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Defective or defensible? Defending product liability claims in Israel
By BENJAMIN LEVENTHAL AND MENACHEM C. KLEIN
04/12/2013
Israel, too, has caught the product liability wave that has taken other western countries by storm.
 
Product liability refers to the body of law which addresses damages or injuries sustained from the use of faulty or “defective” products.

This area encompasses a wide spectrum of cases, from relatively minor damages resulting from the malfunction of a small consumer gadget through multi-million dollar corporate claims stemming from the operational failure of major industrial machinery.

In some cases, damages are a direct result of the defendant’s action or inaction, while in others the defendant merely set in motion a chain of actions which ultimately caused the plaintiff’s loss.

But one thing is clear: some of the most publicized cases and courtroom trials in history are, at heart, essentially product liability claims.

Israel, too, has caught the product liability wave that has taken other western countries by storm. Israeli parties are increasingly stepping up their efforts to pursue such claims in Israeli courts – even against manufacturers based thousands of miles away, even where the foreign-produced products played only a minor role in causing the damages, and sometimes even where the case has almost no factual connection to Israel at all.

As a result, foreign companies are now finding themselves in the position of having to educate themselves on Israeli law and jurisprudence. The truth is, behind the populist facade of product liability lies pretty complex legal DNA. In Israel in particular, product liability claims can be based on a wide variety of very distinct legal theories.

Some plaintiffs choose to predicate their case on the Contract Law (General Part), 1973, alleging the seller breached certain express and/ or implied contractual obligations with the buyer by delivering a defective product. Other claimants establish their claims using the Sales Law, 1968, alleging that the defendant failed to live up to its warranty that the product in question was fit for a particular purpose or of standard and average quality. Others focus on the defendant’s deception, arguing that this constitutes a violation of the Consumer Protection Law, 1981.

But perhaps the most common approach of all is to argue that the defendant’s conduct constituted “negligence,” thereby violating the Torts Ordinance [New Version].

As is the case in general tort law, here the claimant must establish that the defendant had a duty of care toward the claimant which was breached by the defendant’s production and/or sale of a defective product and that said breach caused the claimant damages.

Because the “tort route” is the most prevalent (and interesting) of the various causes of action that may be considered, it is the one upon which we primarily focus on here.

When analyzing a product liability claim grounded in tort, defense lawyers often give special attention to the issue of causation. That is, did the defendant legally and factually cause the damages sustained by the plaintiff? Or did something else – such as the plaintiff’s own “contributory negligence” – play a prominent role in the damages? This issue tends to be of particular relevance in Israeli cases, perhaps due to a mindset that is highly prevalent in Israel; the same entrepreneurial and innovative spirit which has come to be associated with Israeli scientific and technological ingenuity can sometimes lead to a tendency to “experiment” when using products.

This can translate into the use of products in ways which were never intended by the producers of those products.

In some cases, damages or injuries might have resulted from the incorporation of foreign products as components into Israeli end- products.

Frequently, rather than ordering a complete end-use product which can be quite expensive (especially due to hefty Israeli customs duties and other taxes but also because of the origin of the product from a quality manufacturer), Israeli contractors prefer to order parts or components of the product and to then apply their own tailor-made modifications to the product. While this practice may save the Israeli user money initially, it can often lead to disastrous results in the form of malfunction, damages or personal injury.

As a matter of Israeli law, where a plaintiff “contributes” to his own damages by engaging in negligent conduct, the courts adopt a strict “comparative negligence” standard, meaning that the defendant’s responsibility to pay for damages from the defective product will be offset by the share of fault that is ascribed to the plaintiff for his or her own negligence.

It is important to stress that this “contributory negligence” defense, while helpful from the defendant’s point of view, is still not a complete defense because the defendant might still be liable for his share of the fault.

A somewhat related but legally distinct idea is known as the “assumption of risk” doctrine.

Here, the defense argues that the claimant knew or should have known that a particular course of conduct would pose a risk of harm, and yet engaged in said conduct anyway – thereby “assuming the risk” of any damages that may have occurred.

Like contributory negligence, this idea also focuses on the claimant’s own culpability. But it also goes a step further in that it is a complete defense, meaning that under Israeli law, there is generally a complete bar to any recovery whatsoever by the plaintiff.

Thus, where Israeli product users choose to experiment with products, one of the defense counsel’s tasks is to investigate whether it can argue that this constitutes contributory negligence, or even better, cast this conduct as an “assumption or risk” on the part of the plaintiff.

In a recent case handled by our firm, we represented a European manufacturer of unique walls and rails which sold various partitions to an Israeli contractor for use in a popular hotel. In order to save costs, instead of purchasing a complete wall unit for the site, the contractor pieced together smaller components and, to boot, used improper appliances and materials to construct the wall.

We were able to make effective use of the “product misuse” defense and to convince the court that the plaintiff assumed the risk posed by the products in question by misusing them. In so doing, we successfully shifted the focus from the defendant’s activity to the plaintiff’s negligence.

However, it is important that attorneys employing this defense be prepared for a counterargument often used by plaintiffs, namely that the defendant knew or should have known that the product would be “misused” in a specific way and thus should have designed the product to be able to withstand the risks posed by the alleged misuse.

Whether or not this counterargument succeeds often turns on just how novel the plaintiff’s use of the product was, and consequently, the degree to which plaintiff’s activity was foreseeable to the defendant.

Israeli firms experienced in product liability defense also obviously have a variety of other tools in their arsenal to assist foreign manufacturers, distributors, retailers and other potential defendants. As is the case with all cross-border litigation, another area ripe for exploration is whether the local court is the proper forum for the matter.

In another recent matter, we obtained the dismissal of a lawsuit against an Italian automobile product manufacturer on the grounds that the Israeli court lacked both personal and subject matter jurisdiction over the foreign-based client.

As these cases become even more prevalent in Israel, the importance of selecting local Israeli counsel with expertise in the nuances and intricacies of Israeli jurisprudence cannot be overstated. It can often mean the difference between a judgment for the plaintiff and one for the defense.

Adv. Benjamin Leventhal is a partner and Menachem C. Klein, Esq. is New York counsel at the Tel Aviv-based law firm of Gideon Fisher & Co. They are both members of the firm’s international department which specializes, inter alia, in product liability litigation as well as other cross-border disputes and transactions, international arbitration and general corporate advice. Adv. Leventhal regularly appears in Israeli courts of all levels, including the Israeli Supreme Court.
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