Valley Forge Insurance Company v. King Hong Industrial Company Limited

Filing 23

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S 18 MOTION FOR SUMMARY JUDGMENT by Judge John C Coughenour.(TF)

THE HONORABLE JOHN C. COUGHENOUR

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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VALLEY FORGE INSURANCE
COMPANY,

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Plaintiff,

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v.

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CASE NO. C12-0520-JCC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT‘S
MOTION FOR SUMMARY
JUDGMENT

KING HONG INDUSTRIAL COMPANY
LIMITED,

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Defendant.

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This matter comes before the Court on Defendant King Hong Industrial Company

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17 Limited‘s motion for summary judgment (Dkt. No. 18). Having thoroughly considered the
18 parties‘ briefing and the relevant record, the Court finds oral argument unnecessary and hereby
19 GRANTS IN PART and DENIES IN PART the motion for the reasons explained herein.
20 I.

BACKGROUND

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This case arises out of an injury sustained by David Abrams when the chair he was sitting

22 on allegedly collapsed. (Dkt. No. 1 at 3 ¶ 4.4.) Blackburn Office Equipment, Inc. was the alleged
23 retail seller of the chair. (Id.) Blackburn had allegedly purchased the chair from Office Master
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24 Inc., which itself had purchased the chair from King Hong. (Id.) After receiving the chair from

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King Hong represents that, ―for purposes of this Motion, the Court may assume Plaintiff
will be able to prove‖ that King Hong manufactured the chair. (Dkt. Nos. 22 at 4, 18 at 3 n.1.)
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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1 King Hong, Office Master had removed the chair from its packaging, upholstered it, and re2 branded it as an ―Office Master‖ product, before re-packaging it and selling it to Blackburn. (Id.;
3 Dkt. No. 20 Ex. B at 10.) Abrams sued Office Master for injuries he sustained when the chair
4 collapsed. (Dkt. No. 1 at 3 ¶ 4.6.) Plaintiff Valley Forge Insurance Company was Office Master‘s
5 insurer. (Id.) Valley Forge paid for Office Master‘s defense and ultimately settled Abrams‘
6 claims against Office Master for $600,000. (Id. at 3–4 ¶¶ 4.6 & 4.8.) As part of the settlement
7 agreement, Abrams assigned any rights he had against King Hong to Valley Forge. (Id. at 3–4
8 ¶ 4.8.)
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Valley Forge then brought the instant suit against King Hong. Valley Forge claims that

10 (1) King Hong is ―directly liable‖ under the Washington Products Liability Act (―WPLA‖) to
11 Valley Forge (a) ―as subrogee of Office Master[]‖ and (b) ―as assignee of all claims of David
12 Abrams for personal injury against King Hong‖; (2) King Hong is liable to Valley Forge for
13 breaching ―all applicable warranties under the Uniform Commercial Code‖; and (3) Valley Forge
14 is entitled to recover from King Hong the $600,000 settlement amount, plus interest and the cost
15 of defense it provided Office Master, ―by way of equitable indemnity, subrogation and
16 indemnity.‖ (Id. at 4–6 §§ V–VII.)
17 II.

DISCUSSION

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A.

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Summary judgment is proper when there is no genuine issue as to any material fact and

Summary Judgment Standard

20 the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a); see Fed. R.
21 Civ. P. 50(a) (court may grant judgment as a matter of law if ―a reasonable jury would not have a
22 legally sufficient evidentiary basis to find for the party on that issue‖). The party moving for
23 summary judgment has the burden of demonstrating the absence of a genuine issue of material
24 fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has satisfied its
25 burden, the burden shifts to the non-moving party to designate ―specific facts showing that there
26 is a genuine issue for trial.‖ Id. at 324. In deciding a motion for summary judgment, a court
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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1 draws all inferences in the light most favorable to the party opposing the motion. Blair Foods,
2 Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir. 1980).
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B.

Washington Products Liability Act Claims
1. Valley Forge’s Claim as Subrogee of Office Master

Valley Forge, ―as subrogee of Office Master[],‖ seeks to hold King Hong liable for

6 violating the WPLA. (Dkt. No. 1 at 5 ¶ 5.10, 4 ¶ 5.3.) ―The WPLA explicitly confines recovery
7 to physical harm suffered by persons and property and leaves purely economic loss to the UCC.
8 . . . Particular damages may be remediable in tort as well as in contract, but if the damages fall on
9 the contract side of the line and are more properly remediable in contract, tort recovery is
10 precluded.‖ Hofstee v. Dow, 36 P.3d 1073, 1076 (Wash. Ct. App. 2001) (citations omitted). Here,
11 the damages Office Master (Valley Forge) seeks from King Hong to compensate it for the
12 damages it paid to Abrams ―fall on the contract side of the line‖—they are consequential
13 damages caused by King Hong‘s alleged breach of UCC warranties. They are not WPLA
14 damages. Summary judgment for King Hong on this claim is thus GRANTED. The Court
15 discusses Valley Forge‘s UCC breach-of-warranties claim infra.
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2. Valley Forge’s Claim as Assignee of Abrams
Valley Forge, ―as assignee of all claims of David Abrams,‖ seeks to hold King Hong

18 liable under the WPLA ―for [Abrams‘] personal injury.‖ (Dkt. No. 1 at 5 ¶ 5.11, 4 ¶ 5.3.) Under
19 the WPLA, the general rule (to which there are exceptions) is that ―a product seller other than a
20 manufacturer is liable to the claimant only if the claimant‘s harm was proximately caused by‖
21 the seller‘s negligence, breach of an express warranty, or intentional misrepresentation. Wash.
22 Rev. Code § 7.72.040(1). One exception is that such a product seller ―shall have the liability of a
23 manufacturer to the claimant if . . . [t]he product was marketed under a trade name or brand
24 name of the product seller.‖ Id. § 7.72.040(2)(e). Office Master was such a product seller here: It
25 marketed the chair under its own brand name and so was liable as a manufacturer to Abrams.
26 Valley Forge, as Office Master‘s insurer, settled that manufacturer-liability claim with Abrams
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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1 on behalf of Office Master.
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The question is whether, after that settlement, a claim by Abrams against King Hong, the

3 actual manufacturer of the chair, remains. It does not. That is because the WPLA ―created a
4 statutory form of vicarious liability that enables the claimant injured by a defectively
5 manufactured product to recover fully from the product seller where,‖ as here, ―the seller branded
6 the product as its own.‖ Johnson v. Recreational Equip., Inc., 247 P.3d 18, 22 (Wash. Ct. App.
7 2011) (emphasis added). Here, Abrams settled his WPLA claim of ―liability of a manufacturer‖
8 when he settled with Office Master, because Office Master, as the chair re-brander, ―ha[d] the
9 liability of a manufacturer.‖ Wash. Rev. Code § 7.72.040(2)(e). While Office Master (Valley
10 Forge) may have indemnification or breach-of-warranty claims against King Hong, see infra, it
11 does not, by virtue of standing in the shoes of Abrams, have a WPLA manufacturer-liability
12 claim against King Hong. The settlement extinguished Abrams‘ manufacturer-liability claim.
13 Summary judgment for King Hong on this claim is thus GRANTED.
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C.

Claims for Breach of UCC Warranties

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Valley Forge, as subrogee of Office Master, alleges that King Hong is liable to it for

16 breaching ―all applicable warranties under the Uniform Commercial Code,‖ including the
17 implied warranties of merchantability and fitness for a particular purpose. (Dkt. No. 1 at 6 ¶¶ 7.3
18 & 7.4; see Wash. Rev. Code §§ 62A.2-314 & 62A.2-315.) King Hong argues that allowing
19 Office Master (Valley Forge) to sue King Hong for breaching its UCC implied warranties would
20 ―render [WLPA § 7.70.040(2)(e)] meaningless‖ by ―provid[ing] an ‗escape clause‘ to rebranding
21 product sellers—effectively contravening the purpose of the Rebranding Provision‖ in that ―the
22 rebranding product seller would always be able to shirk its [manufacturer] liability under [§]
23 7.70.040(2) and recover its settlement proceeds from the manufacturer by resorting to the UCC.‖
24 (Dkt. No. 22 at 2.) King Hong argues that the Washington Court of Appeals foreclosed the
25 availability of such an ―escape clause‖ in Johnson.
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Not so. Johnson held only that a rebranding product seller could not require a jury to
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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1 apportion fault between the rebranding seller and the manufacturer for a WLPA manufacturer2 liability claim by the injured consumer. The court reasoned that, ―[b]ecause [the rebranding
3 seller] is vicariously liable for [the manufacturer‘s] acts, the basis of both entities‘ alleged
4 liability is the same,‖ and so the jury could not be required to ―allocate[] . . . the same fault . . .
5 aris[ing] from the same acts.‖ Johnson, 247 P.3d at 25. But a rebranding seller‘s vicarious
6 liability for the acts of a manufacturer under the WLPA does not render the manufacturer
7 immune from suit by the rebranding seller. Indeed, the trial court in Johnson allowed the
8 rebranding seller to join the manufacturer as a third-party defendant and state a claim against it
9 for contribution. Id. at 21. Johnson thus does not stand for the proposition that when a rebranding
10 seller seeks to hold the manufacturer liable for its alleged breach of UCC warranties, it is
11 ―shirk[ing] its liability under [WLPA §] 7.70.040(2).‖ To the contrary, here, Office Master fully
12 satisfied its WLPA manufacturer liability to Abrams by settling. Neither Johnson nor
13 § 7.70.040(2)(e) stops Office Master (Valley Forge) from now coming after King Hong for
14 breach of warranties it impliedly made to Office Master. Summary judgment for King Hong on
15 Valley Forge‘s breach-of-warranties claim is DENIED.
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D.

Indemnification Claims

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Valley Forge alleges that ―Valley Forge, standing in the shoes of Office Master Inc., is

18 entitled to recovery of the $600,000 it paid in settlement of the personal injury claims of David
19 Abrams by way of equitable indemnity, subrogation and indemnity.‖ (Dkt. No. 1 at 5 ¶ 6.3.)
20 ―Indemnity in its most basic sense means reimbursement . . . and may lie when one party
21 discharges a liability which another should rightfully have assumed.‖ Cent. Wash. Refrigeration,
22 Inc. v. Barbee, 946 P.2d 760, 762 (Wash. 1997). The Washington Tort Reform Act of 1981
23 abolished the ―common law right of indemnity between active and passive tort feasors.‖ Wash.
24 Rev. Code § 4.22.040(3). However, ―a contractual relationship under the U.C.C., with its implied
25 warranties, provides sufficient basis for an implied indemnity claim when the buyer incurs
26 liability to a third party as a result of a defect in the goods which would constitute a breach of the
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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1 seller‘s implied or express warranties.‖ Barbee, 946 P.2d at 764.
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King Hong argues that implied indemnification is not available to Office Master (Valley

3 Forge) because ―Office Master statutorily assumed the liability of King Hong under RCW
4 7.72.040(2)(e) when it chose to re-brand the chair as its own product. Therefore, the liability it
5 discharged by settling with Plaintiff Abrams was Office Master‘s own liability, not the liability
6 of King Hong.‖ (Dkt. No. 22 at 4). Thus, King Hong argues, Office Master‘s liability to Abrams
7 was not ―a liability which [King Hong] should rightfully have assumed.‖ Barbee, 946 P.2d at
8 762. That Office Master discharged its manufacturer liability under the WLPA does not mean
9 that a court, in equity, could not find that King Hong should reimburse Office Master for the
10 money it paid Abrams. See id. at 762 n.2 (―Conceptually, implied indemnification finds its roots
11 in the principles of equity. It is nothing short of simple fairness to recognize that a person who, in
12 whole or in part, has discharged a duty which is owed by him but which as between himself and
13 another should have been discharged by the other, is entitled to indemnity. To prevent unjust
14 enrichment, courts have assumed the duty of placing the obligation where in equity it belongs.‖)
15 (quoting McDermott v. City of New York, 406 N.E.2d 460, 462 (N.Y. 1980)) (quotation marks,
16 citation, and indications of alteration omitted; emphasis added). Summary judgment for King
17 Hong on Valley Forge‘s indemnification claim is thus DENIED. (This claim may turn out to be
18 duplicative of the breach-of-warranties claim, see, e.g., Barbee, 946 P.2d at 764–65 (plaintiff
19 pursued implied indemnification claim because breach-of-UCC-warranties claim was barred by
20 statute of limitations), but that is not a reason to dismiss it.)
Finally, King Hong argues that Valley Forge ―has no right to contribution from King

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22 Hong‖ and so ―Valley Forge‘s contribution claim should be dismissed.‖ (Dkt. No. 22 at 5.)
23 Valley Forge‘s complaint does not state a claim for contribution. King Hong‘s argument is moot.
24 III.

CONCLUSION

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For the foregoing reasons, King Hong‘s motion for summary judgment (Dkt. No. 18) is

26 GRANTED IN PART and DENIED IN PART.
ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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DATED this 20th day of November 2012.

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John C. Coughenour
UNITED STATES DISTRICT JUDGE

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ORDER GRANTING IN PART AND DENYING IN
PART DEFENDANT‘S MOTION FOR SUMMARY
JUDGMENT
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