We often see cross-complaints filed amongst defendants in product liability cases asserting causes of action for contribution, equitable indemnity and declarative relief. They are rarely litigated and are almost never adjudicated.
In Jerry Bailey v. Safeway, Inc. (Case No. A131349 (CA Dist. 1 Ct. App., Sep. 15, 2011)), the California Court of Appeal explored the distinction between equitable indemnity and comparative equitable indemnity arising out of such a cross-complaint.
In 2006, Jerry Bailey suffered a severe eye injury while assembling a Cook's Champagne display at a Safeway store. Bailey sued Saint-Gobain containers, Inc. (Saint-Gobain) and Safeway for strict liability design defect under the consumer expectations theory. Bailey also sued Safeway for negligence. Bailey settled the case with Saint-Gobain for $1 million and an assignment of its equitable indemnity rights against Safeway.
The case then proceeded to trial against Safeway alone, under the strict product liability claim and negligence. The jury found Safeway liable under the strict product liability claim, awarding plaintiff $718,915.78. However, the jury found that Safeway "was not negligent or 'at fault'." Because the amount of the settlement exceeded the jury award, the court later entered judgment in favor of Safeway.
Bailey then filed a separate suit against Safeway based on the assigned equitable indemnity claim from Saint-Gobain. The trial court sustained Safeway’s demurrer without leave to amend, and an appeal followed. Id. at p. 14109.
Equitable Indemnity vs. Comparative Equitable Indemnity
"Although product liability defendants are jointly and severally liable to the plaintiff, their liability as among themselves is determined according to comparative equitable indemnity principles. [citation omitted]" Id. at p. 14110. "'The doctrine of comparative equitable indemnity is designed to do equity among defendants.' [citation omitted.]" Id.
By contrast, "[t]he purpose of equitable indemnification is to avoid the unfairness, under the theory of joint and several liability, of holding one defendant liable for the plaintiff's entire loss while allowing another potentially liable defendant to escape any financial responsibility for the loss." Id. "[E]quitable indemnification is an extension of comparative fault principles which allows parties to seek a division of loss between the wrongdoers in proportion to their relative culpability. [citation omitted]" Id. at p. 14111.
Here, Bailey argued, unsuccessfully, that the jury's determination that Safeway was 100% responsible allowed him to recover, on an equitable indemnity action, all or a portion of Saint-Gobain’s $1 million settlement based on its assignment to him.
The Court Would Not Allow Bailey to Stand in Saint-Gobain’s Shoes
Ultimately, the Court of Appeal invoked the doctrine of collateral estoppel to bar Bailey’s indemnity action. While cautioning that this decision should not be interpreted as precluding an equitable indemnity claim based on strict liability, the court focused on the fact that the jury exonerated Safeway by finding that it was not negligent. This imperative fact, thus, precluded Bailey as Saint-Gobain's assignee from prevailing on an equitable indemnity claim. To hold otherwise would have given rise to an unfair result where the designer and manufacturer of a defective product could recover against a retailer who’s only "sin" was to sell the defective product.