United States: General Contractor Not A "Seller" Entitled To Indemnity In Product Liability Case

On June 17, 2016, the Texas Supreme Court held that a general contractor was not a "seller" under Chapter 82 of the Civil Practice and Remedies Code and, therefore, not entitled to indemnification from the manufacturer of an allegedly defective roof truss. See Centerpoint Builders GP v. Trussway Ltd., 2016 WL 3413329 (Tex. June 17, 2016). The general contractor, according to the Court, was not a "seller" because it was not "engaged in the business of" selling the roof trusses. Rather, providing the trusses was merely incidental to the general contractor's construction services. The Centerpoint decision does not represent the expansion of liability for general contractors and manufacturers that could have occurred if the Court had ruled differently. See " Looming Texas Supreme Court Decision Could Impact Contractor Liability in Construction Cases." Nevertheless, the Court emphasized that the "seller" analysis is fact-specific and that a general contractor could be considered a "seller" under different circumstances.

Chapter 82

Chapter 82 provides a means for an "innocent" seller to seek indemnification from the manufacturer of an allegedly defective product. See Tex. Civ. Prac. & Rem. Code § 82.002. The statute requires a manufacturer to indemnify and hold harmless a seller against loss arising out of a product liability action, except for any loss caused by the seller's negligence, intentional misconduct, or other act or omission for which the seller is independently liable. Id. at § 82.002(a). "Seller" is broadly defined in the statute as "a person who is engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component part thereof." Id. at § 82.001(3).

Notably, the Texas Supreme Court in Fresh Coat, Inc. v. K-2, Inc., 318 S.W.3d 893 (Tex. 2010) held that a contractor hired to apply synthetic stucco components to homes according to the manufacturer's instructions and training is a "seller" of the synthetic stucco components. The Court in Fresh Coat held that Chapter 82's definition of "seller" does not exclude a seller who is also a service provider, and Chapter 82 does not require the seller to sell only the product at issue. Id. at 899.

Case Background and the Beaumont Court of Appeals Decision

Centerpoint began as a personal injury action filed by Merced Fernandez against Centerpoint Builders GP, LLC ("Centerpoint") and Trussway Ltd. ("Trussway") for injuries sustained while installing drywall at an apartment complex construction project. Centerpoint was the general contractor, and Fernandez was an independent contractor. At the time of the accident, Fernandez was standing on a roof truss that had not yet been installed. The truss broke and Fernandez was severely injured from his fall. Fernandez filed suit, asserting that the truss, which was manufactured by Trussway and purchased by Centerpoint, was defective and unreasonably dangerous.

Centerpoint filed a claim against Trussway seeking statutory indemnification under Chapter 82. Trussway filed a cross-action against Centerpoint, denying that Centerpoint was a seller under Chapter 82 and contending that it was actually an innocent seller that was entitled to indemnification from Centerpoint. The trial court granted Centerpoint's motion for summary judgment and held that Centerpoint was a "seller" under Chapter 82 but denied Centerpoint's motion for partial summary judgment regarding its entitlement to indemnity. The trial court also held that Trussway was not entitled to indemnity from Centerpoint. The parties then filed a joint notice of agreed interlocutory appeal.

On appeal, the Beaumont Court of Appeals reversed the trial court's order and held that Centerpoint does not fit the statutory definition of "seller," focusing on how the Fresh Coat opinion was distinguishable from the facts before it. Centerpoint Builders GP, LLC v. Trussway, Ltd., 436 S.W.3d 882 (Tex. App.—Beaumont, pet. granted).

The Texas Supreme Court's Decision

The Texas Supreme Court framed the inquiry as whether Centerpoint was "engaged in the business of" selling trusses. If so, then it was a "seller" under Chapter 82 entitled to indemnification.

The Court began its analysis by distinguishing Fresh Coat, which it described as being limited to the proposition that one is not precluded from being a seller merely because one also provides services. See Centerpoint, 2016 WL 3413329 at *4. The Court also noted that the contractor in Fresh Coat sold and installed a particular product, as evidenced by testimony that the contractor was in the business of providing the product combined with the service of installing the product. Id.

The Court then turned to case law from both Texas and other jurisdictions, which, although sparse, supported the conclusion that Centerpoint is not a seller. Id. at *6. The Court examined cases—typically in the strict liability context—holding that contractors whose business is providing construction services, as opposed to any particular building material utilized in the construction process, were not sellers of the material. These cases emphasized the distinction between a company in the business of selling its services and a company in the business of selling products. Distilling these cases, the Court held that one is not "engaged in the business of" selling a product if providing that product is incidental to selling services. Id.

Applying this standard, the Court held that Centerpoint was not a seller, even though it technically sold trusses to its customer. Id. In particular, the Court examined the specific project at issue, noting that Centerpoint agreed to undertake construction of an entire building and to be reimbursed for the cost of the materials—including the trusses at issue. Id. This, according to the Court, indicated that Centerpoint was in the business of selling construction services as opposed to trusses or other building materials. Id.

Practical Implications

The Court in Centerpoint declined to expand Chapter 82's applicability to construction cases and provided some much-needed clarity regarding the parameters of the statute's definition of "seller." However, contractors and those in the manufacturing chain should note that the Centerpoint decision left open the possibility of the "seller" designation being applied to contractors in certain situations.

In particular, the Court implied that a general contractor who is also a "retailer" or a "wholesale distributor" of a particular product might be a "seller" under Chapter 82. The Court also placed particular emphasis on how Centerpoint charged its customer for the building materials. The Court noted that Centerpoint did not set prices on the materials to achieve a gain or profit but was effectively reimbursed for the cost of the materials. If building materials were priced to achieve a profit in a particular contract, this fact could weigh in favor of Chapter 82's application.

Given the Court's admonishment that the Chapter 82 "seller" analysis is highly fact-specific—and its acknowledgment that "some contractors may engage in the business of selling both products and services"—this will likely continue to be a heavily contested issue in the construction context. Thus, general contractors and product manufacturers will need to determine how best to allocate the uncertainty of such a statutory indemnification claim. See Centerpoint, 2016 WL 3413329 at *7.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Andrew D. Ness
William R. Taylor
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions