In what seems to be an ever-expanding search for defendants with resources, plaintiffs in mass tort actions have continued to reach up and down the chain of commerce looking for new defendants. Nowhere is this practice more common than in the drug and medical device cases where parent companies, medical associations, and suppliers are brought in on a myriad of theories -- some more creative than others. However, in their efforts to move up the chain to the component part manufacturers and bulk suppliers of raw materials, plaintiffs have hit a stumbling block with a recent decision which makes it clear that at least in California there remains some insulation for the bulk supplier of raw materials. Artiglio v. General Electric Company, 98 Daily Journal D.A.R. 1757 (Feb. 20, 1998).

In Artiglio, plaintiffs -- women who had received silicone breast implants manufactured by McGhan Medical Corporation ("McGhan") -- alleged negligence, breach of warranty and deceit as against General Electric ("GE") -- the supplier of the silicone components. The facts relating to the transaction between GE and McGhan are neither disputed nor uncommon in the medical device industry. GE supplied McGhan with silicone manufactured to particular specifications set by McGhan. Warranty from GE documents claimed only to meet McGhan's specifications and disclaimed any responsibility for determining whether the material was suitable for medical applications. Further, GE used a basic chemical in formulating the silicone which it used in a host of other silicone materials supplied to other companies for use in a wide variety of products -- medical and non-medical. Yet, plaintiffs claimed that GE knew or should have known that silicone was not appropriate material for use in medical devices and that GE failed to convey what it knew or should have known to its customers.

Historically, the duty of a component manufacturer or supplier to warn about the hazards of its product has been recognized in certain contexts. As the law relating to these types of defendants develops, there has been a focus toward balancing factually what the supplier's duties were and what from what they may be relieved. In an older case, the California Court of Appeal indicated that a manufacturer of tubing supplied in rolls to a hospital may have had a duty to warn about the plastic's propensity to kink when heated or soaked, due to the supplier's knowledge that doctor's were using the material to fashion heart catheters. Putensen v. Clay Adams, Inc. 12 Cal.App.3d 1062 (1970). The Putensen court determined that it was a question of fact as to whether a reasonable test or inspection would have disclosed the propensity and if such inspection would have disclosed this propensity then a jury could decide if the manufacturer should have warned of it. Id. at 1071. Although Putensen appeared to have given an opening to the argument that a raw material supplier may have a greater burden if it knows the uses to which its product will be applied, more recent cases simply require adequate warning of a products dangers to the intermediate buyer. Groll v. Shell Oil Co. 148 Cal.App.3d 444 (1983)(duty of a bulk supplier is to warn the intermediate supplier and after such time its responsibility must be absolved).

Other jurisdictions have similarly vacillated on whether a greater duty to warn or inspect will attach when a supplier knows the uses to which its material is intended to be made. Stuckey v. Northern Propane Gas Co. 874 F.2d 1563, 1568 (11th Cir. 1989) (relying on knowledge of ultimate consumer's use, found that a propane gas supplier had a duty to warn that the odorant in its gas was subject to fading); Andrulonis v. U.S., 924 F.2d 1210, 1223 (2d Cir. 1991) (held government liable when a vaccine researcher was exposed to a virus which was supplied by the government and packaged -- with the government's knowledge -- into an aerosol form about which the government would have known was dangerous).

However, Artiglio points to the more recent series of cases involving the supplier of Teflon used in manufacturing temporomandibular jaw (TMJ) implants. In these cases, the courts have made it clear that knowledge of how a raw material will be used to create a final product does not, by itself, create a duty to investigate risks posed by such product. See In re TMJ Implants Products Liability Litigation, 97 F.3d at 1055- 1058; Kealoha v. E.I. DuPont de Nemours and Co., Inc., 82 F.3d 894, 899-901 (9th Cir. 1996); La Montagne v. E.I. DuPont de Nemours and Co., Inc., 41 F.3d 846, 857 (2d Cir. 1994). Further, the idea is supported by the Restatement Third which indicates that "'[i]nappropriate decisions regarding the use of [raw] materials are not attributable to the supplier of the raw materials but rather to the fabricator that puts them to improper use....'" Artiglio at *5. Where the supplier provides materials used in wide range of products, the rationale for limiting the liability of these suppliers is even more clear. To impose a duty on these suppliers would be to require them to become experts "in the infinite number of finished products that might conceivably incorporate their multi-use raw materials or components." In re TMJ Implants Products Liability Litigation, 97 F.3d at 1057 (8th Cir. 1996). Moreover, in another older decision, Walker v. Stauffer Chemical Corp., 19 Cal.App.3d 669, 673 (1971), the California court relied on the reasoning of the Restatement (Second) of Torts and determined that where a product undergoes further processing or substantial change after it leaves the supplier's hands, the responsibility to prevent or warn of a dangerous propensity may be shifted to the intermediate party.

Thus, Artiglio is significant in its affirmative position embracing the rationale which concludes that the duties of these component manufacturers or suppliers is not unlimited. Artiglio at *3. In looking at the "raw material" and "sophisticated buyer" analysis, the court comes in on the side of a simple test. Suppliers are not liable to the ultimate consumers if the following facts are established:

• The goods or material they supply are not inherently dangerous;
  
• The goods or material is sold to a sophisticated buyer;
  
• The material is substantially changed during the manufacturing process by the buyer;
  
• The supplier has a limited role in developing and designing the end product, e.g. comment e to section 5 of the Restatement Third which states that "a supplier who simply designs a component to the buyer's specifications, and does not substantially participate in the integration of the component into the design of the product, is not liable within the meaning of Subsection (b). Nor does providing mechanical or technical services or advice in the selection or integration of a component into a product over whose overall design, testing or labeling the component supplier does not exercise control constitute substantial participation which would subject the component supplier to liability."

When these factors exist, the social cost of imposing a duty to the ultimate consumers far exceeds any additional protection provided to consumers." Id. at *6; See In re TMJ Implants Products Liability Litigation 97 F.3d at 1057 (8th Cir. 1996); Walker v. Stauffer Chemical Corp., 19 Cal.App.3d 669 (1971).

Not surprisingly, the court notes that this rationale will protect the raw material supplier from a defect in an ultimate product, but it would not protect the supplier from a defect in the raw materials generally -- like a supplier of raw coffee beans which are contaminated when sold to the intermediate buyer who roasts and packs them selling them to the ultimate consumer. Artiglio at *4, citing Restatement 2d (Torts) Section 402A, Comment p.

In looking at the facts relating to GE and McGhan, the Artiglio court found that the first element was easily determined -- the silicone supplied by GE was not inherently dangerous -- concluding the only time it was potentially dangerous was when it was used in a medical device. Artiglio at *6. The court also had no trouble with the second test, determining that the buyers were highly sophisticated and "under a legal duty to investigate the potential hazards of implants and each one was in a position to test and evaluate the potential risks of its products and each of their components." The court further noted that the purchasers from McGhan were in a far better position to evaluate the silicone than the doctors in Putensen who fashioned individual heart catheters from tubing supplied by the defendant in that case. Id. Also, GE provided express disclaimers indicating that the manufacturer was responsible for determining the suitability of silicone as the ingredient for the devices they were manufacturing.

In looking at the third factor, the undisputed facts demonstrated that the materials supplied by GE were subjected to substantial processing including cooking the two types of silicone provided by GE, injecting the substance into the shells, packaging and marketing -- over which GE had no control. Again, the court noted the contrast between the sophisticated manufacturing/processing by McGhan and the simple stretching done by the doctor buyers in the Putensen case. In this way, the Artiglio court distinguishes Putensen finding that the level or processing was significant. Id. Finally, the court noted that while GE developed silicone to meet the specifications of manufacturers and consulted on a regular basis about the specifications, it in no way had control over design, testing or labeling of the implants themselves. Id. at *7.

Thus, though the Putensen case lives on as a threat to imposing some liability on a raw material supplier if it knows the uses to which its material will be put, Artiglio sets clear guidelines for imposing such liability and demonstrates that in many products cases, the sophistication level of the manufacturer-buyer and the lack of control over the design by the raw material supplier will almost inevitably insulate the supplier of a material which is not inherently dangerous.