Court Opinion

ID: 8963758
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:55:49.974788+00
Date Added: 2024-06-11T17:10:16.207164
License: Public Domain

NOONAN, Circuit Judge,
concurring and dissenting:
In 1964 the American Law Institute adopted § 402A of the Restatement (Second) of Torts. It provided that the seller of a product in a defective condition unreasonably dangerous to the users was liable for the physical harm caused by the product to the ultimate users if the seller was in the business of selling the product and it was expected that the product would reach the user without substantial change in the condition in which it was sold. The rule applied although the user was not in any contractual relation with the seller.
The rationale for the rule was that “by marketing his product for use and consumption” the seller had undertaken a special responsibility toward the user; that the public in buying goods where it was forced to rely upon the seller had a right to expect that “reputable sellers” would stand behind their goods; and that the burden of accidental injuries caused by such products should be placed “upon those who market them.” Restatement (Second) of Torts § 402A comment c (1964).
Arizona adopted the Restatement in 1968. O.S. Stapley Co. v. Miller, 103 Ariz. 556, 447 P.2d 248 (1968). The court reaffirmed its commitment to the Restatement in 1972. Tucson Industries, Inc. v. Schwartz, 108 Ariz. 464, 501 P.2d 936 (1972). The court declared, “Strict liability is a public policy device to spread the risk from one to whom a defective product may be a catastrophe to those who marketed the product, profit from its sale and have the know-how to remove its defects before placing it in the chain of distribution.” Id. at 467-68, 501 P.2d at 939-40.
In 1976 Arizona codified the law to a degree by providing a statute of limitations, affirmative defenses, a rule as to indemnification, a rule as to the contents of the complaint, a rule as to evidence, and certain definitions. Ariz.Rev.Stat.Ann. §§ 12-681-686. “The previously existing common law of products liability” was “modified” only to the extent thus provided. Id. at § 12-682. Nothing in the statute changed the rationale for imposing product liability.
Since the adoption of the rule, Arizona has imposed product liability on a variety of actors other than those meeting the precise statutory definition of manufacturer or seller. As is observed by this court, those held liable have included a lessor, a dealer in used goods, a jobber, a distributor and a packager. The common thread has been that each of those held liable has been in the chain of distribution.
Now we are asked if the Arizona law of product liability applies to Goodyear Tire and Rubber Co., Inc. We may apply the tests provided by the Supreme Court of Arizona:
First. Does Goodyear have the know-how to remove defects from a tire before placing the tire in the chain of distribution? The licensing agreement between Goodyear and Goodyear GB permits the latter to manufacture tires in strict accordance with the formulas, specifications, and restrictions given by Goodyear. Only materials approved by Goodyear may be used. Goodyear reserves the right to inspect the plant and tire samples of Goodyear GB. In addition, Goodyear does all the basic product *1299research for tires at its Akron, Ohio headquarters. The research results are transmitted to the development department of the Goodyear Technical Center in Luxembourg. This center is the development department for Goodyear GB. Quality control is Goodyear’s responsibility. Goodyear is so sure of its quality control of those tires produced by Goodyear GB that it will honor any warranty claim on these tires.
Second. Does Goodyear market the tires? Goodyear is famous for its advertising. The Goodyear Blimp has carried the Goodyear name over countless stadiums in America. Goodyear runs its advertising on a global basis. In 1986, for example, it used worldwide a single theme: “Goodyear, Take Me Home.” Advertising Age, September 24, 1987, at 110, col. 5. In 1986 Goodyear spent $161 million to advertise its name in the United States. Id. at 1.
Third. Does Goodyear profit from the sale of its tires by Goodyear GB? Goodyear charges Goodyear GB about $10 million annually for its technical services. There is no reason to believe that these services are provided at cost. Goodyear directs and coordinates its investment in Goodyear GB through another subsidiary, Goodyear International, located at corporate headquarters in Akron. Goodyear International chooses the board of Goodyear GB. Goodyear International decides how much capital to allocate to Goodyear GB. Goodyear International is involved in all major financial decisions of Goodyear GB. The financial figures for Goodyear GB are consolidated on Goodyear’s balance sheet. Except for directors’ qualifying shares, Goodyear owns all the common stock of Goodyear GB. It is obvious that Goodyear is in a position to profit from the sales of Goodyear GB. “Goodyear’s net profit during the first half of 1987 was $426.2 million. Advertising Age, Sept. 24, 1987, at 111, col. 1.” A portion of this profit came from Goodyear GB.
The opinion of this court notes that “the precise issue” presented by this appeal has not been decided by an Arizona court. This court arrives at this phrasing of the issue by singling out a single aspect of Goodyear’s relation to Goodyear GB — that of trademark licensor. This narrow focus on a single portion of the relationship misses the point of the Arizona doctrine and fails to respond to the rationale of the rule.
To take a variation on a familiar illustration, if a court holds that barking dogs are a nuisance to the neighborhood because of their noise, it has not decided the precise issue of whether braying asses are a nuisance. But could any reasonable person doubt how the court would decide the case of the braying asses if the court was respectful to the rationale for banning the barking dogs?
To avoid what Arizona law requires, the court has committed a major blunder in federal law. The court suggests that plaintiffs, because they have chosen a federal court, should be treated differently from defendants in the application of state law. When Austin Scott taught Civil Procedure at Harvard Law School, he used to ask the students, “Are you pro-plaintiff or are you pro-defendant?” The question from Scott was ironic, a kind of reductio ad absurdum. But the court here is willing to take this absurd position, to say that plaintiffs will not fare as well as defendants.
The “precise issue,” in the court’s phrasing of the matter, is as undecided as to the defendant as it is to the plaintiff. Would the court have come to a different conclusion if Goodyear had brought a declaratory judgment action and been in the posture of a plaintiff asking the court to say that it was not liable? The court’s position is untenable.
Federal diversity jurisdiction does not exist for the convenience of federal judges. Long ago, Chief Justice Stone put to rest such a view of the function of federal judges determining state law. Meredith v. City of Winter Haven, 320 U.S. 228, 234, 64 S.Ct. 7, 10, 88 L.Ed. 9 (1943). Federal judges are bound to apply the law of the state as enunciated by its highest court. It is unwarrantable disparagement of the Supreme Court of Arizona for the court to take the position that that court would find Goodyear — which carefully develops Goodyear tires from scratch, lavishly markets *1300them, and richly profits from their sale— not liable for the defective condition of a Goodyear tire.
Worldwide the company tells its customers, “Take Me Home.” When they take Goodyear home, are they then to discover that there are many Goodyears and these many Goodyears are not responsible for each other? What Goodyear’s lawyers should be telling the company is, “Goodyear, come home.” If Goodyear is “a reputable seller” it will stand behind its product. If it does not do so, the court should make it answer. I agree with the court that Goodyear cannot be held liable for the injuries in this case under a warranty theory, an agency theory, or as one “putting out” a product under section 400 of the Restatement (Second) of Torts. But in Arizona Goodyear is liable under section 402A. I would reverse.