Nelson v. International Paint Co., Inc.
| Citation | 734 F.2d 1084 |
| Decision Date | 25 June 1984 |
| Docket Number | No. 83-1177,83-1177 |
| Parties | A.G. NELSON and Vida Nelson, Plaintiffs-Appellants, v. INTERNATIONAL PAINT COMPANY, INC., Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Spivey & Grigg, Paul E. Knisely, Broadus A. Spivey, Austin, Tex., for plaintiffs-appellants.
Clark, Thomas, Winters & Shapiro, Peter E. Ferraro, David Duggins, Barry K. Bishop, Austin, Tex., for defendant-appellee.
Scott, Douglass & Keeton, Austin, Tex., for other interested parties.
Appeal from the United States District Court for the Western District of Texas.
Before POLITZ, RANDALL and JOLLY, Circuit Judges.
In this Texas diversity case, plaintiffs-appellants Alfred and Vida Nelson appeal from a summary judgment rendered against them in their products liability suit against International Paint Company, Inc., defendant-appellee, a New Jersey corporation. Finding that there is no genuine issue as to any material fact, we affirm the district court's grant of summary judgment.
Alfred Nelson was injured on June 30, 1978, when he inhaled toxic fumes while painting over a weld at a construction site in Kodiak, Alaska. Nelson alleges that his injury was caused by defectively designed paint.
At the time that he was injured, Nelson was using a marine anti-fouling paint known as "Inter-Trop Red 50." The label on the paint can Nelson was using carried the name "International Paint Company, Inc.," and listed addresses for the company in New York, New Orleans, and San Francisco. Also present on the label was the trademark "International Paint Company."
Shortly after his injury, Nelson returned home to Texas, where he employed Texas counsel to file a products liability action against the manufacturer of the paint. The Texas counsel contacted an Alaska attorney and arranged for him to sue the manufacturer and distributor of the paint in the courts of that state. That attorney left Alaska before the suit was filed, but an associate in his firm brought suit in Alaska state court in April, 1980, naming among the defendants International Paint Company, Inc. ("IPCO"), and International Paint Co. (California), Inc. ("CALCO"), IPCO's wholly-owned subsidiary, which is headquartered in San Francisco. However, because of Nelson's ill-health, and their concern that the new Alaska counsel was inexperienced, the Nelsons directed that a voluntary non-suit be taken in the Alaska court.
The Nelsons then filed suit against IPCO in the court below on May 15, 1980. They sought damages on the basis of strict liability in tort and breach of implied warranty. They contended that the paint was defectively designed and that its label failed to warn adequately of the hazards associated with using Inter-Trop Red 50.
Through IPCO's answer to an interrogatory on June 16, 1981, the Nelsons' Texas counsel learned that Inter-Trop Red 50 was manufactured not by IPCO, but by CALCO. 1 The Nelsons added CALCO as a party-defendant, but CALCO moved to dismiss the complaint against it for lack of personal jurisdiction. The Nelsons opposed the motion, arguing that the court had jurisdiction over CALCO because CALCO was so closely integrated with IPCO that the business conducted in Texas by IPCO could be imputed to CALCO for purposes of jurisdiction. The district court found that IPCO and CALCO were sufficiently separate entities that the Nelsons could not obtain personal jurisdiction over CALCO in Texas. The court then ordered the Nelsons' claim against CALCO transferred to the United States District Court for the Northern District of California. The Nelsons did not appeal that order.
After the Nelsons' action against CALCO was transferred to California, CALCO moved to dismiss because the statute of limitations had run. The district court there granted the motion, holding that California law applied to the action, and that the state's one-year statute of limitations barred suit against CALCO. The Nelsons appealed, but the Ninth Circuit affirmed. Nelson v. International Paint Co., 716 F.2d 640 (9th Cir.1983).
Meanwhile, in Texas, IPCO moved for summary judgment, contending that it did not design, manufacture, or market the paint that caused Nelson's injuries, and thus that it could not be held liable for Nelson's injuries. The district court granted IPCO's motion for summary judgment, and the Nelsons now appeal.
The Nelsons raise several issues on appeal: first, they contend that the evidence shows that there is a genuine issue of fact as to whether IPCO developed the formula; second, they contend that because IPCO's name was on the paint can label, it is liable as the manufacturer under the Restatement (Second) of Torts Sec. 400; third, they argue that because the IPCO label caused them to sue IPCO rather than CALCO, IPCO should be estopped from denying liability for CALCO's acts; and, finally, they assert that there is a genuine fact issue whether IPCO can be held liable as the "alter ego" of CALCO. We consider each one of their arguments in turn, mindful that "[w]e must view the evidence in the light most favorable to the opposing party, resolving all reasonable doubts concerning the facts in [its] favor ...." Miles v. American Telephone & Telegraph Co., 703 F.2d 193, 194 (5th Cir.1983).
As we have previously discussed, CALCO is a wholly owned subsidiary of IPCO. IPCO, in turn, is wholly owned by International Paint Co. of America, a holding company. That company is 100% owned by International Paint Co., Ltd. ("Limited"), a British corporation. Limited has several corporations throughout the world that market marine paints under the trademark "International Paint Company."
In the United States, both IPCO and CALCO manufacture and distribute products under the International Paint Company trademark. IPCO has plants in New Jersey and New Orleans that produce and market paints east of the Rockies, while CALCO's San Francisco plant produces and markets paints west of the Rockies.
The Nelsons contend that there is evidence in the record tending to show that IPCO developed the formula that was used in manufacturing Inter-Trop Red 50. Therefore, they argue, IPCO would be liable if the Nelsons proved at trial that the formula was defective.
The Nelsons acknowledge that Jim Drubel, IPCO's vice-president for engineering, testified in his deposition that the formula was developed by Limited, not IPCO. However, the Nelsons assert that Drubel's testimony was contradicted by Jeffry Longmore, CALCO's technical director, who indicated in his deposition that the formula for Inter-Trop Red 50 was developed in IPCO's New Jersey plant. We do not agree. Longmore's testimony was that IPCO manufactured paint using the same formula that was used in Inter-Trop Red 50. Longmore's deposition does not suggest that IPCO developed the formula. Moreover, the Nelsons admitted in response to IPCO's motion for summary judgment that Limited developed the formula. 2
The Nelsons contend next that, despite the district court's finding to the contrary, there was evidence that IPCO was aware that CALCO was labeling Inter-Trop Red 50 as an IPCO product. They argue that such knowledge is relevant because, under their reading of Texas law, IPCO can be held strictly liable for Nelson's injuries as the manufacturer of Inter-Trop Red 50 if IPCO allowed CALCO to sell Inter-Trop Red 50 under IPCO's name, despite the fact that IPCO did not design, manufacture, or sell the paint. Because we do not believe that, under Texas law, IPCO can be held liable on the grounds that the Nelsons assert, it is unnecessary for us to decide whether the Nelsons introduced any evidence indicating that IPCO knew that CALCO was selling Inter-Trop Red 50 as an IPCO product. 3
The Nelsons assert that if IPCO allowed CALCO to put out Inter-Trop Red 50 as an IPCO product, IPCO faces liability under the Restatement (Second) of Torts Sec. 400 (1966), which provides that:
One who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer.
Id. at 337. The rationale underlying this section of the Restatement is apparent: For example, if Sears markets a blender as a "Sears" product, it leads consumers to believe that Sears is responsible for and stands behind the product. Accordingly, because Sears has induced such reliance on the part of consumers, Sears will be held liable as the manufacturer of the blender, even if it entrusted another company with the responsibility for manufacturing a safe and reliable blender that Sears will sell as its own. 4
For instance, in S. Blickman, Inc. v. Chilton, 114 S.W.2d 646 (Tex.Civ.App.--Austin 1938, no writ), the plaintiff fell off a defective bar stool in a hotel fountain area. The plaintiff sued the contractor who was remodeling the hotel at the time, and who had furnished the bar stool that caused the plaintiff's injuries. The contractor denied that he had manufactured the bar stool. However, because the contractor had sold the stool with the contractor's name on it, the court held that, under section 400, the contractor was liable as if it were the manufacturer, whether or not it had in fact manufactured the defective stool that caused the plaintiff's injuries. 114 S.W.2d at 649.
Similarly, in Ford Motor Co. v. Mathis, 322 F.2d 267 (5th Cir.1963), the plaintiff sued Ford when his car headlights failed and caused him grave injury. Although Ford assembled the plaintiff's car and had sold it under the Ford name, it denied that it was the manufacturer of the defective part. Nonetheless, we held that because the Texas courts had expressly adopted section 400 in Blickman, Ford was liable because the dimmer switch that caused the headlights to fail was a part of the product Ford had sold...
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