Summary
declining to apply apparent manufacturer doctrine in part because, under Michigan law, “both the manufacturer and the seller of a defective product are subject to liability for any injury arising from the product under the theories of breach of warranty and failure to warn”
Summary of this case from Heinrich v. Master Craft Eng'g, Inc.Opinion
Docket Nos. 172400, 172401.
Submitted February 9, 1994, at Lansing.
Decided November 22, 1994, at 9:20 A.M.
Mark Granzotto and Gary M. Bloom, for the plaintiff.
Clark Knight, P.C. (by William E. Clark) ( Bendure Thomas by Amy R. Snell, of Counsel), for the defendant.
Before: MacKENZIE, P.J., and WAHLS and BRENNAN, JJ.
ON REMAND
This products liability case is before this Court for the second time. Plaintiff was injured when a heavy drill that he was using twisted his wrist after the drill bit encountered a concrete rod. The drill was designed and manufactured by Hilti A.G., a Liechtenstein corporation. In his amended complaint, plaintiff alleged that the drill was negligently designed and that defendant was subject to liability because it designed and manufactured the drill, sold the drill, or held itself out as the manufacturer of the drill. Defendant moved for summary disposition on the ground that it did not manufacture, design, or sell the alleged defective drill.
In an unpublished opinion per curiam, decided June 11, 1992 (Docket Nos. 119456, 120839), this Court affirmed the trial court's order granting summary disposition of plaintiff's claim that defendant was liable because it held itself out as the manufacturer of the drill. However, this Court reversed summary disposition of plaintiff's claim that defendant was liable as the seller of the drill because defendant did not properly support its claim that it did not sell the drill in its motion for summary disposition. The Michigan Supreme Court has remanded the matter, directing us to decide whether, and to what extent, the apparent manufacturer theory "should or should not be adopted in this case." 444 Mich. 947 (1994). We believe that the theory should not be adopted and affirm our previous opinion.
Defendant's affidavit stated only that "[t]he TE 22 Rotary Impact Drill which is the subject of this litigation, was designed and manufactured by Hilti A.G. and sold F.O.B. at its place of origin." We rejected defendant's argument that the averment permitted the inference that Hilti A.G. performed its own sales and distribution functions to the exclusion of other company subsidiaries. Rather, we found that one could also reasonably infer that the drill was sold F.O.B. to defendant and thereafter to plaintiff's employer by defendant. Therefore, liability could be imposed upon defendant as the seller of the drill.
The apparent manufacturer theory is contained in 2 Restatement Torts, 2d, § 400, p 337:
One who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer.
Liability is imposed on anyone who supplies a defective product to others for their own use or for the use of third persons. 2 Restatement Torts, 2d, § 400, p 337, comment a. Apparent manufacturer cases usually involve a defendant labeling or affixing to the product its own name, trade name, or trademark, or an advertisement identifying the defendant as the maker of the product. 2 Restatement Torts, 2d, § 400, p 338, comment d. Because it is undisputed that the words "Hilti Inc., Tulsa, OK 74145" appear on the manufacturer plate affixed to the drill and there remains a question of fact whether defendant sold the drill to plaintiff's employer, it appears that plaintiff has stated a claim under the apparent manufacturer theory.
We must decide whether this theory should be incorporated into Michigan products liability law. To date, no Michigan court has recognized the apparent manufacturer theory as a valid cause of action. In Turner v Bituminous Casualty Co, 397 Mich. 406, 426; 244 N.W.2d 873 (1976), our Supreme Court referred to § 400 in a case involving a products liability claim against a successor corporation:
Because this is a products liability case, however, there is a second aspect of continuity which must also be considered. Where the successor corporation represents itself either affirmatively or, by omitting to do otherwise, as in effect a continuation of the original manufacturing enterprise, a strong indication of continuity is established. Justice would be offended if a corporation which holds itself out as a particular company for the purpose of sales, would not be estopped from denying that it is that company for the purpose of determining products liability. This was recognized in another context in the Restatement Torts, 2d, § 400, which decrees that "[o]ne who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer." [Citations omitted.][]
This principle has been referred to as the "continuity of enterprise theory," under which the purchaser of assets who continues to manufacture and sell the product of the seller and who takes advantage of the trade name and good will of the seller is estopped from claiming that it has not also succeeded to the liabilities of the seller. This theory has been adopted by other states in successor liability cases. See Chemical Design, Inc v American Standard, Inc, 847 S.W.2d 488, 492 (Mo App, 1993).
A number of jurisdictions have explicitly adopted or applied the apparent manufacturer theory. However, unlike Michigan, most of these jurisdictions have adopted strict tort liability as a theory of recovery in their products liability laws. MCL 600.2945; MSA 27A.2945. See 63 Am Jur 2d, Products Liability, § 537, pp 737-748.
Warzynski v Empire Comfort Systems, Inc, 102 N.C. App. 222, 226-227; 401 S.E.2d 801 (1991); Burkert v Petrol Plus of Naugatuck, Inc, 216 Conn. 65, 78; 579 A.2d 26 (1990) (finding no liability because General Motors was not involved in the sale of defective automatic transmission fluid); English v Crenshaw Supply Co, 193 Ga. App. 354; 387 S.E.2d 628 (1989); Coca Cola Bottling Co, Inc v Reeves, 486 So.2d 374, 378 (Miss, 1986); Fahey v Rockwell Graphic Systems, Inc, 20 Mass. App. 642, 650-651; 482 N.E.2d 519 (1985); Hebel v Sherman Equipment, 92 Ill.2d 368; 65 Ill Dec 888; 442 N.E.2d 199 (1982) (finding no liability under the theory); Andujar v Sears, Roebuck Co, 193 A.D.2d 415; 597 N.Y.S.2d 78 (1993) (citing Comm'rs of State Ins Fund v City Chemical Corp, 290 N.Y. 64; 48 N.E.2d 262 [1943]); Sears, Roebuck Co v Black, 708 S.W.2d 925, 928 (Tex App, 1986); Dildine v Clark Equipment Co, 282 Ark. 130, 137; 666 S.W.2d 692 (1984) (finding no liability where the defendant did not distribute the defective product as its own); Forry v Gulf Oil Corp, 428 Pa. 334; 237 A.2d 593 (1968); Sears, Roebuck Co v Morris, 273 Ala. 218, 221-222; 136 So.2d 883 (1961).
Under Michigan law, both the manufacturer and the seller of a defective product are subject to liability for any injury arising from the product under the theories of breach of warranty and failure to warn. Prentis v Yale Mfg Co, 421 Mich. 670, 692-693; 365 N.W.2d 176 (1984); Gregory v Cincinnati, Inc, 202 Mich. App. 474, 485-486; 509 N.W.2d 809 (1993); Stachurski v K mart Corp, 180 Mich. App. 564, 567; 447 N.W.2d 830 (1989). Therefore, were we to adopt the apparent manufacturer theory, a consumer could recover against the seller under the theory of negligent design. Prentis, supra. However, we believe that imposing liability for negligent design upon the seller is not feasible in light of the risk-utility test, adopted by our Supreme Court, which focuses on the quality of a manufacturer's decision in light of the prevailing standards and state of technology in existence at the time the product was designed. Prentis, supra at 687-688, 691. Regardless of whether the seller holds the product out as its own, the seller has no input in the design of the product. Thus, imposing liability would amount to strict liability, which this jurisdiction has declined to adopt.
Moreover, as noted by the Supreme Court, a negligence standard in a "design defect" case provides a greater incentive for the manufacturer to design safer products and promotes a primary purpose of products liability law: to encourage the design of safer products and thereby reduce the incidence of injuries. Id. at 689-690. Imposing liability upon the seller does not advance the underlying rationale of the risk-utility test. Accordingly, we decline to adopt the apparent manufacturer theory.
Affirmed.