A June 16, 2009 story in Law360 featured comments from Venable partner Bruce Parker on the high stakes of product recalls and the importance of having the effective recall procedures in place, which may mitigate a company's liability.
"My experience with product recalls is that Murphy's law will usually surface," Parker said. "Cutting corners in a recall increases the probability of someone being allegedly injured by the product during the recall. Should this happen, the potential liability and damage exposure is increased."
The good news, he said, is that maintaining good manufacturing batch and lot records that allow for traceability, coupled with a committed company that doesn't cut corners, will generally produce an effective recall. This is important because the consequences of not doing a proper recall are often far worse than the potential liability that generated the need for a recall, he said.
"It doesn't take too many punitive damage awards or inflated compensatory damage awards driven by juror anger to exceed whatever cost savings the company thought it might achieve with a less than aggressive recall," Parker said.
On the other hand, he said, a jury can be so impressed with how a company conducts a recall that they overlook early conduct that in retrospect could have been better, as in a case he handled several years ago for a major drug company in which the facts of the recall were so powerfully good in his client's favor that the company's reasonableness in that regard helped overshadow some problems it had on liability.
Besides not recognizing the need for a recall soon enough, companies also put themselves at risk by generating damaging e-mail traffic internally as people debate the need for a recall, by not authorizing or conducting an aggressive retrieval of product that has been released to consumers, or by ending the recall too soon, Parker said.
"Failures in any of these areas increases potential liability exposure and the risk of larger compensatory and even punitive damages for companies," he said.