Williams, Daniel M. v. REP Corporation ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-3746
DANIEL M. WILLIAMS,
Plaintiff-Appellant,
v.
REP CORPORATION and REP FRANCE,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 97 C 750—John D. Tinder, Judge.
____________
ARGUED MAY 21, 2002—DECIDED AUGUST 21, 2002
____________
Before BAUER, COFFEY and RIPPLE, Circuit Judges.
RIPPLE, Circuit Judge. Daniel Williams severely injured
his hand in a machine that he was operating for his em-
ployer. He brought this products liability action against
the machine’s manufacturer, REP International, and the
manufacturer’s United States distributor, REP Corporation.
The district court entered summary judgment for REP
Corporation because it did not sell, lease or otherwise
put into the stream of commerce the machine that injured
Mr. Williams, as required for liability under Indiana law.
The district court also dismissed Mr. Williams’ claim
against REP International for want of personal jurisdic-
2 No. 01-3746
tion. For the reasons set forth in the following opinion, we
affirm the judgment of the district court.
I
BACKGROUND
A. Facts
Mr. Williams injured his hand in July 1995 while operat-
ing a V47 rubber injection molding machine for his em-
ployer, ENBI of Shelbyville, Indiana (“ENBI/Indiana”). The
machine was manufactured by REP International of
1 2
France for ENBI of Holland (“ENBI/Holland”). Before
the machine was shipped to ENBI/Holland, REP Interna-
tional altered the machine, which had been set to comply
with European safety requirements, to comply with the
requirements for machines used in the United States. See
R.54 at 17-20 & Ex.19. The machine was shipped to
ENBI/Holland on June 23, 1995. ENBI/Holland then
shipped the machine to ENBI/Indiana. On July 12, 1995,
REP International sent REP Corporation of Illinois (“REP
Corp.”), REP’s exclusive United States distributor, a mes-
sage asking REP Corp. to install the machine for ENBI. REP
Corp. completed the installation on July 14, 1995. Mr.
Williams’ hand was injured while using the machine on
July 31, 1995.
1
REP International is a subsidiary of REP, which is the REP
parent company and is also based in France.
2
ENBI purchased the machine from REP Deutschland, but the
records of REP International indicate that it manufactured the
machine for ENBI/Holland. See, e.g., R.54, Exs.14-20 (French
documents listing “Client” as REP Deutschland and indicating
that the machine was for (“Pour”) ENBI/Holland).
No. 01-3746 3
B. District Court Proceedings
Mr. Williams brought a products liability action in an
Indiana state court against REP Corp. REP Corp. removed
the case to federal court and sought summary judgment.
The district court granted the motion, reasoning that REP
Corp. could not be liable under the Indiana products
liability statute because it had not sold the machine that
injured Mr. Williams.
The district court previously had allowed Mr. Williams
to amend his complaint to include a claim against “REP
France” because the evidence produced in discovery had
shown such an entity to be the manufacturer of the ma-
chine that had injured Mr. Williams. After the court
granted summary judgment in favor of REP Corporation,
the court issued a summons for “REP France” to appear
and to file an answer to Mr. Williams’ amended complaint.
The counsel who had represented REP Corp. thereaf-
ter appeared on behalf of the defendant named as “REP
France.” The same counsel then informed the district
court that no entity named “REP France” existed and
that REP International (of France) manufactured the ma-
chine at issue. Counsel then filed a motion to modify the
caption in the case to identify REP International as the
defendant. In the same motion, REP International moved
to dismiss the case for lack of personal jurisdiction.
Mr. Williams did not oppose REP International’s motion
to modify the caption. The district court therefore di-
rected the clerk of the court to modify the caption to show
REP International as the defendant. The court also
granted REP International’s motion to dismiss for want
of personal jurisdiction. It held that Indiana’s long-arm
statute, Trial Rule 4.4, did not permit the exercise of juris-
diction over REP International and that, even if it did,
the exercise of jurisdiction would violate the Due Process
Clause of the Fourteenth Amendment.
4 No. 01-3746
II
DISCUSSION
A. REP Corp.
At the time of Mr. Williams’ injury and on the date that
he filed this action in state court, the Indiana products
liability statute imposed liability for injury caused by a
defective product on “a person who sells, leases, or other-
wise puts into the stream of commerce” the defective
3
product. Ind. Code Ann. § 33-1-1.5-3(a) (West 1996). The
district court entered summary judgment for REP Corp.
because Mr. Williams produced no evidence that REP Corp.
sold, leased or otherwise put into the stream of com-
merce the allegedly defective machine. We review de
novo the district court’s grant of summary judgment. See
Remer v. Burlington Area School Dist., 286 F.3d 1007, 1010 (7th
Cir. 2002). Summary judgment is appropriate “if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with affidavits, if any, show
that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter
of law.” Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986).
Section 3 of the Indiana products liability act (the Act)
sets out the circumstances under which a person may be
subject to strict liability for harm caused by a defective
product. It reads in relevant part as follows:
(a) Except as provided in subsection (c), a person who
sells, leases, or otherwise puts into the stream of com-
merce any product in a defective condition unrea-
3
That statute was repealed by Pub. L. No. 1-1998, § 221, 1998
Ind. Legis. Serv. 1 (West), and replaced with Ind. Code § 34-20-1to -9.
No. 01-3746 5
sonably dangerous to any user or consumer or to the
user’s or consumer’s property is subject to liability for
physical harm caused by that product to the user or
consumer or to the user’s or consumer’s property if
that user or consumer is in the class of persons that the
seller should reasonably foresee as being subject to the
harm caused by the defective condition, and if:
(1) The seller is engaged in the business of selling such
a product; and
(2) The product is expected to and does reach the user
or consumer without substantial alteration in the
condition in which it is sold by the person sought to be
held liable under this chapter.
***
(c) A product liability action based on the doctrine
of strict liability in tort may not be commenced or
maintained against any seller of a product that is al-
leged to contain or possess a defective condition unrea-
sonably dangerous to the user or consumer unless the
seller is a manufacturer of the product or of the part
of the product alleged to be defective.
(d) Nothing in this chapter shall be construed to lim-
it any other action from being brought against any sell-
er of a product. If a court is unable to hold jurisdic-
tion over a particular manufacturer of a product or
part of a product alleged to be defective, then that
manufacturer’s principal distributor or seller over
whom a court may hold jurisdiction shall be consid-
ered, for the purposes of this section, the manufacturer
of the product.
Ind. Code Ann. § 33-1-1.5-3 (West 1996).
Mr. Williams submits that REP Corp. is subject to liabil-
ity under the Act notwithstanding the fact that it did
6 No. 01-3746
not actually sell the machine that injured him. He offers
several arguments in support of his contention. First,
Mr. Williams contends that REP Corp. falls within the
Act’s definition of “manufacturer” and therefore may be
liable under the Act. The Act defines “manufacturer” to
include “a seller who: . . . (D) is owned in whole or signifi-
cant part by the manufacturer; or (E) owns in whole or
significant part the manufacturer.” Ind. Code Ann. § 33-1-
1.5-2(3) (West 1996). The Act defines a “seller” in general
terms as “a person engaged in the business of selling
or leasing a product . . . .” Id. § 33-1-1.5-2(5). At the time
the district court entered summary judgment for REP
Corp., the evidence before the court indicated that “REP
France” was the manufacturer of the machine and that REP
Corp. was a wholly owned subsidiary of “REP France.”
Even if REP Corp. could be considered a “seller” under
the statute’s generic definition, and therefore a “manu-
facturer” because it is owned by “REP France,” there is
still no evidence that REP Corp. sold, leased or other-
wise put into the stream of commerce the allegedly de-
fective machine as required by Ind. Code § 33-1-1.5-3(a).
It was later disclosed that REP International manufac-
tured the machine and did not own REP Corp. This devel-
opment does not change the basic analysis. REP, the par-
ent corporation, owns REP International and REP Corp.
Yet, REP Corp. still cannot be said to have sold, leased or
4
otherwise placed the machine in the stream of commerce.
4
The Act’s definition of “manufacturer” effectively prevents
sellers that are wholly owned by manufacturers from exploiting
a limitation on liability provided by Section 3(c) of the Act.
Section 3(c) exempts a seller of a defective product from liability
unless the seller is also the manufacturer. See Ind. Code Ann.
§ 33-1-1.5-3(c) (West 1996). The limitation generally protects the
(continued...)
No. 01-3746 7
Mr. Williams also submits that, if REP Corp. is not a
manufacturer or seller of the machine, Section 3(d) of
the Act nevertheless subjects it to liability. Section 3(d)
provides that
[i]f a court is unable to hold jurisdiction over a particu-
lar manufacturer of a product or part of a product
alleged to be defective, then that manufacturer’s prin-
cipal distributor or seller over whom a court may
hold jurisdiction shall be considered, for the purposes
of this section, the manufacturer of the product.
Ind. Code Ann. § 33-1-1.5-3(d) (West 1996). According to
Mr. Williams, because REP Corp. is REP International’s
exclusive distributor and seller in the United States, Sec-
tion 3(d) subjects REP Corp. to liability. In so doing, Mr.
Williams suggests, Section 3(d) reflects a state policy
of ensuring that companies are held responsible for the
injuries they cause and of preventing companies from
structuring themselves in such a way as to avoid liabil-
5
ity altogether.
4
(...continued)
local retail seller of a defective product from liability. See Timothy
C. Caress, Recent Developments in the Indiana Law of Products
Liability, 29 Ind. L. Rev. 979, 999 (1996). But if the seller is also
the manufacturer, or if the seller is wholly owned by the man-
ufacturer (or wholly owns the manufacturer), then the exemp-
tion does not apply. See Ind. Code Ann. §§ 33-1-1.5-2(3) & -3(c)
(West 1996).
5
Mr. Williams relies on Radio Picture Show Partnership v. Exclu-
sive International Pictures, Inc., 482 N.E.2d 1159 (Ind. Ct. App.
1985), which held that service of process upon an executive of
one partnership was sufficient for service upon a closely related
partnership when the partnerships had organized themselves
(continued...)
8 No. 01-3746
Section 3(a) identifies the conduct that exposes a per-
son to liability; a person must “sell[], lease[], or other-
wise put[] into the stream of commerce” the defective
product. Ind. Code Ann. § 33-1-1.5-3(a) (West 1996). If
Section 3(d) were to operate as Mr. Williams suggests,
it would broaden the scope of liability beyond that pro-
vided for in Section 3(a) because it would subject to liabil-
ity a person who did not sell, lease or otherwise put into
the stream of commerce the defective product. When
subsection (d) is read together with the other provisions
of Section 3, it becomes apparent that subsection (d) was
not meant to expand the scope of liability provided in
subsection (a). Subsection (a) begins: “Except as provided
in subsection (c) . . . .” Ind. Code. Ann. § 33-1-1.5-3(a). If
the Indiana legislature meant subsection (d) to provide
for liability in circumstances other than those described
in subsection (a), it would have included subsection (d)
along with subsection (c) in the opening proviso of sub-
section (a).
A review of Section 3 as a whole makes clear that sub-
section (d) operates to temper an exemption from liabil-
ity afforded to sellers by subsection (c). Although subsec-
tion (c) exempts sellers from liability (except when a seller
is also the manufacturer), subsection (d) allows for the
liability of sellers if the manufacturer of the product is
beyond the court’s jurisdiction. See Ind. Code Ann. § 33-1-
1.5-3(c) & (d) (West 1996); Timothy C. Caress, Recent Devel-
5
(...continued)
as a “complicated, closed and secret hierarchy of companies” in
an attempt to “defeat litigants trying to serve them.” Id. at 1165.
There is no suggestion of such corporate maneuvering here. Mr.
Williams simply has sued a corporation that did not sell the
allegedly defective product.
No. 01-3746 9
opments in the Indiana Law of Products Liability, 29 Ind. L. Rev.
979, 999 (1996) (“The effect of these provisions [Ind. Code
§ 33-1-1.5-3(c) & (d)] is to prevent the user or consumer
injured by a product with a manufacturing defect from
suing the local retail seller of the product on a strict liabil-
ity theory unless, for some reasons, the court cannot
get jurisdiction over the manufacturer.”). Subsection (d)
does not, however, subject a person to liability if the per-
son did not engage in any of the conduct identified in
6
subsection (a).
Notwithstanding the language of Indiana’s products
liability act, Mr. Williams submits that REP Corp. should
be liable for the defective product manufactured and
6
Mr. Williams relies on Kennedy v. Guess, Inc., 765 N.E.2d 213(Ind. Ct. App. 2002), to support the notion that a manufac-
turer’s principal distributor can be liable under the Act if
the manufacturer is not subject to the court’s jurisdiction even
if the principal distributor “had nothing to do with [the prod-
uct’s] safety.” Reply Br. of Appellant at 6. In Kennedy, the plain-
tiff, who was injured by a defective umbrella, sued Guess, whose
logo the umbrella bore, and Callenen International, a corpora-
tion that possessed the right to market products under the
Guess name and that had purchased the umbrella from Inter-
asian Resources, a distributor of the umbrella’s manufacturer,
Interasia Manufacturing. See Kennedy, 765 N.E.2d at 216, 219. The
court reversed the grant of summary judgment for the defen-
dants, holding that there was an issue of fact whether either
of the defendants was the “leading seller or intermediary
between seller and manufacturer,” such that it could consti-
tute the manufacturer’s “principal distributor or seller” for
purposes of the Act. Id. at 220. The opinion does not indicate
clearly the extent to which either of the defendants sold, leased
or put into the stream of commerce the umbrella, and the
court did not address the issue whether a defendant that did not
actually engage in such activity could be liable under the Act.
10 No. 01-3746
sold by REP International because REP Corp. is a wholly
owned subsidiary of REP, which also owns REP Interna-
7
tional. He proposes that “[f]undamental fairness in prod-
uct liability actions requires that the wholly-owned sub-
sidiary of a company located outside the territorial limits
of the United States” should be liable for the injury caused
by the products manufactured and sold by the parent
corporation. Br. of Appellant at 17. But “fundamental fair-
ness” does not require holding a corporation liable for
injury caused by a product that the corporation did not
sell just because the corporation that did sell the prod-
uct owns the corporation that did not sell it or is owned
by the same parent company. A corporation that is owned
by another corporation that sells a product does not
derive economic benefits from the sale, and there is no
reason that it should be held accountable for the other
corporation’s act. Moreover, Mr. Williams cites no Indi-
ana case to support his suggestion that we should ig-
nore the language of the Indiana products liability act
and permit REP Corp. to be subject to liability for a de-
fective product that it did not sell, lease or put into
the stream of commerce. In all of the cases on which
Mr. Williams relies, the defendants that the courts al-
lowed to be sued actually sold the injury-causing prod-
7
Mr. Williams does not distinguish between REP International
and REP, the parent corporation. Rather, he refers to each as
“REP France,” because, at the time of the district court’s grant
of summary judgment, the evidence indicated that “REP
France” manufactured the machine and owned REP Corp. The
distinction became clear only later, after REP International ap-
peared and moved to dismiss for the court’s lack of personal
jurisdiction.
No. 01-3746 11
8
ucts. We cannot ignore the language of the Indiana prod-
ucts liability act.
Finally, Mr. Williams submits that REP Corp. was part
of the stream of commerce that took the machine from
REP International to ENBI/Indiana because REP Corp.
installed the machine at the ENBI/Indiana facility and
ENBI/Indiana could not have used the machine until
REP Corp. installed it. Although Mr. Williams does not
explicitly make the argument, he implies that, by install-
ing the machine, REP Corp. put the machine into the
stream of commerce and therefore can be liable under
Section 3(a) of the Indiana products liability act. See Ind.
Code Ann. § 33-1-1.5-3(a) (West 1996) (subjecting to li-
ability “a person who sells, leases, or otherwise puts into
the stream of commerce” the defective product (empha-
sis added)). Mr. Williams cites no authority in support
of such an argument, however, nor did he make the argu-
ment in opposing REP Corp.’s motion for summary judg-
ment before the district court. Indeed, Mr. Williams dis-
claimed making such an argument in his brief in opposition
9
to REP Corp.’s motion for summary judgment. “A party
8
See Swearngin v. Sears Roebuck & Co., 376 F.2d 637 (10th Cir.
1967); Tate v. Renault, Inc., 278 F. Supp. 457 (E.D. Tenn. 1967);
Green v. Equitable Powder Mfg. Co., 95 F. Supp. 127 (W.D. Ark.
1951); Shirley v. Drackett Prods. Co., 182 N.W.2d 726 (Mich. Ct.
App. 1970).
9
In his brief in opposition to REP Corp.’s motion for summary
judgment, Mr. Williams endeavored to distinguish Whitaker v.
T.J. Snow Co., Inc., 953 F. Supp. 1034 (N.D. Ind. 1997), a case
on which REP Corp. had relied for the proposition that a plain-
tiff must prove that the seller placed the defective product
into the stream of commerce. Mr. Williams notes that “the
plaintiff in Whitaker was attempting to prove that by ‘refurbish-
(continued...)
12 No. 01-3746
waives any argument that it does not raise before the dis-
trict court or, if raised in the district court, it fails to de-
velop on appeal.” Hojnacki v. Klein-Acosta, 285 F.3d 544,
549 (7th Cir. 2002).
Because REP Corp. did not sell, lease or otherwise put
into the stream of commerce the machine that caused
Mr. Williams’ injury, it cannot be liable under the Indi-
10
ana products liability act.
B. REP International
Mr. Williams submits, as he did before the district
11
court, that the Indiana long-arm statute, Trial Rule 4.4(A),
9
(...continued)
ing’ the seam welder [the allegedly defective product], the sell-
er was somehow ‘introducing’ the welder into the stream of
commerce. In the case at bar, the plaintiff is NOT asserting any
such argument.” R.53 at 14-15 (emphasis in original). Thus,
not only did Mr. Williams fail to argue that REP Corp. had put
the machine into the stream of commerce by installing the
machine at the ENBI/Indiana facility, but the argument is in
the same vein as one he explicitly disclaimed making before
the district court.
10
Mr. Williams also submits that a question of fact remains
whether REP Corp. exercised reasonable care in installing the
machine that injured him. Mr. Williams’ complaint sounds
only in strict liability, however, and not in negligence. Nor did
Mr. Williams argue before the district court in opposing REP
Corp.’s motion for summary judgment that REP Corp. had
negligently installed the machine. He therefore has waived such
an argument on appeal.
11
“Although Indiana has a trial rule, it performs the same
function as a long-arm statute . . . .” Anthem Ins. Cos., Inc. v.
Tenet Healthcare Corp., 730 N.E.2d 1227, 1231 n.6 (Ind. 2000).
No. 01-3746 13
allows Indiana courts to exercise personal jurisdiction
over any defendant so long as the exercise of such juris-
diction does not violate the Due Process Clause of the
Fourteenth Amendment. Although Mr. Williams cites
numerous cases in support of his position, we cannot ac-
cept such a proposition because the Supreme Court of
Indiana itself has rejected it. See Anthem Ins. Cos., Inc. v.
Tenet Healthcare Corp., 730 N.E.2d 1227, 1232 (Ind. 2000).
In Anthem, the Supreme Court of Indiana acknowl-
edged that many Indiana Court of Appeals decisions had
held “that Indiana Trial Rule 4.4 is intended to extend
personal jurisdiction of courts sitting in this state . . . to the
limits permitted under the Due Process Clause of the
Fourteenth Amendment.” Id. (internal quotation marks
omitted). It held, however, that because Indiana’s long-
arm statute enumerated the circumstances in which an
Indiana court could exercise jurisdiction over a non-resi-
dent defendant, “the correct approach under Indiana Trial
Rule 4.4(A) is to[] engage in a two-step analysis, first
determining whether the conduct falls under the long-arm
statute and then whether it comports with the Due Proc-
ess Clause as interpreted by the United States Supreme
Court and courts in this state.” Id.The district court considered and correctly rejected Mr.
Williams’ contention that the reach of Trial Rule 4.4
was coextensive with that of the Fourteenth Amendment.
In so doing it relied on the Supreme Court of Indiana’s
decision in Anthem and noted that in submitting his inter-
pretation of Trial Rule 4.4, “Williams ha[d] failed to dis-
cuss or even mention the effect of recent Indiana Supreme
Court jurisprudence, specifically requiring a separate
analysis of the Indiana long-arm statute, on this contention.”
Appellant’s Br. at App. 21-22 n.4.
Despite the district court’s treatment of Mr. Williams’
jurisdictional argument, Mr. Williams again failed to ad-
14 No. 01-3746
dress the Anthem decision in his briefs before this court.
Moreover, REP International pointed out in its brief
that Mr. Williams had failed properly to address Trial
Rule 4.4 in his initial appellate brief and suggested
that Mr. Williams had therefore waived any argument
that Rule 4.4 could provide for personal jurisdiction. Yet,
given another opportunity to address the effect of Trial
Rule 4.4 in his reply brief, Mr. Williams again ignored
the issue and, indeed, failed to respond to REP Interna-
tional’s waiver argument. Under these circumstances,
we must hold that Mr. Williams has waived any argu-
ment that Trial Rule 4.4 would permit the exercise of
personal jurisdiction over REP International.
Conclusion
The judgment of the district court is affirmed.
AFFIRMED
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—8-21-02