OWENS & MINOR, INC. and Owens & Minor Medical, Inc., Appellants, v. ANSELL HEALTHCARE PRODUCTS, INC. and Becton, Dickinson and Company, Appellees.
No. 06-0322.
Supreme Court of Texas.
March 28, 2008.
Rehearing Denied May 30, 2008.
251 S.W.3d 481
Barry M. Epstein, Andrew W. Schwartz, Sills Cummis Epstein & Gross P.C., Newark NJ, Joseph R. Little, Shannon, Gracey, Ratliff & Miller, L.L.P., Houston, William C. Dowdy III, P. Michael Jung, Strasburger & Price, L.L.P., Dallas, Gene F. Creely II, Houston, Terry M. Hackett, R. Michael Duffy, Gardner, Carton & Douglas, LLP, Chicago IL, Mike A. Hatchell, Molly H. Hatchell, Susan A. Kidwell, Locke Lord Bissell & Liddell LLP, Austin TX, for Appellees.
Rafael Edward Cruz, Office of Atty. Gen., Austin TX, for person interested.
Section 82.002 of the
When a distributor sued in a products liability action seeks indemnification from less than all of the manufacturers implicated in the case, does a manufacturer fulfill its obligation under Texas Civil Practice and Remedies § 82.002 by offering indemnification and defense for only the portion of the distributor‘s defense concerning the sale or alleged sale of that specific manufacturer‘s product, or must the manufacturer indemnify and defend the distributor against all claims and then seek contribution from the remaining manufacturers?
Burden v. Johnson & Johnson Med., 447 F.3d 371, 375 (5th Cir.2006). In Ansell Healthcare Products, Inc. v. Owens & Minor, Inc., the court of appeals concluded that the Section 82.002 indemnity duty is not fulfilled by a manufacturer‘s “offer to defend” only its own products. 189 S.W.3d 889, 896-98 (Tex.App.-Texarkana 2006, pet. filed). We disagree. Section 82.002 does not require a manufacturer to indemnify a distributor against claims involving products other manufacturers released into the stream of commerce. Therefore, a manufacturer that offers to defend or indemnify a distributor for claims relating only to the sale or alleged sale of that specific manufacturer‘s product fulfills its obligation under Section 82.002.
I
Owens & Minor, Inc. and Owens & Minor Medical, Inc. (Owens, collectively) distributed latex gloves manufactured by other companies. In January 2000, Kathy Burden and members of her family filed a products liability action in Texas state court. The plaintiffs alleged that Burden had developed a Type I systemic allergy from defective latex gloves manufactured and sold by Owens, Ansell Healthcare Products, Inc., Becton, Dickinson and Company, and more than thirty other manufacturers and sellers of latex gloves. It is undisputed that Owens was an innocent seller in the chain of distribution of these products and that Ansell and Becton manufacture latex gloves.
Owens rejected offers of defense and indemnity from both Ansell and Becton and chose instead to hire outside counsel. In March 2000, Owens requested that Ansell, Becton, and eleven other latex glove manufacturers defend it pursuant to Section 82.002 of the
On May 3, 2000, the underlying case was removed to the United States District Court for the Southern District of Texas, which transferred the case to the United States District Court for the Eastern Dis-
Analysis
Our focus when construing a statute is the intent of the Legislature. City of LaPorte v. Barfield, 898 S.W.2d 288, 292 (Tex.1995). To give effect to the Legislature‘s intent, we rely on “the plain and common meaning of the statute‘s words.” Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex.1998). “[I]t is a fair assumption that the Legislature tries to say what it means, and therefore the words it chooses should be the surest guide to legislative intent.” Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex.1999).
At common law, a seller was not entitled to indemnification from a manufacturer unless and until there was a judicial finding of negligence on the part of the manufacturer. Humana Hosp. Corp. v. Am. Med. Sys., Inc., 785 S.W.2d 144, 145 (Tex.1990). In 1993, the Texas Legislature supplemented the common law by enacting Section 82.002,1 which allows an
Owens argues that Section 82.002 requires manufacturers to indemnify and hold harmless innocent sellers from all losses arising out of a products liability action. Owens thus contends that it may impose liability upon any manufacturer for Owens‘s costs in defending a products liability action, even one that did not make the product. Owens argues that once this indemnity liability is placed on a manufacturer, it then falls to the manufacturer to seek contribution from other responsible parties. Ansell and Becton, on the other hand, contend that Section 82.002 requires a manufacturer to indemnify a seller only for claims related to the sale of that manufacturer‘s product.
Owens points to our decisions in Fitzgerald v. Advanced Spine Fixation Systems, Inc., 996 S.W.2d 864, and Meritor Automotive, Inc. v. Ruan Leasing Co., 44 S.W.3d 86, as supporting its position that a manufacturer‘s Section 82.002 obligation is not limited to defense or indemnification costs with respect to its own products alone. In Fitzgerald, the issue was whether manufacturers owe indemnification under Section 82.002 to sellers who are not in the chain of distribution. 996 S.W.2d at 865. We held that the statute requires manufacturers to indemnify a seller even if the seller did not sell the manufacturer‘s product. Id. at 869. In Meritor, we again refused to limit the indemnity obligation by holding that Section 82.002(a)‘s exception to a manufacturer‘s general indemnity obligation is established only by a finding that a seller‘s independent conduct caused the plaintiff‘s injury. 44 S.W.3d at 88-91. Until such a finding is made, a mere allegation of negligence in the plaintiff‘s pleadings is sufficient to invoke the manufacturer‘s duty to indemnify the seller for all theories properly joined to a products liability claim. Id.
But our holdings in Fitzgerald and Meritor do little to support Owens‘s interpretation of Section 82.002. First, whereas Fitzgerald involved the issue of to whom a manufacturer owes indemnification, 996 S.W.2d at 865, this case concerns the scope of that duty of indemnification. Second, we held in Meritor that “the manufacturer‘s duty to indemnify the seller is invoked by the plaintiff‘s pleadings and joinder of the seller as defendant.” 44 S.W.3d at 91; see also Gen. Motors Corp. v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249, 256 (Tex.2006) (“The duty to indemnify is triggered by the injured claimant‘s pleadings.“). Citing Meritor, Owens argues that the plaintiffs’ broad, industry-wide allegations in their pleadings triggered an independent duty of indemnification by each of the companies that manufacture the latex gloves sold by Owens. But, while it is correct that the claimant‘s petition triggers each manufacturer‘s duty to indemnify an innocent seller under Section 82.002, the petition does not define the scope of that duty. Rather, to determine the scope of the duty, we must turn to the text of the statute itself.
The essence of Owens‘s argument is that, because Section 82.002(a) requires a manufacturer to hold an innocent seller
But it is unmistakable that the duty under Section 82.002 is premised on a nexus between a given manufacturer and its product. This nexus is inherent in the statute that requires a “manufacturer” to hold a seller harmless against loss arising out of a products liability action.
On at least two prior occasions, we have implied that requiring a manufacturer to defend or indemnify a seller against claims related to the products of its competitors is an absurd result that cannot have been the intent of the Legislature. First, we touched on this issue in Fitzgerald when responding to the dissent:
The dissenting opinion contends that a literal reading of the statute would permit a seller to obtain indemnity from “every other manufacturer sued,” not just the manufacturer whose product the seller sold. Our construction of the plain language of section 82.002(a) must avoid absurd results if the language will allow.
996 S.W.2d at 867. However, because the plaintiff in Fitzgerald did not sue multiple manufacturers, the Court did not reach the issue. Id. at 865, 867. Second, Hudiburg concerned the statutory duty of a component-part manufacturer to indemnify a seller. 199 S.W.3d at 253-54. In our decision construing the manufacturer‘s duty to indemnify under Section 82.002, we stated that “the claimant‘s pleadings must fairly allege a defect in the component itself, not merely a defect in the seller‘s product of which the component was part.” Id. at 257. While this case does not involve the duty of a manufacturer of component parts, the principle we applied in Hudiburg remains the same. There is no substantive difference between the position of the component-part manufacturer in Hudiburg and the position of Ansell and Becton in this case. In either case, the pleadings must properly allege that the named defendant is a manufacturer of the product under the statutory definition to establish a nexus between the defendant manufac-
At common law, the manufacturer was required to indemnify the seller only for claims involving defects in its own products. See
In the absence of language indicating that the Legislature intended for one manufacturer to hold an innocent seller harmless for losses caused by products made by another manufacturer, we decline to assign such broad liability. Doing so would lead to absurdities and inequities the Legislature certainly did not intend. See C & H Nationwide, Inc. v. Thompson, 903 S.W.2d 315, 322 n. 5 (Tex.1994) (“Statutory provisions will not be so construed or interpreted as to lead to absurd conclusions ... if the provision is subject to another, more reasonable construction or interpretation.“). For example, Owens‘s interpretation of the scope of Section 82.002‘s duty to indemnify could result in manufacturers such as Ansell and Becton being placed in the awkward, if not impossible, position of defending someone else for injuries caused by products they did not make. It is one thing to have to defend a seller who has marketed your product and whose defense would therefore mirror your own. But it is quite another to have to defend a seller who marketed your competitors’ products rather than your own, and on top of that try to defend that seller against allegations that your competitors’ products were defective in manufacture or marketing. While the seller‘s interest might be served in either case, it is clearly not in the competing manufacturer‘s interest that one of its rivals is handed the task of defending its product. It is highly unlikely, for example, that a competing manufacturer would be willing to share its intellectual property with the indemnifying manufacturer, but absent that discovery, the defense of the seller might be problematic. Moreover, a manufacturer‘s ability to insure its indemnity obligation would be extremely impaired if its potential exposure was linked to some other manufacturer‘s product. For these reasons, a manufacturer‘s indemnity obligation only makes sense when its own product is implicated. While we acknowledged in Fitzgerald that Section 82.002 gives preference to innocent sellers, we also noted that it was designed to protect manufacturers. 996 S.W.2d at 868-69. It protects manufacturers by “establishing uniform rules of liability” so they can “make informed business decisions,” such as gauging exposure to liability and obtaining liability insurance. Id.
In 1967, our decision in McKisson v. Sales Affiliates, Inc. established a party‘s strict liability for manufacturing or selling any type of defective product. 416 S.W.2d 787, 789 (Tex.1967). As Owens points out, Section 82.002 was designed to remedy the fundamental unfairness inherent in a scheme that holds an innocent seller liable for defective products manufactured by another by requiring the manufacturer to indemnify the seller unless the seller is independently liable for negligence, intentional misconduct, or any other act or omission.
But Owens‘s argument is unconvincing for three reasons. First, the Legislature‘s intent that an innocent seller be held harmless is satisfied under Ansell‘s and Becton‘s construction of Section 82.002 because a manufacturer would either defend against claims relating to its own products or would later indemnify the seller.
Second, in the event a seller ends up defending a manufacturer‘s products itself and thereafter seeks indemnity from the manufacturer, the seller‘s position is more favorable than that of the manufacturer forced to defend products produced by a competing manufacturer. In the former scenario, the seller, by virtue of its intermediary position in the stream of commerce, has a business relationship with the manufacturer of the product it sells. It stands to reason that such a pre-existing business relationship is more likely to facilitate the sharing of proprietary information that is necessary for a thorough products liability defense. Finally, we find useful the Utah Supreme Court‘s analysis in deciding an indemnification case involving two innocent parties. In Bettilyon Construction Co. v. State Road Commission, a road contractor sued the State Road Commission of Utah to recover legal expenses the contractor had incurred in connection with its successful defense of a lawsuit brought against it by a property owner whose land abutted a road construction project. 20 Utah 2d 319, 437 P.2d 449, 449-50 (1968). To facilitate the project, the road commission had leased a right of way to the contractor. Id. at 449. The property owner alleged the right of way encroached on his property. Id. In holding that the contractor was not entitled to common law or contractual indemnity from the road commission for its legal expenses, the Utah Supreme Court reasoned:
One of the hazards of life which everyone is exposed to is the possibility of being required to defend a lawsuit.... But the fact that the party charged may be innocent of the claimed wrong and can successfully defend against such a suit does not entitle him to pass the burden on the [sic] some equally innocent third party.
Id. at 450. Here, as well, there is no basis for extending Ansell‘s and Becton‘s obligations under Section 82.002 to claims involving another manufacturer‘s products.
Owens argues that interpreting Section 82.002 in this manner reverts to the common law by reinserting a “chain of distribution” requirement. But we conclude that the Legislature never altered this portion of the common law.5 The Legislature specifically incorporated that requirement into the statute by defining a manufacturer as a person who “places the product or any component part thereof in the stream of commerce.”
In Fitzgerald, we held that Section 82.002 does not require a seller to be proven to have been in the chain of distribution for the product at issue. 996 S.W.2d at 867. But the question in this case is not whether the seller stood in the chain of distribution. Instead, our decision in this case concerns only the legal question of whether a manufacturer‘s defense or indemnity obligation in Section 82.002 extends beyond its own products.
The Fifth Circuit asks whether a manufacturer can fulfill its indemnity obligations under Section 82.002 when the manufacturer offered to indemnify and defend an innocent seller only for claims related to the sale of products the manufacturer released into the stream of commerce. We conclude that the statute does not extend a manufacturer‘s obligations under Section 82.002 to claims related to the sale of other manufacturers’ products. When an innocent seller is forced to defend itself in a products liability action, its remedy under the statute is to seek indemnity from the product manufacturer. But where the plaintiff has sued multiple manufacturers, the statute does not authorize a seller to simply select one or more manufacturers and thereby obligate the chosen manufacturers to fully indemnify the seller‘s costs regardless of whether any connection to the product at issue exists. Rather, the product manufacturers satisfy their statutory duty to the seller by offering to indemnify and defend it only for any costs associated with their own products. And if, as in this case, there is no finding as to which manufacturer, if any, is liable for the plaintiff‘s injury, the innocent seller, like an innocent manufacturer, must assume responsibility for recovering the costs of its own defense. Our interpretation of the scope of a manufacturer‘s obligation under Section 82.002 comports with the Legislature‘s intent, as indicated by the plain language of the statute, the policy behind it, and its practical application. Accordingly, Ansell and Becton are not required to indemnify and defend Owens against all claims relating to all products.
Justice BRISTER filed a concurring opinion.
Justice O‘NEILL filed a dissenting opinion, in which Justice MEDINA, Justice JOHNSON, and Justice WILLETT joined.
Justice BRISTER, concurring.
The two opinions here appear to be ships passing in the night—each assuming the other means something it does not actually say. I write separately to indicate what I believe is common ground.
First, the dissent is correct that statutory indemnity is triggered by a plaintiff‘s pleadings, not actual proof. We recently said as much in a unanimous opinion,1 and the Court says so explicitly again today.2 Thus, a retailer is not required to prove that a defendant‘s product caused the plaintiff‘s injury (and thus its own defense costs), only that a plaintiff‘s allegation about the defendant‘s product did so. It is unclear why the dissent thinks this is an “impossible burden.”
Second, I agree with the Court that a manufacturer‘s statutory duty of indemnity is limited to its own products. A nexus between the plaintiff‘s pleadings and the defendant‘s product is required not due to common law, but to common sense. Noth-
Burden‘s pleadings here were industry-wide and very general, but they cannot be fairly read to allege that Ansell or Becton made any latex gloves except their own. Making them provide indemnity for other gloves would make them indemnify a claim the plaintiff never made. That is beyond what the statute requires.4
The retailer here admits as much in its brief, conceding that if Burden dropped her claims against Ansell and Becton, then they would have no duty to defend Owens & Minor any longer.5 The same would be true when a manufacturer is dismissed on special exceptions or summary judgment—if the plaintiff no longer has a pending claim against a product, its manufacturer cannot be liable for any further indemnity.
We did not hold in Meritor that manufacturers must indemnify retailers regardless of the circumstances or the pleadings.6 Although we held manufacturers must cover defense costs relating to a retailer‘s own negligence, that was because statutory indemnity covers “loss arising out of a products liability action” and excludes only “loss caused by the seller‘s negligence.”7 A claim based on a retailer‘s independent culpability arises in a plaintiff‘s pleadings but does not cause loss until there is a judgment to that effect.8 By contrast, no claim that Ansell and Becton made gloves for other manufacturers ever arose in this case.
The dissent is also correct that the statute gives innocent retailers broad protection, and the Court‘s opinion could spell out more clearly why that will still be the case. As we recently noted in Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, when a case involves multiple claims, “many if not most legal fees in such cases cannot and need not be precisely allocated to one claim or the other“:
Many of the services involved in preparing [one] claim for trial must still be incurred if [other] claims are appended to it; adding the latter claims does not render the former services unrecoverable. Requests for standard disclosures, proof of background facts, depositions of the primary actors, discovery motions and hearings, voir dire of the jury, and a host of other services may be necessary
Here, no one disputes that if Burden had alleged injuries solely from Ansell‘s gloves, it would have been responsible for 100 per cent indemnity. Nothing in the statute suggests this responsibility dropped to 50 per cent when Burden added another manufacturer; Ansell still had to pay for sending and responding to standard disclosures, producing documents, deposing the plaintiff, and attending MDL hearings in Pennsylvania. In most toxic tort cases, the costs incurred solely because of an added defendant are marginal, and it is those alone that Ansell would not have to pay.
Thus, I disagree with the dissent that the Court‘s opinion places “an impossible burden” on innocent retailers; they are still entitled to every dime incurred as if the manufacturer from whom they seek indemnity had been the only one sued—which in most cases will be most of the dimes. If several manufacturers have become insolvent (as appears to be the case here), an innocent retailer is not required to squeeze indemnity from those turnips; rational litigants rarely spend much money pursuing penniless defendants, so an innocent retailer can still recover almost all its costs from the manufacturers the plaintiff actually pursues. And as Burden‘s pleadings against Ansell and Becton remained viable until she nonsuited her case, their duty to indemnify continued until that date.
I disagree with Becton‘s argument that the statute requires an innocent retailer to pursue indemnity from each and every manufacturer, rather than picking one or a few. The statute says nothing about how many manufacturers a retailer must sue for indemnity, or about limiting indemnity pro rata. When legal work has to be done whether there are 1 or 100 defendants, the one manufacturer from whom they are sought can hardly claim most of the work was not reasonable, necessary, and due under the indemnity statute. I share Becton‘s concern that an innocent retailer might arbitrarily saddle a disfavored manufacturer with all indemnity costs, and that the dissent may (or may not) be mistaken in assuming one manufacturer can get contribution from others. But today‘s decision provides a disincentive to such favoritism: if a retailer seeks indemnity from less than all manufacturers, it will be entitled to less than all its costs.
In closing, I would also mention that none of this is how the statute was intended to work. The whole idea was that innocent retailers would not be sued at all in products cases, as the Legislature made clear in its 2003 amendments.10 That goal is not advanced by encouraging manufacturers to refuse indemnity except for some pro rata part of the case (as the dissent fears), or to hire duplicative attorneys for the retailer (as the dissent advocates). As we have said many times in other mass-tort contexts, the best plan is to decide early on which defendants are really involved, and discharge those that are not. As I believe the Court‘s opinion today moves in that direction, I join in it.
Justice O‘NEILL, joined by Justice MEDINA, Justice JOHNSON, and Justice WILLETT, dissenting.
A manufacturer of a product alleged in a pleading to be defective is required to
I. Background
Kathy Burden, a dental hygienist, filed a products liability action alleging that she developed a latex allergy from defective latex gloves. The respondents here were among the more than thirty defendants named in Burden‘s suit. Owens & Minor, Inc. and Owens & Minor Medical, Inc. (collectively “Owens & Minor“) were sued as distributors of latex gloves, and Ansell Healthcare Products, Inc. and Becton Dickinson & Co. were sued as manufacturers. Owens & Minor sent letters to several of the defendant manufacturers, including Ansell and Becton, requesting that they indemnify Owens & Minor for all litigation expenses as required under Texas Civil Practice and Remedies Code section 82.002. When Ansell responded by offering to defend claims related only to its own products, Owens & Minor refused the offer. Becton did not respond to Owens & Minor‘s letter, relying on its position in earlier latex-glove litigation that in future proceedings it would only agree to defend Owens & Minor for claims related to its own products. Owens & Minor thus retained its own counsel to defend the products liability suit.
The case was removed to federal court and consolidated as part of multidistrict latex-glove litigation in Pennsylvania. Owens & Minor brought cross-claims for indemnity against several of the manufacturers, including Ansell and Becton. The plaintiff, unable to show that Owens & Minor sold any of the injury-causing latex gloves, nonsuited her claims against Owens & Minor. She subsequently dismissed her case against all the remaining defendants for the same or similar reasons. Thus, the products liability suit ended without a finding that any party was negligent or that any particular product caused the plaintiff‘s injuries. Owens & Minor settled its indemnity suit against all solvent manufacturers except Ansell and Becton. The federal district court granted summary judgment in Ansell‘s and Becton‘s favor, reasoning that they had satisfied section 82.002 by offering to defend
II. Common Law Indemnity and Section 82.002
Under Texas law, sellers of defective products may be held strictly liable for resulting injuries. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334-35 (Tex.1998) (citing McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, 788-89 (Tex.1967)). Sellers are therefore often named as defendants in products liability suits regardless of any allegation of wrongdoing. As a result, undisputedly innocent sellers frequently must dedicate tremendous resources to defending allegedly defective products they did not manufacture or alter but merely passed on to consumers. See Jeffrey Nolan Diamant, Comment, Texas Senate Bill 4: Product Liability Legislation Analyzed, 31 HOUS. L.REV. 921, 930 (1994).
Under the common law, sellers were only entitled to indemnification from the manufacturer for damages if the manufacturer was found to be liable. See Humana Hosp. Corp. v. Am. Med. Sys., Inc., 785 S.W.2d 144, 145 (Tex.1990). Indemnification for other litigation expenses was unavailable altogether. See Aviation Office of Am., Inc. v. Alexander & Alexander of Tex., Inc., 751 S.W.2d 179, 180 (Tex.1988). Thus, when neither the seller nor the manufacturer was found liable, the seller bore the heavy cost of its defense of the product. In addition to the requirement that the manufacturer be found liable, a seller‘s liability must only have been vicarious, B & B Auto Supply, Sand Pit & Trucking Co. v. Cent. Freight Lines, Inc., 603 S.W.2d 814, 817 (Tex.1980), that is, the seller must not have been independently liable based on its own conduct, Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 432 (Tex.1984), and the seller must have been in the chain of distribution, id.
In 1993, the Legislature sought to remedy the unfairness to innocent product sellers by enacting section 82.002 of the Texas Civil Practice and Remedies Code. This statute completely changed the common law manufacturer-seller indemnification scheme by shifting the burden of the seller‘s litigation costs onto the manufacturer. See
III. Interpreting Section 82.002
In construing a statute, our objective is to determine and give effect to the Legislature‘s intent. See Nat‘l Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex.2000). We first look to the statute‘s
(a) A manufacturer shall indemnify and hold harmless a seller against loss arising out of a products liability action, except for any loss caused by the seller‘s negligence, intentional misconduct, or other act or omission, such as negligently modifying or altering the product, for which the seller is independently liable.
(b) For purposes of this section, “loss” includes court costs and other reason-able expenses, reasonable attorney fees, and any reasonable damages.
(c) Damages awarded by the trier of fact shall, on final judgment, be deemed reasonable for purposes of this section.
(d) For purposes of this section, a wholesale distributor or retail seller who completely or partially assembles a product in accordance with the manufacturer‘s instructions shall be considered a seller.
(e) The duty to indemnify under this section:
(1) applies without regard to the manner in which the action is concluded; and
(2) is in addition to any duty to indemnify established by law, contract, or otherwise.
(f) A seller eligible for indemnification under this section shall give reasonable notice to the manufacturer of a product claimed in a petition or complaint to be defective, unless the manufacturer has been served as a party or otherwise has actual notice of the action.
(g) A seller is entitled to recover from the manufacturer court costs and other reasonable expenses, reasonable attorney fees, and any reasonable damages incurred by the seller to enforce the seller‘s right to indemnification under this section.
Section 82.001 defines the term “products liability action” as “any action against a manufacturer or seller for recovery of damages arising out of personal injury, death, or property damage allegedly caused by a defective product whether the action is based in strict tort liability, strict products liability, negligence, misrepresentation, breach of express or implied warranty, or any other theory or combination of theories.”
The statute‘s import is straightforward and unmistakable: unless the seller is found to be negligent, the manufacturer must “indemnify and hold harmless” the seller for any reasonable expenses resulting from products liability litigation “without regard to the manner in which the action is concluded.”
The Court‘s holding also undermines the law‘s fundamental purpose, leaving many innocent sellers exposed to damages and expenses incurred in defending a product without recourse. See
The Court posits that if the Legislature had intended manufacturers to bear the burden of determining how the seller‘s litigation costs should be distributed among the manufacturers, the Legislature would have provided that manufacturers, as well as sellers, be indemnified for litigation expenses incurred in seeking contribution. 251 S.W.3d at 487-88, n. 4. However, indemnification, which is the right provided to the seller in section 82.002, and contribution, which may be available to the manufacturers, are two distinct concepts with varying purposes; indemnity operates to completely shift the burden of loss from one, usually innocent, party to another, while contribution involves apportionment of a burden among a class of liable parties. See 6 Texas Torts & Remedies, Contribution & Indemnity § 102.01(MB) (2007). Here, the Legislature intended that the innocent seller be held completely harmless for any loss and therefore provided the seller with indemnity and compensation for expenses securing that indemnity.
The Court bases its conclusion that a manufacturer‘s indemnity obligation extends only to its own products on section 82.001(4), which defines a “manufacturer” as “a person who is a [maker] of any product or any component part thereof and who places the product or any component part thereof in the stream of commerce.”
Further, our holding in Fitzgerald undermines the Court‘s reliance on common law principles instead of the statutory language to require a nexus between the manufacturer and the product. In Fitzgerald, we considered whether the Legislature intended section 82.002 to supplant all common law indemnification requirements, including the chain-of-distribution requirement, or only the requirement that the manufacturer be found liable. In holding that a seller need not be in the distribution chain for indemnity to apply, we recognized the dramatic changes the statute effected and the diminished import of the common law in this context:
Even if the common law were clear on this issue, the manufacturer‘s claim that the Legislature intended to adopt the common law is not supported by the statute‘s legislative history and is contradicted by the statute itself. The Legislature must have been aware it was creating a new duty, not codifying existing law, because the statute says that the duty to indemnify under this section “is in addition to any duty to indemnify established by law, contract, or otherwise.” Thus, the state of the common law sheds little light on what the Legislature intended when it ... required manufacturers to indemnify sellers in section 82.002(a).
Fitzgerald, 996 S.W.2d at 868 (emphasis added). Nevertheless, the Court invokes the common law to conclude that the statute requires a nexus between the manufacturer and the product the seller is forced to defend, reasoning that since common law indemnity is intended to hold harmless a party exposed to liability due to the wrongdoing of another, the statute too requires indemnity only if a manufacturer “was or would have been liable” in the underlying products liability action. 251 S.W.3d at 486. In reaching this conclusion, the Court disregards our interpretation of the statutory scheme in Fitzgerald and the text of the statute itself, which entitles the seller to indemnity “without regard” to the outcome of the suit.
The Court erroneously concludes that this case is indistinguishable from General Motors Corp. v. Hudiburg Chevrolet, Inc., in which we held that the manufacturer of a component part not alleged to be defective in the plaintiff‘s pleadings did not owe a duty to indemnify the distributor of the finished product. 199 S.W.3d at 257. In so holding, we relied on section 82.002(f)‘s requirement that a seller give notice to a manufacturer of “a product claimed in a
Here, the Court asserts “[t]here is no substantive difference between the position of the component-part manufacturer in Hudiburg and the position of Ansell and Becton in this case.” 251 S.W.3d at 485. To the contrary, unlike the component-part manufacturer in Hudiburg, Ansell and Becton were named as defendants in the underlying suit and their products were specifically alleged to be defective. This case fits squarely within the scope of liability we described in Hudiburg and that was applied in Seelin: “the claimant‘s pleadings fairly allege[d] a defect in” Ansell‘s and Becton‘s products. Hudiburg, 199 S.W.3d at 257. In other words, Ansell and Becton are responsible for costs incurred by Owens & Minor only to the extent that their products are implicated by the plaintiff‘s pleadings; if Burden had dropped her claims against their products, Ansell and Becton would not be liable for any costs incurred by Owens & Minor after that point because, like the manufacturer in Seelin, there would no longer be a live claim against them.
Finally, our holding in Meritor Automotive, Inc. v. Ruan Leasing Co. supports the conclusion that a manufacturer must indemnify the seller for its defense of all allegations made against the seller, even if those allegations are not linked to a manufacturer‘s particular product. 44 S.W.3d at 89. In Meritor, we were asked whether a manufacturer must indemnify a seller for the seller‘s defense of an unsuccessful negligence claim against the seller. Id. at 87. Again relying on the statute‘s plain language, we held that a manufacturer must indemnify a seller for all claims in the products liability suit, including those alleging independent wrongdoing on the seller‘s part. Id. at 90. We reasoned that, since section 82.002(a) states that a “manufacturer shall indemnify and hold harmless [a seller] against loss arising out of a products liability action,” and section 82.001(2) defines “products liability action” as “any action against a manufacturer or seller for recovery of damages arising out of personal injury, death, or property damage allegedly caused by a defective product,” the manufacturer‘s duty to indemnify extended to “all direct allegations against the seller that relate to plaintiff‘s injury as part of
Our decision in Meritor illustrates the breadth of the indemnity the Legislature afforded sellers under section 82.002. In holding that manufacturers must indemnify sellers who successfully defend claims based on the seller‘s own negligence, we recognized that the indemnity obligation manufacturers bear extends even to claims unrelated to any wrongdoing by the manufacturer. The plain language of the statute and our prior cases compel the conclusion that section 82.002 requires a manufacturer to indemnify a seller for its entire defense unless the seller is found to be independently liable.
IV. Policy
The Court asserts various policy considerations to support its interpretation of the statute. Construing the statute to require manufacturers to indemnify or defend all claims against a seller in a products liability action, the Court posits, would lead to absurd results, as it would place one manufacturer in the untenable position of having to defend another manufacturer‘s products. This might be impossible, the Court says, because the defense must be intimately familiar with the particular product in order to defend it, and a manufacturer might be forced to turn over proprietary information to a competitor in the course of the defense.
First, the statute does not require that the manufacturer defend claims against the seller. The statute only uses the words “indemnify and hold harmless.”
Consider this hypothetical: A consumer sues seven drug stores knowing he bought from four or fewer and not knowing which of the defendants supplied him. He took a prescription drug manufactured by two companies, and the claim is product defect. In this case, the statute works to oblige the makers to defend and to pay the sellers’ modest costs, with the modesty of the costs depending on cooperation among the parties and judicial management. The gross costs will be much less if the makers step in the action promptly since no liability could independently attach to the sellers.
Burden, 332 F.Supp.2d at 1028.
Further, the concerns the Court voices about a manufacturer having to defend another manufacturer‘s product are surely magnified for a seller who is forced to defend multiple manufacturers’ products in a products liability action. As the court of appeals in Ansell Healthcare recognized:
The distributor is likewise in a poor position to attempt to defend the product manufactured by another.... The Legislature has elected to favor the innocent distributor over the manufacturers of allegedly defective products. The Texas Supreme Court has analyzed the statute in a light favorable to the innocent seller. Here, such an application results in requiring each manufacturer of an allegedly defective product sold by
an innocent distributor to assume a full defense of the distributor or indemnify it from losses incurred.
The Court bases an additional policy point upon a 1968 Utah case about right-of-way, positing that when there are two innocent parties one party should not be entitled to pass on its litigation expenses to the other. 251 S.W.3d at 488 (citing Bettilyon Const. Co. v. State Rd. Com‘n, 20 Utah 2d 319, 437 P.2d 449, 449-50 (1968)). However, by enacting section 82.002, the Legislature made the policy decision in products liability suits to require even innocent manufacturers to indemnify innocent sellers for their litigation costs. The role of this Court “is not to second-guess the policy choices that inform our statutes ...; rather, our task is to interpret these statutes in a manner that effectuates the Legislature‘s intent.” McIntyre, 109 S.W.3d at 748. Here, the statute‘s text indicates the Legislature‘s intent to “hold harmless a seller” “without regard to the manner in which the action is concluded.”
V. Conclusion
I would hold that section 82.002 obligated Ansell and Becton to indemnify Owens & Minor against all claims that Burden alleged, not just those related to their own products. Because the Court holds otherwise, I respectfully dissent.
ANSELL HEALTHCARE PRODUCTS, INC. and Becton, Dickinson and Company, Petitioners, v. OWENS & MINOR, INC. and Owens & Minor Medical, Inc., Respondents.
No. 06-0386.
Supreme Court of Texas.
April 4, 2008.
Rehearing Denied May 30, 2008.
251 S.W.3d 499
Mike A. Hatchell, Molly H. Hatchell, Susan A. Kidwell, Elissa Gail Underwood, Locke Lord Bissell & Liddell, LLP, Austin, Gene F. Creely II, Cozen O‘Connor, Houston TX, Robert Michael Duffey, Washington DC, Terry M. Hackett, Gardner, Carton & Douglas, LLP, Chicago IL, Jeffery C. Lewis, Robert W. Weber, Atchley Russell Waldrop & Hlavinka, Texarkana TX, Barry M. Epstein, Andrew W. Schwartz, Sills Cummis Epstein & Gross, Newark NJ, P. Michael Jung, Strasburger & Price, L.L.P., Dallas TX, for Petitioners.
Robert F. Redmond Jr., William W. Belt Jr., Williams Mullen, Richmond VA, Brent Maurice Langdon, Holman & Langdon, L.L.P., Texarkana TX, for Respondents.
PER CURIAM.
This case concerns the scope of the duty imposed on manufacturers of allegedly defective products to defend and indemnify innocent sellers under section 82.002 of the Texas Civil Practice and Remedies Code. We decided this issue in Owens & Minor, Inc. v. Ansell Healthcare Products, Inc., 251 S.W.3d 481 (Tex.2008), when we answered this question certified to us by the