Business Law Products Liability and

Business Law Products Liability and Negligence: With the evidence that Vioxx leads to an increased heart risk of heart attack and stroke, Merck is facing the issue of product liability. Product liability, a tort of negligence, holds manufacturers liable for negligently made goods that harm consumers. Manufacturers must meet the standard of care for reasonable manufacturers in the design, manufacture, and marketing of a product. With respect to Merck, this applies to a failure to warn of a danger of using Vioxx.

Merck may be liable under this tort because it owes a duty of care to the users of the medicine and it is foreseeable that carelessness by Merck would impact that group. If the court finds that Merck was careless and did not meet the duty of care, it will be held liable for the damages to the plaintiffs. Competitors selling similar products with warnings may be considered evidence that Merck is not meeting the standard of care for a manufacturer in its industry.

In some countries, if there is a defective product, Merck would be held strictly liable without consideration of negligence. Thus, depending on jurisdiction, liability may differ. Categories of Damages: The four categories of damages Merck may have to pay are pecuniary, nonpecuniary, punitive, and aggravated. Pecuniary damages compensate for incurred, out-of-pocket losses, loss of future income, and cost of future care. Individuals that took Vioxx and suffered a heart attack or stroke could ask for payment for care and loss of income.

Nonpecuniary damages compensate for pain and suffering, loss of life expectancy, and loss of enjoyment of life. The plaintiffs against Merck could claim to have lost life expectancy, suffered in their heart attack or stroke, and, afterwards, lost life enjoyment. Punitive damages are awarded to punish the defendant when the defendant has engaged in behaviour that is particularly offensive. If the court finds Merck's conduct egregious, it may award punitive damages. Aggravated damages are awarded when the defendant's reprehensible conduct causes intangible injury such as distress or humiliation.

The plaintiffs against Merck may have suffered distress after taking Vioxx, as distress would be common with a heart attack or stroke. Thus, aggravated damages may also be proper. Dispute Resolution and Litigation: Merck is facing a large number of lawsuits and the 20 that have been settled have already exceeded Merck's annual profit. Litigation is time-consuming with a number of steps including pleadings, discovery, trial, and appeals. These all incur attorneys' fees which quickly add up. Alternative dispute resolution may be a viable option for Merck.

Their options are negotiation, mediation, and arbitration. Negotiation can be used to settle each of the cases, but those have already cost almost $5 billion. Mediation uses a third party that helps reach a compromise, which may help find a lower-cost solution that satisfies some of the claimants. Arbitration is binding and has a third party hear the dispute and make a ruling, similar to that of a court, but without the same extent of procedure.

By choosing these options, Merck can reduce the legal costs, which have amounted to $1 billion and could destroy the company if similar expenses existed for the rest of the 27,000 lawsuits. Class Actions: Class actions, which are more widely available in the U.S., offer the opportunity to condense the suits into one action. When there is a group where all the members have similar claims, one party is the representative plaintiff and brings suit on behalf of the entire class against the defendant.

In a class action, Merck would be able to deal with multiple claimants at once, minimizing legal costs and potentially leading to a lower settlement per claimant because the numbers would be aggregated. Legal Risk Management: A risk management plan would allow Merck to prevent or reduce loss. In the case of the Vioxx suits, it is too late for a preventative approach, which would try to comply with legal requirements and avoid legal problems.

However, the reactive approach, which is a plan that handles problems as they arise may be a better option. Merck now focuses on reducing the costs of the problem. As a pharmaceutical company, Merck will continue risking similar problems with products that it manufactures. Thus it should create preventative and reactive plans to deal with them. Risk avoidance is not an option because pharmaceutical development and manufacturing is the core of their business.

Risk reduction is the best method for management of legal risks because, while they are unavoidable, the risks can be reduced and legal problems can be mitigated. Question 2: Tort and Property Use: The tort of nuisance addresses the right to enjoy one's land. It generally arises between neighbours where one neighbour is engaging in an activity that inhibits the other's enjoyment of his or her land. The court.