American States Ins. Co. v. Lanier Business Products

• Decision Date: 13 February 1989
• Docket Number: Civ. A. No. 88-T-809-N.
• Citation: 707 F. Supp. 494
• Parties: AMERICAN STATES INSURANCE COMPANY, et al., Plaintiffs, v. LANIER BUSINESS PRODUCTS, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

707 F. Supp. 494

AMERICAN STATES INSURANCE COMPANY, et al., Plaintiffs, v. LANIER BUSINESS PRODUCTS, et al., Defendants.

Civ. A. No. 88-T-809-N.

United States District Court, M.D. Alabama, N.D.

February 13, 1989.

James E. Williams, Melton & Espy, Montgomery, Ala., for American States Ins. Co. and St. Paul Fire & Marine Ins. Co.

Joseph S. Bird, Michael Bell, Brittin T. Coleman, Bradley, Arant, Rose & White, Birmingham, Ala., for defendant Lanier Business Products.

John T. Alley, Jr., Webb, Crumpton, McGregor, Sasser, Davis & Alley, Montgomery, Ala., for defendant Toshiba America, Inc.

William H. Brittain, II, Ball, Ball, Duke, Matthews & Novak, Montgomery, Ala., for defendants Elgin Corp. and Combustion Eng. & Basic Inc.

ORDER

MYRON H. THOMPSON, District Judge.

This cause, in which the plaintiffs, American States Insurance Company and St. Paul Fire and Marine Insurance Company have sued for recovery under, among other theories, the Alabama Extended Manufacturer's Liability Doctrine (AEMLD), is now before the court on a motion for summary judgment filed by one of the defendants, Lanier Business Products. For the reasons that follow, the court concludes that Lanier's motion should be granted in part and denied in part.

1. BACKGROUND

On September 10, 1986, a fire broke out in a building owned by Hill, Guthrie & Trawick Properties in Montgomery, Alabama. An investigation of the fire suggested that a power supply box installed by Lanier Business Products, a tenant in the building, may have caused the fire. The unit had been sold to Lanier as part of a shipment of such units manufactured by Toshiba of America, Inc.

Plaintiff American Trust Insurance Company was the insurance carrier for the owners of the building, and plaintiff St. Paul Fire and Marine Insurance Company insured one of the building's other tenants. Required under their respective policies to pay claims to their insureds for damages resulting from the fire, the two insurance companies initiated this action seeking recovery for their claims payments. In this litigation, they have sued Lanier Business Products, Toshiba of America, Inc., Elgin Corporation, and Combustion Engineering, seeking relief under a variety of legal theories, including negligence, breach of warranty, breach of contract, and the AEMLD.

During the time period in question, Toshiba, as a general course of business, supplied these telephone power supply units to Lanier Business Products, which in turn resold the units to the general public. The units were marketed as Lanier Business Products' merchandise under the Harris/Lanier label. As part of its business, Lanier sold, distributed, installed, and maintained these power supply units.

Although Lanier intended that the shipment of units would eventually be marketed to the general public, the particular power supply unit involved in this litigation was used by Lanier Business Products for internal purposes in its Montgomery, Alabama office. Lanier employees installed the unit in the Hill, Guthrie & Trawick building for the express purpose of using it in conjunction with the telephone system Lanier was using in its offices.¹

It was this unit, the installation of the unit, or the failure to maintain the unit properly that, according to the plaintiffs, gave rise to the fire that damaged and partially destroyed the offices in the Hill, Guthrie & Trawick building.

By its motion for summary judgment, Lanier alleges that there are no disputes of material fact and that, as a matter of law, it is entitled to judgment on the plaintiffs' claims of negligence and under the AEMLD.²

II. THE ALABAMA EXTENDED MANUFACTURER'S LIABILITY DOCTRINE

The Alabama Supreme Court first announced the adoption of the AEMLD in Casrell v. Altec Industries, Inc., 335 So.2d 128 (Ala.1976), and Atkins v. American Motors Corp., 335 So.2d 134 (Ala.1976). Under this doctrine, a manufacturer, supplier, or seller who markets a product not reasonably safe when applied to its intended use in the usual and customary manner, is negligent as a matter of law. Entrekin v. Atlantic Richfield Co., 519 So.2d 447, 449 (Ala.1987).

To state a cause of action under the AEMLD, a plaintiff must show:

(1) He suffered injury or damages to himself or his property by one who sells a product in a defective condition unreasonably dangerous to the plaintiff or the ultimate user or consumer, if

(a) the seller is engaged in the business of selling such a product, and

(b) it is expected and does reach the user or consumer without substantial change in the condition in which it is sold.

(2) Showing these elements, the plaintiff has proved a prima facie case although (a) the seller has exercised all possible care in the preparation and sale of his product, and

(b) the user or consumer has not bought the product from, or entered into any contractual relationship with, the seller.

Casrell, 335 So.2d at 132-33; Atkins, 335 So.2d at 141.

While this doctrine in many ways resembles the strict liability doctrine found in § 402A of the Restatement (Second) of Torts (1965), there are some significant differences. Primary among them is the fact that the AEMLD retains the common law notion of negligence or fault. Casrell v. Altec Industries, Inc., 335 So.2d at 132; Atkins v. American Motors Corp., 335 So. 2d at 139.³ The practical consequence of this distinction is the retention of various affirmative defenses not available under the strict liability theory propounded in § 402A. Thus, in defending a suit brought pursuant to the AEMLD, a manufacturer, supplier, or seller may rely upon several affirmative defenses, including contributory negligence, assumption of the risk, and under certain circumstances, lack of causal relation.⁴ Casrell, 335 So.2d at 134; Atkins, 335 So.2d at 143. Moreover, the defendant in an AEMLD suit can present evidence to rebut any element of the plaintiffs' prima facie case. Id.

Lanier challenges the plaintiffs' proposed application of the AEMLD to it in this litigation.⁵ Lanier argues it never introduced the particular telephone power supply unit that allegedly caused the fire into the public marketplace. Lanier avers that the AEMLD was never intended to be applied to products used for internal consumption only. Relying upon the Alabama Supreme Court's decision in The First National Bank of Mobile v. Cessna Aircraft Co., 365 So.2d 966 (Ala.1978), Lanier contends that, since the power supply unit that allegedly caused the fire was never entered into the "stream of commerce," the AEMLD is inapplicable.

The plaintiffs respond, in essence, by arguing that the fact that the model that allegedly caused the fire was used internally rather than placed on the market was the result of mere chance. They note that the model was part of a larger shipment of power supply units that Lanier had received from Toshiba, its manufacturer. Asserting that Lanier introduced the remainder of the shipment into the commercial marketplace, the plaintiffs contend that this act was sufficient for applying the AEMLD and that Lanier should not be able to escape liability simply because, in retrospect, it was fortuitous in its choice of which model it chose for its internal purposes.

While at first blush the plaintiffs' assertions have some appeal, the court is convinced that such a result would be inconsistent with both the case law surrounding the AEMLD and the policy reasons underlying the doctrine. The problem with the plaintiffs' argument is that it attempts to blur the distinction between products used for internal usage and products placed on the market for more general consumption. This difference is essential if the manufacturer's extended liability doctrine is to apply to Lanier.⁶ Compare First National Bank of Mobile v. Cessna Aircraft Co., 365 So.2d 966 (Ala.1978) (AEMLD applies where products have been placed in the "stream of commerce") with CNG Producing Co. v. Columbia Gulf Transmission, 709 F.2d 959, 963 (5th Cir.1983) (products liability doctrine is inapposite where manufacturer has used product internally and not injected it into the stream of commerce).

In First National Bank of Mobile v. Cessna Aircraft Co., the Alabama Supreme Court addressed what actions by a manufacturer, supplier, or seller were necessary to bring its products within the scope of the AEMLD. The question in First National Bank of Mobile concerned whether a sale in fact was a necessary prerequisite to bringing a manufacturer's actions under the AEMLD's purview. In holding that an actual sale was not a necessary predicate, the Alabama Supreme Court construed the AEMLD to apply to any manufacturer or supplier who places a defective article in the "stream of commerce." Id., at 967-68. This holding was premised on the notion that a manufacturer or supplier who, through any of a variety of marketing techniques, exposes his product to the general public owes a special duty and responsibility to protect those prospective consumers. Id., at 968. Consequently, any entity that places its product in the market cycle, whether by demonstration, lease, free sample, or sale, has an obligation to protect prospective customers from the harms that may be caused by the product should it prove to be defective. Id.

From the facts of this case, it appears quite clear that Lanier never introduced the particular product alleged to have been the cause of the fire into the "stream of commerce" as that term is used in First National Bank of Mobile. While it is true that Lanier is in the business of placing telephone power supply units on the market for general consumption, the fact remains that the particular unit in question was not so placed. The profit motive upon which the AEMLD is premised, see First National Bank of Mobile, 365 So.2d at 968, simply is not present in a case in which the product remains solely within the manufacturer's walls.⁷ As the Fifth Circuit observed in CNG Producing Co. v. Columbia Gulf Transmission,...