Torres v. Goodyear Tire & Rubber Co., Inc.

• Citation: 786 P.2d 939,163 Ariz. 88
• Decision Date: 04 January 1990
• Docket Number: No. CV-89-0047-CQ,CV-89-0047-CQ
• Court: Supreme Court of Arizona
• Parties: , 58 USLW 2423, Prod.Liab.Rep. (CCH) P 12,337 Andrew TORRES; Amanda Torres, husband and wife; Walter Torres; Debra Torres, Plaintiffs-Appellants, v. GOODYEAR TIRE & RUBBER COMPANY, INC., an Ohio corporation, Defendant-Appellee.

Page 939

786 P.2d 939

163 Ariz. 88, 58 USLW 2423, Prod.Liab.Rep. (CCH) P 12,337

Andrew TORRES; Amanda Torres, husband and wife; Walter Torres; Debra Torres, Plaintiffs-Appellants, v. GOODYEAR TIRE & RUBBER COMPANY, INC., an Ohio corporation, Defendant-Appellee.

No. CV-89-0047-CQ.

Supreme Court of Arizona, In Banc.

Jan. 4, 1990.

Engler, Engler, Weil & Nelson by Richard D. Engler, Yuma, for plaintiffs-appellants.

Jennings, Strouss & Salmon by Jefferson L. Lankford and Jay A. Fradkin, Phoenix, for defendant-appellee.

FELDMAN, Vice Chief Justice.

In this case we are asked to consider the liability of a trademark licensor for injuries caused by defects in a product produced and distributed by its licensee. The question was certified to us by the United States Court of Appeals for the Ninth Circuit. The procedure for such certification is outlined in Rule 27, Ariz.R.Sup.Ct., 17A

[163 Ariz. 89] A.R.S. We have jurisdiction to accept certification under A.R.S. § 12-1861 and Ariz. Const. art. 6, § 5(6). Because the issue presented is a matter of first impression under state law, we exercised our discretion in favor of accepting jurisdiction even though the case presents a unique procedural problem. See Rule 27(b), Ariz.R.Sup.Ct., 17A A.R.S.

BACKGROUND FACTS AND PROCEDURAL HISTORY

Andrew and Walter Torres and their wives (plaintiffs) brought an action in United States District Court for the District of Arizona alleging that the two men were injured in an automobile accident caused by tread separation of a defective Goodyear tire. Plaintiffs discovered during the course of litigation that the tire had not been manufactured by the defendant, Goodyear Tire & Rubber Co., Inc. (Goodyear); rather, it had been produced by Goodyear Tyre & Rubber (Great Britain), Ltd. (Goodyear GB). Goodyear International Technical Center (GITC), a division of Goodyear SA of Luxembourg (Goodyear Luxembourg), designed the tire. Plaintiffs' complaint alleged four theories of liability. Three of the counts are irrelevant to the issues considered today. The fourth count alleged Goodyear was strictly liable in tort for the injuries caused by the defective product, even though it was not the corporate entity that had designed, manufactured, or distributed the product.

The district judge eventually granted summary judgment in favor of Goodyear and against plaintiffs on all counts. Evidently the judgment concluded all issues in the action brought against Goodyear. Plaintiffs appealed. Taking jurisdiction pursuant to 28 U.S.C. § 1291 (1982), a divided panel of the ninth circuit affirmed the district court on all issues. See Torres v. Goodyear Tire & Rubber Co., 857 F.2d 1293 (9th Cir.1988) (Torres I ). A sharply worded dissent expressed the view, inter alia, that in a diversity case to be determined by Arizona substantive law (see Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)), the majority had decided a question of first impression under Arizona law without using the procedure available to certify the question to the Arizona Supreme Court. Torres I, 857 F.2d at 1299 (Noonan, J., concurring and dissenting).

Following plaintiffs' filing of a motion for rehearing en banc, the opinion in Torres I was withdrawn and an "Opinion and Order Certifying Question to the Arizona Supreme Court" was substituted. See 867 F.2d 1234 (9th Cir.1989) (Torres II ). The panel was as sharply divided as it had been in Torres I. The difference of opinion was not confined to substantive issues of law pertaining to strict liability, but included characterization of the issue. The majority ordered that the following question be certified to this court:

[W]hether a trademark licensor is subject to strict product liability under § 402A of the Restatement (Second) of Torts (made the law of Arizona in Tucson Industries, Inc. v. Schwartz, 108 Ariz. 464, 501 P.2d 936 (1972) by reason of being either (a) a "manufacturer" or "seller" within the meaning of Ariz.Rev.Stat.Ann. §§ 12-681-686 (1982), or (b) an "integral part of an enterprise" responsible for placing allegedly defective products on the market). See O.S. Stapley Co. v. Miller, 103 Ariz. 556, 447 P.2d 248 (1968) (en banc), and its progeny.

Torres II, 867 F.2d at 1239. Obviously, the question propounded requires an answer under both statutory and common law.

Judge Noonan again concurred and dissented. After reviewing Arizona law, he concluded:

The question that should be certified ... is: Is a company liable in Arizona under § 402A of the Restatement (Second) of Torts for the tort of a company that it licenses to manufacture in strict accordance with its formulas, specifications and restrictions, using only materials approved by the licensor, [the question Judge Noonan would have certified continues by hypothecating many of the facts of the case].

Torres II, 867 F.2d at 1240.

Given the importance of the issues, however characterized, we accepted certification Pursuant to Rule 27(b), ... the Court accepts jurisdiction....

[163 Ariz. 90] but attempted to resolve the procedural problem by formulating our own question. Our order read as follows:

This court will decide the following issue under the questions certified:

Under the facts of this case, as indicated in the Opinion and Order of the United States Court of Appeals for the Ninth Circuit, and in the relevant record before that court, is the trademark licensor strictly liable for personal injuries caused by a defective product put into the stream of commerce by the trademark licensee?

Order, March 27, 1989.

That question was briefed and argued by counsel and is decided today.

CERTIFICATION PROCEDURE

Given that principles of federalism require substantive legal issues in diversity cases be decided by application of state law, this court strives to respond affirmatively to certification requests from the federal bench. We are also moved to accept certification by considerations of comity toward our colleagues on the federal bench and responsibility to the citizens of the state. If state law is applied to decide questions in federal court, and if state law is not clear on the question involved, it is better that we fulfill our responsibility to decide the state law issue rather than leave the federal bench to speculate on what our answers might be. We believe, however, that our task would be easier and our opinions would better assist the federal bench, if the certification process itself did not become adversarial, raising questions as to exactly what issue this court is asked to decide. ¹

In our view also, the entire process would be better served if the questions certified to us were propounded in a factual context agreed on by counsel or formulated by the certifying court. This court generally abstains from abstract questions. See, e.g., Mueller v. City of Phoenix ex rel. Phoenix Bd. of Adjustment II, 102 Ariz. 575, 583, 435 P.2d 472, 480 (1967) (appellate court need not decide moot questions or abstract propositions); Podol v. Jacobs, 65 Ariz. 50, 56, 173 P.2d 758, 762 (1946) (Supreme Court is confined to determining the law on issues arising out of actual facts, and cannot determine what the law or rule may be upon a suppositious case).

Legal issues are much better understood when considered in light of the facts. For instance, the answer to the question whether a trademark licensor is liable under Arizona law is: sometimes yes and sometimes no, depending on the facts. Hence, in formulating the question that we wished to have counsel brief and argue, and that we were willing to decide, we were careful to specify that the "facts of this case," as they must be viewed on the current state of the record, must be presented. Order, March 27, 1989. We turn, then, to a consideration of the facts and then to consider Arizona's answer to the question formulated.

FACTS OF THIS CASE

Fortunately, the facts seem relatively undisputed. The operative facts suggesting resolution of the strict liability issue are taken primarily from the opinions of the majority in Torres I and Torres II.

Both Andrew and Walter Torres were injured in an automobile accident allegedly caused by tread separation of a Goodyear tire on a 1977 Triumph automobile driven by Walter. The tire was original equipment on the Triumph, which had been manufactured in Great Britain and which had been purchased by Walter's wife, Debra. The tire was marked "Goodyear."

The tire was manufactured by Goodyear GB and designed by GITC. Specifications for the manufacture of the tire were issued by either Goodyear Luxembourg or Goodyear GB. See Goodyear's Answer to Plaintiffs' Second Set of Interrogatories No. 62 Goodyear's actual ability to control Goodyear GB's production of Goodyear tires is pervasive. Either directly, or indirectly through its international subsidiaries, Goodyear has the ability to design the product, provide specifications for its manufacture, and control the method of manufacture and actual production of the tire. Goodyear has reserved the right to control the quality of all tires manufactured by Goodyear GB. It sets warranty policy and honors valid warranty claims on all tires bearing the Goodyear trademark, even though, as in this case, they are actually manufactured by a subsidiary.

[163 Ariz. 91] appended to Plaintiffs' Separate Statement of Facts in Support of Plaintiffs' Response to Defendant Goodyear USA's Motion for Summary Judgment, filed Jan. 15, 1987. The European corporations mentioned are supervised by Goodyear International Corporation (Goodyear International). All of them--Goodyear GB, Goodyear Luxembourg and Goodyear International--are Goodyear subsidiaries and the stock in each, except for directors' qualifying shares, is owned by Goodyear. Through its stock ownership in the subsidiaries, Goodyear is able to elect directors to the boards of each subsidiary to ensure that they follow Goodyear's policies. Goodyear International's main...