Opinion ID: 1973885
Heading Depth: 1
Heading Rank: 9

Heading: Leeth Brothers' Cross-Claim for Indemnity

Text: East Penn argues that the trial court's entry of judgment in favor of Leeth Brothers on its cross-claim for indemnity was unsupported by either the facts or the law. It contends that Leeth Brothers assumed the duty to label the batteries, and so assumed all liability associated with defective warnings. It asserts that the fact that the label affixed by Leeth Brothers contained exactly the same warning as that provided the seller by East Penn is irrelevant, because Leeth Brothers was at least equally negligent in its conduct since it was an experienced seller of batteries and held the product out to the public as its own. Leeth Brothers counters that relabellingin a larger formatonly improved the visibility of the warning, and that it reprinted the contents of the warning exactly. East Penn, therefore, as the author of an inadequate warning, should remain primarily responsible and not be allowed to pass through its liability to the seller.
One of the most common, and simple bases of indemnity is a contract that provides for it. W. KEETON, D. DOBBS, R. KEETON, & D. OWEN, supra note 5, § 51, at 341. East Penn relies on a contract between it and Leeth Brothers requiring the latter to apply cautionary and identification labels to unlabeled batteries delivered to it by East Penn as encompassing a duty to indemnify East Penn in the event the manufacturer was held liable for a defective warning. [19] The trial judge found that this agreement did not apply to the battery in question, which was supplied to Leeth Brothers with a warning label. Although East Penn concedes that the agreement refers only to unlabeled batteries, it nonetheless appears to argue that Leeth Brothers had the right and assumed the duty to label the battery in question. We find no reason to disturb the judge's finding as to the scope of this agreement. To discharge its duty to warn ultimate users, East Penn undertook to supply a warning label on the battery that injured Pineda, and it cannot rely on a contract that did not apply to the battery in question to shift the entire loss to the seller.
Absent an express agreement, a duty to indemnify may also be implied, out of a relationship between the parties, to prevent a result which is regarded as unjust or unsatisfactory. Myco, Inc. v. Super Concrete, 565 A.2d 293, 297 (D.C. 1989). Does the manufacturer of a defective product stand in a relationship to the seller giving rise to an implied duty to indemnify the seller in circumstances where (a) the latter relies reasonably on the manufacturer's knowledge and skill in making the product free of defects, and (b) any negligence on the seller's part consists of at most a failure to discover a defect in the product? We think the answer is yes, and on this ground sustain the order of indemnity in this case. When a product cannot be made entirely safe for reasonably foreseeable uses, and thus requires warnings and instructions, it is the manufacturer's duty to warn the ultimate consumer of the risks of harm, and a breach of that duty renders the product defective and unreasonably dangerous. Payne, supra, 486 A.2d at 725. Generally, the manufacturer's duty to provide a non-defective product may not be delegated to another distributor farther down the stream of commerce, because the duty runs to the ultimate user not the immediate purchaser. Lonon v. Pep Boys, 371 Pa.Super. 291, 538 A.2d 22, 27 (1988); RESTATEMENT (SECOND) OF TORTS, supra, § 402A comment l (not necessary that ultimate user or consumer have acquired the product directly from the seller). Although privity between the manufacturer and ultimate consumer is not required for the consumer to hold the manufacturer liable, see Cottom v. McGuire Funeral Service, 262 A.2d 807, 809-10 (D.C.1970), an intermediary seller in privity with the manufacturer receives an implied warranty that the product is safe for its intended use. See Williams v. Steuart Motor Company, 161 U.S.App.D.C. 155, 165, 494 F.2d 1074, 1084 (1974). When a breach of that warranty exposes the retailer to liability in circumstances where its fault lay only in failing to discover and correct a defect created by the manufacturer, upon whose skill and expertise it reasonably relied, we think it equitable to shift the burden of loss entirely to the manufacturer. Id. at 164-65, 494 F.2d at 1083-84, citing Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 134, 76 S.Ct. 232, 237, 100 L.Ed. 133 (1956). See also Leflar, Contribution and Indemnity Between Tortfeasors, 81 U.PA. L.REV. 130, 156-58 (1932). As the Restatement notes, the basis for indemnity is restitution, and the concept that one person is unjustly enriched at the expense of another when the other discharges liability that it should be his responsibility to pay ... The unexpressed premise is that indemnity should be granted in any factual situation in which, as between the parties, it is just and fair that the indemnitor should bear the total responsibility, rather than to ... divide it proportionally between the parties by contribution. RESTATEMENT (SECOND) OF TORTS, supra, § 886B comment c. The Restatement identifies as one such factual situation: [where] the indemnitor supplied a defective chattel ... as a result of which both were liable to a third person and the indemnitee innocently or negligently failed to discover the defect. Id. § 886B(d) & comment h. [20] As the trial court found, the defect in the label supplied by East Penn concerned its content, not its form. Leeth Brothers' acts involved changing the form of the label enlarging itbut not the substance of the warning. Its negligence, therefore, lay not in relabelling the battery but in failing to recognize and correct the substantive defects of the warnings and instructions on charging and jump-starting. In Williams, supra, the court held that an automobile retailer's failure to discover and remedy a latent manufacturing defect did not relieve the manufacturer of its primary duty of care in design and manufacture of the accelerator assembly, and that the retailer's breach of warranty to the user was but a consequence of the manufacturer's breach to it. 161 U.S.App.D.C. at 165, 494 F.2d at 1084. Here, although Leeth Brothers changed the label to include its trade name and warranty, and to make it more eye-catching, it did not change the wording of the warning but instead relied on East Penn's superior knowledge in formulating the contents of a battery warning. Leeth Brothers was indeed an experienced battery retailer, [21] but there was evidence fairly permitting the court to conclude that East Penn was much better situated than the retailer to identify and warn against risks connected with battery charging and jump-starting. Relying upon the principles articulated in Williams and the Restatement, we uphold the judgment for indemnity. [22]