Opinion ID: 2834343
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Heading: Common Law Indemnity and Section 82.002

Text: Under Texas law, sellers of defective products may be held strictly liable for resulting injuries. Uniroyal Goodrich Tire Co. v. Martinez , 977 S.W.2d 328, 334–35 (Tex. 1998) (citing McKisson v. Sales Affiliates, Inc. , 416 S.W.2d 787, 788–89 (Tex. 1967)). Sellers are therefore often named as defendants in products liability suits regardless of any allegation of wrongdoing. As a result, undisputedly innocent sellers frequently must dedicate tremendous resources to defending allegedly defective products they did not manufacture or alter but merely passed on to consumers. See Jeffrey Nolan Diamant, Comment, Texas Senate Bill 4: Product Liability Legislation Analyzed , 31 Hous. L. Rev. 921, 930 (1994). Under the common law, sellers were only entitled to indemnification from the manufacturer for damages if the manufacturer was found to be liable. See Humana Hosp. Corp. v. Am. Med. Sys., Inc. , 785 S.W.2d 144, 145 (Tex. 1990). Indemnification for other litigation expenses was unavailable altogether. See Aviation Office of Am., Inc. v. Alexander & Alexander of Tex., Inc. , 751 S.W.2d 179, 180 (Tex. 1988). Thus, when neither the seller nor the manufacturer was found liable, the seller bore the heavy cost of its defense of the product. In addition to the requirement that the manufacturer be found liable, a seller’s liability must only have been vicarious, B & B Auto Supply, Sand Pit & Trucking Co. v. Cent. Freight Lines, Inc. , 603 S.W.2d 814, 817 (Tex. 1980), that is, the seller must not have been independently liable based on its own conduct, Duncan v. Cessna Aircraft Co. , 665 S.W.2d 414, 432 (Tex. 1984), and the seller must have been in the chain of distribution, id. In 1993, the Legislature sought to remedy the unfairness to innocent product sellers by enacting section 82.002 of the Texas Civil Practice and Remedies Code. This statute completely changed the common law manufacturer-seller indemnification scheme by shifting the burden of the seller’s litigation costs onto the manufacturer. See Tex. Civ. Prac. & Rem. Code § 82.002. Now, when neither the seller nor the manufacturer is found liable, the manufacturer must “indemnify and hold harmless” the seller for all of its litigation expenses, including attorney’s fees. Id. § 82.002(a), (b). As under the common law, the statute explicitly provides that the seller loses its right to indemnification if it is found independently liable. Id. § 82.002(a). However, unlike the common law, the statute requires that the manufacturer indemnify the seller for all litigation expenses “without regard to the manner in which the action is concluded.” Id. § 82.002(e)(1). We recognized in Fitzgerald that section 82.002 is intended to protect both sellers and product manufacturers, “[f]irst, [by] ensur[ing] that the relatively small seller need not fear litigation involving problems that are really not in its control,” and “[s]econd, [by] establish[ing] uniform rules of liability so that manufacturers could make informed business decisions and plaintiffs could understand their rights.” Fitzgerald , 996 S.W.2d at 868–69. In easing the requirements for indemnification, the Legislature “gave preference to sellers with no independent liability.” Id. at 869.