PHOENIX -- The ability of Arizona manufacturers to escape some liability for their defective products could depend on what lawmakers remember -- and think about -- the Ford Pinto.
Lawsuits over the compact car in the 1970s became a textbook case in how companies balance financial risk with human life. It also became Exhibit No. 1 in why companies should be subject to punitive damages.
Now the Arizona Trial Lawyers Association is using the case to block Arizona legislation aimed at curbing such jury awards here in cases where products kill or injure people.
SB1336, crafted by the Arizona Chamber of Commerce and Industry, would spell out that courts and juries cannot financially punish companies when their product was designed, made, packaged, sold or labeled as required by a government agency. It also would bar punitive damages when products comply with state or federal standards or rules.
Punitive damages are sometimes called exemplary damages. These are above and beyond any award to compensate someone for a financial loss but instead to punish a company for an intentional or outrageous act, or to make an example of the company so that others behave better.
Chamber lobbyist Marc Osborn said the way companies see it, if they're complying with regulatory requirements, their conduct should not be considered outrageous.
"If you're going to make a product and the government tells you how to make that product, that should be your basis or standard,' he said.
"If your product ends up injuring or impacting someone in a negative way, you still should be able to compensate that individual' for out-of-pocket expenses, Osborn said. "But you're not a bad actor, you're not an individual who is going out there and willfully trying to harm somebody because you followed the regulations.
But Richard Langerman, representing the trial lawyers who are the attorneys for those who sue, said there are major loopholes in the law. And he said if there is any question, the Pinto lawsuits should remove any doubt.
"Memos were distributed and went all the way to the president of the company saying they recognized their automobiles might cause fires in rear-end crashes,' Langerman said.
"They made the decision to proceed despite the fact that they knew,' he continued. "The actually calculated how many people would be injured and killed per year by their vehicles and decided it would be cheaper to pay that' in lawsuits.
"I used to have a Pinto,' recalled Sen. Jerry Lewis, R-Mesa. "I'm glad they're no longer made.'
Osborn said any company that keeps selling a product after a recall would not have that protection. Similarly, there would be no shield if a firm intentionally withheld or misrepresented information to the government agency.
But Richard Langerman, representing the Arizona Trial Lawyers Association, said that languate would still allow companies to knowingly leave dangerous products on the market and yet, under the Arizona measure, escape liability for punitive damages.
"Just because the government has regulators, just because they have tried to analyze a particular industry, doesn't mean they have adequate information, doesn't mean that they always get it right,' he said.
Beyond that, there are situations where companies acquire knowledge about their products after they have been approved and put on the market, yet fail to make corrections. And that, he said, is shown by the Pinto cases.
Lewis questioned whether anything in this legislation would have required Ford to report the problem to federal officials or take the cars off the market. Langerman said it would not.
"Ford, having made the Pinto, having consciously been aware that it would kill and maim people, would still have to pay the damages to the people they killed and maimed,' he said. "They would no longer be punished for their outrageous behavior.'
But Chris Hanlon, president of the Arizona Association of Defense Counsel said there are reasons for lawmakers to restrict the ability to sue for punitive damages.
"Many insurance companies do not cover punitive damages, which means the manufacturer or the company or the individual which makes the product is not going to be covered if there's a judgment against them,' he said.
Hanlon said sometimes trial lawyers will make a claim for punitive damages, even in cases where they're not really merited, "simply in an attempt to, shall we say, create a fear in the defendants that they're going to be personally liable out of pocket.'
He also said that this legislation provides a baseline -- a standard of care -- to use when determining liability. Without the new law, Hanlon said that opens the door for anyone filing suit to hire his or her own expert witness who can tell the jury that the product was not manufactured up to the standards expected for the industry.
Lewis said he understands what manufacturers are trying to do. But he wants to "tighten the language up.'
He said Arizona should protect those who make honest mistakes in manufacturing from having to pay out exorbitant punitive damages. But Lewis said he wants to make sure "we don't give safe harbor to those who knowingly put out products, services or otherwise that could otherwise harm our society.'
Langerman also said the potential harms are not limited to traditional products.
He said companies were selling various financial products that were legal and had been approved by the proper government agencies. But Langerman said evidence that has been developed since shows many of those marketing the products knew they were "defective' to the extent that it was clear the buyers were going to lose money.