Opinion ID: 1387072
Heading Depth: 4
Heading Rank: 1

Heading: Western Substantially Altered the Beads.

Text: In its brief, ARCO argues that the superior court failed to consider an alternate basis for granting summary judgment: The trial court addressed the question of Western['s]... negligence and held that ARCO ... had raised evidence of Western['s] ... negligence sufficient to defeat Western['s] . .. motion for summary judgment. However, the trial court did not explicitly address the significance of nonnegligent active participation or contribution. .... The active participation or contribution by Western ... in this case, even if such conduct does not constitute negligence, should also bar any recovery by Western.... Because Western ... manufactured and marketed its insulation board, Western ... had to have contributed to and actively participated in any alleged defect in the Insulfoam that it sold. (Emphasis added.) By stating as such, ARCO is asking us to consider the significance of Western's material alteration of the beads. ARCO's assertion that Western actively participated in or contributed to any alleged defect in the Insulfoam by altering the beads is an affirmative defense. As ARCO correctly notes, we have held that [a]ctive participation by the indemnitee in the indemnitor's wrong may preclude recovery on an implied contract theory. Kandik I, 795 P.2d at 804; see also D.G. Shelter Prods., 684 P.2d at 842. However, based on this premise, ARCO mistakenly concludes that Western is precluded from seeking implied indemnity. As for whether Western's material alteration of the beads precludes its claim for implied indemnity, the Restatement (Second) of Torts is instructive. It states: Further Processing or Substantial Change. ... It seems reasonably clear that the mere fact that the product is to undergo processing, or other substantial change, will not in all cases relieve the seller of liability under the rule stated in this Section. If, for example, raw coffee beans are sold to a buyer who roasts and packs them for sale to the ultimate consumer, it cannot be supposed that the seller will be relieved of all liability when the raw beans are contaminated with arsenic, or some other poison.... On the other hand, the manufacturer of pigiron, which is capable of a wide variety of uses, is not so likely to be held to strict liability when it turns out to be unsuitable for the child's tricycle into which it is finally made by a remote buyer. The question is essentially one of whether the responsibility for discovery and prevention of the dangerous defect is shifted to the intermediate party who is to make the changes. No doubt there will be some situations, and some defects, as to which the responsibility will be shifted, and others in which it will not. Restatement (Second) of Torts § 402A, cmt. p (1977). Though the coffee bean example posed above does not involve a design defect, whereas Western's allegation does, the necessary analysis remains unchanged. Material alteration, per se, does not preclude indemnity. Instead, the necessary focus is on the alleged defect and whether the alteration actively contributed to it. Applied to this case, if, as a result of Western's processing, the beads became more flammable, and this increased flammability played a role in causing the fire, then Western actively contributed to the defect. Though normally a question of fact, in this instance ARCO has effectively conceded that Western did not actively contribute to the alleged defect, the flammability of the beads themselves. Rather, ARCO argues as follows: ARCO['s] ... defense is based upon the proposition that Western ... manufactured an insulation product, not that it altered the beads so as to increase their flammability characteristics. The flammability characteristics of the beads have virtually no bearing upon the flammability characteristics of any insulation board as installed or maintained by the [underlying] plaintiffs. The flammability characteristics of the insulation board depends upon the application of the insulation board and the measures employed by users such as the plaintiffs to protect the insulation board from fire. In essence, ARCO is arguing that Western, either through nonfeasance or malfeasance, caused the ultimate harm. In so doing, ARCO is making two, somewhat implicit, arguments. First, it is arguing that its beads were not defective. That is, in the words of the Restatement, The seller is not liable when he delivers the product in a safe condition, and subsequent mishandling or other causes make it harmful by the time it is consumed. Restatement (Second) of Torts § 402A, cmt. g (1977). However, whether or not ARCO's beads were defective when delivered is a threshold inquiry, not an affirmative defense, which we discuss in further detail infra, §§ III(C)(2) & (C)(3). Second, ARCO is arguing that, notwithstanding any flammability defect in its beads, Western's subsequent processing of the beads into insulation either caused or contributed to the fire. That is, ARCO argues that Western's marketing, labeling, and inadequate sheathing of its insulation end product, rather than any inherent flammability characteristic of the beads, caused or contributed to the fire. As we stated in Kandik II, A traditional rule of indemnity, however, is that an indemnitee is not entitled to recover if the indemnitee has actively participated in the wrongful acts that caused the damage. 823 P.2d 632, 638 (Alaska 1991). [26] Whether or not Western's subsequent processing of the beads, rather than the beads themselves, caused or contributed to the damage  the fire  is a factual inquiry. Since the record does not dispositively demonstrate that it was Western's subsequent manufacturing processes that caused or contributed to the fire, ARCO's affirmative defense is not ripe for summary judgment. [27]