Last week the Fifth District Court of Appeals affirmed a Dallas district court’s judgment awarding nearly $200 million in a product liability action in which a rear-end collision left two small children with permanent severe traumatic brain injuries. The majority opinion has serious and far-reaching implications for Texas product liability law, as well as for the use of the “Reptile theory” to demonize a corporate defendant to distract the jury from the lack of evidence of an actual defective product.
Toyota Motor Sales, U.S.A., Inc. and Toyota Motor Corporation v. Reavis (No. 05-19-00075-CV) arose from a 2002 accident on North Central Expressway in Dallas. While stopped in traffic, plaintiffs’ Toyota Lexus was struck from behind by a Honda SUV traveling at between 45 and 48 m.p.h. The collision pushed the plaintiff’s vehicle into the vehicle in front, before the Honda struck the Lexus again at a slower speed. During the chain reaction, the plaintiffs’ seatbacks deformed, causing the plaintiffs to slip up and back into the back seats, a response to a rear-end collision called “ramping.” The plaintiffs’ heads collided with the heads of their 5 and 3-year-old children, who were secured in car seats. As a result, the children sustained severe traumatic brain injuries, though their parents suffered only minor injuries.
The plaintiffs brought suit on behalf of their minor children against Toyota, the Toyota dealer that sold them the vehicle, and the driver of the Honda SUV. They alleged design and marketing defect claims against Toyota and the dealer, negligence against the driver, and gross negligence against all defendants. After a three-week trial, the jury found Toyota liable on the design and marketing claims, the dealer liable on the marketing claim, and the driver liable for negligence. It awarded more than $98 million in actual damages (including future medical) and apportioned 90% of the fault to Toyota. It also found Toyota and the dealer grossly negligent and awarded punitive damages of nearly $110 million, $95.4 million of which charged to Toyota. Plaintiffs settled with the driver during jury deliberations, so these amounts reflect the application of the settlement credit. The trial court denied Toyota’s motions for a directed verdict, a verdict JNOV, and a new trial.
On appeal, Toyota challenged plaintiffs’ liability theories, the trial court’s evidentiary rulings, the sufficiency of the evidence, and parts of the jury charge. In a lengthy opinion authored by Justice Nowell and joined by Justice Partida-Kipness, the court rejected Toyota’s arguments one-by-one. Specifically:
- Toyota invoked §82.008(a), CPRC, which establishes a rebuttable presumption that a product that meets or exceeds applicable federal safety standards, asserting that the seatbacks met or exceeded the Federal Motor Vehicle Safety Standards (FMVSS) and that the plaintiffs did not rebut the adequacy of the standards under §82.008(b). Toyota further argued, for the first time on appeal, that federal law pre-empts 82.008(b) because the statute allows a jury to supersede a federal agency’s determination of uniform standards. The court rejected the first argument, finding that the plaintiffs did offer rebuttal evidence of the inadequacy of the design from which the jury could reasonably have determined overcame the presumption. The court likewise found that the plaintiffs offered rebuttal evidence from which a jury could conclude that Toyota, after marketing the vehicle, withheld or misrepresented information about the safety of the seatbacks. Some of this evidence pertained to Toyota’s federal lobbying activities and representations that the company had a strong internal culture of safety. Plaintiffs also submitted evidence of Toyota’s 2014 deferred prosecution agreement in which it admitted to having misled US consumers with respect to safety issues involving unintended acceleration problems with Toyota vehicles. With respect to the pre-emption argument, the court found that since Toyota did not raise the argument trial or in its post-trial motions, nor did it object to the relevant jury instruction, it did not preserve appeal.
- Toyota asserted that the plaintiffs cannot prevail on the marketing defect claim because they presented no evidence of what such a warning might have said nor any indication that the plaintiffs would have read a warning if it was provided. The court rejected this argument as well, finding that the jury could conclude that Toyota knew or reasonably should have known about the risk posed by the seatback design but failed to give adequate warning of the risk.
- Perhaps the most significant issue in the case for TCJL members involves the trial court’s evidentiary rulings. On appeal Toyota challenged the trial court’s admission of evidence related to the company’s lobbying activities, the deferred prosecution agreement the company entered into in 2014 regarding the unintended acceleration, and video clips from a 1992 60 Minutes story about seatback failures. The trial court, according to Toyota, also allowed an insinuation that Toyota destroyed seatback safety test information, although the company did so in accordance with its routine document retention policies. For obvious reasons, Toyota argued that the inflammatory effect of this evidence substantially outweighed its dubious probative value to the actual defect at issue. The court found that the trial court did not abuse its discretion in admitting this evidence, noting that the trial court had issued appropriate limiting instructions to the jury. It determined that evidence of the deferred prosecution agreement was probative as to Toyota’s claims about its robust safety culture and relevant to the credibility and bias of the company’s witnesses at trial. The video clips, the court found, were admissible on the issue of whether Toyota was aware of the extreme risk of ramping to rear-seat passengers and was consciously indifferent to that risk. Again, it determined that the trial court did not abuse its discretion in admitting this evidence with respect to the plaintiffs’ gross negligence claim.
Justice Schenk dissented to the majority opinion in its entirety. He rejected the plaintiffs’ design defect claim on the basis that they failed to prove a defect actually existed, relying instead on a weakly supported claim that federal safety standards were inadequate. Further, he found no evidence in the record of “any automobile that has been marketed with both the seatback strength necessary to avoid the injuries here and the proposed seatbelt changes that would protect front seat occupants” from the ramping effect. As Justice Schenk observes:
The Texas Supreme Court has repeatedly held that proof of a design that would reduce or eliminate risk of a single accident type is insufficient to sustain a design defect claim. Were it otherwise, manufacturers would be unable to settle on any design, much less one that would promote the underlying purposes of the basis of product liability—promoting the safest overall design possible to all consumers, users, and other persons on the road. Cars cannot be designed with the foreknowledge of which type of severe accident they might encounter.
Justice Schenk then conducts a lengthy analysis of §82.008, CPRC, concluding that the majority misapplied the statute by allowing the plaintiffs to rebut the presumption by: (1) using evidence concerning an entirely different issue (unintended acceleration), and (2) by alleging the inadequacy of federal safety standards relating to seatbelts based not on the development of the standards themselves but on the theory that any failure of the restraint system necessarily demonstrates the inadequacy of the standards. Such a reading guts §82.008, CPRC, and arrogates to courts a license to overrule federal safety standards by fiat.
Finally, Justice Schenk finds the admission of evidence attacking Toyota’s corporate culture, particularly evidence regarding lobbying activities and paying a fine arising from a different issue, disturbing and inappropriate. “These evidentiary attacks,” he notes, “seem more reflective of the English idiom ‘first you give a dog a bad name, and then you hang him.’” If every time a corporate representative speaks to a member of the legislature or a government regulator, testifies before a legislative committee or administrative agency, or says anything complimentary of the safety record of the company may be used against it in litigation to imply a nefarious purpose, then we have taken the “reptile theory” to a new level.
Given the size of the award, the scope of the issues, and the court of appeals’ split decision, we can expect Toyota to seek SCOTX review in the near future. The majority opinion is troubling on so many fronts that a response from the broader business community may well be warranted. TCJL will keep you informed about the progress of this case as it moves forward.