On the surface, it might seem strange that Ford Motor Co. is spending $1 million to defend itself against a reckless homicide charge that carries a maximum fine of about $30,000.
But the ramifications of a Ford conviction for its role in designing the 1973 Pinto in which three young women died during a fiery crash 17 months ago in Indiana go much deeper than any possible fine.
The case, which opens tomorrow, could signal a new era of corporate liability, opening the door for the first time to the possibility that criminal sanctions could be brought against companies and their executives for design and production failures of the products they manufacture and sell.
Specifically, Ford goes on trial in the tiny Winamac, Ind., courtroom, on charges that it "recklessly" failed to warn buyers and drivers of its Pinto that the car had a particularly vulnerable gas tank which would leak fuel and become more prone to explosion and fire in the event of a rearend collision.
Elkhart County Prosecutor Michael Cosentino (the case was moved to Winamac on a Ford motion) will attempt to show through internal Ford documents that the company knew the design of its gas tank was bad, and would result in a certain amount of crash victim deaths due to fire, but didn't change the design for several years because of costs, and until the company had to in order to be in technical compliance with new federal safety design standards.
In Indiana, as in many other states, the manufacturer of any product, including a motor vehicle, can be held accountable for any risks that could have been reasonably foreseen in the use of that product.
In the case of an automobile, for example, that means that a company is liable for an injury that results from a structural defect. Because a crash is a forseeable event, the defect does not even have to cause the crash.
In the accident in this case, three young women were burned to death, according to autopsies, after the Pinto they were driving in was slammed in the rear by a van on a Goshen, Ind., highway. Because it was the burns, and not the crash, that reportedly killed the teenagers, the State of Indiana alleges the deaths to be reckless homicide.
The state contends that because Ford knew about the problems with the gas tank design -- it was located at the very rear of that auto, and too susceptable to leaks and fires during rearend crashes -- and still chose both not to change that design for several years and not to inform the public, the company acted in "reckless disregard" for life of Pinto riders.
In fact, the federal Transportation Department found in May 1978 -- three months before the accident -- that the fuel system in all (except for station wagons) Pintos and the twin Mercury Bobcats built between 1971 and 1976 was defective. Ford later agreed to recall the vehicles to correct the problem. By the 1977 model year, the company had changed the design of the car to correct the problem.
Ford has been hit hard in several civil cases involving fiery Pinto crashes. A California jury awarded a badly burned youth $128 million in one verdict, although a judge later trimmed that judgment to $6.3 million.
But this is the first time anyone has sought to convict the company -- or any company -- criminally for its actions in designing a product. The real damage to Ford is the devastating impact a conviction could have on the dozens more civil cases pending.
And the real damage to industry in general if Ford is convicted is a tidalwave effect that could lead to many more criminal charges being brought in product liability cases.
"The impact of this case is going to be in the criminal law field," said Prosecutor Cosentino in an interview.
"This case is a test as to whether or not the teeth of the criminal law will enter the civil law products liability field," he said, adding that "this situation should only come into the picture when civil damages are no longer a remedy."
Cosentino said that under a 1977 Indiana criminal code revision, both a corporation and indiviuals in that corporation could be charged in such criminal indictments. He said he did not go after the indictment of Ford executives because "Ford Motor Co., the corporation itself, was all that Elkhart County could handle. To go further, and take the next step, which may be individuals, (would have to be done by somebody with far more resources than we have in Elkhart County."
Cosentino plans to cite a U.S. Court of Appeals ruling two years ago in the Indiana case of Huff vs. White Motor Corp., which upheld earlier court rulings that "an auto manufacturer has aduty to design and construct its product so as to be reasonably fit for its intended use and reasonably free from hidden defects."
In that case, a truck driver died after his truck jacknifed, and its fuel tank ruptured and ignited. His wife sued, claiming the fuel tank design was defective and prone to fire in such situations.
The fact that Ford knew of the alleged defects in the Pinto several years before it corrected them, and perhaps even before the fateful car in question was built, makes the company criminally reckless, Cosentino will charge.
The additional fact that the government did not require tough rear-end-collision protection until 1977 is irrelevant because the company itself knew of the dangers involved, Cosentino is likely to claim.
But Ford attorney James F. Neal says the case boils down to three questions:
"Should you apply state criminal laws as a sanction against manufacturers generally? Should you apply state criminal law to an industry that is highly regulated by federal standards?Should you allow (the case) to proceed criminally when the vehicle met all those standards?"
Neal argues that in this case, an individual state is taking it upon itself to impose tougher standards on a company than are already required by the federal government.
He asks how any company can manufacture products for a national market, within federal safety guidelines, when any state might come along later and say that the federal standards are not good enough and that the company is to blame for some disaster?
"If a jury in Indiana is gonna say (that meeting the federal standards) is not enough, then what is a Jury in Alabama gonna say?" he asks.
Under such a finding, individuals also would be held liable for products they designed for coporations, Neal said."Does that mean that any engineer must check with his own private counsel to see whether when he signs off on a car that meets the federal standard that he may be subjecting himself to prosecution in one or all of the 50 states who might decide they are going to prosecute him because they have their own idea of what that standard should be?"
"If you allow state criminal charges to be used in the arsenal against producers who are regulated federally, what happens to uniformity" and howcan any company function in such an environment? asks Neal.
In fact, the entire issue of product liability has been a touchy one for several years. The issue started emerging in 1973 and 1974, when product liability judgments of millions of dollars against various manufacturers began to appear in newspaper headlines around the country.
That was followed by a crisis in product liability insurance, with several insurers boosting their rates exponentially, often not because of rational data but rather because of fears that they could be destroyed by even a handful of unpredictable blows. Although the situation has eased a bit recently, the problem remains unresolved.
"Companies don't know what to expect, what standard they are going to be held to, what degree of care one must exercise in desinging and producing a product," said Kim Smith, a product liability expert for the National Association of Manufacturers.
"Most companies would not consciously sacrifice safety of their consumers; it's just bad business," she contended.
Conscious of the problem, which it found popping up in many of its regulated industries, the federal government decided two years ago to launch a major study into the problems of product liability.
The Commerce department investigated the huge problems involved with state inconsistencies in their assessments of the safety of nationally sold products.
NAM's Smith praised Commerce Department official Victor Schwartz' study, which she said "added immeasurably to an understanding of the different dimensions." Schwartz' study, which detected inconsistencies in many areas of liability law, recommended a model product liability bill that all states could draft, thus subjecting companies that sell in interstate markets to the same standards everywhere.
That bill also has been proposed as a federal law to Congress by Rep John LaFalce, (D-N.Y.), and likely will be the subject of hearing next spring.
Although the commerce study does not recommend fundamental changes like the creation of federal tort laws to apply to federally regulated industries, there is an increasing call for that kind of solution from those industries.
"We're trying to get the technological perspective, the economic perspective and the legal perspective back into some semblance of order, so the judgments that are made are fair judgment calls . . . . against a manufacturer or in favor of a manufacturer," said Smith.
But in Winamac, Ind., (pop. 2,400) -- where the death of three teenaged girls will be relived -- Ford has to worry about the judgment of a country jury.