SW Legal studies in Business

Importer and Retailer of Defective Product Have Right to Recover from Manufacturer
Description

Texas high court held that both the importer and the retailer of a defective product, who settled a product liability suit based on a defect, had the right to recover from the manufacturer. While parties in the distribution chain may be found liable at trial, they have a statutory right to recover against the manufacturer responsible for the defect.

Topic Torts
Key Words

Product Liability; Defect; Distribution

C A S E   S U M M A R Y
Facts

A five-year old boy was playing with a WAX-brand disposable lighter. He started a fire and was killed. His parents contended that the child-resistant mechanism on the lighter was defective. The lighter was designed, manufactured, and marketed by Gladstrong. Gladstrong sold the lighter to Metro Novelties, which sold it to SSP, which sold it to the boy’s parents. For purposes of litigation, Metro and SSP are treated as the same party (SSP). Gladstrong and SSP both settled the case before trial and both paid the parents $1.6 million. SSP then sued Gladstrong to recover payment to the parents. After complicated proceedings, the matter was appealed to the Texas high court.

Decision

The company that imported the defective lighter was not a manufacturer for purposes of the requirement that manufacturers indemnify innocent sellers against losses arising out of a product liability action. Neither SSP nor Metro had anything to do with making the lighter. While the seller of a defective product may be liable for harm, the manufacturer is required by Texas law to indemnify an innocent seller against losses arising out of such litigation. The claim by Gladstrong that there is a “single business enterprise” from manufacture to sale is incorrect. There was no joint venture or other agreement where the parties down the distribution chain had an equal right of control over manufacturing. Corporations are not liable for each other’s obligations merely because they did business with each other.

Citation

SSP Partners v. Gladstrong Investments (USA) Corp., ---S.W.3d--- (2008 WL 4891733, Sup. Ct., Tex., 2008)

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