Products Liability Law Daily Faulty jury instruction on risk-benefit test leads to new trial in perchlorate contamination case
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Monday, February 10, 2020

Faulty jury instruction on risk-benefit test leads to new trial in perchlorate contamination case

By Kathleen Bianco, J.D.

Under strict liability principles, a jury is required to assess the risks and benefits of a product design "through hindsight."

A jury verdict in favor of a company charged with causing the contamination of a city’s water supply was reversed by the U.S. Court of Appeals for the Ninth Circuit and remanded to the district court for a new trial. In an unpublished opinion, the appellate panel determined that the district court had misstated the applicable law in its jury instruction regarding the applicable risk-benefit test standard (City of Pomona v. SQM North America Corp., February 6, 2020, per curiam).

The City of Pomona, California, which administers a public water system, discovered in 2007 that the source of its water, the Chino Basin aquifer, had levels of the chemical perchlorate in excess of the Maximum Contaminant Level (MCL) of six parts per billion (ppb) permitted by the California Department of Public Health (CDPH), which regulates contaminants in drinking water and has the power to suspend or revoke a municipality’s water system operating permit for failure to comply with an MCL.

In October 2010, Pomona filed suit against SQM North America Corporation (SQM) to recover the cost of investigating and remediating perchlorate contamination in the groundwater in and around Pomona, California. Pomona alleged that SQM’s importation of natural sodium nitrate from the Atacama Desert in Chile for use as a fertilizer was the primary source of Pomona’s perchlorate contamination. On October 31, 2011, SQM moved for summary judgment on two grounds—that Pomona had not suffered a compensable injury under strict products liability law based on California’s "economic loss rule"; and that even if Pomona had sustained a compensable injury, Pomona’s claim was barred by the applicable three-year statute of limitations. The federal district court in California denied judgment as a matter of law on both arguments [see Products Liability Law Daily’s May 5, 2014 analysis].

In 2017, a jury verdict in favor of the company charged with causing the contamination of the city’s water supply was reversed by the Ninth Circuit and remanded to the district court for a new trial following a determination that the district court had abused its discretion in the admission and exclusion of certain expert witness testimonies [see Products Liability Law Daily’s August 8, 2017 analysis].

Following a retrial in 2018, the jury again issued a verdict in favor of the company based upon its determination that the company had not been aware of the danger posed by the chemical at the time the product was in use. The city appealed, arguing that the district court had incorrectly instructed the jury on the risk-benefit test to evaluate design defect claims under California law.

Proper instruction for risk-benefit test. Under California law, a jury must determine "through hindsight" whether the risks inherent in a design are outweighed by the benefits. This allows the jury to consider risks that were not, and could not have been, known to the manufacturer at the time of use, which in this case was the 1930s and 1940s. Thus, the district court’s instruction to the jury to consider the risks and benefits of the design of the product "at the time the product was in use" was a misstatement of law warranting reversal and remand.

Dissent. A dissenting opinion was issued by Judge Lee. The dissent opined that the term "hindsight" in the pattern jury instruction was ambiguous based upon the arguments made by the parties. Judge Lee recommended that the issue be certified to the California Supreme Court for clarification.

The case is No. 18-55733.

Attorneys: Arnold Michael Alvarez-Glasman (Alvarez-Glasman & Colvin) for City of Pomona. Michael Kenneth Johnson (Lewis Brisbois Bisgaard & Smith LLP) for SQM North America Corp.

Companies: City of Pomona; SQM North America Corp.

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