In June 2008 Nottingham Crown Court made a group litigation order relating to consumers who had allegedly suffered extensive skin reactions from sitting on sofas that were contaminated with fungicide. The sofas had been manufactured by Chinese companies Linkwise and Eurosofa, imported into the United Kingdom and sold by numerous high-street retailers. The group action was launched against three of the UK retailers – Argos, Land of Leather and Walmsleys. All three have since admitted liability.
Over 2,000 people lodged proceedings in the United Kingdom and it was alleged that up to 50,000 UK households could have been affected. The contaminated sofas gave rise to what is believed to be the largest consumer group litigation in UK legal history.
On 16 September 2008 the court ruled that further investigation into the medical evidence was necessary, and stated that greater clarity was needed on affected sofa models and batch numbers. In October 2008 an advertising campaign was launched to warn the public of the potential link between skin rashes and the affected sofas.
The burns were caused by dimethyl fumarate, which is known to cause skin irritation. The chemical is used as a fungicide and was contained in sachets that were placed inside the sofas for protection against mould during transportation and delivery. Exposure to dimethyl fumarate can allegedly be fatal; it was also claimed that the chemical caused rashes and pain similar to severe sunburn or scalding. The use and manufacture of the chemical has been banned under EU biocides legislation since 1998, but it was legal to import it into the European Union until 1 May 2009.
On 26 April 2010 the High Court announced that consumers injured by the toxic sofas will share a payout of up to £20 million. The judge heard that a claims-handling agreement had been reached which could potentially benefit between 1,500 and 2,000 claimants through a series of "swift" payments. The victims are expected to receive between £1,175 and £9,000 each, depending on the severity of their symptoms – the claims-handling agreement is understood to relate only to what were described as "non-severe" cases.
However, 350 customers who bought sofas from Land of Leather, which went into administration in January 2009, are not entitled to compensation. Although liability had been admitted, Land of Leather's insurer has refused indemnity for the claims, citing a breach of policy. This decision was upheld by the courts in April 2010 and is likely to be referred to the Court of Appeal. Legal proceedings are ongoing for a further 3,000 cases in which liability remains disputed.
The dimethyl fumarate claims litigation has demonstrated how well the UK group litigation order process can resolve claims on a mass scale, and is likely to influence the way in which future group actions are conducted. It is also likely to affect UK retailers' dealings with foreign suppliers and their insurance requirements. For example, UK retailers would be wise to:
- request far more product-related information from their foreign suppliers (including storage and preservation guidance);
- review their supplier terms and conditions; and
- employ more due diligence and quality control over the products supplied to them.
It is also advisable for retailers to review their product recall policies; they should have efficient systems in place to identify all relevant documents, suppliers and vendors and to allow for potential recovery against suppliers immediately should the need arise. Equally, their insurers should ensure that they can fully assess risk in such circumstances, and that their insureds act appropriately.