June 1, 1999

Trade Association Tort Liability

Holland & Knight Newsletter
William S. Dufoe

Although trade associations do not manufacture, distribute, or sell products, such organizations have been targets of product liability litigation. A critical threshold question in cases against trade associations is whether the association owed a duty of care to the plaintiff. This issue has become the subject of a growing body of case law.

Promulgation of Standards

Trade associations, which promulgate standards for the products made by their member companies, have been sued by plaintiffs claiming that the standards were inadequate. Traditionally, the key issue in these cases has been whether the association exercised control over its member companies. The trend in the earlier cases was to absolve the associations from liability when they did not have the ability to require the member companies to follow the standards. See, e.g. Howard v. Poseidon Pools, Inc., 506 N.Y.S.2d 523 (N.Y. App. 1986) (National Spa and Pool Institute would not be liable for negligence in promulgating standards because it did not have the authority to control the manufacturers who produce the swimming pools); Beasock v. Dioguardi Enterprises, Inc., 494 N.Y.S.2d 974 (N.Y App. 1985) (although standards promulgated by Tire and Rim Association had become the industry standards, because the association neither monitored nor mandated the use of its standards by any manufacturer, it lacked control necessary to impose liability).

The Supreme Court of Alabama departed from previous case law in holding that a trade association which does not control the actions of its members may nevertheless owe a duty to the public to exercise reasonable care when it undertakes to promulgate standards for the needs of the consumer. King v. National Spa and Pool Institute, Inc., 570 So. 2d 612, 618 (Ala. 1990). In the aftermath of widespread roof failures in Hurricane Andrew, a federal court in Florida followed King in holding that the American Plywood Association had a duty to homeowners to exercise due care in promulgating construction standards. Prudential Property and Casualty Insurance Company v. American Plywood Association, 1994 WL 463527 (S.D. Fla. 1994).

Product Certification

Some trade associations go beyond the development of product standards; they examine products and certify that they meet established standards. Courts have held such associations liable if a "certified" product proves defective and causes injury. See, e.g., FNS Mortgage Service Corporation v. Pacific General Group, Inc., 29 Cal. Rptr. 2d 916 (Cal. App. 1994) (association was subject to liability to consumers for failure to exercise reasonable care in inspecting plumbing supplies for conformity with its uniform plumbing code); Duffin v. Crater Farms, Inc., 895 P.2d 1195 (Idaho 1995) (Idaho Crop Improvement Association, the only entity which could certify seed potatoes in the state of Idaho, occupied a "special relationship" with those who relied upon it to certify their seed and could be held liable for the negligent performance of its functions).

Product Endorsements

Courts have considered the potential liability of associations that allow their names to be placed on products for marketing purposes. In Hanberry v. Hearst Corporation, 81 Cal. Rptr. 519 (Cal. App. 1969), the plaintiff was injured due to an alleged defect in a pair of shoes which bore the "Good Housekeeping Seal of Approval." The court held that an association which endorses a product for its own economic gain, and to encourage the public to buy it, may be liable to a purchaser who buys the product in reliance on the endorsement and is injured because it is defective and not as represented.

Dissemination of Information

In some cases, liability is sought against a trade association on the basis that it has misled the public regarding a product marketed by its member companies, usually by disseminating publicity that either denies defects or omits information regarding dangers of the product being promoted. In Arnstein v. Manufacturing Chemists Association, Inc., 414 F.Supp. 12 (E.D. Pa. 1976), the plaintiff sued to recover for injuries sustained as a result of long-term workplace exposure to vinyl chloride. The plaintiff asserted that the trade association had erroneously recommended a "safe" exposure level. The court held that circumstances might exist under which the association would owe a duty to the plaintiff. In Klein v. Council of Chemical Associations, 587 F.Supp. 213 (E.D. Pa. 1984), a printing industry worker brought suit against manufacturers of printing chemicals and their trade association alleging that he had contracted cancer as a result of long-term exposure to various chemical products used in the industry. The court held that the trade association did not owe a duty of care to the plaintiff.

In Friedman v. F. E. Myers Co., 706 F.Supp. 376 (E.D. Pa. 1989), the plaintiffs brought a personal injury action arising out of their alleged exposure to polychlorinated biphenyls (PCBs) against a water pump manufacturer and its trade association. The court denied a motion for summary judgment on a civil conspiracy claim under which the plaintiffs charged that the trade association and its members had conspired to disseminate false and misleading information and to suppress facts about the dangers of PCBs in well pumps. In Gunsalus v. Celotex Corp., 674 F.Supp. 1149 (E.D. Pa. 1987), a cigarette smoker who had developed lung cancer sued the manufacturer and the Tobacco Trade Association, claiming that the association was negligent in disseminating scientific and medical information to the public. The court held that the association did not assume a duty to perform research and inform the public of all the dangers of cigarette smoking, even though it had generally promoted tobacco products. In a similar case, City of New York v. Lead Industries Association, Inc., 597 N.Y.S. 2d 698, (N.Y. App. 1993), the result was dramatically different. In that case, several lead-based paint manufacturers and their industrial trade association were sued for fraudulently misrepresenting, through the marketing actions of the trade association, the safety of lead-based paint and for concealing their knowledge of the paint hazards. The court held that the association and its member companies could be held jointly and severally liable for the activities of the association.

Conclusion

Cases imposing liability on trade associations warrant the attention of product manufacturers who are members of such associations. Although the Lead Industries case may be an aberration, the court in that case deemed the trade association to be the agent of the member companies and held that liability for the association's misrepresentations would attach not only to the members who actively participated, but also to those who continued their membership without protest.

Related Insights