Ssp Partners v. Gladstrong Inv. (Usa)

Citation275 S.W.3d 444
Decision Date14 November 2008
Docket NumberNo. 05-0721.,05-0721.
PartiesSSP PARTNERS and Metro Novelties, Inc., Petitioners, v. GLADSTRONG INVESTMENTS (USA) CORPORATION, Respondent.
CourtSupreme Court of Texas

Jennifer Rebecca Henderson, Fredrick F. "Rick" Rogers Jr., John Joseph Janssen, Porter, Rogers, Dahlman & Gordon, P.C., Corpus Christi, TX, Juan J. Hinojosa, Hinjosa & Powell, P.C., McAllen, TX, Roger W. Hughes, Scott T. Clark, Robert Barrett Ray, Adams & Graham, L.L.P., Harlingen, TX, for Petitioners.

Thomas C. Wright, Julia Leigh Kurtz, Michael A. Choyke, Lucy H. Forbes, Wright Brown & Close, LLP, Houston, TX, Jose E. Garcia, Francisco R. Villarreal, Garcia & Villarreal, LLP, Boone Channing Slusher, Slusher & Associates, McAllen, TX, for Respondent.

Ramon Garcia, Sonia I. Lopez, Eric Samuel Jarvis, Law Offices of Ramon Garcia, P.C., Edinburg, TX, Adolfo "Al" Alvarez, Law Office of Aldolfo Alvarez, McAllen, TX, Eloy Sepulveda, Fort Worth, TX, for Other Party In Interest.

Justice HECHT delivered the opinion of the Court.

In Texas, the seller of a defective product is subject to strict liability for damages the product causes even though the defect was not his fault, but he is generally entitled to indemnity from the manufacturer by statute1 and by common law.2 Is he entitled to indemnity from an upstream supplier other than the manufacturer? Not, we hold, by statute, and not under the common law without showing that the upstream supplier was at fault. We also hold that corporations cannot be held liable for each other's obligations merely because they are part of a single business enterprise. For reasons different from the court of appeals',3 we remand the case to the trial court for further proceedings.

I

The parents of a five-year-old boy killed in a house fire sued SSP Partners and Gladstrong Investments (U.S.A.) Corp. on a claim of product liability, alleging that the fire was started by a WAX-brand disposable butane lighter with a defective child-resistant mechanism, sold by SSP and designed, manufactured, and marketed by Gladstrong USA. SSP sought indemnity from Metro Novelties, Inc., one of its suppliers of WAX lighters, and SSP and Metro both sought indemnity from Gladstrong USA. Before trial, the parents settled with Gladstrong USA and SSP for $1.6 million each, and SSP settled its indemnity claim against Metro for $800,000. Because SSP's and Metro's positions are aligned here, we refer to them collectively as SSP except when necessary to distinguish between them.

Gladstrong USA moved for summary judgment on SSP's indemnity claims. Statutory indemnity under chapter 82 of the Texas Civil Practice and Remedies Code is owed only by a manufacturer,4 defined as "a designer, formulator, constructor, rebuilder, fabricator, producer, compounder, processor, or assembler of any product".5 Gladstrong USA asserted that there was no evidence it manufactured WAX lighters or that it sold the lighter in question. In response, SSP argued that Gladstrong USA was a "producer" of WAX lighters within the ordinary meaning of that word and therefore a "manufacturer" under the statutory definition; that it was an apparent manufacturer with the same statutory duty; that it should be deemed to have been a manufacturer under industry standards and federal law; and that it should be liable with the actual manufacturer because they were part of a single business enterprise. As for common law indemnity, SSP argued that upstream distributors other than the manufacturer must indemnify downstream distributors. The parties' arguments thus raised six issues:

• Regarding statutory indemnity:

• Was Gladstrong USA a "manufacturer" of WAX-brand lighters as defined by the statute?

• Should Gladstrong USA be deemed by federal law and industry standards to have been a "manufacturer" as defined by statute?

• Is an entity liable as a manufacturer if it is part of a "single business enterprise" with a manufacturer?

• Is an apparent manufacturer of a product a "manufacturer" as defined by statute?

• Regarding common law indemnity:

• Must upstream sellers indemnify downstream sellers for product liability?

• Did Gladstrong USA sell the lighter that caused the accident?

The record establishes the following facts. WAX lighters are made in China by Tianjin Sico Lighters Company, Limited and exported exclusively by Gladstrong Hong Kong, both Chinese companies.6 Gladstrong Hong Kong designed and patented the lighters' safety wheel and instructed Tianjin on construction of the lighters. Gladstrong Hong Kong has sometimes referred to itself as the manufacturer of the lighters for promotional purposes and in obtaining a Uniform Product Code required for sales in the United States.

Gladstrong Hong Kong owns Gladstrong USA, a California corporation, which imports, promotes, and distributes the lighters in the United States, sharing the profits with its parent. Of the two companies' employees, all but one belong to the same family, and Gladstrong Hong Kong holds Gladstrong USA out as its "branch office".

Metro, a Texas corporation, sells WAX lighters to SSP, a Texas general partnership, which retails them through its Circle K convenience stores. Circle K stores sell WAX lighters, identified by a unique Uniform Product Code that Gladstrong Hong Kong owns and by their distinctive labels, markings, and slender shape. The deceased child's aunt bought two lighters at one of SSP's Circle K stores. One of the lighters was allegedly destroyed in the fire. The other bore the WAX-brand UPC, label, and model number GIL-02 ("GIL" stands for Gladstrong Investments, Limited), and had the slim shape of a WAX-brand lighter.

After the child's death, Gladstrong USA sent out safety recall notices to purchasers of WAX lighters, stating that the "Consumer Product Safety Commission has tested these lighters and found they violate federal regulations pertaining to child safety [and] found the child safety mechanism in these lighters to be ineffective." No one else sent recall notices regarding WAX lighters. Gladstrong Hong Kong paid for the recall.

The trial court granted Gladstrong USA's motions for summary judgment, and SSP appealed. The court of appeals implicitly rejected SSP's arguments that Gladstrong USA was, or by federal law could be deemed to be, the manufacturer of the lighter for purposes of statutory indemnity.7 The court held that an apparent manufacturer — which the court defined as "one who puts out, as its own product, chattel manufactured by another"8 — could be liable for common law indemnity9 (an argument SSP did not make) but not for statutory indemnity,10 and that there was some evidence Gladstrong USA was an apparent manufacturer.11 The court also held that one entity cannot be liable as part of a single business enterprise if the other entities in the enterprise are not parties to the case.12 The court reversed in part and remanded the case for further development of the record.13 SSP and Gladstrong USA both petitioned this Court for review.

II

We first consider whether Gladstrong USA is liable for indemnity under chapter 82 of the Texas Civil Practice and Remedies Code.

A

Although a seller of a defective and unreasonably dangerous product may be liable, along with the manufacturer, for physical harm caused to the consumer,14 chapter 82 requires the manufacturer to indemnify an innocent seller against losses arising out of a products liability action.15 Section 82.002(a) imposes that obligation only on manufacturers, not on other sellers.16 As already noted, a manufacturer is defined by section 82.001(4) as "a designer, formulator, constructor, rebuilder, fabricator, producer, compounder, processor, or assembler" of a product,17 while a seller is defined by section 82.001(3) as someone who commercially distributes a product.18 Thus, as we have previously observed, "all manufacturers are also sellers, but not all sellers are manufacturers."19

SSP argues that because Gladstrong USA imports WAX-brand lighters from Gladstrong Hong Kong in China, it "produces" them, as that word is commonly understood, and is therefore a manufacturer. We do not disagree that the dictionary meaning of a producer is broad enough to encompass distributors, but to equate them in the statute would destroy all distinction between manufacturers and sellers. If all sellers were manufacturers because all sellers are producers, then the indemnity obligation would be unlimited; everyone in the distribution chain would owe everyone else indemnity, contrary to the statute's stated purpose of requiring indemnity only by manufacturers. The word "producer" cannot be read to confound the statute; rather, the word's meaning in the statutory definition is confined by the words that surround it: "designer, formulator, constructor, rebuilder, fabricator, ... compounder, processor, or assembler"20 — that is, someone involved in making a product.21 Gladstrong USA imports lighters; it has nothing to do with making them. We have no difficulty concluding that Gladstrong USA was not a manufacturer for purposes of statutory indemnity.

B

SSP argues that the Federal Consumer Product Safety Act defines a "manufacturer" to include an importer,22 reflecting a common commercial understanding, and so should section 82.001(4). But the purpose of that Act is to protect consumer safety,23 not to adjust liabilities among distributors. Imposing safety standards on everyone that introduces a product into the American marketplace, importers and manufacturers alike, is obviously important to consumer safety. Imposing a no-fault indemnity obligation only on importers and not other sellers is certainly not essential to a fair allocation of responsibility. The fact that Congress has chosen to impose product safety requirements on importers in no way suggests that the Legislature has chosen to require importers to indemnify other sellers from...

To continue reading

Request your trial
186 cases
  • Cadena Comercial USA Corp. v. Tex. Alcoholic Beverage Comm'n
    • United States
    • Texas Supreme Court
    • April 28, 2017
    ...to FEMSA, absent evidence of abuse of the corporate form, or use of it to circumvent a statute. See SSP Partners v. Gladstrong Invs. (USA) Corp. , 275 S.W.3d 444, 451 (Tex. 2008).While we have no dispute, generally, with Cadena's reading of the cases it references, we disagree with the appl......
  • Wooley v. Lucksinger
    • United States
    • Court of Appeal of Louisiana — District of US
    • December 30, 2008
    ...behalf of another corporation; and (7) unclear allocation of profits and losses between corporations. SSP Partners v. Gladstrong Investments (USA) Corp., 275 S.W.3d 444, 451 (Tex.2008); PHC-Minden, L.P. v. Kimberly-Clark Corp., 235 S.W.3d 163, 174 (Tex.2007), judgment rev'd on other grounds......
  • Fuentes v. Zaragoza
    • United States
    • Texas Court of Appeals
    • May 31, 2018
    ...each constituent corporation liable for debts incurred in pursuit of their common business purpose. See SSP Partners v. Gladstrong Invs. (USA) Corp. , 275 S.W.3d 444, 455–56 (Tex. 2008). Accordingly, the trial court erred in treating the entities as a single business enterprise.V. Fraud on ......
  • Peterson Grp., Inc. v. PLTQ Lotus Grp., L.P.
    • United States
    • Texas Court of Appeals
    • December 19, 2013
    ...for corporate obligations....” Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex.1986); see [SSP Partners v. Gladstrong Investments (USA) Corp., 275 S.W.3d 444, 451 n. 29 (Tex.2008) ]. However, the corporate veil may be pierced on an alter-ego theory “where a corporation is organized and op......
  • Request a trial to view additional results
1 firm's commentaries
2 books & journal articles
  • Update on Piercing the Corporate Veil
    • United States
    • South Carolina Bar South Carolina Lawyer No. 30-5, March 2019
    • Invalid date
    ...corporation as a separate entity." Pertuis, 423 S.C. at 654-655, 817 S.E.2d at 280 (quoting SSP Partners v. Gladstrong Inus. (USA) Corp., 275 S.W.3d 444, 455 (Tex. 2008)). The South Carolina Supreme Court stated: "We agree with the reasoning of the Texas Supreme Court." Pertuis, 423 S.C. at......
  • Chapter 2-13 Suit to Pierce the Corporate Veil
    • United States
    • Full Court Press Texas Commercial Causes of Action Claims Title Chapter 2 Business Management Litigation*
    • Invalid date
    ...Code Annotated Section 101.002(a) Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986) SSP Partners v. Gladstrong Inves. (USA) Corp., 275 S.W.3d 444 (Tex. 2008) 2-13:2 Elements 2-13:2.1 Contractual Obligations (1) A recognized circumstance of injustice, including: (a) when the corporate fict......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT