In Lou v. Otis Elevator Co., 77 Mass. App. Ct. 571 (2010), a young boy’s hand was caught and injured in an escalator located in a department store in China. The boy sued the American company that had licensed its trademark and the relevant escalator technology to the escalator’s Chinese manufacturer (which itself was a joint venture among the defendant, a Chinese elevator firm and a Chinese governmental investment group) for breach of the implied warranty of merchantability (the Massachusetts near-equivalent of strict liability), and his parents sued for loss of consortium. After the Massachusetts Superior Court entered judgment on a jury verdict for the plaintiffs, defendant appealed to the Massachusetts Appeals Court.
Defendant first argued that the trial court’s jury instructions improperly extended the apparent manufacturer doctrine—which makes one liable for a product that he “puts out as his own”—to a non-seller of the product. The appellate court observed that the instructions were consistent with comment d to the Restatement (Third) of Torts: Products Liability § 14, which treats a trademark licensor that substantially participates in the design, manufacture or distribution of a product licensed to use that trademark as a potentially liable seller of that product. The court interpreted comment d not as an extension of the apparent manufacturer doctrine, but rather as a limitation created in response to case law in some jurisdictions that had held trademark licensors liable for product defects even where the licensor had no role in designing or manufacturing the product. The court adopted comment d, rejecting defendant’s argument that an “apparent manufacturer” who is not also a seller is entitled to a privity defense under Mass. G.L. c. 106, § 2-318, the Massachusetts statute that eliminates the defense of lack of privity where the manufacturer, seller or supplier might reasonably have expected the plaintiff to use or be affected by the goods sold.
Defendant also argued that the trial court’s award of prejudgment interest under Massachusetts law was improper, and that Chinese law should have applied. The appellate court explained that Chinese law does not provide for prejudgment interest because—in contrast to Massachusetts law—Chinese law considers an injured plaintiff’s entitlement to damages to accrue only upon judgment. The court determined that, because the defendant’s liability was determined pursuant to Massachusetts law, Massachusetts had a stronger interest in determining when the defendant’s obligation to pay damages accrued, and thus the award of prejudgment interest was proper.