Court Opinion

ID: 63882
Source: CourtListenerOpinion
Date Created: 2010-04-26 05:04:49+00
Date Added: 2024-06-11T14:57:42.997821
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                               FILED
                                                                            October 13, 2008

                                         No. 07-50188                    Charles R. Fulbruge III
                                                                                 Clerk

AFSANEH NAZARI; ET AL

                                             Plaintiffs

HOME DEPOT, U.S.A, INC.

                                             Defendant - Cross Claimant - Appellee
v.

KOHLER CO.

                                             Defendant - Cross Defendant - Appellant

             Appeal from the United States United States District Court
                          for the Western District of Texas
                            USDC No. 1:05-CV-00924-SS

Before GARZA and DENNIS, Circuit Judges, and MILLS,* District Judge.
PER CURIAM:**
       Kohler Co. (“Kohler”) appeals from the district court’s grant of summary
judgment to Home Depot, U.S.A., Inc. (“Home Depot”) on its cross-claim for
indemnification. The district court ruled that Kohler has a duty under Texas

       *
           Chief Judge of the Northern District of Mississippi, sitting by designation.
       **
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
                                     No. 07-50188

law to indemnify Home Depot for injuries to a third party caused by a shower
door display manufactured by Kohler. At issue in this case is whether the
shower door display was placed in the stream of commerce such that Kohler
qualifies as its “manufacturer” and Home Depot as a “seller,” thereby triggering
a duty of indemnity under Tex. Civ. Prac. & Rem. Code § 82.002(a). We conclude
the statute requires Kohler to indemnify Home Depot and therefore AFFIRM the
judgment of the district court.
                            I. BACKGROUND FACTS
      Afsaneh Nazari was allegedly injured at a Home Depot store located in
Austin, Texas when a shower door display shattered as she opened it. Kohler
Co. (“Kohler”) manufactured the display. Ms. Nazari and her husband, Asgar
Nazari, filed suit against Kohler and Home Depot in the district court raising,
inter alia, two products liability claims, one sounding in strict liability and the
other in negligence.       Home Depot filed a cross-claim against Kohler for
indemnification under Tex. Civ. Prac. & Rem. Code § 82.002.1 The Nazaris
eventually settled their claims and Kohler and Home Depot filed cross motions
for summary judgment on the indemnification claim. The district court granted
summary judgment in favor of Home Depot concluding that it was entitled to
indemnification and awarded Home Depot $34,613.39 in defense costs. Kohler
filed a timely notice of appeal.
                          II. STANDARD OF REVIEW
      This court reviews a district court’s grant of summary judgment de novo.
Hockman v. Westward Commc’ns, LLC, 407 F.3d 317, 325 (5th Cir. 2004). A
party is entitled to summary judgment only if “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine

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        Home Depot also sought attorneys’ fees under Tex. Civ. Prac. & Rem. Code § 38.001
and contribution under Tex. Civ. Prac. & Rem. Code § 32.002. The district court granted
summary judgment in favor of Kohler on these claims, holding that neither statute applied.
Home Depot does not appeal from this part of the district court’s ruling.

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                                  No. 07-50188

issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c). On a motion for summary judgment, the
court must view the facts in the light most favorable to the non-moving party
and draw all reasonable inferences in its favor. See Hockman, 407 F.3d at 325.
In reviewing the evidence, the court must therefore “refrain from making
credibility determinations or weighing the evidence.”         Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
                                III. ANALYSIS
      Section 82.002(a) of the Texas Civil Practice and Remedies Code provides:
      [A] manufacturer shall indemnify and hold harmless a seller against
      loss arising out of a products liability action, except for any loss
      caused by the seller’s negligence, intentional misconduct, or other
      act or omission such as negligently modifying or altering the
      product, for which the seller is independently liable.

As the Texas Supreme Court recently explained, this statute “was designed to
remedy the fundamental unfairness inherent in a scheme that holds an innocent
seller liable for defective products manufactured by another by requiring the
manufacturer to indemnify the seller unless the seller is independently liable for
negligence, intentional misconduct, or any other act or omission.” Owens &
Minor, Inc. v. Ansell Healthcare Prods., Inc., 251 S.W.3d 481, 487 (Tex. 2008).
      By its plain terms, § 82.002 applies only to sellers and manufacturers.
“Seller” is defined as “a person who is engaged in the business of distributing or
otherwise placing, for any commercial purpose, in the stream of commerce for
use or consumption a product or any component part thereof.” Tex. Civ. Prac.
& Rem. Code § 82.001(3). “Manufacturer” is defined as “a person who is a
designer . . . of any product or any component part thereof and who places the
product or any component part thereof in the stream of commerce.” Tex. Civ.
Prac. & Rem. Code § 82.001(4). The sole issue is whether Home Depot and
Kohler acted within these definitions of “seller” and “manufacturer” in respect

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                                 No. 07-50188

to the shower door display so as to trigger Home Depot’s statutory right to
indemnification.
      Kohler’s central argument is that the district court erred in holding that
Home Depot was entitled to indemnification because neither party ever intended
to sell the shower door display. Thus, Kohler argues the product never entered
the stream of commerce and, concomitantly, Home Depot and Kohler do not meet
the statute’s definitions of “manufacturer” and “seller.” Likening the display to
a “sample” product, the district court rejected this argument, reasoning that
“[b]ecause Home Depot and Kohler both supplied the door display to the public
with the expectation of profiting from future sales of that product, each placed
the door into the ‘stream of commerce’ as that term is defined in the context of
a products liability action.”
      The Texas Supreme Court recently set forth the principles of statutory
construction under Texas law:
      Our focus when construing a statute is the intent of the Legislature.
      To give effect to the Legislature’s intent, we rely on the plain and
      common meaning of the statute’s words. It is a fair assumption that
      the Legislature tries to say what it means, and therefore the words
      it chooses should be the surest guide to legislative intent.

Owens, 251 S.W.3d at 483 (internal citations and quotations omitted).
      Because the statute does not define “stream of commerce,” we must rely
on other sources of authority to determine the meaning of that phrase. Under
Texas law, “[i]n construing a statute, whether or not the statute is considered
ambiguous on its face, a court may consider among other matters the common
law or former statutory provisions, including laws on the same or similar
subjects[.]” Tex. Gov’t Code § 311.023(4). Accordingly, we presume “that the
Legislature acted with knowledge of the common law and court decisions” when
it enacted the statute. See Phillips v. Beaber, 995 S.W.2d 655, 658 (Tex. 1999)
(citing McBride v. Clayton, 166 S.W.2d 125, 128 (Tex. 1942)).

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                                    No. 07-50188

      Texas courts have never decided whether installing a display product for
in-store use constitutes placing that product in the stream of commerce. Thus,
we are required to predict the Texas Supreme Court's determination of this
novel issue. Morin v. Moore, 309 F.3d 316, 324 (5th Cir. 2002) (“In making an
Erie determination, we are emphatically not permitted to do merely what we
think best; we must do that which the Texas Supreme Court would deem best.").
      Texas courts generally focus on the foreseeability of the product’s use by
the consuming public, not on the product’s availability for purchase. See Davis
v. Gibson Prods. Co., 505 S.W.2d 682, 691 (Tex. Civ. App. -- San Antonio 1973,
writ ref'd n.r.e.) (applying strict liability because it was "clearly foreseeable" that
a shopper would handle a machete on display). For that reason, the Texas
Supreme Court has recognized that a product need not be sold in order to enter
the stream of commerce. See Armstrong Rubber Co. v. Urquidez, 570 S.W.2d
374, 376 (Tex. 1978); see also Davis v. Gibson Prods. Co., 505 S.W.2d 682, 691
(Tex. Civ. App. -- San Antonio 1973, writ ref’d n.r.e.) (“[I]t is clear that
continuation of the flow of commerce does not require transfers of possession.”).
Instead, the product need only “be released in some manner to the consuming
public.” Id. (emphasis added); see also Thate v. Tex. & Pac. Ry. Co., 595 S.W.2d
591, 598 (Tex. Civ App. -- Dallas 1980, writ dism’d) (“Channels of commerce
implies that a product is placed for use by or sale to the consuming public.”).
      Indeed, Texas courts have held manufacturers strictly liable for (1) placing
sample products into the stream of commerce, noting that “[o]ne who delivers an
advertising sample to another with the expectation of profiting therefrom
through future sales is in the same position as one who sells the product,”
McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787, 792 (Tex. 1967); (2) placing
display products intended for sale into the stream of commerce even if the
customer ultimately does not purchase the item, Davis, 505 S.W.2d at 689-92;
and (3) bailments that accompany the sale of a good or service. New Tex. Auto

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                                  No. 07-50188

Auction Servs., L.P. v. Gomez De Hernandez, 249 S.W.3d 400, 403 (Tex. 2008)
(citing Armstrong, 570 S.W.3d at 377). Thus, because Kohler manufactured --
and Home Depot exhibited -- the shower door display to be used by the
consuming public for the commercial purpose of profiting from future sales of
that very product, Kohler and Home Depot entered the shower door display into
the stream of commerce sufficient to satisfy the respective definitions of
manufacture and seller under the statute. This interpretation accords with the
general purpose of the indemnification statute, i.e., to avoid holding an innocent
seller liable for a defective product manufactured by another. Owens, 251
S.W.3d at 487. Accordingly, the district court correctly determined that Home
Depot is entitled to indemnification.
      Kohler argues the Texas Supreme Court’s decision in Armstrong requires
a different result. In Armstrong, the decedent-employee was killed while driving
a tractor-trailer in order to test tires manufactured by Armstrong Rubber Co.
570 S.W.2d at 375. As the employee drove the tractor-trailer, a defective tire
blew and caused the vehicle to crash, killing the employee. Id. The employee
worked for a contractor retained by Armstrong to test its tires, meaning the tires
came directly from Armstrong. Id. Thus, the defective tire was new when
received at the testing facility and had never previously been sold, although it
“was of the same quality as tires manufactured by Armstrong and sold across the
nation.” Id. The employee’s family filed suit, alleging Armstrong was strictly
liable as the seller of a defective product. See id. at 375-76.
      To determine liability, the Texas Supreme Court focused on whether the
seller was “engaged in the business of selling products for use or consumption.”
Id. (citing Restatement (Second) of Torts § 402A cmt. f (1965)). The court first
noted that “[a]lthough phrased in terms of sellers, it is not necessary that the
defendant actually sell the product, but only that he be engaged in the business
of introducing the product into channels of commerce.” Id. The court concluded

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                                  No. 07-50188

that Armstrong was not strictly liable because the tire was provided solely for
the purpose of testing -- also, the accident occurred in a laboratory -- and thus,
the tire “was never sold and, more importantly, never entered the stream of
commerce.” Id. at 376. The court recognized that tires of the same design and
manufacture were “regularly sold by [the manufacturer] in regular channels of
commerce,” but concluded that the actual product causing the injury must
somehow enter the stream of commerce and although it need not be sold, it
“must be released in some manner to the consuming public.” Id. In analyzing
several out-of-state decisions in which strict liability was extended to bailments,
the court distinguished those cases on the ground that each case concerned a
bailment accompanying the sale of a good or service and thus, the product was
placed into the stream of commerce. Id. at 377.
      Unlike Armstrong, the instant case involves an allegedly defective product
that was actually “released in some manner to the consuming public.” The
shower door display was intended for consumer use and did, in fact, reach the
consuming public, albeit not through a sale. Indeed, the Texas Supreme Court
recognized in Armstrong that a product need not be sold in order to enter the
stream of commerce. Here, as the district court correctly recognized, Kohler
manufactured -- and Home Depot displayed -- the shower door display with the
expectation that it would be presented to the consuming public for the
commercial purpose of profiting from future sales of that same product. This
case therefore stands in contrast to Armstrong, where the manufacturer merely
provided the defective product to its own contractor for testing.
      Kohler also relies on Culton v. Saks, Inc., Case No. H-04-3001, 2006 WL
2729408 (S.D. Tex. Sept. 25, 2006), in which the plaintiff was injured while
riding an escalator at Saks Fifth Avenue (“Saks”). Id. at *1. The plaintiff filed
suit, alleging Saks and Montgomery Kone to be liable as the respective operator
and manufacturer of the escalator. Id. Saks sought indemnification under

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                                  No. 07-50188

Section 82.002. The district court rejected Saks’s claim for indemnification,
reasoning that Saks does not engage in the business of releasing either its
interest in or its control of the escalator to the consuming public. Id. at *3.
Instead, according to the district court, the fact that customers ride the escalator
establishes only that it is an “incidental component of a larger business
enterprise” and that, if anything, Saks is the consumer of the escalator, not the
seller. Id. Culton is inapposite here because the shower door display was
presented for examination to customers and was certainly not an incidental
component of a larger business enterprise. Instead, as the district court noted,
the display was “intimately connected with the business of selling shower doors.”
                              IV. CONCLUSION
      For the foregoing reasons, we affirm the district court’s grant of summary
judgment to Home Depot on its indemnification claim.
      AFFIRMED.

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