Court Opinion

ID: 6308493
Source: CourtListenerOpinion
Date Created: 2022-02-18 18:22:00.17147+00
Date Added: 2024-06-11T08:58:38.857648
License: Public Domain

HUDOCK, Judge,
dissenting:
I respectfully dissent. As the majority states, ifm Electronics (ifm) is the manufacturer of proximity switches distributed by Automatic Time and Control Co., Inc. (ATC). When ATC was sued in underlying tort actions, ifm was made a party to those actions. ATC requested that ifm indemnify and defend under a theory of common law indemnity and a contract which allegedly provided for the same type of indemnification and defense, ifm refused. ATC was then put in a position where it either defended the actions or risked a default judgment. ATC elected to defend the actions and was successful in having the actions dismissed. At this stage in the present situation, we do not know what the reasons were that those underlying actions were dismissed, but it appears from the record that no finding of a defect was ever reached.
ATC then sought recovery from ifm of the costs it incurred in successfully defending these underlying tort actions. There seems to be little dispute here that had ATC been unsuccessful, and had there been a finding of neglect or product defect, a cause of action would have been stated by ATC under either a common law or contract theory of indemnification. Therefore, the one variation which occurred in the present situation is that ATC was successful in litigating a challenge to the proximity switches involved.
As one of our sister states so aptly put it:
“If the right to costs and attorney’s fees for defending the law suit is made contingent on losing on the merits of that action, in every case the indemnitee would be put in the difficult position of attempting to show lack of his own culpability at the same time that he is aiding the *444plaintiffs case by attempting to prove the liability of his indemnitor.” [Heritage v. Pioneer Brokerage & Sales, Inc., 604 P.2d 1059, 1067 (Alaska 1979)].
Such a result would not inspire confidence in our adversarial judicial system. Another court in following the Heritage rationale has stated that a rule that allows recovery of attorney’s fees only if the indemnitee loses would “penalize a party for successfully defending the allegation against it”. Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 338 (Tenn.1985). The baseball equivalent would reward a batter for striking out, but cost him dearly if he gets a hit. Just as such a rule would be inimical to the interests of baseball so it also runs counter to the Anglo-American adversary tradition of litigation. These concerns underscore the reasonableness of requiring a manufacturer to pay for those legal costs incurred in the defense of claims for which it would be ultimately liable.
Booker v. Sears Roebuck & Co., 785 P.2d 297, 304 (Okla.1989) (concurring opinion).
The majority is concerned that finding for ATC in the present case would create an enormous change in the law of Pennsylvania and put manufacturers in the position of having to pay for litigation in which it has no role or over which it has no control. I disagree. The cases in this area of indemnification show that often manufacturers are notified of the litigation and given an opportunity to defend and indemnify. Papas v. Kohler Co., Inc., 581 F.Supp. 1272 (M.D.Pa.1984). This is a reasonable requirement and I would also require it. In other cases, the manufacturer has been made a party to the litigation. Sirianni v. Nugent Bros., Inc., 509 Pa. 564, 506 A.2d 868 (1986); Walton v. Avco Corp., 383 Pa.Super. 518, 557 A.2d 372 (1989). In the present situation, ifm was made a party to the underlying tort actions, and ATC notified ifm to indemnify and defend, ifm had every opportunity to take over the defense and control the flow of the litigation but it refused to do so.
*445The majority also expresses concern that there are potential conflicts of interest involved in finding for ATC. The majority states:
Counsel selected by a defendant seller in a product liability case could be expected to attempt to design a defense and establish evidence which would result in a determination that if any defect existed, it arose from the neglect of the manufacturer of the product, rather than from any fault of the seller. That would create a no-risk situation for the seller.
Majority opinion at p. 442.
Again, one of our sister states has solved this problem by requiring that the downstream party, ATC in our case, must present a unified defense and not take a position adverse to the manufacturer. To take an adverse position precludes the downstream party from obtaining indemnity. Booker v. Sears Roebuck & Co., supra. This is sound reasoning that I would likewise embrace.
Although the majority would find an enormous change in the law of indemnity in Pennsylvania, I would not find such a far reaching result and would apply this theory to cases similar to this one where the manufacturer has been made a party, notified to defend and indemnify, and still refuses. Clearly, manufacturers are entitled to notice that their product has been called into question either in the form of joinder as a party or a formal notice to defend and indemnify. If the manufacturer refuses to take up the defense at that point, forcing the downstream party to defend, then the manufacturer, who is later released from liability upon a finding of no defect, has received a benefit for which payment should be made to put the downstream member in the position of being held harmless for actions against it by injured third parties. As the Alaska Supreme Court stated:
[The manufacturer] argues, however, that because [the retailer] successfully contested the [tort plaintiffs] law suit, that no right of indemnity arose and, therefore, [the manufacturer] should not be required to reimburse [the retailer’s] expenses in defending the action. We think *446that the attempt to draw a distinction along these lines is without merit. In the first place, [the manufacturer] owed [the retailer] a duty to defend the strict products liability suit---- Further, [the manufacturer] could have avoided assessment of attorney’s fees by taking over defense of the [tort plaintiff’s] claim when it was tendered by [the retailer], but it declined to do so____ Thus, we hold that where indemnification is required, and the indemnitor has been given proper notice of the pending litigation and an adequate opportunity to undertake its duty to defend, the indemnitee is entitled to recover full costs and attorney’s fees for the expenses of its successful defense of the action giving rise to the claim for indemnity.
Heritage, supra at 1067 (footnotes omitted). I would, therefore, hold that ATC has stated a cause of action and reinstate the complaint.