Question

Joe’s Supply Company manufactures and sells elbow joints from its only location in New York. The elbow joints are sold throughout the United States and go into homes, houses, apartments, office buildings, hospitals and other buildings. On January 1, 2007 Joe, CEO of Joe’s Supply Company, finds a new supplier for resin to make his elbow joints at a much lower cost. This will make his business competitive with other manufacturers who already have Chinese suppliers. Joe’s R&D director does some preliminary tests on the resin and ultimately, the resin seems satisfactory. On February 1, 2007, Joe’s Supply begins manufacturing his elbow joints with the new resin and selling the newly formulated product over the internet, by mail and with walk-in customers. The elbow joints come with a 2 year limited warranty and a disclaimer about consequential damages.

In June 2008, Joe started to get reports from contractor customers that his elbow joints were leaking and damage to property was occurring. Joe did nothing to investigate these claims. He simply sent the customers a letter with the final results on the resin and told them, they must have installed the elbow joints incorrectly.

Can Joe be sued for the damage caused by the elbow joints? If so, describe the steps that Joe’s customer would have to take to sue Joe.

Can Joe’s customer sue the Chinese Company that made the resin?

If Joe did not want to be sued what other dispute resolution procedures are available to him and what do you think he should do?

If the government brought a criminal case against Joe’s Supply, can the corporation refuse to testify against itself under the 5^th Amendment? Can Joe refuse to testify? Can Joe refuse to hand over internal corporate papers such as the test results? Why?

Answer 1

Joe can be sued for the damage caused by elbow joints based on product liability which is also a strict liability as the product defect is a design defect. In order to prove strict liability claim, the customer should follow the below steps and prove the conditions for strict liability.

1.Customer need to show that the elbow joints had an unreasonably dangerous defect that injured the customer and the defect was introduced while designing the product by the use of low cost resin.

2. The defect caused an injury while customer was using the elbow joint in the way it was intended to be used.

3. The elbow joints had not been substantially changed from the condition it was sold.

Joe’s customer can sue the manufacturer of component parts for product liability cases. But in the case of strict liability, the supplier must be regularly in the business of selling the elbow joints. In this case the supplier of resin is new and hence the Chinese company that made resin cannot be sued.

If Joe did not want to be sued he needs to consider the compliant letters with much importance and take actions on the allegations. He should negotiate with the customers and settle the dispute by allowing the customers to return the defective product. The cost of the product should be refunded to the customers. He should also find new resin supplier and start manufacturing the elbow joints replacing the Chinese resin with good quality resin.

The corporation cannot refuse to testify against itself under the 5^th amendment because the privilege against self incrimination is personal and cannot be utilized on behalf of corporation. Joe as an individual can refuse to testify but cannot refuse to give the evidence as a corporate official. Hence Joe cannot refuse to hand over the internal corporate papers such as test results utilizing the 5^th amendment.