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One Product Gone Bad: What’s the Real Cost

On Behalf of | Nov 17, 2016 | Avoiding Investment Scams, Personal Liability, Uncategorized

Recently there has been an increase in discussions concerning phone explosions. The two recent cases have included Samsung smart phones and Nokia (a couple of years ago). It is important to note that in the most recent case (involving Samsung) no one has accepted liability.

These are phones, but similar issues can happen with other products.

What can be the impacts on your company of a defective product?

Financial Liability

The financial liability of an event like an exploding cell phone can be a huge problem. The mere cost of the recall could be huge – to make the product do what you told consumers would do. Additionally, there could be injuries that could cause more liability (like burns).

Costs Beyond Liability

What are the costs to the company because of Recalls and exploding smart phones? Well, the first is financial where you have to pay for the replacement phones.

Then there are the court costs. In the exploding phone, there are cases where there is already Class action lawsuit involving the cost of replacement phones.[1] Now you can try and mitigate changes by offering to pay the replacement costs. However, when there is a class action lawsuit the costs can go up quickly because of the number of people involved and the sophistication (read: expense) of the counsel involved.

Another cost is the cost to the company’s reputation. It is not easy to predict how much it will cost from that loss of reputation but corporate quarterly earnings and their market share in the industry after the event could be hugely effected.

A situation like this can cost a lot. For a weak company it could be financially fatal.

Have you ever worried about product liability for your company?  What will you do differently? Tell us about it in the comments below. We love hearing from you.

This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Sarah LeClair is a Paralegal in the Dallas office of The R. Shawn McBride Law Firm, PLLC.

[1] Epstein, Z. (2016, October 18). Samsung hit with class action lawsuit over exploding Galaxy Note 7. Retrieved from BGR:

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