Litigation: 6 defenses every inside counsel

should know (Part 1)

Defense #1: The Component Supplier Doctrine
By Jonathan B. Shoebotham
October 31, 2013
This is the first of a six-part series on liability defenses that every inside counsel should
know. Based on more than 30 years of litigation practice, I am going to discuss in this
series the six liability defenses that I have found to most often result in summary
judgment or dismissal for the defendant. They are the liability defenses with the most
potential to end expensive and time-consuming litigation.
The first of these six defenses is the component supplier doctrine. I used this defense
recently to obtain a summary judgment in a $23 million property damage claim against
my client, a Fortune 100 product manufacturer. Litigation against manufacturers of
complex, integrated products often includes claims by the plaintiff against the individual
manufacturers of the many component parts. This is usually inappropriate. The
component supplier doctrine narrowly defines the liability of manufacturers of
component parts and can be used to obtain summary judgment or dismissal of claims that
fall outside of its boundaries.
The component supplier doctrine is established by the Restatement (Third) of Torts:
Product Liability, Section 5 (1998) (hereinafter Restatement, Section 5). That section
provides:
Liability of Commercial Seller or Distributor of Product Components for Harm
Caused by Products Into Which Components Are Integrated
One Engaged in the business of selling or otherwise distributing product
components who sells or distributes a component is subject to liability for harm to
persons or property caused by a product into which the component is integrated if:
(a) the component is defective in itself, as defined in this Chapter, and the defect
causes the harm; or
(b) (1) the seller or distributor of the component substantially participates in the
integration of the component into the design of the product; and
(2) the integration of the component causes the product to be defective, as defined in
this Chapter; and
(3) the defect in the product causes the harm.
Under this doctrine, component suppliers should not be subject to strict liability unless
the component itself is defective. If the component is not itself defective, then it is unjust
and inefficient to impose strict liability on a component part manufacturer solely on the
ground that the manufacturer of the integrated or finished product utilized the component
in a manner that rendered the integrated, finished product defective. Imposing strict
liability on the manufacturer of a component part simply because of how it was used in
the final product would unfairly require a component manufacturer to analyze another
manufacturers product, which the component seller has no role in developing. The
Restatement, Section 5 subjects component sellers to liability only when the components
themselves are defective or when the component seller substantially participates in the
integration of the component into the design of the finished product, and that integration
actually causes the finished product to be defective.
The question sometimes arises about what it means for the component supplier to have
substantial participation in the integration of the component into the finished product.
Comment e to the Restatement notes that substantial participation can take various
forms. The manufacturer or assembler of the integrated product may invite the
component seller to design a component that will perform specifically as part of the
integrated product or to assist in modifying the design of the integrated product to accept
the sellers component. Or the component seller may play a substantial role in deciding
which component best serves the requirements of the integrated product. Comment e
explains that, under such circumstances, it is fair and reasonable to hold the component
seller responsible for harm caused by the defective, integrated product. Accordingly,
counsel for product manufacturers should be aware that substantial participation in the
process of integration of a component into a finished product may ultimately result in
liability for defects in the finished product.
However, a component seller that simply designs a component to its buyers
specifications, and does not substantially participate in the integration of the component
into the design of the finished product, should not be liable for defects in the finished
product. Simply providing mechanical or technical services or advice concerning a
component part should not, by itself, constitute substantial participation that would
subject the component supplier to liability.
These same principles also potentially may bar claims for failure-to-warn. A component
seller is required to provide instructions and warnings regarding risks associated with the
use of the component product. However, when a sophisticated buyer integrates a
component into another product, the component seller can argue that it owes no duty to
warn either the immediate buyer or ultimate consumer of dangers arising because the
component is unsuited for the special purpose used by the buyer. To impose a duty to
warn in such a circumstance would require that component sellers monitor the
development of products and systems into which their components are to be integrated,
according to Comment b in Restatement, Section 5.
The component supplier doctrine is well-recognized in jurisdictions throughout the
United States. In fact, courts in 17 states have adopted or cited with approval to the
Restatement, Section 5 or the substance of the component supplier doctrine. Product
manufacturers should be aware of its restrictions on liability. If it can be proved that a
component itself was not defective, and that the manufacturer or seller of the component
did not substantially participate in the integration of the component into the design of the
finished product, then dismissal or summary judgment of the plaintiffs claims against the
component manufacturer should be sought.