Protecting Innocent Sellers

PROTECTING INNOCENT SELLERS

Dear Colleagues:

There has been much confusion, misunderstanding, and misinformation regarding the “Innocent Seller” amendment to the general tort reform bill, offered by Rep. Snowden, and proposed to be codified as a new code section, Miss. Code Ann. § 11-1-64. Here are our honest and straight-forward answers to the questions posed by some members:

WHAT DOES THE “INNOCENT SELLER” AMENDMENT DO?

In a nutshell, the amendment protects innocent retailers and wholesalers from being sued in products liability lawsuits brought against the product manufacturer for a defective product.

WHAT IF THE SELLER ISN’T REALLY INNOCENT?

Then he will not be protected and he can still be sued. The explicit language of the amendment protects only that seller who is a mere conduit for the sale of a product purchased from a reputable manufacturer, and then only to the extent that the defect is latent (hidden). The amendment further says that the seller is not negligent for failing to inspect the product if (and only if) he had no reasonable opportunity to inspect the product, or if a reasonable inspection still would not have revealed any defect.

DOESN’T CURRENT LAW ALREADY PROTECT INNOCENT SELLERS?

No. While it is true that existing Miss. Code Ann. § 11-1-63(g) requires a manufacturer ultimately found liable for a defective product to reimburse an innocent seller for the costs of litigation (including attorney’s fees and any damages awarded against the seller), such reimbursement does not happen unless the manufacturer loses, and then only after the case is over. Existing law does nothing to keep the innocent seller from being needlessly dragged into court in the first place, or from having to lay out his own money to defend a suit in hopes of an ultimate reimbursement which may or may not be forthcoming.

WHY ARE INNOCENT SELLERS SUED AT ALL?

Plaintiff trial attorneys sue innocent sellers as mere “straw men” for the sole purpose of making sure that a products liability case against an out-of-state manufacturer remains in state court and is not removed to Federal court. Everyone involved in such a case understands that the manufacturer is the true target, and that the seller has done nothing wrong and is not really expected to pay anything. But, as long as one of the defendants (even a “straw man” innocent seller) is a Mississippi resident, the case is triable in state court instead of Federal court.

SO, THE AMENDMENT REQUIRES PLAINTIFFS TO SUE IN FEDERAL COURT?

No. The injured plaintiff can still file his lawsuit in state court, even if the only defendant is an out-of-state manufacturer. If the amount of damages the plaintiff seeks is less than $75,000, the case will remain in state court. But, if the amount the plaintiff claims is more than $75,000, the nonresident defendant may “remove” the case to Federal court unless there are other in-state defendants in the case. The “innocent seller” amendment simply would protect innocent sellers from being named as sham defendants for the sole purpose of allowing plaintiffs to artificially maintain state court jurisdiction. On the other hand, if the plaintiff has a legitimate claim against the in-state seller (i.e., the seller isn’t really “innocent” within the meaning of the amendment), the case will remain in state court, regardless of the amount of damages the plaintiff seeks.

Hardly. This concept (called “diversity of citizenship” jurisdiction) has been fundamental to American jurisprudence for more than two centuries, and is the main reason the lower Federal courts were created in the first place. The idea is a simple one: If the only parties to the lawsuit are the injured person (a Mississippi resident) and the sole person who caused the injury (the out-of-state manufacturer), both the U. S. Constitution and the Judiciary Act of 1789 give the nonresident defendant the right to have the case heard in a Federal court instead of in a state court presumably more favorable to the local plaintiff. This legal concept protects the rights of Mississippians when they are sued in the courts of other states, and nonresident defendants are entitled to the same Federal protection when they are sued in Mississippi.

That is the wrong way to look at it. What the amendment does is to ensure that the person actually responsible for an injury is the person who is sued. An innocent seller whom everyone agrees is not really responsible should not be sued merely to accommodate the trial attorney’s understandable desire to get his case before the most favorable (for his plaintiff) judge and jury available.

Of course not. Under our existing “long-arm” jurisdiction statute, Miss. Code Ann. § 13-3-57, a nonresident who commits a tort “in whole or in part” in Mississippi is subject to being sued in this state. If an out-of-state manufacturer negligently makes a product in another state which causes an injury within Mississippi, the tort has occurred “in part” within Mississippi and the manufacturer can be sued here, regardless of whether a local seller is even involved. Service of process may be obtained on a nonresident defendant in accordance with Rule 4 of the Mississippi Rules of Civil Procedure, whether or not there is a local defendant. It is simply untrue that the amendment will immunize out-of-state manufacturers from being sued here.

No. Even if a products liability case is removed to Federal court, the trial still will take place in Mississippi, the Federal judge who presides over the case will be a Mississippi resident, and the jurors who ultimately decide the case will be Mississippians too. Furthermore, the Federal court is bound by what is called the Erie Doctrine to apply the substantive law of Mississippi to the case; in other words, the statutes passed by our Legislature and the interpretive decisions of our state courts in other cases will be the law that applies in the Federal trial.

This happens only in cases where a great number of people have similar claims against the same or similar defendants, such as airline crash disasters or widespread pharmaceutical claims. In such cases, Federal procedure allows consolidation before a Multi-District Litigation Panel so as to streamline overall cost by eliminating needless duplication. Mississippi claimants are treated no differently from the citizens of other states in these type cases.

Those who oppose the amendment believe that keeping a plaintiff’s case in the most favorable court available is always more important than protecting innocent sellers from having to defend unnecessary lawsuits. We disagree. We think it is always wrong to sue someone everyone knows is innocent simply for the plaintiff’s convenience or to further the trial attorney’s clever recovery strategy. “Mom and Pop” agree with us. Your vote in favor of the “Innocent Seller” amendment is a sound, pro-small business vote which you will not regret.