Torres v. Goodyear Tire & Rubber Co., Inc.

• Decision Date: 20 September 1988
• Docket Number: No. 87-2062,87-2062
• Citation: 857 F.2d 1293
• Parties: Prod.Liab.Rep.(CCH)P 11,917 Andrew TORRES; Amanda Torres, husband and wife; Walter Torres; Debra Torres, Plaintiffs-Appellants, v. GOODYEAR TIRE & RUBBER COMPANY, INC., an Ohio Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1293

857 F.2d 1293

Prod.Liab.Rep.(CCH)P 11,917

Andrew TORRES; Amanda Torres, husband and wife; Walter

Torres; Debra Torres, Plaintiffs-Appellants, v. GOODYEAR TIRE & RUBBER COMPANY, INC., an Ohio Corporation,

Defendant-Appellee.

No. 87-2062.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 18, 1988.

Decided Sept. 20, 1988.

Richard D. Engler, Engler, Engler, Weil & Nelson, Yuma, Ariz., for plaintiffs-appellants.

Jefferson L. Lankford, Jennings, Strouss & Salmon, Phoenix, Ariz., for defendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Before SNEED, HALL and NOONAN, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

Plaintiffs-appellants the Torreses sue to recover for personal injuries suffered as a result of an automobile accident. The district court exercised diversity jurisdiction pursuant to 28 U.S.C. Sec. 1332(a)(1) (1982). The district court granted summary judgment in favor of defendant-appellee Goodyear Tire & Rubber Company ("Goodyear") concluding that "neither the Arizona courts nor the Arizona legislature have accepted the expansive liability doctrines argued by the plaintiffs." We have jurisdiction pursuant to 28 U.S.C. Sec. 1291 (1982). We affirm.

I

The pertinent facts, briefly stated, are as follows. Andrew and Walter Torres were injured in an automobile accident allegedly caused by the tread separation of a tire on an automobile driven by Walter, a 1977 Triumph manufactured in Great Britain. The tire was original equipment on the automobile which was purchased by Walter's wife, Debra. The car's allegedly defective tire bore the legend "Goodyear." The Torreses assert that Goodyear is liable for the resulting damages under four different theories: enterprise liability, apparent manufacturer liability, agency liability, and breach of warranty.

The tire was manufactured in Wolverhampton, England by Goodyear Tyre & Rubber (Great Britain), Ltd. ("Goodyear GB"). Goodyear International Technical Center ("Goodyear Technical Center"), a division of Goodyear SA of Luxembourg, designed the tire. Either Goodyear SA of Luxembourg or Goodyear GB issued the tire specifications. According to the Torreses, Goodyear operates its foreign subsidiaries, with the exception of its Canadian subsidiary, through Goodyear International Corporation.

Goodyear GB, Goodyear SA of Luxembourg, and Goodyear International Corporation are all Goodyear subsidiaries. Because Goodyear owns most or all of its subsidiaries' stock, it is able to elect the corporate directors and thereby control the subsidiaries. There is commonality between some of the officers and directors of Goodyear and its subsidiaries.

Goodyear's support for its tires extends from research and development to trademark licensing, and from warranting to advertising. Goodyear's trademark is registered and its use is conditioned on Goodyear's control of the manufacturer. Goodyear is responsible for quality assurance and control of all tires manufactured by its foreign subsidiaries. It will honor any valid warranty claim on a tire that bears a Goodyear trademark and is produced by either Goodyear or a foreign subsidiary.

Pursuant to a licensing agreement with Goodyear, Goodyear GB may manufacture tires bearing the Goodyear trademark. The Licensing Agreement provides for manufacture of the tires in accordance with the formulas, specifications, and directions given by Goodyear. Only materials approved by Goodyear may be used. Goodyear GB must comply with Goodyear's instructions on production, labeling, marketing, and packaging of these tires.

II

We review the grant of summary judgment de novo. California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). Under Fed.R.Civ.P. 56(c), summary judgment is appropriate if the pleadings and supporting materials "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

III

The Torreses claim that Goodyear is liable under an "enterprise theory" of liability. The district court found that this claim lacked an essential element of strict liability under Arizona statutory and case law: the defendant must have designed, manufactured or sold the defective product.

As a federal court sitting in diversity, we must apply Arizona substantive law. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Because the Arizona Supreme Court has not considered the issue of strict liability of trademark licensors, we must determine the result the Arizona Supreme Court would reach if it were deciding the case. Molsbergen v. United States, 757 F.2d 1016, 1020 (9th Cir.), cert. denied, 473 U.S. 934, 106 S.Ct. 30, 87 L.Ed.2d 706 (1985). In determining what the Arizona Supreme Court would conclude, we may consider recognized legal sources including statutes, treatises, restatements, and published opinions. Id. We also may look to "well-reasoned decisions from other jurisdictions." Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir.1980). We review de novo the district court's determination of the applicable state law. In re McLinn, 739 F.2d 1395, 1400 (9th Cir.1984) (en banc).

Arizona has adopted section 402A of the Restatement (Second) of Torts which imposes strict liability on "[o]ne who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property." In Tucson Industries, Inc. v. Schwartz, 108 Ariz. 464, 501 P.2d 936 (1972), the Arizona Supreme Court explained strict liability as a rule placing the burden of loss on " 'those persons who are in the chain of placing defective goods on the market.' " Id. at 467, 501 P.2d at 939 (quoting Caruth v. Mariani, 11 Ariz.App. 188, 192, 463 P.2d 83, 87 (1970)). "Strict liability is a public policy device to spread the risk from one to whom a defective product may be a catastrophe, to those who marketed the product, profit from its sale, and have the know-how to remove its defects before placing it in the chain of distribution." Id., 108 Ariz. at 467-68, 501 P.2d at 939-40. We find no support in Arizona law, however, for the Torres' argument that we should deduce from these policy statements a willingness on the part of the Arizona Supreme Court to impose strict liability on trademark licensors.

Arizona's product liability statute, Ariz.Rev.Stat.Ann. Secs. 12-681-686 (1982), defines a "product liability action" as one "brought against a manufacturer or seller of a product...." "Manufacturer" and "seller" are defined as follows:

"Manufacturer" means a person or entity who designs, assembles, fabricates, produces, constructs or otherwise prepares a product or component part of a product prior to its sale to a user or consumer, including a seller owned in whole or significant part by the manufacturer or a seller owning the manufacturer in whole or significant part.

"Seller" means a person or entity, including a wholesaler, distributor, retailer or lessor, engaged in the business of leasing any product or selling any product for resale, use or consumption.

Sec. 12-681(1), (5).

In addition to "manufacturers" and "sellers," Arizona courts have found a variety of entities to be integral parts of an enterprise responsible for placing allegedly defective products on the market: a lessor, Sequoia Mfg. Co. v. Halec Constr. Co., 117 Ariz. 11, 570 P.2d 782 (Ct.App.1977); a dealer in used goods, Jordan v. Sunnyslope Appliance Propane & Plumbing Supplies Co., 135 Ariz. 309, 660 P.2d 1236 (Ct.App.1983); a retailer, O.S. Stapley Co. v. Miller, 103 Ariz. 556, 447 P.2d 248 (1968) (en banc); a jobber, Tucson Industries, supra; a distributor, Lunt v. Brady Mfg. Corp., 13 Ariz.App. 305, 475 P.2d 964 (1970); and a packager, Shell Oil Co. v. Gutierrez, 119 Ariz. 426, 581 P.2d 271 (Ct.App.1978). However, no Arizona court has considered the precise issue of whether a trademark licensor is strictly liable for personal injuries caused by a defective product bearing its trademark.

In other jurisdictions that have considered the issue, some courts have concluded that strict liability should attach to the trademark licensor as one within the "stream of commerce" in which the product flows. See Connelly v. Uniroyal, Inc., 75 Ill.2d 393, 27 Ill.Dec. 343, 389 N.E.2d 155 (1979), cert. denied and appeal dismissed, 444 U.S. 1060, 100 S.Ct. 992, 62 L.Ed.2d 738 (1980); City of Hartford v. Associated Construction Co., 34 Conn.Supp. 204, 384 A.2d 390 (Super.Ct.1978); Kasel v. Remington Arms Co., 24 Cal.App.3d 711, 101 Cal.Rptr. 314 (1972). Accord Kosters v. Seven-Up Co., 595 F.2d 347 (6th Cir.1979) (applying Michigan law, franchisor liable under implied warranty theory); Harris v. Aluminum Co. of America, 550 F.Supp. 1024 (W.D.Va.1982) (applying Virginia law, same); Taylor v. General Motors, Inc., 537 F.Supp. 949 (E.D.Ky.1982) (applying Kentucky law, strict liability applies to one exercising strict control over design and testing of defective product); Carter v. Joseph Bancroft & Sons Co., 360 F.Supp. 1103 (E.D.Pa.1973) (applying Pennsylvania law, trademark licensor strictly liable as "seller"). Some commentators have agreed. See 2 L. Frumer & M. Friedman, Products Liability Sec. 3.03[b][viii] at 3-456 (1988); Note, Tort Liability of Trademark Licensors, 55 Iowa L.Rev. 693 (1970).

In this case, however, we hesitate prematurely to extend the law of products liability in the absence of an indication from the Arizona courts or the Arizona legislature that such an extension would be desirable. We have limited discretion in a diversity case "to adopt untested legal theories brought under the rubric of state law." Affiliated FM Ins. Co. v. Trane Co., 831 F.2d 153, 155 (7th Cir.1987); see Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Dayton v....