Court Opinion

ID: 9636256
Source: CourtListenerOpinion
Date Created: 2023-08-22 14:21:48.961817+00
Date Added: 2024-06-11T18:09:43.497720
License: Public Domain

Justice OWEN,
joined by Chief Justice PHILLIPS, Justice BAKER and Justice HANKINSON, dissenting.
This Court, like the United States Supreme Court, has recognized a rule of statutory construction that is sensible and ensures that courts do not embellish or expansively interpret acts of the legislative branch. When a statute creates a liability unknown to the common law, the new liability will not be extended beyond the statute’s plain meaning. The meaning of the statute before us does not plainly extend indemnity to a seller who was not in the marketing chain, despite the Court’s repeated assertions to the contrary. Indeed, the statute indicates that the common-law requirement that the seller must have sold the offending product to the third party survives.
The Court’s opinion is also short on consistency. It insists that the open-ended definition of “seller” under the statute can only be read broadly, but when it comes to the statute’s parallel and equally open-ended definition of “manufacturer,” the Court refuses to construe it in the same manner.
In the final analysis, the Court substitutes what it thinks the statute should accomplish for what the statute actually says. Accordingly, I cannot join the Court’s opinion, and I respectfully dissent.
I
Athough the common-law rule requiring strict construction of statutes in derogation of the common law does not apply to Texas statutes, see Tex. Gov’t Code § 312.006(b), we said in Smith v. Sewell, 858 S.W.2d 350, 354 (Tex.1993), that if a statute creates a liability unknown to the common law, it will be “strictly construed in the sense that it will not be extended beyond its plain meaning or applied to cases not clearly within its purview.” See also Shaw v. Railroad Co., 101 U.S. 557, 565, 25 L.Ed. 892 (1879) (“No statute is to be construed as altering the common law, farther than its words import. It is not to be construed as making any innovation upon the common law which it does not fairly express.”).
Sections 82.001 and 82.002 are not models of clarity. The definitions of “seller” and “manufacturer” are open-ended. Accordingly, this Court should consider the state of the law before the enactment of sections 82.001 and 82.002 to determine if these sections would create a new liability for indemnity if they were construed in the manner urged by Fitzgerald.
When the prior law is examined, four things become clear. First, Texas law allowed indemnity only for a party whose liability was purely vicarious. See B & B Auto Supply, Sand Pit, & Trucking Co. v. Central Freight Lines, Inc., 603 S.W.2d 814, 817 (Tex.1980) (explaining that “the common law right of indemnity is no longer available between joint tortfeasors in *870negligence cases”). Second, if the party seeking indemnity was independently culpable, there was no right to indemnity. See Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 432 (Tex.1984). Third, there was no common-law indemnity for an innocent seller who was not in the chain of distribution and thus was not liable to the third party. See id. And finally, this Court strongly implied — if not held — that common-law indemnity did not include the right to recover attorney’s fees or defense costs. See Aviation Office of Am., Inc. v. Alexander & Alexander, Inc., 751 S.W.2d 179, 180 (Tex.1988). In view of the Court’s conclusion in this case that Texas decisions did not directly address indemnification of sellers outside the chain of distribution, that aspect of common-law indemnity warrants further analysis.
Common-law indemnity is based on the concept that the party seeking indemnity was liable or was exposed to liability to a third party and had actually paid damages or settlement dollars to that third party. We said in Humana Hospital Corp. v. American Medical Systems, Inc., 785 S.W.2d 144 (Tex.1990), that “[generally speaking, a person who, without personal fault, has become subject to tort liability for the unauthorized and wrongful conduct of another, is entitled to full indemnity from the other for expenditures properly made to discharge the liability.” Id. at 145 (citing Lee, Modern Tort Law § 20.02 (1989)).
In accord with this basic premise of common-law indemnity, we observed in Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816 (Tex.1984), that an innocent retailer in the chain of distribution could seek indemnity from the manufacturer in a products liability case. See id. at 819. We further explained in Duncan v. Cessna Aircraft Co., that the adoption of comparative causation did not affect the common-law right of an innocent seller in the marketing chain to indemnity:
Comparative causation does not affect the right of a retailer or other member of the marketing chain to receive indemnity from the manufacturer of the defective product when the retailer or other member of the marketing chain is merely a conduit for the defective product and is not independently culpable.
665 S.W.2d at 432.
Although the question of whether an innocent seller who did not sell the offending product to the plaintiff could seek indemnity was not at issue in Bonniwell or Duncan, our references to the chains of distribution and marketing in those decisions were not simply oversights or accidents. The common law of indemnity always recognized as a first principle that the indemnitee had to have a relationship with the underlying third party. See Restatement of Restitution § 76 cmt. b (1937) (stating that the general rule of indemnity “applies where two or more persons are subject to a duty to a third person either as joint promisors or otherwise, under such circumstances that one or more of them, as between themselves, should perform it rather than the other” (emphasis added)); Restatement (Second) of Torts § 886B(1) (1979) (stating that indemnification is available “if two persons are liable in tort to a third person”). Within the context of products liability, the necessary relationship arises from the fact that the seller was in the chain of distribution from the manufacturer to the consumer. If the seller was not in the chain, then the seller would have no duty or relationship to the consumer.
The corollary to the requirement that the seller must have had some liability or potential liability when it paid damages or settlement dollars was the concept that the manufacturer was not required to indemnify the seller for those payments unless it was proven that the manufacturer was liable to the plaintiff or the manufacturer admitted that it was liable to the plaintiff. See Humana, 785 S.W.2d at 145 (holding that no right to indemnity could be asserted until there was a judicial determination or admission that the one from whom indemnity was sought was or could have been liable for the underlying injury); *871Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 446 (Tex.1989) (holding that “[t]here is no right of indemnity against a defendant who is not liable to the plaintiff’) (citing Hunter v. Fort Worth Capital Corp., 620 S.W.2d 547, 553 (Tex.1981); Brown & Root, Inc. v. Rust Eng’g, 679 S.W.2d 576, 578 (Tex.App.—Texarkana 1984, writ ref'd n.r.e.)). The fact that there was a relationship between the would-be indemnitee and the would-be in-demnitor was insufficient to give rise to indemnity even if that relationship, such as seller and manufacturer, was the basis of the third party’s suit.
Thus, to summarize, if someone were seeking indemnity under the common law, as distinguished from indemnity based on the terms of a contract, the common law required that the indemnitee must be liable or have considerable exposure to liability to the third party. And the common law never recognized a right of indemnification for costs associated with defending claims made against a party who could not be liable to the plaintiff. Indeed, the common law did not recognize a right to indemnification for defense costs even when there was a right to full indemnity for all amounts paid to a third party. See Alexander, 751 S.W.2d at 180. The law left it to parties who had a relationship with one another to provide contractually for indemnification for defense costs, to obtain insurance for the cost of defending nonmeritorious claims, or to bear their own costs of defending nonmeritorious claims.
As interpreted by the Court, section 82.002 is a significant departure from the common law. Thus, the question is whether the statute plainly and fairly expresses such an intention. That is the question to which I now turn.
II
The Products Liability Act provides that a manufacturer shall indemnify a seller as follows:
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.
Tex. Civ. Prac. & Rem.Code § 82.002(a). The Act defines “seller” 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.” Id. § 82.001(8).
The imprecise definition of “seller” under the Act does not constitute a sufficient statement from the Legislature that it intended to remove the common-law chain-of-distribution requirement. To the contrary, there is a strong indication in the definition of “seller” and in section 82.002 that the Legislature intended for a seller seeking indemnity to have actually sold the defective product that caused the underlying injury.
First, the Legislature chose to use the words “in the stream of commerce” in explaining which sellers would be entitled to indemnity. Id. It seems apparent that the Legislature intended that the stream of commerce actually bring the seller’s product to the plaintiff before a seller would be entitled to indemnity.
Second, the Act provides in subsection 82.002(a) that a seller is entitled to indemnity “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.” Id. § 82.002(a) (emphasis added). “[T]he product” unmistakably refers to the product that caused the injury that gave rise to a products liability action. Likewise, “the seller[ ] ... modifying ... the product” can refer only to the seller who placed that particular defective product in the stream of commerce. And, the final reference to “the seller” also clearly refers to the seller who sold the offending product and who would be “independently liable” for its actions. It seems more probable than not that when the Legislature said that a man*872ufacturer shall indemnify “a seller against loss arising out of a products liability action,” it meant that the actual seller of the product was entitled to indemnity, just as it meant “the seller” of the product when setting forth the exceptions to the statutory grant of indemnity. See id.
Nevertheless, the Court interprets the statute expansively, at least as to sellers. As long as the seller places “a product” in the “stream of commerce,” id. § 82.001(B), the Court says that the seller is entitled to indemnity even though the “stream of commerce” did not take the seller’s product to the plaintiff. See 996 S.W.2d at 871.
But if sections 82.001 and 82.002 are interpreted in this manner, then the definition of “manufacturer” must be interpreted consistently with that approach. The Court says that because there is no mention of “chain of distribution” or words of similar import in the definition of seller or in subsection 82.002(a), a seller who seeks indemnity is not required to be in the chain of distribution. See 996 S.W.2d at 871. If that is so, then the Act’s silence with regard to a chain of distribution between a manufacturer and a seller seeking indemnity means that a manufacturer may be required to indemnify a seller who was not in its chain of distribution. If there is no requirement of a marketing chain between the seller and the manufacturer, then Fitzgerald could recover its defense costs not only from Advanced Spine but also from every other manufacturer sued in the multi-district litigation, even if Fitzgerald never sold any products made by those defendants. The hyperteehnieal approach adopted by the Court in construing which sellers are indemnified inevitably leads to a dramatic change in the law of indemnity.
In implicit recognition that its reasoning leads to results that the Legislature never contemplated, the Court balks at carrying its approach to statutory interpretation to its logical conclusion. The Court dodges the issue, saying that “[wjhether th[e] manufacturer must also be in the seller’s ‘chain of distribution’ is not raised here because Fitzgerald has not sought indemnification from any other manufacturer.” 996 S.W.2d at 871.
The Court has engaged in its own determination of who should and should not be entitled to indemnity and from whom indemnity should and should not be permitted. The Court has not discharged its proper function, which is to construe the statute in a manner that does not create new liability in derogation of the common law unless the statute evinces the Legislature’s clear intent to do so. See Smith v. Sewell, 858 S.W.2d 350, 354 (Tex.1993). The fact that the Court is deciding what the law of indemnity should be is exposed when it says: “A seller of a manufacturer’s product who is alleged to have sold the product to the plaintiff should not be denied indemnity if it proves that it is innocent but given indemnity if he settles without admitting or denying the fact.” 996 S.W.2d at 871 (emphasis added). The Court thus believes that it is fundamentally unfair to deny indemnity to a seller who had no contact with the plaintiff but to indemnify a seller who actually sold the product that injured the plaintiff. What is fair or unfair in this context is not our call. Our task today is to determine what call the Legislature has made. If this Court had been asked in a products liability case to change the common law and to allow a seller such as Fitzgerald to have indemnity, then the Court may have done so. But we cannot now substitute our judgment for that of the Legislature in construing what the Legislature has enacted.
The approach taken by the Court in determining who is entitled to indemnity misses the mark because the statute does not clearly say that a seller does not have to be in the chain of distribution or whether there must be a chain of distribution between the seller and the manufacturer from which it seeks indemnity. Unless and until the Legislature unmistakably speaks to these issues, the prudent course is for this Court to expand indemnity only to the limits clearly laid out by the Legislature and not beyond those limits.
*873III
The only other reason the Court gives for its expansive interpretation of “seller” under sections 82.001 and 82.002 is also untenable. The Court says that if those sections were construed to require that a seller must have sold a product that injured the third party, they would conflict with subsection 82.002(e)(1). See 996 S.W.2d at 871.
Subsection 82.002(e)(1) says that a manufacturer’s duty to indemnify under section 82.002 “applies without regard to the manner in which the action is concluded.” Tex. Civ. Prao. & Rem.Code § 82.002(e)(1). The Court reasons: “An action may be concluded with a settlement, in which no underlying facts are admitted or established and the liability of a defendant seller or a defendant manufacturer is not determined.” 996 S.W.2d at 871. How that fact creates a conflict the Court does not explain, other than to offer its own opinion that a seller who is innocent “should not be denied indemnity.” 996 S.W.2d at 871.
Subsection 82.002(e)(1) does not speak at all to the question of whether a seller must have actually sold the product that is the basis of the third party’s claim before the seller is entitled to indemnity. Instead, subsection 82.002(e)(1) removes the common-law requirement that there be either a judicial determination or an admission of liability by the manufacturer before the manufacturer is required to indemnify a seller. See Humana, 785 S.W.2d at 145. Before the enactment of subsection 82.002(e)(1), a seller was required to show that it sold the product to the underlying plaintiff, that the manufacturer was found liable or admitted liability to the plaintiff, and that the seller had to pay damages. Under the statute, a seller no longer has to prove that the manufacturer was found liable or admitted liability. Thus, if both the seller and the manufacturer are exonerated in a suit by the third party, the seller is entitled to indemnity if it sold and the manufacturer supplied the product at issue. Assuming that a case were settled before there was a determination of liability, the seller would still have to prove in a subsequent indemnity action that it sold and the manufacturer supplied the product at issue. Subsection 82.002(e)(1) does not dispense with the common-law requirement that the seller must have some relationship or potential basis of liability to the third party.
IV
I agree with the Court that the Legislature did intend to change the common law of indemnity when it enacted section 82.002 and that the Legislature created rights that did not exist at common law. Those include (1) the right to indemnity from a manufacturer without showing that the manufacturer would have been liable to the underlying plaintiff, and (2) the right to recover attorney’s fees and other costs of litigation. But when it created these new rights, the Legislature did so directly and unmistakably. The Legislature has not unmistakably dispensed with the common-law requirement that a seller must have some connection to the .third party before it is entitled to indemnity from a manufacturer. Indeed, the statute itself indicates that such a requirement remains. I would answer the certified question “no.”