Booker v. Sears Roebuck & Co.

HODGES, Justice.

The appeal before us is the result of an action filed by Tammy Booker, now Loar (hereinafter plaintiff), against the distributor and manufacturer of a wall heater, Sears Roebuck & Company and White Rogers Division of Emerson Electric Company respectively. Also included as defendants were the propane gas wholesaler, J.D. Fite d/b/a Clayton Propane, Inc. (hereinafter wholesaler) and the gas retailer, Kiamichi Valley LP Gas Co. (hereinafter retailer); the petition contained allegations of negligence against both of these defendants. By an amended petition, plaintiff added the gas refiner, Kerr-McGee Refining Corporation (hereinafter Kerr-McGee). Prior to trial the plaintiff settled her claim with the distributor and manufacturer and dismissed all charges of negligence against the remaining defendants. After a nine day jury trial on the theory of products liability a single form verdict was returned in favor of the defendants. Six months prior to the beginning of trial the retailer and wholesaler had requested of Kerr-McGee that it take over their defense. When Kerr-McGee refused this request, the wholesaler and retailer filed cross-actions for indemnification against Kerr-McGee for any amounts the wholesaler and retailer were required to pay the plaintiff as a result of a judgment in favor of the plaintiff. After the verdict was returned motions to assess costs and attorneys’ fees against the plaintiff were filed pursuant to 12 O.S.1981 § 940. The trial court denied the cross-petitions for indemnification and the motions for assessment of legal fees. The motions to tax costs against the plaintiff were granted. The wholesaler and retailer then perfected this appeal on the denial of the cross-petitions for indemnification.

I.

INDEMNIFICATION LAW IN OKLAHOMA

Despite the favorable verdict and lack of a written indemnification agreement, the wholesaler and retailer now contend that Kerr-McGee should be required to indemnify them for their defense costs and attorney fees under (1) the theory of an implied indemnification contract or, in the alternative, (2) the theory that only vicarious liability could attach to them as a result of an unfavorable jury verdict in this products liability suit and this would require indemnification of all costs and judgments; the lack of such unfavorable determination should not now bar their recovery of legal costs. Thus, the question presented to us is whether a manufacturer should be required to indemnify its retailer and/or wholesaler for attorney fees and costs when the jury verdict specifically found no product defect or negligence on the part of either the manufacturer, the retailer or the wholesaler.

Oklahoma has adopted the principle known as “the American rule” which holds that all parties should bear the costs of their own individual legal representation. City Nat. Bank & Trust Co. v. Owens, 565 P.2d 4 (Okla.1977). Exceptions to this rule have been recognized by courts where an opponent has acted in bad faith; where a litigant has conferred a substantial benefit upon a class of person; or where a “private attorney general” rationale has been found to warrant fee shifting. The theory of fee shifting, however, is based on equitable considerations and the court’s power to award attorney fees despite the fact that such an award is not authorized by statute or contract. Owens, supra.

Oklahoma has previously recognized that a manufacturer may be found to have a duty to indemnify its dealer against claims for loss caused by the manufacturer’s defective product. Braden v. Hendricks, 695 P.2d 1343 (Okla.1985). Reasonable attorney fees have been allowed, as a part of damages, to an indemnitee so long as the fees were incurred in defense of the claim indemnified against. United General Ins. v. Crane Carrier Co., 695 P.2d 1334 (Okla.1984). While this duty of the manufacturer to the indemnitee is typically the result of the manufacturer being found liable the duty may be implied by operation of law and is just as enforceable as if an express indemnification agreement had been entered into by the parties. Berry v. Barbour, 279 P.2d 335 (Okla.1955) However, indemnification of legal costs is not permissible where an adverse position has been taken by the claimant against the party from whom indemnity is sought. This is due to the necessity of a benefit being conferred on the indemnitor before the law will impose an obligation. Berry, supra.

II.

THE RETAILER V. KERR-MCGEE, THE MANUFACTURER

The case before us presents facts wherein Kerr-McGee, the wholesaler and retailer handled their own defenses independently of each other and primarily each for its own benefit. The independent nature of the conduct of the defenses is particularly significant in light of the fact that during the trial counsel for the retailer stated that he disagreed very little with the plaintiffs position, cross-examined witnesses in a manner hostile to and against the interests of Kerr-McGee and even went so far as to argue for a verdict in favor of the plaintiff and discuss the amount of money necessary to compensate the plaintiff. An example of this antagonistic approach is found in the closing argument of counsel for the retailer:

Now, let’s talk about Kerr McGee Corporation, or Refining Corporation. Their attitude? “We don’t have control over it. We’re not part of the gas industry. We don’t know where it goes.”

Well, it goes somewhere. Somebody uses it. Individually, people that work for Kerr McGee Refining Corporation seem like nice people, but they have a problem. The problem is, they work for a corporate ostrich that wants to bury its head in the sand and not look — not take responsibility for what it’s doing.

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Let’s talk a little bit about punitive damages, now. Exemplary damages, they’re also-called. Instruction Number 24 when you get it — You’ve been read it already, but you’ll see it. It says, “If you find in favor of the Plaintiff and award actual damages, and if you find that the conduct of the Kerr McGee Refining Corporation is conduct that has amounted to reckless disregard for the public safety, then and in addition to the actual damages” — in addition to meaning on top of- — -meaning you have to have some actual damages, and you can grant the Plaintiff these exemplary damages. The range there goes from zero to a million dollars. You’re the Jury. You decide what fits in those ranges, but in order to get punitive, you’ve got to have some actual, according to this Instruction.

Now punitive damages means just what they say. Punitive means to punish. Right in that instruction it says, “Exemplary damages in a sum you reasonably believe will punish Kerr McGee Refining Corporation and be an example to others.” You can find up to a million dollars in that category.

Remember, the Instructions say you have to find actual damages to get the punitive. They don’t say how much.

How much is a life worth? You heard Mr. Branam ask you that. How much is a mixing tank worth compared to one life? How much is a sampling technique worth? How much is a specific gravity tester, or even an expensive gas chroma-tograph worth if it prevents one life from being lost?

The adverse position taken by the retailer and the fact that no possible benefit could be forthcoming from the retailer’s attack on Kerr-McGee at trial clearly precludes the retailer from consideration for an award of legal costs.

III.

THE WHOLESALER V. KERR-MCGEE, THE MANUFACTURER

On the other hand the position of the wholesaler is distinguishable from that of the retailer in that the wholesaler did not, at any time, attack Kerr-McGee’s position. Rather, the wholesaler’s case complemented that of Kerr-McGee. In finding whether this conduct warrants the granting of legal costs we must determine if an exception to the American rule is present.

A review of the arguments and testimony presented by the wholesaler throughout the trial brings the request for attorney fees under an exception to the American rule. While the retailer “jumped ship” and began attacking Kerr-McGee, the wholesaler consistently defended not only its own actions but those of Kerr-McGee. Counsel for the wholesaler was continually placed in the position of immediately following the cross-examination and opening/closing statements of counsel for the retailer. The adverse positions taken by the retailer were always quickly defused by the statements of counsel for the wholesaler in a firm but professional manner. Some of the bolstering statements of the wholesaler’s counsel can be found in this excerpt from the closing argument:

The simple fact of the matter is — is that the propane sold by Kerr McGee is as safe as they can make it. Nobody’s come up with a way to prepare for what people will do. I am sure if there was a way, a safer way, you’d have heard testimony from that witness saying, “Well, they ought to do what Phillips is doing because Phillips has this new system that’s a lot safer.” Or, “Well, there’s a place in Canada that sure has a lot better way of doing it.”

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Ladies and Gentlemen of the Jury, there’s just no liability in this lawsuit, against any of these Defendants. They operate as well as anybody in the industry does. Kerr McGee does. Certainly J.D. does — going to classes every 18 years — every year for 18 years. There’s just no liability there.

Considering the fact that the wholesaler and retailer were initially placed before the jury in the same position of being downstream marketers faced with a potential products liability judgment, the benefit bestowed on Kerr-McGee by the wholesaler’s supportive arguments was indeed substantial. As Kerr-McGee so benefited it is only proper that legal fees incurred by the wholesaler in defense of the products liability claim be borne by Kerr-McGee. The case is therefore remanded to the trial court for the sole purpose of fixing the amount of legal fees to be assessed against Kerr-McGee.

AFFIRMED IN PART; REVERSED IN PART; REMANDED FOR A LIMITED PURPOSE.

DOOLIN, ALMA WILSON, KAUGER and SUMMERS, JJ., concur. OPALA, V.C.J., and LAVENDER, J., concur in Parts I & II, dissent from Part III. HARGRAVE, C.J. and SIMMS, J., dissent.