Topic: Product Liability Issues

Characters: Mark, Marketing Sales Representative David, farmer/owner of product Jim, hired man who suffered anhydrous ammonia burn Lee, president of agricultural products firm

Mark had been an agricultural products representative for just over 19 months. During his initial year of probation and the subsequent months, he had proven himself over and over again for the company. His farm background enabled him to establish great rapport with his farmer clients. The product line included agricultural-related safety items, primarily for power equipment.

During a recent visit with Dave, one of his best clients, Mark was told about a farming accident that had occurred over six years previously. A shutoff valve between a tractor and an anhydrous ammonia tank had broken. Jim, the hired man, had been burned by the spraying ammonia. Litigation had never been initiated even though Jim had incurred close to $20,000 in medical expenses.

Upon his return to the office, Mark pulled the files on the shutoff valve. Although the valve had been removed from the market several years earlier, there were five similar cases noted in the file. All had been settled directly with the farmers, and no formal litigation had been filed. The defective valves had been advertised as “totally safe.” Anytime the connectors between the tractor and the ammonia tank were incorrectly disconnected, the shutoff valve was supposed to engage and prevent accidents. Because of the accidents, sale of the valve had ceased.

Mark’s curiosity about the fact that nothing had really been done for the clients got the best of him, so he went directly to Lee, the company president, about the matter. Upon hearing him out, Lee got up, closed his office door and proceeded to give him the following bit of advice. “Look, the statute of limitations on that product is seven years. If we can hold out just a few more months, we’ll be in the clear. What Dave and those other clodhoppers don’t know is their problem. The original product was defective and pulled.” When Mark started to protest, Lee said, “I’m warning you to keep your mouth shut and you’ll continue to do well with our company!”

Author: Dennis  J. Elbert, Professor  of  Marketing, University  of  North  Dakota

Co-author: John Gillett, Associate Professor of Accounting, University of North Dakota