Products Liability Law Daily Consumer met all necessary prerequisites for a default judgment, but the court denied it nonetheless
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Tuesday, December 8, 2020

Consumer met all necessary prerequisites for a default judgment, but the court denied it nonetheless

By Joshua Frumkin, Esq.

Instead, the manufacturer and the distributor of the product at issue, an electric heater, were barred from contesting liability in a future proceeding.

In a products liability action arising from a malfunctioning electric heater, a New York federal court denied a consumer's renewed motion for a default judgment against the manufacturer and the distributor of the product. The court instead chose to delay granting default out of concern that the ruling would raise the specter of inconsistent judgments against the non-defaulting defendants (Hunter v. Shanghai Huangzhou Electrical Appliance Manufacturing Co., Ltd., December 7, 2020, Sannes, B.).

A consumer purchased a portable electric heater from Home Depot in 2013. The heater was manufactured and sold by Shanghai Huangzhou Electrical Appliance Manufacturing Co., Ltd. and Shanghai Huangzhou Industry Co., Ltd. (collectively, Shanghai Huangzhou), which are foreign corporations. The consumer alleged that the heater defectively generated a dangerous level of heat which, over the course of two hours, rendered her infant child's bedroom unbearably hot and induced severe heat stroke, causing brain damage to her infant. The consumer filed suit in January 2017. She obtained a clerk's entry of default against Shanghai Huangzhou in December 2019. The court denied the consumer's subsequent motion for default judgment on the grounds that her amended complaint failed to allege sufficient facts to exercise personal jurisdiction over Shanghai Huangzhou, did not sufficiently state a claim against Shanghai Huangzhou, and neglected to specify the damages sought. The court instructed the consumer to renew the motion to rectify those errors; the court issued a subsequent text order stating that the consumer could supplement the renewed motion with a supplemental attorney letter brief.

Personal jurisdiction applied. The court found it proper to exercise personal jurisdiction over Shanghai Huangzhou. Specific personal jurisdiction over a foreign corporation is proper under New York's long-arm statute when, inter alia, a foreign corporation that earns substantial revenue from interstate or international commerce reasonably expects its out-of-state tortious conduct to have legal consequences in New York. The court determined that the consumer proffered sufficient evidence to satisfy the state’s long-arm statute. Evidence was produced that identified Shanghai Huangzhou as the manufacturer of the injurious product and that Shanghai Huangzhou shipped thousands of units into New York. This established that Shanghai Huangzhou committed a tortious act outside of New York which caused injury within New York. The court further reasoned that Shanghai Huangzhou should have expected that any malfunctioning heater would have legal consequences in New York.

The consumer also produced a sales history report which declared that Shanghai Huangzhou earned a total sales revenue of nearly $2 million from Home Depot alone in the year that the heater was manufactured. The consumer further pointed to Shanghai Huangzhou's website, which stated that it exports products to major multinational retailers "all over the world." The court determined that both Shanghai Huangzhou entities conducted international commerce together as a cohesive enterprise and that both derived significant revenue from those international transactions. Consequently, the court found that Shanghai Huangzhou's conduct fell within the reach of New York's long-arm statute. Finally, the court concluded that the exercise of personal jurisdiction over Shanghai Huangzhou would comport with federal due process standards, as the company shipped thousands of units to New York state, illustrating a purposeful targeting justifying specific jurisdiction. As a result, the court saw fit to exercise personal jurisdiction over Shanghai Huangzhou.

Defective design claim sufficiently pleaded. The court determined that the consumer successfully stated a claim for strict liability design defect. A defectively designed product is one that is unreasonably dangerous for its intended use at the time it left the manufacturer's control. A consumer must demonstrate that the product posed a substantial likelihood of harm, that it was feasible to design the product in a way which diminished that likelihood, and that the product's design was a substantial factor in causing the injury. A consumer does not need to specify an alternative design at the pleading stage. The consumer here alleged that the heater was defectively designed to produce a dangerous amount of heat. Based on that allegation, the court inferred the existence of a design defect. The court noted that the pleading did not specifically identify Shanghai Huangzhou's role in the design process, but that the allegations put Shanghai Huangzhou on constructive notice that it was at least partially responsible. Further, the imprecise pleading was supplemented by more specific evidence submitted with the consumer's default motion. As such, the court found that the consumer had successfully stated a claim.

Manufacturing defect claim successfully made. The court also determined that the consumer successfully stated a claim for strict liability manufacturing defect. To state such a claim, the consumer needed to allege that the product was defective due to a manufacturing error and that the defect was the proximate cause of injuries. The consumer was not required to identify a specific manufacturing defect if she could demonstrate that the product did not perform as intended and there were no other causes for the malfunction. Here, based on the same allegation as above, the court found that the consumer successfully stated her claim. The heater produced an unsafe level of heat when it was used as intended, and Shanghai Huangzhou failed to allege an alternative cause for that malfunction.

Failure to warn claim unsuccessful. The court determined that the consumer did not successfully state a claim for strict liability failure to warn. To prevail, a consumer must establish that the manufacturer had a duty to warn, that the consumer used the product in a reasonably foreseeable manner, and that the failure to warn was the cause of injury. In this case, the consumer failed to allege specific facts regarding what warnings, if any, were provided to her and how they were inadequate. Absent those specific facts, the court ruled that the consumer failed to state a claim for failure to warn.

Negligence claim failed. The court held that the consumer failed to state a negligence claim against Shanghai Huangzhou. Because the court had previously ruled that the consumer successfully stated claims for design and manufacturing defects, the consumer only needed to demonstrate that the manufacturer failed to exercise reasonable care in designing and/or manufacturing the heater to prevail on this claim. As it pertained to Shanghai Huangzhou Electrical, the court found that the consumer successfully stated a claim, based on evidence and allegations that Shanghai Huangzhou Electrical manufactured the heater and that its defects injured the consumer's child. However, the court found that the consumer failed to state a negligence claim against Shanghai Huangzhou Industry, which was merely the distributor and not liable for negligence.

Motion denied nonetheless. The court chose to delay the determination of damages and the entry of a default judgment against Shanghai Huangzhou. Courts are empowered to separately enter default as to liability and as to damages. As the consumer failed to specify a theory of damages, the court declined to enter default on damages and turned to liability. The court noted that the non-defaulting parties necessarily shared common defenses as to the strict liability claims. The court thus determined that a contrary ruling for the other defendants could require the court to vacate its own default judgment against Shanghai Huangzhou if, for example, the heater is shown to have not been defective. As such, after finding that it would not prejudice the consumer to delay entering default, the court denied the consumer's motion.

The case is No. 5:17-cv-00052 (BKS/TWD).

Attorneys: Timothy P. Murphy (Hancock Estabrook, LLP) for Meghan Hunter. Marc H. Goldberg (Phillips Lytle, LLP) for Quality Craft Home Décor, Inc., Quality Craft Merger co., Quality Craft, Ltd., and QCIL International, Inc. Steven W. Williams (Smith, Sovik, Kendrick & Sugnet, P.C. ) for Home Depot, U.S.A., Inc., The Home Depot, Inc., and HD Development of Maryland, Inc.

Companies: Quality Craft Home Décor, Inc.; Quality Craft Merger co.; Quality Craft, Ltd.; QCIL International, Inc.; Home Depot, U.S.A., Inc.; The Home Depot, Inc.; HD Development of Maryland, Inc.

MainStory: TopStory DesignManufacturingNews WarningsNews JurisdictionNews HouseholdProductsNews NewYorkNews

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