Monday, February 22, 2010

Case Brief: Scott v. Fruehauf Corp.

Today's case brief is Scott v. Fruehauf Corp., 302 S.C. 364, 396 S.E.2d 354 (1990). To be fairly short, this case is pretty substantive in terms of the number of products liability issues it addresses. The most significant issue it addresses is the triggering date for application of the strict liability statute (which is the date of sale of the product, and not the manufacture date).

FACTUAL BACKGROUND: The case involves a defective wheel assembly manufactured by Firestone Tire and Rubber Co. and sold to a trailer manufacturer. 302 S.C. at 367, 396 S.E.2d at 356. The wheel assembly's rim and ring were not designed to be used together. Id. The trailer manufacturer sold the trailer in question to Defendant Fruehauf Corp. ("Fruehauf") in used condition. Id. Fruehauf repaired and reconditioned the trailer, including the tires, but did not break down the wheel assemblies. Id. Fruehauf then sold the trailer to Defendant Piedmont ("Piedmont"), who leased it to Plaintiff's employer. Id. Plaintiff was injured when he attempted to place the wheel assembly on the axle of a trailer. Id. The wheel rim and side ring separated, striking Plaintiff in the head and causing severe head trauma. Id.

PROCEDURE: Plaintiff settled his claim against Firestone for $675,000, with a guarantee of $200,000 if he did not recover against the other parties. 302 S.C. 367, 396 S.E.2d at 356. Plaintiff brought an action against Fruehauf and Piedmont and won $1,125,000 in actual damages against both defendants. Id., 396 S.E.2d at 355. The verdict against Fruehauf was based on strict liability and negligence, and the verdict against Piedmont was based on strict liability only. Id., 396 S.E.2d at 356. Plaintiff also won $1,125,000 in punitive damages from Fruehauf. Id., 396 S.E.2d at 355. The jury also found for Piedmont with regard to its indemnification cross claim against Fruehauf. Id.

ISSUES: The appellate issues that are most substantive in terms of products liability law are as follows: (1) whether strict liability applied where the wheel assembly was placed in the stream of commerce prior to July 9, 1974 (the effective date of the strict liability statute); (2) whether a supplier of a defective product can be liable for negligence if there is no privity between the supplier and injured party; (3) whether the trial court's decision to deny Fruehauf's motions for directed verdict and j.n.o.v. concerning certain issues and submit them to the jury was proper; (4) whether the jury's award of punitive damages against Fruehauf in a strict liability case was proper; and (5) whether the trial judge erred in submitting Piedmont's cross claim for indemnity to the jury. 302 S.C. at 368-71, 396 S.E.2d at 356-58.

RULES AND OPINION: With regard to the first issue, the court disagreed that the manufacture dates of the mismatched ring (1968) and rim (1972) were the pertinent dates for triggering application of the strict liability statute. 302 S.C. at 368, 396 S.E.2d at 356. "The pertinent date to determine [the strict liability statute's] application is the date the product was sold by the seller," and not the manufacture date." Id. (citing Schall v. Sturm, Ruger Co., 278 S.C. 646, 300 S.E.2d 735 (1983)). Since Fruehauf sold the trailer to Piedmont in 1976 and Piedmont leased the trailer in 1979, the strict liability statute applied. 302 S.C. at 369, 396 S.E.2d at 356.

The court also disagreed with Fruehauf's contention that Plaintiff failed to establish that Fruehauf owed him a duty of care since it did not design or manufacture the wheel assembly and was merely a seller. 302 S.C. at 369, 396 S.E.2d at 357. "In South Carolina, . . . the supplier of a defective product is accountable to an injured party on ordinary negligence principles despite a lack of privity." Id. (citing Carolina Home Builders, Inc. v. Armstrong Furnace Co., 259 S.C. 346, 191 S.E.2d 774 (1972)).

The court agreed with the trial court's decision to deny Fruehauf's motions for directed verdict and j.n.o.v. with regard to the issue of whether it breached its duty of care. Id. The evidence supported that Fruehauf was aware of the danger of a mismatched rim as early as 1963 and failed to properly inspect the wheel assembly. Id. Therefore, the issue of breach of duty was properly submitted to the jury. Id. Similarly, there was evidence that Plaintiff's employer warned him to put the tires in a cage before inflating them to avoid exploding rims. 302 S.C. at 369-70, 396 S.E.2d at 357. Therefore, whether Plaintiff assumed the risk or was contributorily negligent were also issues for the jury, and the trial court properly denied Fruehauf's directed verdict and j.n.ov. motions on these issues. Id.

With regard to Fruehauf's punitive damages issue, the court agreed that Barnwell v. Barber Colman Co., 301 S.C. 534, 393 S.E.2d 162 (1989) disallowed punitive damages in an action based solely on strict liability. 302 S.C. at 370, 396 S.E.2d at 357. However, in this case, the jury found Fruehauf liable on both strict liability and negligence causes of action. Id. Punitive damages are recoverable in a negligence cause of action when the conduct rises to the level of a willful, wanton or malicious violation of the plaintiff's rights. Id. (citing Harris v. Burnside, 261 S.C. 190, 199 S.E.2d 65 (1973)). From the evidence, the jury could have reached this conclusion, so the court affirmed the award. Id.

Finally, the court agreed that the trial judge erred in submitting Piedmont's cross claim for indemnification to the jury. Id. Fruehauf and Piedmont shared a common liability to Plaintiff under South Carolina' strict liability law. 302 S.C. at 371, 396 S.E.2d at 358. Both contributed to Plaintiff's injury by selling a defective product. Id. "Parties that have no legal relation to one another and who owe the same duty of care to the injured party share a common liability and are joint tortfeasors without a right of indemnity between them." Id. (citing Atlantic Coast Line R.R. v. Whetstone, 243 S.C. 61, 132 S.E.2d 172 (1963)). This principle required reversal of the trial court's decision. Id. Since both defendants were jointly liable, the court also held that each was entitled to benefit from the setoff for the $675,000 Firestone settlement. Id. The setoff should apply to the award for actual damages instead of the punitive damages award. Id.

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