Jones v. Aero-Chem Corp., CV-86-188-GF.

• Decision Date: 27 November 1987
• Docket Number: No. CV-86-188-GF.,CV-86-188-GF.
• Citation: 680 F. Supp. 338
• Parties: Rose Maree JONES, Plaintiff, v. AERO-CHEM CORPORATION, and Athea Laboratories, Inc., Defendants. AERO-CHEM CORPORATION, and Athea Laboratories, Inc., Third-Party Plaintiffs, v. EMSON RESEARCH COMPANY, Third-Party Defendant.
• Court: U.S. District Court — District of Montana

680 F. Supp. 338

Rose Maree JONES, Plaintiff, v. AERO-CHEM CORPORATION, and Athea Laboratories, Inc., Defendants.

AERO-CHEM CORPORATION, and Athea Laboratories, Inc., Third-Party Plaintiffs, v. EMSON RESEARCH COMPANY, Third-Party Defendant.

No. CV-86-188-GF.

United States District Court, D. Montana, Great Falls Division.

November 27, 1987.

Zander Blewett, Hoyt & Blewett, Great Falls, Mont., for plaintiff.

Jack L. Lewis, Jardine, Stephenson, Blewett & Weaver, Great Falls, Mont., for defendants and third-party plaintiffs.

Gary M. Zadick, Ugrin, Alexander, Zadick & Slovak, Great Falls, Mont., for third-party defendant.

MEMORANDUM AND ORDER

HATFIELD, District Judge.

This strict products liability action is before the court on motion of the third-party defendant, Emson Research Company (hereinafter "Emson"), requesting the court to enter summary judgment in that entity's favor with respect to the claim, sounding in indemnity, advanced against it by defendants/third-party plaintiffs, Aero/Chem Corporation and Athea Laboratories, Inc. (collectively referred to as "Aero/Chem").

FACTUAL BACKGROUND

The plaintiff, Rose Maree Jones, an officer of the United States Customs Service, was allegedly injured when a tear gas cannister she was carrying discharged upon incidental contact with another object. Ms. Jones seeks damages for the injuries she sustained from Aero/Chem, the commercial entity which purportedly designed, manufactured and marketed the cannister. Ms. Jones seeks to impose liability upon Aero/Chem under a theory of strict liability in tort. By way of third-party complaint, Aero/Chem seeks indemnity from Emson, the designer/manufacturer of a valve incorporated by Aero/Chem into the finished cannister, for any damages Ms. Jones may ultimately recover against Aero/Chem.¹

Emson takes the position that Aero/Chem is precluded, as a matter of law, from seeking indemnity or contribution from Emson. In addition, Emson seeks to impress upon the court that no genuine issue of material fact exists with respect to the issue of causation. Emson asserts that any defect in the cannister was caused, not by any defect in the valve Emson manufactured, but from improper design and assemblage of the cannister.

ANALYSIS

I.

Jurisdiction of this action is founded on diversity of citizenship. Montana substantive law is, therefore, controlling. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

The primary issue presented for determination is whether, under Montana law, the manufacturer/assembler of a finished product, held strictly liable to a third party for damages caused by a defective component part integrated into the finished product, is entitled to recover indemnity from the manufacturer of the defective component part. To date, the Montana Supreme Court has not addressed this specific question. The decisional law extant in Montana, however, provides clear guidance as to what the Montana Supreme Court would conclude if presented with this precise issue.²

The State of Montana has unequivocally adopted Section 402A of the RESTATEMENT OF TORTS as the rule governing strict products liability. Brandenburger v. Toyota Motor Sales, 162 Mont. 506, 513 P.2d 268 (1973). In adopting the doctrine of strict products liability, the Montana Supreme Court recognized the strong public interest in placing responsibility for injury proximately caused by a defective product upon the manufacturer responsible for that product reaching the marketplace. 162 Mont. at 514, 513 P.2d 268.

The State of Montana has also adopted the equitable principle of indemnity which recognizes the right of one compelled to pay damages caused by another to shift the burden of that loss to the responsible party. See, Poulsen v. Treasure State Industries, Inc., 626 P.2d 822, 829 (Mont.1981). The principle of indemnity, like the doctrine of strict products liability, is bottomed on the desire of the public to impose liability for an injury on the person or entity primarily responsible for that injury.

Recognition of the fact that the doctrine of strict products liability and the principle of indemnity are premised on the same public concern, leads to the logical conclusion that the public interest is best served by allowing indemnity based on the principle of strict products liability. There is nothing inherent in the principle of indemnity which makes it inapplicable to strict products liability actions, nor vice versa. Not only are the principles compatible but they both serve to accomplish the same result.

It is generally recognized that a person or an entity in the chain of distribution of a defective product, held liable for injuries sustained by the user of that product, has a right to maintain an action for indemnification against the manufacturer of the defective product. See, e.g., Liberty Mutual Insurance Co. v. Williams Machine & Tool Co., 62 Ill.2d 77, 338 N.E.2d 857 (1975); McCrory Corp. v. Girard Rubber Corp., 225 Pa.Super. 45, 307 A.2d 435 (1973), affirmed, 459 Pa. 57, 327 A.2d 8 (1974); Farr v. Armstrong Rubber Co., 288 Minn. 83, 179 N.W.2d 64 (1970). This "upstream" indemnification fosters the policy behind strict products liability by placing final responsibility for injuries caused by a defective product upon the entity initially responsible for placing that product into the stream of commerce.

Although it has not specifically addressed the principle of "upstream" indemnification, the Montana Supreme Court alluded to its availability in Montana in the seminal case of Brandenburger v. Toyota Motor Sales, 162 Mont. at 514-515, 513 P.2d 268. Citing with approval Escola v. Coca Cola Bottling Co. of Fresno, 24 Cal.2d 453, 150 P.2d 436 (1944), the court in Brandenburger noted that a consumer, injured by a defective product, may place responsibility not only on the manufacturer of that product but also upon the retailer or wholesaler of that product. Id. The import in allowing an injured consumer to hold a retailer or wholesaler of a defective product liable lies, inter alia, in the fact that "the retailer and wholesaler may act as a conduit through which liability may flow to reach the manufacturer, where ultimate responsibility lies." Id. The persons or entities in the chain of distribution of a defective product can be an efficient "conduit" for the imposition of liability on a manufacturer only if they in turn are allowed to seek indemnification from the manufacturer.³

There exists no logical reason to deny the manufacturer/assembler of a final product, held liable for injuries sustained by a third party and proximately caused by the defective condition of a component part, the same right to indemnification enjoyed by those individuals in the chain of distribution. Indemnification in such instances fosters the desire of the public to place responsibility for injury caused by a defective product on the manufacturer of that product. See, McCaffery v. Illinois Central Gulf Railroad Company, 71 Ill. App.3d 42, 27 Ill.Dec. 99, 388 N.E.2d 1062 (1979); see also, Suvada v. White Motor Co., 32 Ill.2d 612, 210 N.E.2d 182 (1965). The public interest in holding the manufacturer of a defective product responsible for damages caused by that product does not wane because an injured third party chooses to sue the manufacturer/assembler of a final product, or any entity in the chain of distribution, instead of the manufacturer of the defective component part.

As an alternate argument, Emson asserts the principle of strict products liability, as a theory of liability, is not available between parties dealing in a commercial setting. Ergo, Emson submits, the principle is likewise unavailable in the commercial setting as a vehicle for obtaining indemnity. The thrust of Emson's argument lies in the contention that the consumer protection objective in which strict products liability has its genesis is absent in the commercial setting. Unlike the average consumer who is at the mercy of the products manufacturer, the manufacturer/assembler which incorporates a defective component part into a finished product, Emson submits, is equally able to allocate any loss occasioned by that particular product as is the manufacturer of the component part. Accordingly, Emson urges that as between manufacturers no right to indemnity should be recognized.

This court is unpersuaded by Emson's argument, or the rationale expressed by those courts which have adopted the proposition proffered by Emson. The court is convinced that if presented with the issue sub judice, the Montana Supreme Court would be compelled to conclude that the manufacturer of a defective component part may be held strictly liable, in either a direct action by an injured consumer, or in an action for indemnification by the manufacturer of a finished product which incorporated the defective component part.⁴

Emson correctly notes that in formulating the RESTATEMENT, SECOND, TORTS § 402A, the American Law Institute declined to express, and continues not to express, an opinion as to whether the rules of strict tort liability apply to the seller of a component part of a product to be assembled. The Institute's observation, of course, was based upon the paucity of decisional law addressing the issue. At present, a split of authority has evolved with respect to that issue. See, e.g., Kaiser Steel Corporation v. Westinghouse Electric Corporation, 55 Cal.App.3d 737, 127 Cal.Rptr. 838 (1976) (no right to indemnification as between manufacturer of finished product and manufacturer of component part); S.A. Empresa v. Walter Kidde & Co., Inc., 690 F.2d 1235 (9th Cir.1981) (applying California law); contra, see, e.g., Liberty Mutual Insurance Co. v. Williams Machine and Tool, 62 Ill.2d 77, 338 N.E.2d 857 (1975) (recognizing right to indemnification); Union Supply Co. v. Pust, 196 Colo. 162, 583 P.2d 276 (1978); Burbage v. Boiler Engineering & Supply Co., 433 Pa. 319, 249 A.2d 563 (1969); ...