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From Products Liability Law Daily, December 4, 2017

Utah high court overrules passive retailer doctrine

By John W. Scanlan, J.D.

Utah’s Liability Reform Act (LRA) does not immunize retailers from liability for strict liability claims, the Utah Supreme Court held in reversing a lower court’s decision dismissing claims brought by an injured consumer against the seller of a reclining chair. In doing so, the state high court also overruled a 2004 decision by the state appellate court and subsequent case law adopting the passive retailer doctrine because it was inconsistent with strict liability principles (Bylsma v. R.C. Willey, December 1, 2017, Durrant, M.).

The consumer’s foot was crushed by the reclining chair’s foot-massage attachment. He and his wife brought claims for strict liability, breach of implied warranties, and for rescission of the contract and restitution of the purchase price against manufacturer Human Touch and retailer R.C. Willey. R.C. Willey moved to dismiss the tort and warranty claims, arguing that it was immune from suit under the "passive retailer" doctrine recognized by the state appellate court in Sanns v. Butterfield Ford because the suit also named the manufacturer of the chair. The consumers argued that this doctrine was incompatible with the LRA, but the district court agreed with the retailer and dismissed the tort and warranty claims, leaving only the rescission claim. The retailer then stipulated to liability on this claim and tendered payment of the chair’s purchase price. The court then denied both parties’ attempts to recover attorney fees on the ground that neither qualified as a prevailing party. The consumers appealed.

Passive retailer doctrine and the LRA. Both the legislative intent and the context of the LRA showed that the legislature intended to retain the strict liability doctrine. The LRA was enacted expressly to eliminate joint and several liability and replace it with the rule that "[n]o defendant is liable to any person seeking recovery for any amount in excess of the proportion of fault attributed to that defendant." The LRA’s definition of "fault" included claims for strict liability, breach of warranty, and products liability, as well as defenses of misuse, modification, and abuse. These terms are not themselves defined by the LRA, showing that the legislature intended to incorporate and preserve existing product liability claims and defenses.

The strict products liability regime imposes liability for harm caused by defective products without regard to the culpability of the defendants; imposes liability on every seller of the product, including manufacturers, wholesalers, retailers, and other involved parties in order to ensure that the injured plaintiff has a meaningful remedy; and permits a non-manufacturer to recover its losses from the manufacturer through indemnity. Unlike the liability involved in a products liability claim, an implied indemnity claim allows a seller that was found strictly liable to recover its loss from a more culpable seller, such as the manufacturer, and has nothing to do with the plaintiff or the plaintiff’s recovery. All sellers of a defective product are equally and strictly liable with respect to the plaintiff but are liable with respect to other sellers based upon their respective culpability.

According to R.C. Willey, the LRA’s liability rule requires passive retailer liability because a passive retailer has a common law right of indemnity against the manufacturer and, therefore, the proportion of fault attributed to a passive retailer always must be zero. Further, it argued, the LRA expressly eliminated an action for implied indemnity by a retailer against a manufacturer because it provides that "[a] defendant is not entitled to contribution from any other person." This reasoning largely followed the Sanns court’s analysis, which stated that the LRA’s purpose was to ensure that parties are not unfairly held liable greater than their degree of fault.

However, the court found that the passive retailer doctrine "eviscerate[s]" each of the three essential elements of the strict products liability doctrine by conflating strict liability with negligence, distinguishing between "passive" and "active" sellers, and conflating contribution with implied indemnity. Allowing a passive retailer to be dismissed from a products liability suit as long as the manufacturer is named in the suit effectively overrides the state’s adoption of Section 402A of the Restatement (Second) of Torts and the LRA’s preservation of strict liability; shifts the cost of injuries from defective products from retailers and manufacturers to injured parties when a manufacturer is not capable of satisfying a judgment; and weakens the incentives in the products liability scheme encouraging retailers to work with responsible and solvent manufacturers.

Further, the district court, like the Sanns court, was mistaken in finding that the LRA foreclosed actions for implied liability because an action for implied indemnity is not the same as an action for contribution. The doctrine of contribution is a means whereby a defendant who paid an obligation for which it was only partially responsible under joint and several liability can recover the amount beyond which it was responsible, and involves the reallocation of fault that divides damages among the defendants. By contrast, indemnity involves full reimbursement based on the relationship of the parties rather than any assessment of fault. The legislature’s decision not to foreclose indemnity while foreclosing contribution was not an error but an intentional decision that was consistent with its decision to preserve strict products liability.

Apportionment under the LRA. Because the district court would be faced on remand by what the state high court called a "novel" question not previously addressed by the state’s appellate courts, the supreme court wrote to provide guidance to the lower court on how to address the apportionment required by the LRA. Instead of requiring the finder of fact to allocate fault among strictly liable tortfeasors, which would "eviscerate" strict products liability by bringing in negligence concepts to determine which of them was at "fault" for the injury, the court instead adopted a "relative causation" approach used by other states’ courts rather than using relative culpability. The LRA shifted the focus from apportionment of comparative negligence to assignment of relative responsibility. At the time of its enactment, the legislature’s concern was with comparing the "fault" of strictly liable parties—those who had breached the duty not to sell a defective product—against the negligence of other parties, generally the plaintiff.

Adopting the approach used by the Texas Supreme Court, the Utah high court instructed that a jury must first determine whether the defendants sold a defective product that injured the plaintiff, and then allocate the "fault" by determining the proportion of the injury caused by the product and the proportion caused by the plaintiff’s misuse, modification, or abuse without assessing the relative culpability of the defendants. Once this has been done, whichever party in the suit is found strictly liable must pay for the proportion of the injury caused by the strictly liable defendants, and that party would have the right to bring an indemnification claim against the manufacturer or other responsible entities. This approach satisfied both strict liability principles and the LRA.

Concurring opinion. Although Justice Thomas Lee agreed with the judgment, and with the decision to overrule the passive retailer doctrine, he did not agree with the majority’s analysis for apportionment of fault. According to Justice Lee, the majority opinion embraced joint and several liability principles, which he found to be consistent with the common law doctrine of strict products liability but inconsistent with the LRA, which overruled these principles. Furthermore, he asserted, the LRA does, in fact, foreclose equitable claims for indemnity as well as for contribution. The LRA provided for a single proceeding in which "fault" is apportioned among all parties and all others for which there is a basis for apportionment without any separate claims for indemnity. The LRA "made a choice" between fully compensating the plaintiff and proportionally assessing damages to each defendant, and the court could not make a different choice.

The case is No. 20140484.

Attorneys: Daniel F. Bertch (Bertch Robson) for Richard Bylsma. Jaryl L. Rencher (Stucki & Rencher LLC) for R.C. Willey.

Companies: R.C. Willey

MainStory: TopStory SCLIssuesNews DefensesLiabilityNews CausationNews LawsPendingLegNews HouseholdProductsNews UtahNews

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