Product safety and liability

Safety and environmental

What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?

Environmental regulations

The EPA and CARB have comprehensive regulations for automobiles. Since the 1970s, the EPA has established mandatory emissions standards for ‘criteria pollutants’ (eg, NOx, PM, CO, HC) that have become progressively more stringent. Since the 1980s, the NHTSA has enforced fleet-wide standards for fuel economy. More recently, the EPA and CARB started to regulate greenhouse gases through progressively more rigorous mandatory fleet-wide standards. In addition, California has established a zero emissions vehicle programme requiring manufactures’ annual sales to include a certain fraction of electric or hybrid vehicles.

Safety regulations

The NHTSA maintains more than 70 federal motor vehicle safety standards covering the full range of safety-relevant vehicle performance parameters, from occupant protection to headlight illumination levels. Following the Ford-Firestone tyre safety crisis in the US, the NHTSA also developed mandatory reporting requirements for potentially relevant safety information from in-use vehicles both in the US and in foreign markets (pursuant to the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act enacted in 2000). The TREAD requirements require manufacturers to actively monitor warranty claims, customer complaints, death and injury claims, property damage claims, field reports and service measures, and report relevant data to the NHTSA on a periodic basis. The NHTSA has aggressively ramped up enforcement of all of its regulations and requirements in recent years, following major safety issues by a number of manufacturers. The NHTSA has collected hundreds of millions of dollars in civil penalties for a wide variety of violations, including failure to recall safety defective vehicles and failure to comply with TREAD reporting requirements.

Product liability and recall

Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?

Product liability and class action litigation play a significant role in the US automotive market. Each year, consumers file numerous individual product liability lawsuits alleging that purported automotive defects resulted in bodily injury, injury, death or other damages. Consumers have also filed an increasing number of individual lawsuits seeking reimbursement for certain repair costs. (These are often referred to as ‘lemon law’ cases.) Consumers also file numerous class actions alleging that purported automotive defects (or alleged unfair business practices) resulted in economic damages, such as unreimbursed repair costs.

In some of these class actions, the consumer filing suit will not have incurred any repair costs or experienced the alleged vehicle malfunction. This type of class action is frequently referred to as a ‘no injury’ class action. In such class actions, a consumer frequently alleges that the automotive company concealed a supposed defect in the vehicle or its components and that, as a result, the consumer either paid more to purchase or lease the vehicle than intended or will recoup a lesser amount than expected upon resale. (This is also frequently referred to as a diminution in value claim.) Generally, a class action cannot be premised on the basis of bodily injury as there would be too many individual variations in class member claims.

A few trends are apparent in automotive companies’ efforts to defend against individual and class action product liability claims. First, when facing class action allegations that a particular component is supposedly ‘susceptible’ to malfunction (but has not yet actually malfunctioned), automotive companies have argued that consumers have no standing to litigate, either individually or as part of a class action, because they have not in fact been injured. Second, a recent US Supreme Court decision has admonished courts to scrutinise the basis for personal jurisdiction in each case. In limited circumstances, this decision permits automotive companies to argue that courts have no authority to exercise personal jurisdiction over them. Third, automotive companies have investigated strategies for diverting consumer claims from the US court system to arbitration, which can often be a more efficient mechanism for resolving disputes. However, thus far, automotive companies have enjoyed only limited success in compelling the arbitration of claims by vehicle purchasers against automotive companies.

The advancement of autonomous vehicle technology also has implications for US litigation, including potentially reapportioning the liability of certain actors and the burdens of proof associated with particular claims. However, until new legislative and regulatory frameworks to address autonomous vehicles are developed, consumers likely will continue to rely on traditional common law and statutory claims in lawsuits involving autonomous vehicles.