and insurance rates for manufacturers--began skyrocketing in the mid-1970s--manufacturers looked to their state legislatures for relief. One of the most popular ideas--enacted into law in many jurisdictions--was a total ban on suits brought long after an item had been made. Now some state courts are beginning to hold that those bans, however popular they may have been with both lawmakers and businessmen, are in fact unconstitutional.
That's what the New Hampshire Supreme Court decided last month, and its decision follows closely the reasoning of similar recent decisions from Florida, North Carolina and Alabama.
What is at issue in judging these "statutes of repose" is not the idea behind the more ordinary concept of "statutes of limitations." The statute of limitations says that, once potential plaintiffs know that they have been injured, they had better be reasonably quick about getting their claim to court. A statute of repose sets an absolute time period after which no suit can be filed, even if the injury--or knowledge of it--happens after the deadline.
One of the cases before the New Hampshire high court involved an accident with a crane manufactured in 1958. Another involved an explosion in a bottled-gas cooking system in a mobil home produced in 1968. In other situations, the justices pointed out, the time period between manufacturing and the filing of a suit could be even longer: they noted the discovery of adenocarcinomas in the daughters of women who, before their daughters were born, took the DES estrogen pill.
The New Hampshire state constitution--like those of most of the other states--insures citizens of the right to take disputes to court. So the question in assessing the limit on product liability suits was whether or not the curb was reasonable.
They decided in Heath v. Sears, Roebuck that it is not reasonable, because "its effect is to nullify some causes of actions before they even arise." And it makes no sense to limit suits arising from faulty products more severely than other kinds of claims for damages, the justices reasoned. A person hit by an old car could sue the driver for operating the vehicle in a dangerous way, but could not, under the statute of repose, sue the manufacturer for a faulty design that made the result of the accident far worse. That kind of discrimination is unconstitutional, they decided.
Besides, the justices said, the law had little effect on the supposed problem it was meant to remedy: product liability insurance rates leveled off around 1979 nationwide, regardless of state laws.
In other cases, courts ruled that:
* "Little FTC acts" in state law cover deceptive practices by lawyers. The Connecticut Supreme Court, in the first such ruling on the issue, decided there is no reason why the state's commissioner of consumer protection should not probe a legal clinic accused of misrepresenting both its own fees and those charged by competing attorneys. The Connecticut Unfair Trade Practices Act is supposed to be interpreted in light of federal interpretations of the Federal Trade Commission Act. And even though there have been no rulings on the applicability of the FTC act to lawyers, the Supreme Court has said it covers doctors, and that's a clear signal, the Connecticut justices said.
The lawyers under investigation argued that the probe violates separation of powers, since the courts discipline errant lawyers. But the state high court decided that just because there was one policeman was no reason that lawyers shouldn't have to answer to other regulators as well. (Heslin v. Trantolo & Trantolo, June 28)
* Employe social clubs encounter tax problems when they get money from sources other than membership dues. The Armour-Dial Men's Club, a group of workers for the meat packer, lost a battle with the Internal Revenue Service over how to treat profits from a "factory outlet" store it ran. Factory rejects of Dial soap and other Armour products were sold to the public through a retail outlet run by the club, and the profits from that operation helped pay for the various recreational functions put on by the organization. The club wanted to deduct on its tax returns all of its expenses, but the taxmen said that it could deduct only those costs covered by dues, not the ones paid for by store profits.
The key consideration, according to the U.S. Court of Appeals in Chicago, which sided with the IRS, was that unlike a charity that runs a thrift shop to raise money to give to the poor, the Armour-Dial group exists primarily to benefit its own members, and so its deductions are limited to membership income. (Armour-Dial Men's Club v. Commissioner, June 2)