Caseflicks

District Court, M.D. Alabama • 2001

Price v. CTB, Inc.

168 F. Supp. 2d 1299 | 2001 U.S. Dist. LEXIS 17076

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Takeaway

In short, this case confirms that a contractor may use Rule 14 to bring in a product manufacturer when a plausible implied-indemnity theory could shift the contractor's liability to the manufacturer, and a failed initial attempt at service does not establish laches without prejudice or culpable delay.

Background

Lateo, Inc., a contractor, was sued by Alabama farmers over allegedly defective chicken houses. The claims against Lateo included breach of contract, fraudulent misrepresentation about the quality of materials, and negligent and wanton construction.

Lateo sought to bring ITW, the manufacturer of nails allegedly used in the construction, into the suit as a third-party defendant. Lateo alleged that ITW had defectively designed the nails and asserted warranty, Alabama Extended Manufacturer’s Liability Doctrine, and common-law indemnity claims. Although Lateo moved to implead ITW in February 2001, it did not successfully serve ITW until July because it initially failed to identify an authorized service agent.

ITW moved to dismiss the third-party complaint. It argued that Lateo's claims were not proper under Federal Rule of Civil Procedure 14 because Alabama law supplied no viable right of indemnity, and that the delay in service barred the complaint under laches. The district court denied the motion.

Issues

Issue #1

Whether Lateo could implead ITW under Federal Rule of Civil Procedure 14(a) based on a claim for common-law implied indemnity.

Holding

Yes. Lateo alleged a legally cognizable theory under Alabama law on which ITW may be derivatively liable for all or part of Lateo's liability to the farmers.

Reasoning

Rule 14(a) permits a defendant to implead a nonparty only when the proposed third-party defendant's liability is derivative of the original claim. A third-party complaint cannot rest merely on a separate and independent claim arising from the same events; the defendant must be attempting to shift some or all of its potential liability to the third party.

ITW correctly observed that Rule 14 is procedural and that impleader therefore requires a substantive right to indemnity. But Alabama recognizes implied contractual indemnity where the party seeking indemnity is without fault, the manufacturer is responsible for the underlying harm, and the indemnitee has been required to pay a monetary judgment.

Lateo's allegations fit that potential framework. If Lateo were held liable for defective chicken-house construction, it could attempt to prove that it was without fault and that the actual defect stemmed from ITW's nails or nailguns. The fact that Lateo might ultimately fail to establish its own lack of fault went to the merits, not to whether ITW could be impleaded at the pleading stage.

The court found support in an analogous Illinois decision allowing a contractor sued over shoddy roof construction to seek indemnity from the manufacturer and seller of allegedly defective roof trusses. Although the Alabama U.C.C. did not itself govern the precise indemnity claim, Alabama's U.C.C. provides that equitable principles supplement its provisions unless displaced. That provision left room for common-law implied indemnity.

Because Rule 14 permits impleader of a party who may be liable, the court allowed the factual record to develop regarding ITW's products and their role in the alleged construction defects. The court also stressed the efficiency of resolving related liability questions in this action, particularly because forty substantially identical suits had been filed against Lateo.

Issue #2

Whether Lateo's additional warranty and product-liability claims against ITW could remain in the third-party complaint.

Holding

Yes. Once Lateo properly impleaded ITW on the implied-indemnity claim, its other claims could be joined under Rule 18(a).

Reasoning

The viable implied-indemnity claim supplied the necessary Rule 14 anchor. A properly impleaded third-party claim permits the defendant to join separate and independent claims against that third-party defendant under Rule 18(a).

Accordingly, the court did not need to decide independently whether Rule 14 would support Lateo's warranty and Alabama Extended Manufacturer's Liability Doctrine claims. Those claims could proceed alongside the properly pleaded indemnity claim.

Issue #3

Whether laches barred Lateo's third-party complaint because Lateo did not properly serve ITW until nearly a year after the original action began.

Holding

No. ITW did not show prejudice from an unreasonable or culpable delay by Lateo.

Reasoning

Laches requires more than delay. The party invoking the doctrine must show that the opposing party's unreasonable delay caused prejudice. ITW identified no concrete detriment resulting from Lateo's delayed successful service, and ITW had retained its own counsel and had sufficient time to investigate the claims.

Laches also does not ordinarily apply where the allegedly dilatory party lacked sufficient information needed to act sooner. Lateo had tried to serve ITW in February 2001, but its effort failed because a subsidiary was not an authorized agent for service. The record did not show culpable conduct by Lateo that would justify an equitable bar.

ITW's reliance on a case involving an express indemnity agreement was unpersuasive. In that case, the indemnitee waited two years to notify the indemnitor and then sought to make it pay for counsel it had neither selected nor supervised. ITW, by contrast, had notice through this action, its own lawyer, and an adequate opportunity to prepare its defense.