Burkert v. Petrol Plus of Naugatuck, Inc.

• Decision Date: 31 July 1990
• Docket Number: No. 13732,13732
• Citation: 216 Conn. 65,579 A.2d 26
• Court: Connecticut Supreme Court
• Parties: , 90 A.L.R.4th 961, 59 USLW 2152, 13 UCC Rep.Serv.2d 85, Prod.Liab.Rep. (CCH) P 12,553 Herbert G. BURKERT et al. v. PETROL PLUS OF NAUGATUCK, INC., et al.

Page 26

579 A.2d 26

216 Conn. 65, 90 A.L.R.4th 961, 59

USLW 2152,

13 UCC Rep.Serv.2d 85,

Prod.Liab.Rep. (CCH) P 12,553

Herbert G. BURKERT et al. v. PETROL PLUS OF NAUGATUCK, INC., et al.

No. 13732.

Supreme Court of Connecticut.

Argued May 8, 1990.

Decided July 31, 1990.

Robert B. Yules, Hartford, for appellant (named defendant-third party plaintiff).

Philip S. Walker, with whom were Robin S. Linker and, on the brief, Karen L. Goodwin, Hartford, for appellee (third party defendant General Motors Corp.).

Before PETERS, C.J., and GLASS, COVELLO, HULL and BORDEN, JJ.

PETERS, Chief Justice.

The principal issue in this appeal is whether the distributor of a defective product is entitled to indemnification against the licensor of a trademark under which the allegedly defective product was marketed, when the trademark licensor did not participate in the production, marketing or distribution of the product. The first party plaintiffs initiated this action to recover for damages allegedly caused by defective automatic transmission fluid that the plaintiffs purchased from the named defendant, Petrol Plus of Naugatuck, Inc. (Petrol Plus). ¹ Petrol Plus filed third party complaints seeking indemnification against Atlantic Coast Oil Company (Atlantic Coast) and General Motors Corporation (GM). ² After the first party actions were settled, the third party claims were tried to a jury. Following the trial, the trial court accepted the jury verdicts and rendered judgment in favor of the third party defendant GM but against Atlantic Coast. The court ordered Atlantic Coast to pay compensatory damages in the amount of $1,020,000, plus $510,000 in punitive damages and $60,597 for attorney's fees. Petrol Plus appealed only the judgment in favor of GM, and we transferred the case from the Appellate Court to ourselves pursuant to Practice Book § 4023. We affirm the judgment of the trial court.

The facts relevant to this appeal are undisputed. The allegedly defective product in this case was automatic transmission fluid, a lubricant composed of base oil and a complex combination of additives designed to withstand the intense conditions of a motor vehicle automatic transmission. Atlantic Coast and Petrol Plus marketed the transmission fluid as Dexron TM II, a registered trademark owned by GM. Dexron TM II, one of only two types of automatic transmission fluids currently on the market, is approved for use in most motor vehicle automatic transmissions.

Although the parties dispute several of the details of GM's involvement in the case, it is clear, even taking Petrol Plus' statement of facts as true, that GM's role as a trademark licensor was unusually limited. GM operates a licensing program by which it permits third parties to use the Dexron TM II trademark on specific formulations of automatic transmission fluids meeting GM's performance standards. ³ To qualify as Dexron TM II, a lubricant must pass twenty separate performance tests at one of two GM approved laboratories. GM exercises no control over the actual formulations that its licensees use to meet these performance standards, however, and the physical and chemical properties of the transmission fluid therefore vary among producers. Indeed, no one at GM knows the actual makeup of the licensees' various formulations of Dexron TM II, since licensees consider their transmission fluid formulas to be trade secrets.

Significantly, GM receives no royalties or other financial benefits from the licensing program. GM established the Dexron TM II trademark program not as a marketing scheme to generate income or to promote GM's visibility in the marketplace, but rather as a quality control measure to ensure an adequate supply of suitable lubricant to meet its needs. Once it grants a license, GM does little to supervise the production and distribution of Dexron TM II. According to Petrol Plus, GM never provided its licensees with educational literature or seminars on production and quality control matters. GM also did not require its licensees to submit samples or test data to determine whether the transmission fluid being marketed as Dexron TM II met GM's performance specifications, and did not undertake to warn purchasers of potential problems with the product. ⁴

Petrol Plus, a petroleum products distributor, sold transmission fluid as Dexron TM II to automatic transmission repair shops and to Connecticut Transit. Petrol Plus obtained this transmission fluid from Atlantic Coast, which held a "rebrander's license" from GM. Atlantic Coast's rebrander's license, in turn, entitled it to purchase transmission fluid bearing a specified identification number from Sun Oil Company, which operated under an original formulator's license. Atlantic Coast "rebranded" the transmission fluid purchased from Sun Oil Company as "Kenmore" Dexron TM II. ⁵

Beginning in 1981, Petrol Plus purchased one quart containers of Kenmore Dexron TM II from Atlantic Coast for resale to its customers. In 1983, Petrol Plus began purchasing transmission fluid in 5000 gallon amounts that Atlantic Coast delivered in bulk. In all, Petrol Plus accepted four bulk loads during the period between May and August of 1983.

During June, 1983, one of Petrol Plus' customers complained about the color of the Dexron TM II. In response, Petrol Plus commissioned Ana Laboratories, Inc., to test the suspect transmission fluid. Although Ana Laboratories is not one of GM's authorized testing facilities, Petrol Plus notified the complaining customer that Ana Laboratories had concluded that the fluid was "satisfactory for use." Later tests conducted after receipt of many additional customer complaints reached differing conclusions. In light of these results, Petrol Plus suspended distribution of the bulk transmission fluid in August and notified its customers by letter that they should terminate all use of the product. Further inquiry revealed that Atlantic Coast had not been supplying the approved Sun Oil Company lubricant. In lieu of the approved formulation, Atlantic Coast had supplied Petrol Plus with a base oil, dyed red to make it look like Dexron TM II. ⁶

In its third party complaint against Atlantic Coast and GM, Petrol Plus claimed that it was entitled to common law indemnification for the settlement moneys and other expenses incurred in settling the first party actions for damages caused by the defective transmission fluid. The complaint set forth five counts for indemnification including negligence, strict tort liability, breach of implied warranties of merchantability and fitness for a particular purpose and breach of an express warranty. In addition, Petrol Plus alleged three other counts for compensatory and punitive damages for its alleged economic losses based on recklessness, misrepresentation and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes 42-110a et seq. ⁷

Following the parties' submission of proposed jury instructions, the trial court opted to give separate instructions on the counts against Atlantic Coast and on those against GM. In its charge on the counts against GM, the trial court instructed the jury to determine, as a threshold matter, whether GM was a product seller as defined by the Product Liability Act; General Statutes §§ 52-572m through 52-572r; notwithstanding Petrol Plus' objection that it had not pleaded the statute. The trial court refused to instruct the jury on Petrol Plus' recklessness, misrepresentation and CUTPA claims against GM, but denied GM's motion for a directed verdict on the remaining counts. The jury found in favor of GM on all counts, but returned a verdict against Atlantic Coast in the amount of $1,020,000, after having concluded that Petrol Plus was 15 percent responsible for the total damages of $1,200,000. The court accepted the jury's verdicts, and thereafter granted Petrol Plus' motion for punitive damages and awarded an additional $510,000, plus $60,597 for attorney's fees against Atlantic Coast.

On appeal, Petrol Plus challenges the trial court's judgment in favor of GM on three grounds. First, it contends that the court should have held, as a matter of law, that GM was a "product seller" for purposes of the Product Liability Act, rather than leaving that question for the jury to resolve. Second, Petrol Plus argues that the court's instructions on its common law theories of indemnity were unduly restrictive. Finally, Petrol Plus contends that the court wrongly failed to charge the jury on its CUTPA claim against GM.

I

Petrol Plus first contends that the trial court should not have treated the issue of whether GM was a "product seller" under the Product Liability Act as a question of fact. Instead, Petrol Plus argues, the court should have ruled that GM was a product seller and instructed the jury that, as a matter of law, GM was liable to Petrol Plus under the statute. GM, by contrast, agrees that the question should not have been left to the jury, but contends that, as a mere trademark licensor, it did not fit within the statutory definition of a product seller. On this theory, GM argues, the court should have granted its motion for a directed verdict, since the Product Liability Act is the exclusive remedy for harm caused by a defective product. While we agree that GM was not, as a matter of law, a product seller under the Product Liability Act, we conclude that the statute does not preclude an injured party from asserting a claim for indemnification against a nonseller. ⁸

The Product Liability Act defines a product seller as "any person or entity, including a manufacturer, wholesaler, distributor or retailer who is engaged in the business of selling such products whether the sale is for resale or for use or consumption. The term 'product' seller also includes lessors or bailors of products who are engaged in the business of leasing or bailment of products." General Statutes § 52-572m(a). Plainly, GM was not the ...