Court Opinion

ID: 9669507
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:57:48.737525+00
Date Added: 2024-06-11T18:15:57.487947
License: Public Domain

*159SNELL, Justice
(dissenting).
I respectfully dissent.
This decision in effect converts our comparative fault chapter 668, from authorizing apportionment of fault to mandating collectibility of damages. The majority justifies its result as needed to protect a plaintiff against fault siphoning. Nothing in chapter 668 suggests, however, that an insolvent defendant should suddenly disappear from the total fault picture, leaving solvent defendants to bear all the blame for a plaintiffs damages. In eschewing fault siphoning the result reached by the majority is a sort of fault avulsion.
Owatonna Manufacturing Company, Inc. was party to this lawsuit, initially, having been sued by the plaintiff as the defendant solely responsible for his injuries. No one doubts that chapter 668 applied then.
On learning of Owatonna’s bankruptcy proceedings, plaintiff then sued Star Equipment claiming it was solely responsible. Owatonna was dismissed by plaintiff from the suit at this time. Instantly, chapter 668 no longer applies. The majority concludes that it is legal for plaintiff to bring suit against a solvent defendant but it is illegal for a subsequently sued defendant to bring into the suit the same original defendant to apportion fault because it is now insolvent. This scenario assures plaintiff a 100% recovery from somebody more than it furthers the legislature’s intent to fairly apportion fault. An analysis of the interplay between our comparative fault chapter and our statute limiting products liability of nonmanufacturers indicates that allowing Owatonna to be impleaded was proper.
Iowa Code section 613.18(1), (2) (1991) provides as follows:
Limitation on products liability of nonmanufacturers.
1. A person who is not the assembler, designer, or manufacturer, and who wholesales, retails, distributes, or otherwise sells a product is:
a. Immune from any suit based upon strict liability in tort or breach of implied warranty of merchantability which arises solely from an alleged defect in the original design or manufacture of the product.
b. Not liable for damages based upon strict liability in tort or breach of implied warrant of merchantability for the product upon proof that the manufacturer is subject to the jurisdiction of the courts of this state and has not been judicially declared insolvent.
2. A person who is a retailer of a product and who assembles a product, such assembly having no causal relationship to the injury from which the claim arises, is not liable for damages based upon strict liability in tort or breach of implied warranty of merchantability which arises from an alleged defect in the original design or manufacture of the product upon proof that the manufacturer is subject to the jurisdiction of the courts of this state and has not been judicially declared insolvent.
The relevant provision from our comparative fault act is Iowa Code section 668.3(2), which reads as follows:
In the trial of a claim involving the fault of more than one party to the claim including third-party defendants ... the court, unless otherwise agreed by all parties, shall instruct the jury to answer special interrogatories or, if there is no jury, shall make findings, indicating all of the following:
[[Image here]]
b. The percentage of total fault allocated to each ... third-party defendant. ...
Plaintiff maintains that Iowa Code section 613.18(1)(b) reflects a legislative intent to ensure that where a plaintiff is entitled to bring a products liability action against a seller, the plaintiff’s actual recovery therein will not be diminished by an apportionment of fault between an insolvent manufacturer and the solvent seller pursuant to Iowa Code section 668.3(2)(b). In contrast, if Star Equipment, the seller in the instant dispute, is allowed to join Owatonna Manufacturing as a codefendant, the chapter 668 comparative fault act would be applicable and an apportionment of fault between *160Star Equipment and Owatonna would be in order. Iowa Code § 668.3(2)(b).
Turning to the language of the Iowa statutes, chapter 668 provides nothing to suggest that an insolvent person or entity may not be made a “party” for purposes of apportioning fault. More specifically, Iowa Code section 668.2 defines a party as being any of the following: (1) a claimant, (2) a person named as a defendant, (3) a person who has been released, and (4) a third-party defendant. Thus, considering chapter 668 alone, to the extent that Owatonna is made a “party” to this lawsuit, it may be allocated a percentage of fault under section 668.-3(2)(b).
Furthermore, allowing an insolvent manufacturer to be made a codefendant in a products liability suit against a seller who is not also an assembler is consistent with the legislative intent as expressed in Iowa Code section 613.18. Iowa Code section 613.18 is designed to expose a seller or distributor, who is not the assembler, designer or manufacturer, to liability in a products liability action only where two conditions are satisfied: One, the products liability action must not be based solely on an alleged defect in the original design or manufacture of the product, and two, the manufacturer must either not be subject to the jurisdiction of the courts of this state or have been judicially declared insolvent. Iowa Code § 613.18(1)(a), (b).
Standing alone, the formulation of the statute above might suggest that a seller or distributor, who is not also the assembler, designer or manufacturer of the product, could be held liable for defects introduced by the manufacturer so long as the suit was not based solely on an alleged defect in design or manufacture and the manufacturer is either not subject to the jurisdiction of the court or has been judicially declared insolvent. However, sub-paragraph two of section 613.18 strongly suggests that the legislature did not intend to expose a seller who is not also an assembler to liability for the manufacturer’s share of the harm, even where the suit is not based solely on an alleged defect in the original design or manufacture of the product. Subparagraph two of section 613.18 clearly exposes a seller or distributor who is also the assembler of a product to liability for injury that has no causal relationship to the assembly of the product whenever the manufacturer is either not subject to the jurisdiction of the court of this state or has been judicially declared insolvent. In effect, the legislature has expressly made the seller who is also an assembler an insurer of the manufacturer’s solvency, but has notably declined to do the same with respect to a seller who is not also an assembler of the offending product. The negative implication of this express legislative mandate is that if Star Equipment is not both the assembler and the seller of the skidloader, then it should not be shouldered with liability arising from a defect introduced by the manufacturer/designer.
Other comparisons indicate that Iowa Code chapter 668 on comparative fault and section 613.18 limiting products liability of nonmanufacturers are not mutually exclusive. Nowhere in section 668.2 is the definition of “party” limited to solvent parties. Also, section 613.18 affects the liability of sellers only when the suit is based on strict liability or breach of implied warranty of merchantability. Fault based on negligence is not affected by section 613.18. Plaintiff’s construction of these statutes would result in a nonmanufacturer seller being able to compare the manufacturer’s fault in a negligence case, but not in a strict liability or implied warranty case. None of the statutory language suggests that this bizarre result was intended by the legislature. See Metier v. Cooper Transp. Co., 378 N.W.2d 907, 913 (Iowa 1985) (impractical or absurd results are to be avoided). I am also unable to find any language in section 613.18 indicating that the non-manufacturer product seller was intended to be the sole target in cases where the manufacturer is insolvent. Similarly, no language in chapter 668 suspends its principles when a party is insolvent.
Another statutory rule would be drastically altered by plaintiff’s claim. Section 668.4 abolished joint and several liability among joint tortfeasors for a defendant *161found less than fifty percent at fault. This 100% liability would be reinstated by the majority’s decision when the manufacturer is insolvent, a result nowhere indicated as the intent of the legislature.
In deciding that this case is controlled by our prior decisions, the majority has ignored an analysis of these statutes and has accepted a mechanical application of our cases.
In Peterson v. Pittman, 391 N.W.2d 235 (Iowa 1986), we held that third-party defendants were properly dismissed where they were sued for the purpose of ascertaining their degree of fault without any claim being made against them. Id. at 238. Because no relief was sought, they were not parties to the suit. We addressed a collateral issue in Selchert v. State, 420 N.W.2d 816 (Iowa 1988). There, we held that the comparative fault act does not require join-der of all potential defendants in one action. Id. at 819-20. Thus, fault allocation pursuant to chapter 668 was precluded against defendants who had not been made a “party” to the suit. Id. We said: “Had our legislature intended to include in the section 668.2 definition of ‘party’ all those persons involved in an occurrence, whether or not named as a claimant or defendant, it could easily have done so.” Id. at 820. Finally, in Schwennen v. Abell, 430 N.W.2d 98 (Iowa 1988), we said:
The fault of parties toward the claimant which has not been placed in issue cannot be considered. Peterson v. Pittman, 391 N.W.2d 235, 238 (Iowa 1986). Similarly, fault of parties placed in issue in the pleadings which is ultimately determined to be legally insufficient to support the claim may not be considered in the aggregate fault apportionment. Payne Plumbing & Heating Co. v. Bob McKiness Excavating & Grading, 382 N.W.2d 156, 158-60 (Iowa 1986); Reese v. Werts Corp., 379 N.W.2d 1, 4 (Iowa 1985).
Our decisions in these cases recognized the need to exclude phantom defendants from being apportioned fault under our comparative fault act. In Schwennen, we said that the jury must be made aware of the effect of its fault apportionment on the claimant’s right of recovery. We reversed and remanded for reconsideration of fault where the jury had considered a spouse’s fault who could not be liable on a loss of consortium claim. Schwennen, 430 N.W.2d at 104.
Although these cases consider the effect of nonparties and legally immune parties to a suit, they do not rest on a construction of our comparative fault act based on the collectibility of judgments. Our comparative fault act apportions fault, not solvency.
In the case at bar, further actions against Owatonna were automatically stayed by the bankruptcy court. When Star Equipment obtained the order from the bankruptcy court permitting suit but prohibiting collection of any judgment against Owatonna, it did what it could to make Owatonna a party. A demand for judgment by Star Equipment against an insolvent Owatonna has no relevance to the apportionment of fault issue and might violate the bankruptcy court’s order. Cf. Green v. Welsh, 956 F.2d 30 (2d Cir.1992) (section 524 of bankruptcy code not a bar to a judicial proceeding to determine debt- or’s liability on prepetition claim as prerequisite to claimant’s recovery from debtor’s insurer). Owatonna would not be a phantom defendant but would be seen by the jury as a party whose fault will necessarily be placed “at issue” as the source of the product defect is litigated. See Schwennen, 430 N.W.2d at 102.
I believe the impleader of Owatonna was consistent with our cases and the legislative intent of the statutes. The trial court should be affirmed.