopt the Third Restatement is binding upon federal district courts sitting in diversity.

On three prior occasions, the Third Circuit has ruled that the Pennsylvania Supreme Court has not issued a definitive opinion as to whether the Third Restatement of Torts or the Second Restatement of Torts applies to strict liability and product defect cases. Therefore, federal courts applying substantive law must predict how the Commonwealth of Pennsylvania’s highest court would decide the case. In its 2011 Covell v. Bell Sports, Inc. decision, the Third Circuit affirmed the district court’s application of the Third Restatement, and allowed the defendant to rely on evidence of compliance with industry and governmental standards on the issue of whether a product was “defective” or not. The Covell decision reaffirmed the Third Circuit’s 2009 decision in Berrier v. Simplicity Manufacturing, Inc., in which the Court also predicted that the Pennsylvania Supreme Court would not continue to apply the Second Restatement, but rather, would adopt the Third Restatement of Torts for product liability actions. The most recent pronouncement on this topic was in Sikkelee v. Precision Airmotive Corp, et al, where, although the Third Circuit refused to accept an interlocutory appeal on the issue, the Court handed down an Order in which it once again stated that because the Pennsylvania Supreme Court has not yet held which Restatement applies, it would follow its own Third Circuit precedent in Berrier and Covell that the Third Restatement should apply.

These decisions serve to highlight the dichotomy between a products liability analysis under the Second Restatement versus the Third Restatement. Previously, Pennsylvania state courts (following the Second Restatement) have taken an approach that negligence concepts have no place in a product liability analysis. State courts found is increasingly difficult, however, to determine whether a product was “unreasonably dangerous” without some reference to evidence that the seller did or did not exercise reasonable care regarding the product.

By contrast, the Third Restatement’s approach to strict liability design defect law includes a balancing of a product’s risk and utility. In addition, the Third Restatement applies a broader post-sale duty to warn, and injects “comparative fault” and negligence concepts (such as “foreseeable risk” of harm and “care” exercised by the defendant) into product liability law—something that is precluded in state courts. Section 1 of the Third Restatement makes sellers liable only for the sale of products that are “defective,” and Section 2 provides that a product may be “defective” if it meets one of three sets of criteria. In determining whether a product is “defective”, a jury may consider evidence of standards or customs in the industry, which is precluded under a Second Restatement analysis in Pennsylvania state courts.

The Third Circuit’s prediction that the Third Restatement should apply to product liability actions in Pennsylvania should be binding on federal district courts sitting in diversity absent an affirmative indication from the Pennsylvania Supreme Court that the Restatement Second remains the law of Pennsylvania. As a result, the Third Restatement’s “reasonableness” approach to strict liability will be utilized in product liability actions in federal courts applying Pennsylvania law. This makes federal court a more favorable forum for manufacturers and other product liability defendants than state court, and means strategic decisions such as removal to federal court are all the more important at the outset of a product case.