Bridgestone Firestone North America Tire v. A.P.S. Rent a Car & Leasing ( 2004 )

IN THE COURT OF APPEALS
STATE OF ARIZONA
DIVISION TWO
BRIDGESTONE/FIRESTONE NORTH ) 2 CA-CV 2003-0115
AMERICA TIRE, L.L.C., a Delaware ) DEPARTMENT B
Limited Liability Company, )
) OPINION
Plaintiff/Appellant, )
)
v. )
)
A.P.S. RENT-A-CAR & LEASING, )
INC., an Arizona corporation, )
)
Defendant/Appellee. )
)
APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY
Cause No. C20015988
Honorable Lina S. Rodriguez, Judge
AFFIRMED
Fennemore Craig
By Timothy Berg, Christopher L. Callahan,
Darcy R. Renfro, and William L. Thorpe Phoenix
Attorneys for Plaintiff/Appellant
Jones, Skelton & Hochuli, P.L.C.
By Donald L. Myles, Jr., Les S. Tuskai, and
Randall H. Warner
Phoenix
Attorneys for Defendant/Appellee
P E L A N D E R, Presiding Judge.
¶1 This declaratory relief action (DRA), which arises from an underlying product
liability action (the Naranjo case), involves the seller’s claim for indemnity against the
manufacturer. The manufacturer, appellant Bridgestone/Firestone North America Tire,
L.L.C., appeals from the trial court’s grant of summary judgment in favor of the seller,
appellee A.P.S. Rent-A-Car & Leasing, Inc.1 Based on both statutory and common law
grounds, the trial court ordered Bridgestone to indemnify A.P.S. for thirty percent of the
judgment entered against A.P.S. in the Naranjo case. Bridgestone challenges that ruling on
various legal grounds and argues numerous issues of material fact preclude summary
judgment.
¶2 This appeal requires us to analyze and apply A.R.S. § 12-684(A). The primary
issue is whether that statute is a stand-alone, independent basis for indemnity, as A.P.S.
contends and the trial court ruled, or whether the statute must be construed consistently with
various common law principles, as Bridgestone argues. Because we find no genuine issues
of material fact and agree with A.P.S.’s legal position, we conclude Bridgestone was
1
Although A.P.S. actually leased rather than sold the product, lessors and sellers are
treated the same for product liability purposes. See A.R.S. § 12-681(7) (“‘Seller’” includes
a “lessor, engaged in the business of leasing any product . . . for . . . use[] or consumption.”);
Torres v. Goodyear Tire & Rubber Co., 163 Ariz. 88, 92, 786 P.2d 939, 943 (1990) (lessors
of products and dealers in used goods may be subject to strict liability); Restatement (Third)
of Torts, Products Liability §§ 8, 20(b) (1998).
2
obligated to indemnify A.P.S. under § 12-684(A). We therefore affirm the trial court’s
judgment on that basis.
BACKGROUND
¶3 We view the facts and reasonable inferences therefrom in the light most
favorable to the party against whom summary judgment was entered, here Bridgestone. Link
v. Pima County, 193 Ariz. 336, ¶ 12, 972 P.2d 669, 673 (App. 1998). On February 18, 2001,
A.P.S. rented a van to the Naranjo family. A few days later, one family member was killed
and several others injured when the van’s right rear tire suddenly failed, causing the vehicle
to roll and crash. The failed tire was manufactured in Mexico in 1998.
¶4 In March 2001, the Naranjos sued only A.P.S., alleging negligence and strict
liability in tort. In May, A.P.S. tendered its defense to Bridgestone, the tire’s alleged
manufacturer, by sending a letter and a copy of the complaint to Bridgestone headquarters
in Tennessee. Bridgestone received the tender of defense but did not formally respond.
A.P.S. therefore defended itself in the Naranjo case, named Bridgestone as a non-party at
fault,2 and unsuccessfully attempted to bring Bridgestone into the case as a third-party
defendant. Bridgestone, however, took certain steps to monitor the Naranjo case.
2
Although the record contains A.P.S.’s notice naming Bridgestone as a non-party at
fault, the verdict form submitted to the jury in the Naranjo case did not include Bridgestone.
Nonetheless, the parties in that case essentially treated Bridgestone as a non-party at fault
throughout the trial. See Bridgestone/Firestone North America Tire, L.L.C. v. Naranjo, 206
Ariz. 447, ¶ 16, 79 P.3d 1206, 1210 (App. 2003).
3
¶5 During trial in that case, A.P.S. essentially admitted the tire in question was
defective and never disputed that the tire was unreasonably dangerous when A.P.S. rented
the van to the Naranjos. In fact, A.P.S. presented expert testimony and argued that the tire
was defective due to a design or manufacturing defect. Based on A.P.S.’s evidence and
concessions, the trial court directed a verdict in favor of the Naranjos on their strict liability
claim and instructed the jury that A.P.S. “was at fault for product liability for leasing a
vehicle to the [Naranjos] with defective and unreasonably dangerous tires.”
¶6 After a seven-day trial, the jury awarded $9,539,838 in compensatory damages
to the Naranjos. In response to a special interrogatory, the jury stated that seventy percent
of its verdict was based on the Naranjos’ negligence claim and thirty percent on their product
liability claim.3 A.P.S. paid the entire amount of the ensuing judgment, and the Naranjos
filed a satisfaction of judgment with the trial court.
¶7 While the Naranjo case was pending, Bridgestone filed this DRA, seeking a
ruling that it would neither be bound by any judgment in the Naranjo case nor obligated to
indemnify A.P.S. for any damages awarded to the Naranjos. Bridgestone alleged that its
Mexican subsidiary, Bridgestone/Firestone de Mexico (BFMX), had actually manufactured
the failed tire and, therefore, A.P.S.’s tender of defense to Bridgestone was not proper.
3
The Naranjos’ negligence claim, and presumably the seventy percent portion of the
verdict the jury allocated to that claim, rested on allegations that A.P.S. had failed to inspect
the subject tire, warn the Naranjos of a prior incident involving another virtually identical tire
on the same vehicle, or replace the other tires after that prior incident. See n.7, infra.
4
Bridgestone further claimed that A.P.S.’s own negligence and a conflict of interest between
itself and A.P.S. would defeat any claim for indemnity. A.P.S. responded with a
counterclaim for indemnity and contribution against Bridgestone.4
¶8 Following the verdict in the Naranjo case, A.P.S. moved for summary
judgment in this DRA, arguing that Bridgestone had been properly “vouched in” to the
Naranjo litigation and that, pursuant to § 12-684, Bridgestone was required to indemnify
A.P.S. for the product liability portion (thirty percent) of the verdict. In its response and
cross-motion for partial summary judgment, Bridgestone argued it was not the manufacturer
on whom A.P.S.’s tender of defense should have been served. In addition, Bridgestone
contended A.P.S. had not diligently defended the product liability claim in the Naranjo case,
but rather, had “actively blamed” Bridgestone at trial for the defective tire. Consequently,
Bridgestone denied any obligation to indemnify A.P.S. for the resulting verdict. Bridgestone
also argued it should not be bound to any part of the judgment rendered in the Naranjo case
because a conflict of interest had prevented it from assuming A.P.S.’s defense. Bridgestone
acknowledged it ultimately might have to indemnify A.P.S. for some portion of that
4
The Naranjos, whom Bridgestone also named as defendants in this DRA,
counterclaimed against Bridgestone for negligence and strict liability in tort based on the
defective tire. We previously affirmed the trial court’s summary judgment in favor of
Bridgestone on the Naranjos’ counterclaim. Bridgestone/Firestone North America Tire,
L.L.C. v. Naranjo, 206 Ariz. 447, 79 P.3d 1206 (App. 2003).
5
judgment but claimed that a trial was necessary to determine the parties’ relative degrees of
fault and liability.5
¶9 After further briefing and argument, and after taking judicial notice of the
entire record in the Naranjo case (over which it also had presided), the trial court granted
summary judgment in favor of A.P.S. and denied Bridgestone’s cross-motion. The court
ruled that Bridgestone was the manufacturer of the tire and had received and refused a proper
tender of defense from A.P.S. Concluding that Bridgestone had not established either of the
two statutory exceptions in § 12-684(A) and that its various common law defenses were
inapplicable, the court ordered Bridgestone to indemnify A.P.S. for $2,861,951.40, thirty
percent of the damages awarded to the Naranjos. The trial court also grounded its ruling on
“common law vouching in and indemnification” and on A.P.S.’s contribution claim “for 30
percent of the Naranjo Judgment.”
¶10 Bridgestone filed a motion for reconsideration, reurging the arguments made
in its cross-motion for partial summary judgment. Bridgestone also argued the trial court had
improperly taken judicial notice of substantive evidence presented in the Naranjo case and
had decided issues beyond the scope of the parties’ motions, specifically in ruling that the
failed tire had a design or manufacturing defect. Attached to Bridgestone’s motion for
5
Both below and on appeal, Bridgestone agreed that the judgment in the Naranjo case
“would define the amount at stake” on any indemnity or contribution claim by A.P.S. And,
A.P.S. implicitly agrees that its indemnity claim is limited to that portion of the Naranjo
judgment that was allocated to their product liability claim, that is, thirty percent (or
$2,861,951.40) of the total judgment.
6
reconsideration was an affidavit from a tire expert, who stated that the failed tire had no such
defect, but rather, had failed due to punctures and improper repairs that were not attributable
to the design or manufacturing process. After ordering a response from A.P.S., the trial court
denied Bridgestone’s motion without comment. This appeal followed the court’s entry of
judgment in favor of A.P.S. pursuant to Rules 54(b) and 56, Ariz. R. Civ. P., 16 A.R.S., Pt. 2.
DISCUSSION
I.
¶11 The trial court’s summary judgment ruling was primarily based on § 12-684.
Enacted in 1978, that statute provides in pertinent part:
A. In any product liability action where the manufacturer
refuses to accept a tender of defense from the seller, the
manufacturer shall indemnify the seller for any judgment
rendered against the seller and shall also reimburse the seller for
reasonable attorneys’ fees and costs incurred by the seller in
defending such action, unless either paragraph 1 or 2 applies:
1. The seller had knowledge of the defect in the product.
2. The seller altered, modified or installed the product,
and such alteration, modification or installation was a substantial
cause of the incident giving rise to the action, was not
authorized or requested by the manufacturer and was not
performed in compliance with the directions or specifications of
the manufacturer.
¶12 “Section [12-]684 is intended, in most circumstances, to place the burden and
costs of defending products on their manufacturers.” Desert Golf Cars v. Yamaha Motor
Co., 198 Ariz. 103, ¶ 11, 7 P.3d 112, 115 (App. 2000). Thus, a blameless manufacturer
7
might be liable for a seller’s defense costs, even when no liability is found or judgment
rendered against the seller. McIntyre Refrigeration, Inc. v. Mepco Electra, 165 Ariz. 560,
564, 799 P.2d 901, 905 (App. 1990). And, sellers of both new and used products may utilize
§ 12-684 to seek indemnity from manufacturers. Jordan v. Sunnyslope Appliance Propane
& Plumbing Supplies Co., 135 Ariz. 309, 315, 660 P.2d 1236, 1242 (App. 1983). But, “when
a seller modifies the product and that modification substantially causes the incident in
question, then it is the seller who steps into the shoes of the manufacturer as being the one
best situated to detect, control or prevent the putative defect.” Desert Golf Cars, 198 Ariz.
103, ¶ 11, 7 P.3d at 115.
¶13 The trial court concluded that § 12-684 “is a legislatively mandated procedure
for vouching in/indemnification which differs from the common law vouching in and
provides fewer defenses in order to carry out the legislature’s intent to place the burden and
costs of defending products on the manufacturer rather than Arizona retailers.” As noted
above, the court ruled that A.P.S. had properly served a valid tender of defense on the
manufacturer, Bridgestone, which had refused to accept the tender. The trial court also ruled
as a matter of law that the exception in § 12-684(A)(1) required the seller’s actual, not merely
constructive, knowledge of the product’s defect. The court found “no material issues of fact
or law that A.P.S. misused or altered the tire or had knowledge of the design or
manufacturing defect in the product.” Accordingly, the trial court concluded that
8
Bridgestone was obligated to fully indemnify A.P.S. for the thirty percent portion of the
verdict in the Naranjo case that the jury had allocated to the Naranjos’ product liability claim.
II.
¶14 We review de novo the trial court’s grant of summary judgment and questions
of statutory interpretation. Bridgestone/Firestone North America Tire, L.L.C. v. Naranjo,
206 Ariz. 447, ¶ 6, 79 P.3d 1206, 1208 (App. 2003). A motion for summary judgment should
be granted if “there is no genuine issue as to any material fact and . . . the moving party is
entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(c)(1); see also Orme Sch. v.
Reeves, 166 Ariz. 301, 802 P.2d 1000 (1990).
¶15 In interpreting statutes, “[o]ur primary goal is to discern and give effect to
legislative intent.” State v. Kearney, 206 Ariz. 547, ¶ 5, 81 P.3d 338, 340 (App. 2003). “To
that end, we construe the statute’s language, and if it is unclear, then consider its historical
background, subject matter, context, effects, consequences, spirit, and purpose.” Id. Of
course, “a statute’s language is the most reliable index of its meaning.” State v. Sepahi , 206
Ariz. 321, ¶ 16, 78 P.3d 732, 735 (2003). We also are mindful of the “‘universal rule that
courts will not enlarge, stretch, or expand a statute to matters not falling within its express
provisions.’” Id. ¶ 15, quoting State ex rel. Morrison v. Anway, 87 Ariz. 206, 209, 349 P.2d
774, 776 (1960).
¶16 Nonetheless, “‘[t]o discern the legislature’s intent, we may consider the effect
and consequences of alternative construction.’” Way v. State, 205 Ariz. 149, ¶ 10, 67 P.3d
9
1232, 1236 (App. 2003), quoting Forino v. Arizona Dep’t of Transp., 191 Ariz. 77, 80, 952
P.2d 315, 318 (App. 1997). In addition, we attempt to read statutes in a “common-sense and
contextualized” manner. Arizona Libertarian Party v. Schmerl, 200 Ariz. 486, ¶ 11, 28 P.3d
948, 952 (App. 2001); see also United States v. Superior Court, 144 Ariz. 265, 278, 697 P.2d
658, 671 (1985) (“We must interpret the statute with common sense and, if possible, in a
manner consistent with constitutional principle.”).
III.
¶17 Bridgestone contends on several grounds that A.P.S.’s tender of defense was
improper, thereby defeating any claim for indemnity. As it did below, Bridgestone first
argues that because its subsidiary BFMX actually manufactured the tire, A.P.S. directed its
tender of defense to the wrong entity. Relying on Torres v. Goodyear Tire & Rubber Co.,
163 Ariz. 88, 786 P.2d 939 (1990), the trial court rejected that argument, finding that
Bridgestone was responsible for its subsidiary’s product. The trial court therefore deemed
Bridgestone the tire’s manufacturer for purposes of § 12-684 and ruled that A.P.S. had
provided a “timely and sufficient” tender of defense to the appropriate entity.
¶18 In Torres, Goodyear, a tire manufacturer, essentially disclaimed responsibility
for a defective tire produced by its wholly owned British subsidiary and trademark licensee,
Goodyear GB. Noting that Arizona’s product liability statutes included a broad definition
of “manufacturer,” see A.R.S. § 12-681(1), our supreme court determined that
under Arizona law a trademark licensor may be held liable
where a licensee marketed the defective, unreasonably
10
dangerous product as the licensor’s, where the licensor’s
relationship with the technical manufacturer or seller made it a
significant participant in the enterprise by which the product is
brought to market, and where the licensor controlled or had the
ability to control the design, manufacture, or quality of the
merchandise.
163 Ariz. at 96-97, 786 P.2d at 947-48.
¶19 Here, Bridgestone itself provided the evidence of its corporate relationship with
BFMX. In support of its cross-motion for partial summary judgment, Bridgestone submitted
the affidavit of Brian Queiser, a senior product engineer familiar with the corporate structure
of Bridgestone and its subsidiaries. He stated that BFMX had manufactured the tire in
Mexico in 1998. He further stated that until December 2001, BFMX had been a subsidiary
of Bridgestone/Firestone, Inc. (BFS) and that BFS later had merged into Bridgestone.
Bridgestone had later transferred its ownership interest in BFMX to Bridgestone/Firestone
Americas Holding, Inc., Bridgestone’s parent company. Therefore, when the tire in question
was manufactured, Bridgestone’s predecessor in interest owned BFMX.
¶20 Queiser, however, further declared that BFMX was an “independent entity,”
“solely responsible for the manufacture of tires fabricated” at its Mexican facility. He stated
that BFMX produced and distributed the type of tire at issue in Mexico and had its own
marketing organization. Moreover, neither Bridgestone nor BFS had ever imported the tires
to the United States or sold them as original equipment on vehicles sold in the United States.
Finally, Queiser stated that, although it “would not be unusual” for BFMX to use
manufacturing specifications provided by Bridgestone, BFMX would “necessarily” have had
11
to adapt such specifications to “the equipment and processes in place at its manufacturing
facility.”
¶21 In rejecting Bridgestone’s argument and finding this case “substantially
similar” to Torres, the trial court stated:
[Bridgestone] does not dispute that at the time of the Naranjo
accident and tender of defense, [Bridgestone] was a trademark
licensor to BFMX, that BFMX was a wholly owned subsidiary
of [Bridgestone], that BFMX manufactured the tire in
compliance with [Bridgestone]’s standards and specifications,
and that the tire bore the Bridgestone/Firestone trademark.6
The trial court further noted Bridgestone’s response to an earlier consumer warranty claim,
submitted by A.P.S. and involving the same model of tire from the same vehicle.7
Bridgestone had accepted the failed tire for inspection and, although it denied warranty
coverage, had not rejected the claim because BFMX rather than it had manufactured the tire.
¶22 Queiser’s affidavit does not clearly establish that Bridgestone was a trademark
licensor to BFMX or that Bridgestone directly controlled the distribution of BFMX tires. But
6
The hearing on the parties’ cross-motions for summary judgment was not reported.
But when specifically asked at oral argument in this court about the facts set forth in ¶21
above, Bridgestone only questioned the finding that BFMX had manufactured the tire in
compliance with Bridgestone’s standards and specifications, correctly noting that the record
did not clearly establish that. In any event, in the absence of a transcript of the hearing
below, we presume the record supports the trial court’s recitation of undisputed facts. See
In re Estate of Mustonen, 130 Ariz. 283, 284, 635 P.2d 876, 877 (App. 1981).
7
Several months before the Naranjo accident, the right front tire on the same rental van
suddenly failed. A.P.S. took that tire to a local Bridgestone service center and, at its
direction, later sent it to Bridgestone headquarters in Tennessee for inspection. Bridgestone
denied warranty coverage, claiming that the tire had failed because an old puncture had
damaged the tread and allowed moisture to enter the tire.
12
the affidavit does establish that, during the relevant time frame, BFMX was a subsidiary of
Bridgestone or its predecessor in interest. See Torres, 163 Ariz. at 94, 786 P.2d at 945 (“The
parent company owns the subsidiaries, designates their directors and officers, allocates the
capital needed and used by the subsidiaries, and enjoys the profits made by them. Certainly
the brain that so competently and thoroughly directs the entire enterprise must be liable for
the acts of its appendages.”). Furthermore, although Queiser did not investigate whether the
tire in question had been made according to Bridgestone specifications, he stated that
Bridgestone regularly provided such specifications to BFMX and that it “would not be
unusual” for the tire to have been made using Bridgestone specifications. See id. at 95-96,
786 P.2d at 946-47 (Trademark licensors “who significantly participate in the overall process
by which the product reaches its consumers, and who have the right to control the incidents
of manufacture or distribution” may be subject to liability.).
¶23 Bridgestone argues the evidence provided by Queiser falls short of the
evidence presented in Torres and notes A.P.S. did not demonstrate that a licensor/licensee
relationship existed between Bridgestone and BFMX or that the tire in question actually was
manufactured according to Bridgestone’s standards and specifications. But this overlooks
the essentially undisputed facts noted in ¶ 21, supra. And, as the court in Torres stated, the
“realities of the marketplace” must be recognized in addition to technical corporate form and
organization:
[W]e do not believe it is good law to allow multinational firms
the freedom to compartmentalize strict liability . . . .
13
....
The marketplace, as described by the facts of this case, indicates
very clearly that we deal with a tire designed to be a Goodyear
tire, produced, packaged, advertised, and sold as a Goodyear
tire, and warranted by Goodyear. To hold, as we are asked, that
when the product is defective and unreasonably dangerous it
should not be considered a “Goodyear” tire but a “Goodyear
GB” tire would be to espouse a doctrine that would no doubt
surprise most Goodyear customers, and perhaps some officers
of Goodyear itself.
Id. at 92-93, 786 P.2d at 943-44. Here, the “realities of the marketplace,” the evidence
produced by Bridgestone, and other pertinent facts which it apparently did not dispute show
that the tire in question was a “Bridgestone” tire, rather than a “BFMX” tire.
¶24 We agree with Bridgestone that the evidence produced in this case is less
comprehensive than that produced in Torres, that the ruling in that case was based on its
particular facts, and that our supreme court’s answer to the certified question there was
“sometimes yes and sometimes no, depending on the facts.” Id. at 90, 786 P.2d at 941.
Nonetheless, the record does not support Bridgestone’s broad assertion that it “was not
involved in any way with the marketing, distribution or sale of the tire.” In strictly
organizational terms, Bridgestone might be correct; but in “realit[y],” the tire was marketed,
distributed and sold as a “Bridgestone.” Accordingly, Torres supports the trial court’s
determination that Bridgestone could be liable for its subsidiary’s allegedly defective product
and was not an improper recipient of A.P.S.’s tender of defense.
14
IV.
¶25 Bridgestone also contends the tender of defense was improper because a
fundamental, inherent conflict of interest existed between itself and A.P.S. That conflict,
Bridgestone further argues, “invalidated” the tender, prevented it from assuming A.P.S.’s
defense in the Naranjo case, and “negates any indemnity obligation under [§] 12-684.”
¶26 Both sides agree that § 12-684 contemplates and implicitly requires a “proper”
tender of defense, even though the statute does not expressly so provide. The parties further
agree that A.P.S.’s tender of defense was sufficient in form and content.8 According to
A.P.S., that fact alone renders its tender “proper” for purposes of statutory indemnity under
§ 12-684.
¶27 In contrast, Bridgestone contends an otherwise sufficient tender should be
deemed “improper” or “fatally deficient” if the indemnitor’s acceptance of the tender would
place the indemnitor and indemnitee in a conflict situation. In other words, Bridgestone
argues, when an inherent conflict of interest exists between an indemnitee and indemnitor,
8
The letter in which A.P.S. tendered its defense was sufficient because it detailed the
substance of the Naranjos’ allegations, enclosed a copy of their complaint (which alleged the
tire was defective), and quoted A.R.S. § 12-684(A) in its entirety. See, e.g., Cunningham v.
Goettl Air Conditioning, Inc., 194 Ariz. 236, ¶ 20, 980 P.2d 489, 493-94 (1999) (tender was
valid when indemnitor had notice of action and copy of complaint and was informed of
litigation’s progress); Dearborn Ins. Co. v. Int’l Surplus Lines Ins. Co., 719 N.E.2d 1092,
1097 (Ill. App. Ct. 1999) (letter enclosing copy of complaint constituted sufficient tender);
see also Foremost-McKesson v. Allied Chemical Co., 140 Ariz. 108, 111, 680 P.2d 818, 821
(App. 1983); Litton Sys., Inc. v. Shaw’s Sales & Serv., Ltd., 119 Ariz. 10, 14, 579 P.2d 48,
52 (App. 1978); Restatement (Second) of Judgments § 57, cmt. e (1982).
15
the latter may reasonably refuse to accept the tender without being exposed to a potential
statutory indemnity obligation based on that refusal. Relying primarily on Restatement
(Second) of Judgments § 57 (1982) (hereafter Restatement § 57) and other common law
principles, Bridgestone contends an inherent conflict of interest existed between itself and
A.P.S.
¶28 In pertinent part, Restatement § 57 states:
(2) If there is a conflict of interest between the indemnitee
and the indemnitor regarding the injured person’s claim against
the indemnitee, so that the indemnitor could not properly have
assumed the defense of the indemnitee, a judgment for the
injured person precludes the indemnitor only with respect to
issues determined in that action as to which:
(a) there was no conflict of interest between the
indemnitee and the indemnitor; and
(b) the indemnitee conducted a defense with due
diligence and reasonable prudence.
(3) A “conflict of interest” for purposes of this Section exists
when the injured person’s claim against the indemnitee is such
that it could be sustained on different grounds, one of which is
within the scope of the indemnitor’s obligation to indemnify and
another of which is not.
See also Cunningham v. Goettl Air Conditioning, Inc., 194 Ariz. 236, ¶ 14, 980 P.2d 489,
492 (1999) (looking to Restatement § 57 “[i]n the absence of statutory and case authority that
directly speaks to [the] issue”).
¶29 Similarly, this court has observed, albeit in a case that involved neither a
product liability claim nor § 12-684,
16
even if indemnification principles were applied there was no
duty to defend in this case because of the conflict of interest
between [the indemnitee] and [the indemnitor]. . . . In these
circumstances, a properly notified indemnitor need not defend
and is free to contest the basis of its liability in a subsequent
action.
Industrial Indem. Co. v. Beeson, 153 Ariz. 317, 319, 736 P.2d 800, 802 (App. 1986), citing
Restatement § 57. Thus, under common law, a conflict of interest between an indemnitor
and indemnitee might justify a properly notified indemnitor’s refusal to assume the
indemnitee’s defense in the underlying action. As the Restatement explains:
In such circumstances, it is to the interest of the
indemnitee that, if liability be established against him, it be
established on a ground within the indemnity obligation so that
he can shift the loss to the indemnitor. It is to the interest of the
indemnitor that, if liability be established against the indemnitee,
it be on a ground outside the indemnity obligation. Neither of
them could defend the action in a way that would fairly protect
the interests of the other in all respects. Because of the conflict,
the indemnitor cannot properly be called on to take control of
the defense of the action, for he would be required either to
sacrifice his own interests without a fair opportunity to litigate
questions concerning his liability or to commit a breach of his
duty to conduct a vigorous defense of the indemnitee. . . .
....
When, because of conflict of interest between the
indemnitee and indemnitor, the indemnitor cannot properly take
over the defense of the indemnitee, the situation is one of a
justified refusal by the indemnitor to defend the action.
Restatement § 57, cmt. c.
17
¶30 The trial court ruled that no conflict of interest actually existed between
Bridgestone and A.P.S. We disagree.9 We first note that the plaintiffs in the Naranjo case
were not concerned about how or when the defect in the tire arose—at the time of
manufacture or sometime later in the chain of distribution. They had no obligation to present
such evidence. See Mineer v. Atlas Tire Co., 167 Ariz. 315, 317, 806 P.2d 904, 906 (App.
1990), quoting Prutch v. Ford Motor Co., 618 P.2d 657, 660 (Colo. 1980) (“‘[T]he plaintiffs’
burden is limited to showing a defect existed at the time the [product] in question first came
into the plaintiffs’ possession.’”). Indeed, the Naranjos argued in that case that the tire was
“defective and unsafe at the time of rental,” and, therefore, that it “d[id] not matter whether
the defective condition existed when [Bridgestone] sold the tire initially, or whether the
defective condition [wa]s the result of maintenance, repair, care and use of the tire.” Thus,
the Naranjos consistently maintained they had no burden to show the cause or timing of the
tire defect, only that it existed at the time of the rental.
¶31 In contrast, to secure its indemnity claim against Bridgestone, A.P.S. wanted
to show that the tire was defective when it left Bridgestone’s control. See Dixon v. Fiat-
Roosevelt Motors, Inc., 509 P.2d 86, 90-91 (Wash. Ct. App. 1973) (retailer’s and
9
At oral argument, A.P.S. acknowledged that its interests and Bridgestone’s probably
did conflict. But A.P.S. argued that conflicts of interest between the manufacturer and
ultimate seller typically would arise in cases such as this involving used products, and that
any such conflicts are irrelevant under § 12-684. The trial court agreed with the latter
proposition but also erroneously found no conflict of interest existed between Bridgestone
and A.P.S.
18
manufacturer’s positions were in conflict because retailer sought “to show the alleged defect
occurred at the time of manufacture,” whereas manufacturer sought “to show the defect
occurred subsequent to the time the wheel left” its control); see also Restatement § 57,
cmt. c. Toward that end, A.P.S. attempted in the Naranjo case to attribute all of the fault to
Bridgestone, presenting an expert who testified that the tire had failed because of a
manufacturing or design defect. And A.P.S. repeatedly argued that theory to the jury.
¶32 Although Bridgestone was not a party to the Naranjo case, its interest obviously
would have been to minimize its liability by proving that the tire had neither a manufacturing
nor design defect when Bridgestone placed it into the stream of commerce. See Jimenez v.
Sears, Roebuck & Co., 183 Ariz. 399, 402, 904 P.2d 861, 864 (1995) (prima facie case of
strict product liability against manufacturer includes proof that product defective and
unreasonably dangerous when it left manufacturer’s control); Dietz v. Waller, 141 Ariz. 107,
110, 685 P.2d 744, 747 (1984) (same); Piper v. Bear Med. Sys., Inc., 180 Ariz. 170, 173, 883
P.2d 407, 410 (App. 1993) (same); Restatement § 57, cmt. c. According to Bridgestone, had
it been a party to the Naranjo case, “it would have presented expert testimony that the only
defects were puncture holes and improper repairs.” And, as Bridgestone observes, the
Naranjos’ negligence claim against A.P.S. fell outside any indemnity obligation and,
therefore, “would have created an insurmountable conflict.” See Restatement § 57(3), cmt.
c and Illustration 4.
19
¶33 In short, the divergent positions of Bridgestone and A.P.S. created an
irreconcilable conflict of interest between them. See Dixon, 509 P.2d at 90-91. The
question, then, is what effect that conflict has on A.P.S.’s statutory indemnity claim. For
several reasons, we agree with A.P.S. that the conflict does not render its tender of defense
“improper” or otherwise negate A.P.S.’s right to indemnity under § 12-684(A).
¶34 First, the legislature has clearly mandated that a manufacturer that rejects a
proper tender of defense from a seller “shall indemnify the seller for any judgment rendered
against the seller,” subject only to the two, expressly stated statutory exceptions. § 12-
684(A) (emphasis added). As Bridgestone acknowledges, under § 12-684, “a manufacturer
who refuses to accept a proper tender of defense is required to indemnify the seller for a
verdict based upon strict liability absent either the seller’s knowledge of the defect or product
modification.” The statute does not include a “conflict of interest” exception or defense. If
the legislature had wanted to include such an exception, it could and presumably would have
done so. See State v. Fell, 203 Ariz. 186, ¶¶ 9, 13, 52 P.3d 218, 220-22 (App. 2002).
¶35 Second, Bridgestone cites no authority, nor have we found any, for the
proposition that a conflict of interest between indemnitor and indemnitee invalidates the
latter’s tender of defense or otherwise renders it “improper.” Restatement § 57(2) states that
a conflict of interest might prevent the indemnitor from “properly . . . assum[ing] the defense
of the indemnitee.” But that section does not suggest that the tender of defense itself is
improper.
20
¶36 Third, as A.P.S. remarked at oral argument, if Bridgestone’s position were the
law, it would essentially “gut” the statute in cases such as this involving used products.
Despite the inherent conflict between the parties, we do not view this case as particularly
unusual or anomalous. Product liability cases involving used products that deteriorate with
age and usage might easily pit the ultimate seller against the manufacturer. That is
particularly so when, as here, the product admittedly was defective at the time it was last sold
or leased before the accident. Under such circumstances, both the manufacturer and ultimate
seller would have an interest in and incentive to “point the finger” at each other. The
manufacturer would seek to disprove any design or manufacturing defect in the product when
it left its hands, and the ultimate seller would seek to establish such defect and disprove or
minimize any independent negligence on its part.
¶37 Fourth, from a practical standpoint, the conflict of interest did not require
Bridgestone to reject A.P.S.’s tender of defense. Had Bridgestone instead accepted the
tender, it presumably could and would have retained counsel of its choice to defend A.P.S.
in the Naranjo case.10 And, in that event, neither the handling of the defense nor the outcome
10
In that situation, of course, the manufacturer will bear the cost of defending the seller
in the underlying action and might be unable to recoup that cost should the manufacturer
ultimately prevail in a subsequent indemnity action. But that cost often will pale in
comparison to the amount of the manufacturer’s ultimate indemnity liability if the
manufacturer refuses to accept the tender and later cannot establish one of the two exceptions
under § 12-684(A). In addition, as Bridgestone acknowledges, a manufacturer might be
required to indemnify (or reimburse) the seller for defense costs incurred in the underlying
tort action even when no product defect was proven. See Desert Golf Cars v. Yamaha Motor
Co., 198 Ariz. 103, ¶ 15, 7 P.3d 112, 116 (App. 2000) (“[A] favorable defense verdict [in the
21
of that case necessarily would have been any different. Even if defended by counsel retained
by Bridgestone, A.P.S. still would have sought to decrease the percentage of fault allocated
to the Naranjos’ negligence claim and increase the percentage allocated to their product
liability claim.
¶38 In short, had Bridgestone accepted A.P.S.’s tender of defense in the Naranjo
case, A.P.S. presumably would have done precisely what it actually did—present a defense
that in essence blamed the accident on a manufacturing or design defect in the tire, rather
than on any independent negligence on A.P.S.’s part. That scenario, however, would have
precluded Bridgestone’s indemnity liability under § 12-684(A) because that statute premises
any indemnity obligation on the manufacturer’s “refus[al] to accept a tender of defense.”
Thus, had Bridgestone accepted the tender, A.P.S. would not have had any right to statutory
indemnity under § 12-684(A), regardless of the resulting verdict and judgment in the Naranjo
case and regardless of any factual determinations made in that case.
¶39 Although A.P.S. still might have pursued a common law claim for indemnity,
Bridgestone would have been entitled to raise any available common law defenses and fully
underlying tort action] does not preclude indemnity.”); McIntyre Refrigeration, Inc. v. Mepco
Electra, 165 Ariz. 560, 564, 799 P.2d 901, 905 (App. 1990) (“[A] manufacturer’s product
need not be proven to be defective to render the manufacturer liable for the seller’s defense
costs.”); Hellebrandt v. Kelley Co., 153 Ariz. 429, 737 P.2d 405 (App. 1987) (same).
Nonetheless, we recognize that the statute potentially places manufacturers in a quandary in
situations such as this, when the case involves a used product, the ultimate seller and
manufacturer have a clear conflict of interest, and the manufacturer is not a party to the
underlying tort action.
22
litigate that claim, for example, by presenting evidence that the tire had no design or
manufacturing defect when it left Bridgestone’s control.11 Thus, had Bridgestone accepted
A.P.S.’s tender and assumed its defense, it would have preserved its right to litigate the
nature and extent of any indemnity obligation owed to A.P.S., but arguably not issues as to
which there was no conflict of interest between them (for example, the Naranjos’ damages).
See Restatement § 57(2)(a), cmt. c and Illustration 5. In sum, the conflict between
Bridgestone and A.P.S. did not invalidate or negate the latter’s tender of defense.
11
The trial court implicitly ruled that the jury in the Naranjo case had found a “design
or manufacturing defect in the product.” But we agree with Bridgestone that no such
determination was made on either “the nature of the tire defect or the time at which it arose.”
Accordingly, in any common law indemnity action, Bridgestone would have been entitled
to litigate those issues, even had it assumed A.P.S.’s defense. See Restatement § 57(1)(b),
(2), cmt. a (indemnitor only precluded from relitigating issues “determined” in underlying
action against indemnitee whether or not parties had conflict of interest); see also SCAC
Transport (USA) Inc. v. SS Danaos, 845 F.2d 1157, 1162 (2d Cir. 1988) (preclusive effect
of underlying judgment on a properly “vouched-in” indemnitor does not extend to issues not
actually determined in the first proceeding); Collins v. Miller & Miller, Ltd., 189 Ariz. 387,
397, 943 P.2d 747, 757 (App. 1996); Dixon, 509 P.2d at 91 (“Neither the doctrine of
collateral estoppel nor the vouching-in doctrine can be applied to preclude litigation of issues
which were previously unlitigated.”). Moreover, even if issues relating to the nature, timing,
and source of the tire’s defect had been determined in the Naranjo case, Bridgestone (as a
nonparty to that case) would not have been bound by those determinations in a subsequent,
common law indemnity action because of the parties’ conflict of interest. See Restatement
§ 57(2), (3); see also A.R.S. § 12-2506(B); cf. Farmers Ins. Co. v. Vagnozzi, 138 Ariz. 443,
448, 675 P.2d 703, 708 (1983) (“[W]here there is a conflict of interest between an insured
and his insurer, the parties will not be estopped from litigating in a subsequent proceeding
those issues as to which there was a conflict of interest, whether or not the insurer defended
in the original tort claim.”). And, in such action, Bridgestone would have been entitled to
fully litigate not only the defect-related issues but also the percentage of fault attributable to
A.P.S.’s independent negligence rather than to the product’s defect. Restatement § 57,
cmt. c.
23
V.
¶40 Bridgestone also argues A.P.S.’s “utter and complete failure to defend the strict
liability claim” in the Naranjo case forecloses indemnity. In support of that proposition,
Bridgestone relies on Restatement § 57(2)(b), Cunningham, and Falcon v. Beverly Hills
Mortgage Corp., 168 Ariz. 527, 815 P.2d 896 (1991). Under Restatement § 57(2)(b), when
a conflict of interest exists between the indemnitee and prospective indemnitor, the latter has
no indemnity obligation if the indemnitee failed to “conduct[] a defense with due diligence
and reasonable prudence.” See Cunningham, 194 Ariz. 236, ¶¶ 19, 21, 980 P.2d at 493-94.
¶41 The record clearly supports Bridgestone’s contention that A.P.S. not only failed
to diligently defend against the product liability claim in the Naranjo case, but also
“affirmatively blamed [Bridgestone] for the defect in the tire and the underlying accident.”
A.P.S. does not suggest otherwise. Nonetheless, as the trial court correctly noted, § 12-684
does not condition indemnity rights on an indemnitee having diligently defended the product
or the manufacturer’s interests, particularly when the manufacturer rejects a tender of
defense. If Bridgestone “‘was of the view that it could defend the case better with its own
lawyers, it had full opportunity to do so but declined.’” Litton Sys., Inc. v. Shaw’s Sales &
Serv., Ltd., 119 Ariz. 10, 14, 579 P.2d 48, 52 (App. 1978), quoting Hessler v. Hillwood Mfg.
Co., 302 F.2d 61, 63 (6th Cir. 1962).
¶42 As A.P.S. points out, “[i]f a manufacturer declines a tender and leaves the
seller to fend for itself, it gambles on its ability to later prove one of the statutory exceptions”
24
under § 12-684(A). And, as A.P.S. also observes, after Bridgestone failed to accept its tender
of defense, A.P.S. “had to make a tactical decision on whether to defend the tire or admit it
was defective and defend the remaining allegations.” Thus, the manner or strategy of
A.P.S.’s defense in the Naranjo case does not relieve Bridgestone of its statutory indemnity
obligation.
VI.
¶43 Bridgestone also argues that saddling it with a statutory indemnity obligation
based on a strict construction of § 12-684(A) would contravene other well-established
common law principles and be “fundamentally unfair.” As noted in ¶ 32, supra, under
common law, a manufacturer may be held strictly liable in tort only if its product is defective
and unreasonably dangerous at the time the product left the manufacturer’s control. See
Jimenez; Piper; Jordan; see also A.R.S. § 12-683(2). A defect that existed when the product
left the manufacturer’s control would render both the manufacturer and seller strictly liable.
See Rocky Mountain Fire & Cas. Co. v. Biddulph Oldsmobile, 131 Ariz. 289, 293, 640 P.2d
851, 855 (1982). On the other hand, a defect not attributable to the design or manufacture
of the product and that arose after the product left the manufacturer’s control would render
25
only the seller strictly liable.12 See § 12-683(2); Dietz; Caruth v. Mariani, 11 Ariz. App. 188,
191, 463 P.2d 83, 86 (1970).
¶44 A manufacturer’s indemnity obligation, Bridgestone contends, should be no
greater than its primary duty to the person injured by the allegedly defective product. Thus,
Bridgestone further argues, a manufacturer should not be required to indemnify a seller for
a “defect that arose after the product left the manufacturer’s control.” To do so, it argues,
“render[s] a manufacturer derivatively liable for indemnity in situations where the
manufacturer would have no primary liability to the injured party” and “would transform
manufacturers into absolute insurers against defects causing injury.”
¶45 Based on the foregoing common law principles, Bridgestone contends it is
entitled to its “day in court on APS’s claim for indemnity” to litigate all relevant issues
bearing on that claim, including the nature, cause, and time of origination of the tire defect.
According to Bridgestone, the law should not require it to indemnify A.P.S. based on its
reasonable refusal to accept A.P.S.’s tender of defense, and without affording Bridgestone
an opportunity to litigate the indemnity-related issues.
¶46 Although we find Bridgestone’s arguments somewhat persuasive, we cannot
accept them. Section 12-684(A) does not condition a seller’s indemnity rights on any of the
12
A manufacturer can also be held strictly liable in tort for “informational defects
encompassing instructions and warnings,” but no such claim is at issue here. Gosewisch v.
Am. Honda Motor Co., 153 Ariz. 400, 403, 737 P.2d 376, 379 (1987); see also Golonka v.
Gen. Motors Corp., 204 Ariz. 575, 65 P.3d 956 (App. 2003).
26
common law factors Bridgestone cites. For example, as A.P.S. points out, “the statute does
not require proof that the product was defective or that the defect originated with the
manufacturer.” Contrary to Bridgestone’s argument, the statute does not condition a
manufacturer’s indemnity obligation on the seller’s “showing that the defect arose from the
manufacturing process itself.” In that same vein, Bridgestone contends “an otherwise
innocent seller is entitled to indemnity from the manufacturer, both at common law and under
[§] 12-684, if the seller can actually show that the defect existed when the product left the
manufacturer’s hands.” But even if common law supports that proposition, § 12-684(A) has
no such condition.
VII.
¶47 In sum, the various common law principles and defenses on which Bridgestone
relies are unavailing under § 12-684(A). Neither the conflict of interest between A.P.S. and
Bridgestone nor A.P.S.’s handling of its defense in the Naranjo case invalidated A.P.S.’s
tender of defense or negated Bridgestone’s statutory obligation to indemnify A.P.S. Because
of its refusal to accept the tender of defense, Bridgestone was obligated to “indemnify the
seller for any judgment rendered against the seller,” unless either of the two statutory
exceptions applied. § 12-684(A).
¶48 In support of a contrary conclusion, Bridgestone argues that we should
superimpose the various common law principles discussed above, including those embodied
in Restatement § 57, on § 12-684 and interpret and apply the statute consistently with those
27
principles. According to Bridgestone, “[t]he scope of a manufacturer’s indemnity obligation
under [§] 12-684 must be construed in light of common-law rules of indemnity.”
¶49 Bridgestone relies primarily on A.R.S. § 12-682 for that argument. That statute
provides: “The previously existing common law of products liability is modified only to the
extent specifically stated in this article and § 12-551.” See also Torres, 163 Ariz. at 96, 786
P.2d at 947 (noting that § 12-682 “expressly disclaim[s] any limitation of the existing
common law of product liability”). Bridgestone also cites our supreme court’s dicta in
Torres that the product liability statutes do not “attempt to oust [the supreme] court from the
evolution of product liability law.” Id.; see also McIntyre Refrigeration, 165 Ariz. at 565,
799 P.2d at 906 (“The common law formed the legal context in which the legislature acted
in enacting an indemnity statute addressed to product liability actions in particular.”); cf.
A.R.S. § 1-201 (adopting common law as “rule of decision” in all Arizona courts, but only
so far as it is “not repugnant to or inconsistent with . . . laws of this state”).
¶50 We are not persuaded by Bridgestone’s argument. Although § 12-684(A)
clearly does change some aspects of the common law relating to indemnity claims by sellers
against manufacturers, the legislature apparently intended such change. And, insofar as § 12-
684(A) alters the common law of products liability,13 § 12-682 expressly permits that “to the
13
A.P.S. argues § 12-682 is inapplicable here because § 12-684 does not purport to
change “[t]he previously existing common law of products liability.” § 12-682 (emphasis
added); see also A.R.S. § 12-681(3) (defining “[p]roduct liability action” but not
encompassing indemnity action by seller against manufacturer). We do not necessarily agree
with that distinction and, in any event, do not decide this issue on that basis.
28
extent specifically stated” in the statutes. As our supreme court noted in Torres, § 12-684
expressly “provide[s] for indemnification between manufacturers and sellers.” 163 Ariz. at
96, 786 P.2d at 947. Thus, we agree with A.P.S. that § 12-684(A) “merely provides a
statutory indemnity claim separate and apart from common law indemnity.”
¶51 Absent any constitutional infirmity, therefore, the statute controls and is
unaffected by common law principles.14 Were we to interpret § 12-684(A) by importing
Bridgestone’s common law and policy arguments into the statute, “[s]uch an interpretation
in effect [would] amend[] the statute to require proof of elements not set forth by the
legislature.” Sepahi, 206 Ariz. 321, ¶ 15, 78 P.3d at 735; see also McIntyre Refrigeration,
165 Ariz. at 565, 799 P.2d at 906, quoting City of Phoenix v. Donofrio, 99 Ariz. 130, 133,
407 P.2d 91, 93 (1965) (“‘[A] court will not inflate, expand, stretch or extend a statute to
matters not falling within its expressed provisions.’”) (alteration in McIntyre). That we will
not do, because any such amendment falls within the legislative prerogative. If the statute
might produce unintended or unfair results in some cases, it is the role of the legislature, not
this court, to clarify or change the statute.15
14
To the extent Bridgestone contends § 12-684(A) violates due process, we find no
merit to the argument and no support for it in Desert Golf Cars, on which Bridgestone relies.
See Litton Sys., 119 Ariz. at 14, 579 P.2d at 52 (“Binding the indemnitor to a judgment
against the indemnitee, where the indemnitor has received due notice of the pending
litigation, is not a denial of due process.”).
15
We note, however, that the statutory scheme is not necessarily unfair or impractical.
Under § 12-684, a manufacturer may avoid the dire consequences Bridgestone postulates by
either accepting the seller’s tender of defense or later proving one of the statutory exceptions.
See ¶¶ 37-39 and nn.10-11, supra.
29
VIII.
¶52 Bridgestone further contends the record contains triable issues of fact on one
or both of the statutory exceptions in § 12-684, thereby precluding summary judgment. We
therefore turn our analysis to those exceptions.
¶53 We first note that the manufacturer bears the burden of proving one of the
exceptions under § 12-684(A)(1) or (2). See Desert Golf Cars, 198 Ariz. 103, ¶ 23, 7 P.3d
at 117; see also Harvest v. Craig, 195 Ariz. 521, ¶ 15, 990 P.2d 1080, 1083 (App. 1999)
(when statute grants benefit but also contains exception to benefit, and the exception does
not appear in portion of statute granting the benefit but appears in another clause, party
seeking benefit of exception has burden of proving its entitlement thereto); Troutman v.
Valley Nat’l Bank, 170 Ariz. 513, 517, 826 P.2d 810, 814 (App. 1992) (party claiming to fall
“within a recognized exception to the statute” has burden of showing exception applies).
¶54 We also note that both exceptions specifically refer to “[t]he seller,” rather than
more broadly to any party in the chain of distribution that might have handled, marketed, or
sold the product after it left the manufacturer’s hands and before the ultimate seller obtained
it. § 12-684(A)(1), (2). Thus, that some party in the chain of distribution other than the final
seller might have known of the defect or might have altered, modified, or installed the
product does not relieve the manufacturer of its indemnity obligation to the final seller under
§ 12-684. We therefore disagree with Bridgestone’s unsupported contention that § 12-
684(A)(2) “forecloses indemnity in situations where the underlying injuries resulted from an
30
alteration of the product for which the seller is responsible,” even if the seller itself did not
alter, modify, or install the product.
¶55 In support of that proposition, Bridgestone relies on dicta in Jordan. In holding
that sellers of used goods may be subject to strict liability in tort, Division One of this court
noted that, “whether the product is new or used,” “the dealer will not be able to obtain
indemnity from the manufacturer if there has been a substantial change in the product since
it left the manufacturer.” 135 Ariz. at 315, 660 P.2d at 1242. The court in Jordan, however,
did not analyze or interpret the specific language of § 12-684(A)(2) and later remarked that
“Arizona law authorizes a seller to seek indemnity from a manufacturer without any
limitation on whether the product is new or used.” Id. But, to the extent the court suggested
that the exception in § 12-684(A)(2) applies broadly to any post-manufacture alteration,
modification, or installation of the product, even occurring before the final seller obtained
the product, we disagree.
¶56 We also reject Bridgestone’s assertion, based on dicta in Western Agricultural
Insurance Co. v. Chrysler Corp., 198 Ariz. 64, ¶ 25, 6 P.3d 768, 773 (App. 2000), that “some
fault,” of any kind, by the seller “in causing the incident that is the subject of the action”
defeats indemnity under § 12-684(A). Rather, the only “fault” of significance under the
statute is the seller’s knowledge of the product’s defect or the seller’s unauthorized and
causally related alteration, modification, or installation of the product.
31
¶57 We agree with the trial court that Bridgestone failed to establish either of the
two exceptions and that the record does not reflect a triable issue of fact on those. We also
agree with the trial court that the first exception requires evidence of the seller’s actual
“knowledge of the defect in the product.” § 12-684(A)(1). According to Bridgestone, the
record presents disputed issues of fact on “whether APS had reason to know of the alleged
defect at the time that it rented the van to the Naranjos.” Contrary to Bridgestone’s
argument, however, mere constructive knowledge does not suffice.
¶58 In construing a statute, “[w]e give words their usual and commonly understood
meaning unless the legislature clearly intended a different meaning.” State v. Korzep, 165
Ariz. 490, 493, 799 P.2d 831, 834 (1990); see also A.R.S. § 1-213 (“Words and phrases shall
be construed according to the common and approved use of the language.”). “In determining
the ordinary meaning of a word, we may refer to an established and widely used dictionary.”
State v. Mahaney, 193 Ariz. 566, ¶ 12, 975 P.2d 156, 158 (App. 1999). The word
“knowledge” is commonly understood to mean “[a]n awareness or understanding of a fact
or circumstance.” Black’s Law Dictionary, at 876 (7th ed. 1999); see also The American
Heritage Dictionary, at 705 (2d college ed. 1991) (defining “knowledge” as “[t]he state or
fact of knowing”); Webster’s Third New Int’l Dictionary, at 1252 (1971) (“knowledge” is
“the fact or condition of knowing something with a considerable degree of familiarity gained
through experience of or contact or association with the individual or thing so known”). In
contrast, “constructive knowledge” is essentially a legal fiction, referring to knowledge that
32
“one using reasonable care or diligence should have, and therefore that is attributed by law
to a given person.” Black’s Law Dictionary, at 876.
¶59 In general, when the legislature has chosen to employ a standard of actual or
constructive knowledge, it has expressly so stated. See, e.g., A.R.S. §§ 4-241(B) (liquor
licensee who fails to obtain proof of age “is deemed to have constructive knowledge of the
person’s age”); 44-1531 (wilful violation of consumer fraud statute occurs when party “knew
or should have known” conduct was prohibited); cf. A.R.S. § 13-107(B) (limitations period
commences on state’s actual discovery or discovery that should have occurred with exercise
of reasonable diligence). That the legislature supposedly rejected a proposed amendment in
1978 to add the word “actual” before the word “knowledge” in § 12-684(A)(1) and has
chosen to use the phrase “actual knowledge” in some other statutes does not alter our
conclusion.16 See A.R.S. §§ 14-3714; 29-319(D). The legislature might well have deemed
the proposed amendment superfluous. Absent any meaningful legislative history to suggest
that the legislature intended the word “knowledge” in § 12-684(A)(1) to include either actual
or constructive knowledge, we decline to interpret the statute in that manner.17 Rather, we
16
The record does not contain the proposed, legislative amendment to which
Bridgestone refers.
17
At common law, courts have expressed differing views on this subject. Compare
Hales v. Green Colonial, Inc., 402 F. Supp. 738, 741 (W. D. Mo. 1975), aff’d in part and
modified and remanded in part on other grounds, 544 F.2d 331 (8th Cir. 1976) (“[T]he
weight of authority generally supports a cause of action for indemnity against the
manufacturer of a defective product which has been found to be unreasonably dangerous
where the seller seeking indemnity has no actual knowledge of the defect.”), with Welkener
v. Kirkwood Drug Store Co., 734 S.W.2d 233, 242 (Mo. Ct. App. 1987) (“[A] ‘seller’ lower
33
give the word “knowledge” in (A)(1) its common, understood meaning—that the seller
actually knew of the product’s defect.
¶60 Bridgestone points to evidence presented in the Naranjo case but also included
in this record that A.P.S. had known of the prior failure in the van’s right front tire, had
submitted that tire for inspection, had declined a request to inspect the remaining tires, and
had rented the van to the Naranjos before obtaining the results from Bridgestone of the first
tire inspection. Bridgestone also emphasizes that seventy percent of the jury’s verdict in the
Naranjo case was based on its finding of independent negligence against A.P.S. That
negligence, Bridgestone asserts, included A.P.S.’s failure to inspect the tire, to warn the
Naranjos of the prior incident involving the other tire, and to replace all of the tires after the
prior incident. According to Bridgestone, all of the foregoing facts or implicit findings
“show that APS acted negligently by introducing a product that it knew or should have
known to be defective into the stream of commerce.”
in the chain of distribution who sells a product without actual or constructive knowledge of
a defect and who has no duty to inspect is entitled to indemnity against one higher in the
chain, such as the manufacturer.”). In any event, we do not necessarily disagree with
Bridgestone’s argument that an actual or constructive knowledge standard “would encourage
sellers to be vigilant in monitoring product quality” and, at least with respect to used
products, “would further the statutory goal of placing liability on the party best able ‘to
detect, control or prevent the putative defect.’” Desert Golf Cars, 198 Ariz. 103, ¶ 11, 7 P.3d
at 115. In our view, however, the determination of whether such a standard should apply to
a seller’s claim for statutory indemnity rests with the legislature. See Taylor v. Graham
County Chamber of Commerce, 201 Ariz. 184, ¶ 27, 33 P.3d 518, 525 (App. 2001) (“[W]hen,
as here, the legislature has clearly spoken on a matter within its domain, its word constitutes
public policy on that subject and controls, assuming no constitutional impediments exist.”).
34
¶61 None of those facts, however, permits a finding or inference that A.P.S.
actually knew of any defect in the van’s right rear tire when it leased the vehicle to the
Naranjos. Thus, no genuine issues of material fact exist to preclude summary judgment
against Bridgestone based on the exception in § 12-684(A)(1).
¶62 The same is true with respect to the exception in § 12-684(A)(2). The trial
court referred to “uncontested evidence at the Naranjo trial” that “A.P.S. did not misuse, alter
or modify the [Bridgestone] tire in any way.” Bridgestone challenges the trial court’s having
taken judicial notice of the entire record in the Naranjo case for substantive purposes,
including the foregoing evidence. We need not address that issue, however, because, unlike
the manufacturer in Desert Golf Cars, Bridgestone failed to present any triable issues of fact
on the (A)(2) exception, on which it bore the burden of proof.
¶63 In sum, the record does not present any genuine issue of material fact on either
exception. In his affidavit attached to Bridgestone’s motion for reconsideration below,
Bridgestone’s tire expert opined that the tire in question had failed as a result of previous
punctures that had been improperly repaired. Assuming that evidence was timely presented
below and properly before us, however, Bridgestone’s expert did not state that A.P.S. (rather
than some other entity) had known of the tire defect or had altered, modified, or installed the
tire. Nor does any other evidence in the record support a finding or inference of those facts.
Accordingly, the trial court did not err in granting summary judgment in favor of A.P.S. on
its indemnity claim under § 12-684(A).
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CONCLUSION
¶64 Because Bridgestone was statutorily obligated to indemnify A.P.S. under § 12-
684(A), we do not address A.P.S.’s alternative claims for common law vouching in and
indemnity or contribution, on which the trial court also granted summary judgment in favor
of A.P.S. See Foremost-McKesson; Litton Sys.; Dixon. The trial court’s summary judgment
in favor of A.P.S. based solely on § 12-684(A) is affirmed.
______________________________________
JOHN PELANDER, Presiding Judge
CONCURRING:
_______________________________________
PHILIP G. ESPINOSA, Chief Judge
_______________________________________
PETER J. ECKERSTROM, Judge
36