Opinion ID: 1379140
Heading Depth: 2
Heading Rank: 3

Heading: IFF's Proposed Implied Indemnification Crossclaim

Text: IFF challenges the District Court's denial of its request with respect to its proposed implied indemnification crossclaim. The District Court found that crossclaim wanting for many of the same reasons discussed above. To the extent IFF sought compensation for first-party damages, the Court found that IFF in fact stated a direct liability claim. To the extent IFF sought compensation for third-party damages, the Court noted that IFF failed to allege that it had incurred any `legal obligation' under which it was compelled to pay the claimed money to its customers and distributors and failed to point to any settlement agreement, court order, etc. under which it was obligated to make these payments. Travelers Indem., 592 F.Supp.2d at 768. Accordingly, the District Court held that IFF failed to state a claim for implied indemnification. IFF has no quarrel with the District Court's determination that it did not state a claim for first-party damages because, according to IFF, it never asked for such damages. Instead, IFF trains its sights on the District Court's ruling with respect to its indemnification crossclaim for third-party damages. In its brief, IFF recites the following chronology to support that crossclaim: IFF notified the Food and Drug Administration (FDA) of the potential contamination of the vanilla beans it bought from Dammann; the FDA subsequently classified those beans as adulterated under federal law; IFF's sale of vanilla extract made from the adulterated beans led to customer claims against IFF; and IFF made demand on Dammann for compensation in connection with those claims. IFF maintains that it is strictly liable under New Jersey law for its vanilla extract sales and that it was therefore obligated to compensate its customers. In IFF's view, its customers did not need to establish [its] `legal obligation' through a lawsuit [because] IFF made ... payment... under penalty of law. (Appellant's Br. 58.) In New Jersey, the right of indemnity is a right which enures to a person who, without active fault on his own part, has been compelled, by reason of some legal obligation, to pay damages occasioned by the initial negligence of another, and for which he himself is only secondarily liable. Adler's Quality Bakery, Inc. v. Gaseteria, Inc., 32 N.J. 55, 159 A.2d 97, 110 (1960) (emphasis supplied and internal quotation marks and citation omitted); see also George M. Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 109 A.2d 805, 810 (1954) (Indemnitors are within the rule that the doctrine may be invoked in favor of one who is under a legal duty to repair a loss ensuing from the tortious act or omission of another. (emphasis supplied and citations omitted)); Tryanowski v. Lodi Bd. of Educ., 274 N.J.Super. 265, 643 A.2d 1057, 1061-62 (1994). Here, because Dammann's duty to indemnify arises from a legal obligation to pay damages, IFF had to allege a legal duty to compensate its customers in order to state an implied indemnification claim. A careful review of IFF's proposed crossclaim reflects no such allegation. Although IFF states that it notified both its customers and the FDA of possible contamination and that the vanilla beans were later determined to be prohibited from sale under federal law, IFF alleges  in the product liability count of its proposed crossclaim  only that it was required to issue credits and/or refunds to its customers and distributors that had purchased mercury contaminated flavor products and that Dammann owes a common law duty to indemnify IFF. (App. 307, 310.) Importantly, that allegation refers only to some amorphous, unspecified requirement. Even the most indulgent reading does not suggest that IFF was legally obligated to compensate its customers. The absence of such an allegation is fatal to IFF's proposed indemnification claim. [15] Accordingly, we will decline to upset the District Court's holding that IFF failed to state an implied indemnification claim for third-party damages. [16]