BILL ANALYSIS SENATE JUDICIARY COMMITTEE John L. Burton, Chairman 1997-98 Regular Session SB 67 S Senator Kopp B As Amended February 14, 1997 Hearing Date: April 8, 1997 6 Civil Code 7 GWW:cjt SUBJECT Products Liability: Repeal of Immunity for Tobacco Products DESCRIPTION This bill would repeal the current immunity conferred upon manufacturers and sellers of tobacco products, as specified in Civil Code Section 1714.45, for products liability. BACKGROUND In 1987, the Legislature enacted Civil Code Section 1714.45 to provide an immunity to manufacturers and sellers in a products liability if: (1) the product was oinherently unsafeo and commonly known to be unsafe; and (2) the product is a common consumer product intended for personal consumption, such as sugar, castor oil, alcohol, tobacco and butter, as identified in comment i to Section 402A of the Restatement (Second) of Torts. In American Tobacco Co. v. Superior Court (1989) 208 Cal.App.3d 480, the First District Court of Appeal stated that Section 1714.45 was opoorly draftedo and construed the statute to provide an unconditional immunity to tobacco products. More recently, in Richards v. Owens Corning, Inc. (1997) 14 Cal.4th 985, the California Supreme Court construed Section 1714.45 to onegate liability to voluntary users....In other words, under the conditions of Section 1714.45, a tobacco supplier simply commits no tort against knowing and voluntary smokers by making cigarettes available for their use.oo(Id., at p. 1000.) Richards noted that a determination of the exact substantive scope of Section 1714.45 was not necessary for the case at hand and that it otakes no position of the correctness of the American Tobacco decisiono construing section 1714.45 to provide a onearly complete immunity.o (Id., footnote 8 at p. 1002.) CHANGES TO EXISTING LAW Existing law provides an immunity to a manufacturer or seller in a product liability action if (1) the product is inherently unsafe and is known to be unsafe by the ordinary consumer with common community knowledge who consumes the product, and (2) the product is a common consumer product intended for personal consumption, such as sugar, castor oil, alcohol, tobacco, and butter, as identified in comment i to Section 402A of the Restatement (Second) of Torts. The term oproduct liability action" is defined to mean oany action for injury or death caused by a product, except that the term does not include an action based on a manufacturing defect or breach of an express warranty.o This bill would delete tobacco from the list of illustrative examples and provide that Section 1714.45 does not exempt tobacco products from product liability actions. COMMENT 1. Repeal of tobacco immunity: restoration of private cause of action According to the authoros office, this bill is intended to restore products liability law as it relates to tobacco products prior to the enactment of Civil Code Section 1714.45. In support of the repeal, he writes: "Evidence has now become available showing tobacco companies may have deliberately manipulated the level of nicotine, a powerfully addictive substance, in tobacco products so as to create and sustain addiction in smokers. In addition, evidence shows the tobacco companies have systematically suppressed and concealed material information and waged an aggressive campaign of disinformation about the health consequences of tobacco use." In support, the California Medical Association, one of the main participants in the tort liability reform package of 1987, writes: oAt the time, it was not anticipated that the California courts would interpret this provision [Section 1714.45] so broadly. Over the last decade, we have also learned much regarding the addictive nature of tobacco and the industryos intentional efforts to mislead the public on the health effects of tobacco. This, coupled with the courtso broad interpretation of the California statute, has precipitated the need to change that statute and remove tobaccoos liability protections.o The repeal would leave tobacco manufacturers and suppliers subject to products liability claims by users of the product. However, common law defenses, such as assumption of the known risk, will be available to tobacco manufacturers and suppliers. In addition, certain claims may be pre-empted by the 1965 Federal Cigarette Labeling and Advertising Act and the 1969 Public Health Cigarette Smoking Act. (See Cippollone v. Liggett Group. Inc. (1992) 505 U.S. 504.) Generally, some ofailure to warno cases are preempted (those based on a state-law requirement or prohibition with respect to advertising or promotion), but state law claims for damages based on breach of express warranty, intentional fraud and misrepresentation, or conspiracy to misrepresent or conceal material facts concerning the health hazards of smoking, are not pre-empted. Id. at 524. 2. Opposition Opponents assert that Civil Code Section 1714.45 provides manufacturers appropriate protection from lawsuits from individuals who choose to use an inherently dangerous product. The California Chamber of Commerce writes: "We do not believe that individuals should be able to engage in inherently dangerous activities and then sue someone for the harm which results from that activity. The current law requires that individuals accept responsibility for the known consequences of their actions which we believe is sound policy." A representative of the tobacco companies have also expressed opposition to repeal of the immunity. However, they have not submitted a formal letter of opposition. 3. Prospective repeal only Some concern has been expressed that SB 67 would apply only to causes of action arising on or after January 1, 1998, assuming it is enacted this year. In the absence of specific language in the legislation specifying retroactive application, a measure will operate prospectively only upon its enactment. 4. Impact on state recovery actions unclear The State Attorney General has steadfastly maintained that the osweeping immunityo of Section 1714.45 bars him from filing a state lawsuit to recover state costs of treating residents for tobacco-related illnesses. (Statement of Steve Telliano, spokesman for the Attorney General.) A prospective repeal of the immunity could be used by the Attorney General to support his contention. If his claim is correct, passage of this bill should enable him to sue for costs incurred after January 1, 1998, but would not solve the problem of suing to recover treatment costs spent by the state prior to January 1, 1998. However, substantial doubt has been voiced about the Attorney General's legal opinion. Several recent court decisions have already concluded that Section 1714.45 does not provide a osweeping immunityo against public entity actions. For example, it does not bar a claim for unfair trade practice under Business and Professions Code Section 17200. (See Cardoza v. Liggett Group, Inc. et. al. (1997) No. 651824, San Diego Superior Court, Order dated October 30, 1996. See, also, People of the State of San Francisco, et. al. v. Philip Morris Inc., et. al. (1996) No. 980864, San Francisco Superior Court, Order dated January 8, 1997. Conspiracy and deceptive practices claims are not barred by Section 1714.45.) Nor does it bar claims based on fraudulent conduct. (See City and County of San Francisco, et. al., v. Philip Morris Inc., et. al., No. C-96-2090-DLJ, Order dated February 26, 1997, pp. 18-19. oCalifornia law recognizes a distinction between claims based on fraudulent conduct and claims based on defects in a product.... Based on this distinction, the Court finds that plaintiffos state law fraud and special duty claims are not barred by section 1714.45.o) Moreover, the Attorney General just recently entered into Liggett Group class action settlement of a claim to recover state treatment costs. WOULD THIS BILL BE USED BY THE ATTORNEY GENERAL TO SUPPORT HIS POSITION THAT HE CANNOT SUE TO RECOVER STATE COSTS OF TREATING TOBACCO-RELATED ILLNESSES UNTIL SECTION 1714.45 IS CHANGED? TO REMOVE ANY DOUBT, SHOULD THE BILL BE AMENDED TO ALSO PROVIDE THAT THE STATE MAY BRING A DIRECT AGGREGATE ACTION AGAINST TOBACCO COMPANIES FOR THE RECOVERY OF ITS COSTS? 6. No impact on other products The bill would not affect the immunity afforded to the other consumer products illustrated by way of example in Section 1714.45, to whatever extent the immunity applies. 7. Other pending legislation SB 340 (Sher) would state the Legislatureos intent in enacting Civil Code Section 1714.45 in 1987 and provide that the provision does not apply to any action against a tobacco company, its successor-in-interest, or a tobacco industry research organization brought by: 1) any party who did not voluntarily consume the product; 2) any party for fraud, misrepresentation, or conspiracy; or 3) a party on behalf of a public entity to recover the entityos costs of treatment provided to individuals injured by the use of tobacco products. SB 340 is also scheduled for hearing on April 8. Support: California Medical Association; American Lung Association; American Heart Association; American Cancer Society; City of Los Angeles; Retired United Pilots Association; California Nurses Association; California Alliance for Consumer Protection; Americans for Nonsmokers' Rights (if amended) Opposition: California Chamber of Commerce; Philip Morris: R. J. Reynolds HISTORY Source: Author Related Pending Legislation: SB 340 (Sher) Prior Legislation: None Known **************