Bridgestone/Firestone North America Tire, LLC v. APS Rent-A-Car & Leasing, Inc.

• Citation: 207 Ariz. 502,88 P.3d 572
• Decision Date: 30 April 2004
• Docket Number: No. 2 CA-CV 2003-0115.,2 CA-CV 2003-0115.
• Parties: BRIDGESTONE/FIRESTONE NORTH AMERICA TIRE, L.L.C., a Delaware Limited Liability Company, Plaintiff/Appellant, v. A.P.S. RENT-A-CAR & LEASING, INC., an Arizona corporation, Defendant/Appellee.
• Court: Court of Appeals of Arizona

88 P.3d 572

207 Ariz. 502

BRIDGESTONE/FIRESTONE NORTH AMERICA TIRE, L.L.C., a Delaware Limited Liability Company, Plaintiff/Appellant, v. A.P.S. RENT-A-CAR & LEASING, INC., an Arizona corporation, Defendant/Appellee.

No. -0115.

Court of Appeals of Arizona. Division Two, Department B.

April 30, 2004.

Fennemore Craig, By Timothy Berg, Christopher L. Callahan, Darcy R. Renfro, and William L. Thorpe, Phoenix, for Plaintiff/Appellant.

Jones, Skelton & Hochuli, P.L.C., By Donald L. Myles, Jr., Les S. Tuskai, and Randall H. Warner, Phoenix, for Defendant/Appellee.

OPINION

PELANDER, Presiding Judge.

¶ 1 This declaratory relief action (DRA), which arises from an underlying product liability action (the Naranjo case), involves the seller's claim for indemnity against the manufacturer. The manufacturer, appellant Bridgestone/Firestone North America Tire, L.L.C., appeals from the trial court's grant of summary judgment in favor of the seller, appellee A.P.S. Rent-A-Car & Leasing, Inc.¹ Based on both statutory and common law grounds, the trial court ordered Bridgestone to indemnify A.P.S. for thirty percent of the judgment entered against A.P.S. in the Naranjo case. Bridgestone challenges that ruling on various legal grounds and argues numerous issues of material fact preclude summary judgment.

¶ 2 This appeal requires us to analyze and apply A.R.S. § 12-684(A). The primary issue is whether that statute is a stand-alone, independent basis for indemnity, as A.P.S. contends and the trial court ruled, or whether the statute must be construed consistently with various common law principles, as Bridgestone argues. Because we find no genuine issues of material fact and agree with A.P.S.'s legal position, we conclude Bridgestone was obligated to indemnify A.P.S. under § 12-684(A). We therefore affirm the trial court's judgment on that basis.

BACKGROUND

¶ 3 We view the facts and reasonable inferences therefrom in the light most favorable to the party against whom summary judgment was entered, here Bridgestone. Link v. Pima County, 193 Ariz. 336, ¶ 12, 972 P.2d 669, 673 (App.1998). On February 18, 2001, A.P.S. rented a van to the Naranjo family. A few days later, one family member was killed and several others injured when the van's right rear tire suddenly failed, causing the vehicle to roll and crash. The failed tire was manufactured in Mexico in 1998.

¶ 4 In March 2001, the Naranjos sued only A.P.S., alleging negligence and strict liability in tort. In May, A.P.S. tendered its defense to Bridgestone, the tire's alleged manufacturer, by sending a letter and a copy of the complaint to Bridgestone headquarters in Tennessee. Bridgestone received the tender of defense but did not formally respond. A.P.S. therefore defended itself in the Naranjo case, named Bridgestone as a non-party at fault,² and unsuccessfully attempted to bring Bridgestone into the case as a third-party defendant. Bridgestone, however, took certain steps to monitor the Naranjo case.

¶ 5 During trial in that case, A.P.S. essentially admitted the tire in question was defective and never disputed that the tire was unreasonably dangerous when A.P.S. rented the van to the Naranjos. In fact, A.P.S. presented expert testimony and argued that the tire was defective due to a design or manufacturing defect. Based on A.P.S.'s evidence and concessions, the trial court directed a verdict in favor of the Naranjos on their strict liability claim and instructed the jury that A.P.S. "was at fault for product liability for leasing a vehicle to the [Naranjos] with defective and unreasonably dangerous tires."

¶ 6 After a seven-day trial, the jury awarded $9,539,838 in compensatory damages to the Naranjos. In response to a special interrogatory, the jury stated that seventy percent of its verdict was based on the Naranjos' negligence claim and thirty percent on their product liability claim.³ A.P.S. paid the entire amount of the ensuing judgment, and the Naranjos filed a satisfaction of judgment with the trial court.

¶ 7 While the Naranjo case was pending, Bridgestone filed this DRA, seeking a ruling that it would neither be bound by any judgment in the Naranjo case nor obligated to indemnify A.P.S. for any damages awarded to the Naranjos. Bridgestone alleged that its Mexican subsidiary, Bridgestone/Firestone de Mexico (BFMX), had actually manufactured the failed tire and, therefore, A.P.S.'s tender of defense to Bridgestone was not proper. Bridgestone further claimed that A.P.S.'s own negligence and a conflict of interest between itself and A.P.S. would defeat any claim for indemnity. A.P.S. responded with a counterclaim for indemnity and contribution against Bridgestone.⁴

¶ 8 Following the verdict in the Naranjo case, A.P.S. moved for summary judgment in this DRA, arguing that Bridgestone had been properly "vouched in" to the Naranjo litigation and that, pursuant to § 12-684, Bridgestone was required to indemnify A.P.S. for the product liability portion (thirty percent) of the verdict. In its response and cross-motion for partial summary judgment, Bridgestone argued it was not the manufacturer on whom A.P.S.'s tender of defense should have been served. In addition, Bridgestone contended A.P.S. had not diligently defended the product liability claim in the Naranjo case, but rather, had "actively blamed" Bridgestone at trial for the defective tire. Consequently, Bridgestone denied any obligation to indemnify A.P.S. for the resulting verdict. Bridgestone also argued it should not be bound to any part of the judgment rendered in the Naranjo case because a conflict of interest had prevented it from assuming A.P.S.'s defense. Bridgestone acknowledged it ultimately might have to indemnify A.P.S. for some portion of that judgment but claimed that a trial was necessary to determine the parties' relative degrees of fault and liability.⁵

¶ 9 After further briefing and argument, and after taking judicial notice of the entire record in the Naranjo case (over which it also had presided), the trial court granted summary judgment in favor of A.P.S. and denied Bridgestone's cross-motion. The court ruled that Bridgestone was the manufacturer of the tire and had received and refused a proper tender of defense from A.P.S. Concluding that Bridgestone had not established either of the two statutory exceptions in § 12-684(A) and that its various common law defenses were inapplicable, the court ordered Bridgestone to indemnify A.P.S. for $2,861,951.40, thirty percent of the damages awarded to the Naranjos. The trial court also grounded its ruling on "common law vouching in and indemnification" and on A.P.S.'s contribution claim "for 30 percent of the Naranjo Judgment."

¶ 10 Bridgestone filed a motion for reconsideration, reurging the arguments made in its cross-motion for partial summary judgment. Bridgestone also argued the trial court had improperly taken judicial notice of substantive evidence presented in the Naranjo case and had decided issues beyond the scope of the parties' motions, specifically in ruling that the failed tire had a design or manufacturing defect. Attached to Bridgestone's motion for reconsideration was an affidavit from a tire expert, who stated that the failed tire had no such defect, but rather, had failed due to punctures and improper repairs that were not attributable to the design or manufacturing process. After ordering a response from A.P.S., the trial court denied Bridgestone's motion without comment. This appeal followed the court's entry of judgment in favor of A.P.S. pursuant to Rules 54(b) and 56, Ariz. R. Civ. P., 16 A.R.S., Pt. 2.

DISCUSSION

I.

¶ 11 The trial court's summary judgment ruling was primarily based on § 12-684. Enacted in 1978, that statute provides in pertinent part:

A. In any product liability action where the manufacturer refuses to accept a tender of defense from the seller, the manufacturer shall indemnify the seller for any judgment rendered against the seller and shall also reimburse the seller for reasonable attorneys' fees and costs incurred by the seller in defending such action, unless either paragraph 1 or 2 applies:

1. The seller had knowledge of the defect in the product.

2. The seller altered, modified or installed the product, and such alteration, modification or installation was a substantial cause of the incident giving rise to the action, was not authorized or requested by the manufacturer and was not performed in compliance with the directions or specifications of the manufacturer.

¶ 12 "Section [12-]684 is intended, in most circumstances, to place the burden and costs of defending products on their manufacturers." Desert Golf Cars v. Yamaha Motor Co., 198 Ariz. 103, ¶ 11, 7 P.3d 112, 115 (App.2000). Thus, a blameless manufacturer might be liable for a seller's defense costs, even when no liability is found or judgment rendered against the seller. McIntyre Refrigeration, Inc. v. Mepco Electra, 165 Ariz. 560, 564, 799 P.2d 901, 905 (App.1990). And, sellers of both new and used products may utilize § 12-684 to seek indemnity from manufacturers. Jordan v. Sunnyslope Appliance Propane & Plumbing Supplies Co., 135 Ariz. 309, 315, 660 P.2d 1236, 1242 (App.1983). But, "when a seller modifies the product and that modification substantially causes the incident in question, then it is the seller who steps into the shoes of the manufacturer as being the one best situated to detect, control or prevent the putative defect." Desert Golf Cars, 198 Ariz. 103, ¶ 11, 7 P.3d at 115.

¶ 13 The trial court concluded that § 12-684 "is a legislatively mandated procedure for vouching in/indemnification which differs from the common law vouching in and provides fewer defenses in order to carry out the legislature's intent to place the burden and costs of defending products on the manufacturer rather than Arizona retailers." As noted above, the court ruled that A.P.S. had properly served a valid tender of defense on the manufacturer,...