Opinion ID: 2602125
Heading Depth: 3
Heading Rank: 1

Heading: Tests Used by Other States

Text: ¶ 17 There are several different tests used by other courts to determine whether a product liability claim can be brought where a transaction is a hybrid of sale and service. Although cases discussing whether a hybrid transaction falls under product liability typically involve a plaintiff attempting to bring a product liability claim, the tests used in those cases are equally applicable where a defendant alleges that the plaintiff's claim is properly characterized as a claim for damages resulting from a defective product. See, e.g., Alder, 2002 UT 115, ¶ 23, 61 P.3d 1068 (denying a defendant's claim that moving and reinstalling a machine rendered the machine defective and therefore the claim should be governed by the two-year product liability statute of limitations). Additionally, although most often these tests are used to determine whether strict liability should apply, their focus is on determining the nature of the transaction; therefore, they are applicable to the question before us as well. ¶ 18 An important initial distinction often made in classifying hybrid transactions is whether the transaction was with a professional or a nonprofessional. Where a professional, such as a doctor, dentist, hospital, architect, or engineer, uses a defective item in their work, courts have refused to classify the action against the professional as a product liability action. See 2 David G. Owen et al., Madden & Owen on Products Liability § 20:3, p. 447 (3d ed.2000). For example, where a patient was injured by a hypodermic needle that broke as a dentist was injecting anesthetic into her jaw, the court held that a product liability action could not be brought against the dentist because the dentist was in no better position to inspect and discover the defect than the plaintiff. Magrine v. Krasnica, 94 N.J.Super. 228, 227 A.2d 539, 543 (Law Div.1967). [2] Even where a transaction with a professional involves the sale of a faulty object, the professional is generally protected from a product liability claim. See, e.g., Hoff v. Zimmer, Inc., 746 F.Supp. 872 (W.D.Wis. 1990) (holding that the doctor who used a faulty artificial hip was not subject to a product liability action). If it is not clear that a defendant is a professional, other aspects of the transaction besides the defendant's status must be examined to determine the nature of a hybrid transaction. ¶ 19 One test for determining whether a hybrid transaction should be treated as the sale of a product is whether the service aspect of the transaction occurred before the item being sold was placed in the stream of commerce. In Erickson Air-Crane Co. v. United Technologies Corp., the Oregon Supreme Court held that the product liability statute of limitations only applied to acts, omissions or conditions existing or occurring before or at the date on which the product was first purchased for use or consumption. 303 Or. 281, 735 P.2d 614, 616 (1987) (internal quotation marks omitted). In Jamison v. Spencer R.V. Center, Inc., the stream of commerce test was applied to a hybrid transaction involving the sale and installation of a trailer hitch. 98 Or.App. 529, 779 P.2d 1091 (1989). The item being sold was the hitch, and the service being provided was installation of the hitch. The court held that when the service makes the product defective before the item is placed in the stream of commerce, the service becomes part of the product and is subject to the product liability statute of limitations. Id. at 1093. Additionally, the court held that the product enters the stream of commerce when it leaves the seller's hands, even if the contract for sale was executed before the service work was performed on the product. Id. ¶ 20 This test is highly dependent on the definition of entry into the stream of commerce. In the Oregon cases applying this test, however, the time that the product entered the stream of commerce was not at issue. See generally Erickson Air-Crane, 303 Or. 281, 735 P.2d 614; Simonsen v. Ford Motor Co., 196 Or.App. 460, 102 P.3d 710 (2004); Kambury v. DaimlerChrysler Corp., 185 Or.App. 635, 60 P.3d 1103 (2003); Jamison, 98 Or.App. 529, 779 P.2d 1091. No standard for determining when something enters the stream of commerce is ever discussed. In the absence of such a standard, whether an item entered the stream of commerce would be a factual question for the district court. ¶ 21 The court of appeals used the stream of commerce test in its resolution of this case; they failed, however, to articulate a test for placement into the stream of commerce. The court of appeals decided that the participation of the City in some of the installation indicated that the product was already in the stream of commerce. Since the question of when an item was placed in the stream of commerce is one of fact, had this been the correct test for determining whether a hybrid transaction was governed by the product liability statute of limitations, the court of appeals should have remanded the case to the district court for application of the stream of commerce test. ¶ 22 The stream of commerce test, however, is not the best test for determining whether a transaction is the sale of a product or the provision of a service. There are two reasons for this. First, the test does not address the true nature of the transaction; rather, it focuses on when the sale occurs. Second, the test is overly broad because it could expand the scope of product liability law to transactions that are primarily for services but happen to involve the sale of an object. For example, an electrician hired to repair a fuse box may have to replace a piece of wiring in order to repair the box. If the wire was installed incorrectly, rendering it defective, and if the customer paid for the repair after the completion of the installation, the use of the wire could cause the entire transaction to be treated as a product liability action under the stream of commerce test. In contrast, had the electrician not needed to use a piece of new wiring, the transaction would have been a pure service transaction and the product liability statute of limitations would not apply. A test that would allow these two transactions to be treated differently does not further the goal of protecting people from dangerous objects. ¶ 23 The stream of commerce test is also at odds with the most frequently used test for classifying hybrid transactions, the essence of the transaction test. 2 David G. Owen et al., Madden & Owen on Products Liability § 20:3, p. 444 (3d ed.2000); see also Charles E. Cantu, A New Look at an Old Conundrum: The Determinative Test for the Hybrid Sales/Service Transaction Under Section 402A of the Restatement (Second) of Torts, 45 Ark. L.Rev. 913, 923 (1992-1993). ¶ 24 The essence of the transaction test is often applied in cases where the provision of medical service also involves the doctor or hospital dispensing a medical device. See generally San Diego Hosp. Ass'n v. Superior Court, 30 Cal.App.4th 8, 35 Cal.Rptr.2d 489 (1994) (holding that a physician who was injured while using a laser provided by the hospital could not bring a product liability action against the hospital because the hospital rendered service to physicians and patients and was not in the business of selling products); Hector v. Cedars-Sinai Med. Ctr., 180 Cal.App.3d 493, 225 Cal.Rptr. 595 (1986) (holding that implanting a defective pacemaker was a service despite the device's defect). Courts in these cases have examined the nature of the relationship between the hospital and the patient and have found that the facts of the case support a finding that the transaction was for a service. In Hector, the court found that the fact that the hospital did not stock, recommend, distribute or sell any pacemakers supported a finding that it did not play `an integral and vital part in the overall production or marketing' of pacemakers and therefore provided a service rather than engaged in a sale. 225 Cal.Rptr. at 599 (quoting Silverhart v. Mount Zion Hosp., 20 Cal.App.3d 1022, 98 Cal.Rptr. 187, 190 (1971)). Generally, when courts must determine the essence of the transaction, they look at whether the defendant was instrumental in moving a harm-producing `product' through the stream of commerce or whether the chain of distribution ended effectively with the defendant who was more of a product user than a supplier. 2 David G. Owen et al., Madden & Owen on Products Liability § 20:3, p. 445 (3d ed.2000). If the defendant was more a product user than supplier, then the transaction was more likely a service.