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Case Law - save on Lexis / WestLaw. Original WP 5.1 Version This case can also be found at 150 N.J. 489.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Harley Davidson Motor Company v. Advance Die Casting, Inc. (A-117) Argued March 17, 1997 -- Decided July 16, 1997 O'HERN, J., writing for a majority of the Court. The question in this appeal is whether, in a consumer's products liability action, the claim by a retailer of the defective product for indemnification from a supplier of the product or a component thereof, is subject to the procedural requirements of the entire controversy doctrine. In June 1988, Mario DiMaria was riding his 1977 Harley Davidson motorcycle when it was hit by a car. His left foot was on the foot peg attached to the aluminum front chain housing cover, which shields the clutch plate and rotating chain. On impact, the front bumper of the car drove DiMaria's left foot into the cover, which shattered. DiMaria's heel was forced against the exposed rotating chain and clutch plate and both the skin and muscle surrounding his left heel were torn down to the bone. In 1990, DiMaria sued the driver of the car and Harley Davidson. Against Harley, DiMaria claimed that a defect in the front chain housing cover aggravated his injuries. He alleged that the housing cover had been defectively designed and defectively manufactured. The other driver settled with DiMaria for his policy limits. Advance Die Casting, Inc. (Advance) had manufactured the housing cover for Harley. By letter dated March 1, 1993, Harley asked Advance to assume Harley's defense against DiMaria and to indemnify Harley against any judgment in the trial scheduled for July 1993. The insurance carrier for Advance declined to assume Harley's defense or to indemnify Harley. Harley renewed its demands, but failed to join either Advance or its insurance company in the action. DiMaria's trial against Harley took place in July 1993. Harley successfully moved to dismiss the design defect claim. The jury decided that the front chain housing cover had been defectively manufactured, but that the defect was not the proximate cause of DiMaria's injuries. DiMaria appealed, and the Appellate Division reversed on the issue of causation and damages. Harley wrote to Advance and its insurance company, Northbrook Property and Casualty Insurance Company, in November 1994, informing them of the Appellate Division's decision and again demanding that Advance or Northbrook assume its defense and agree to indemnify it against any judgment. Northbrook refused. In March 1995, during the pendency of the underlying tort action, Harley filed this declaratory judgment action claiming that Advance and Northbrook were obliged to provide a defense for Harley and to indemnify it against any judgment. Harley informed the court of the underlying tort action by including the complaint of that action as an exhibit. At no time did a party or the court attempt to consolidate the two matters. On April 28, 1995, before the retrial of the tort
action, counsel for Advance and Northbrook attended a settlement conference
in that action. On May 1, 1995, Harley and DiMaria agreed to a settlement
of $150,000. Harley notified Advance of the settlement, and Advance agreed
that it was reasonable. At the settlement proceeding, Harley's attorney
advised the court of the pending declaratory judgment action, as well as
Northbrook's agreement that the settlement was fair.
In August 1995, Advance sought to dismiss the declaratory judgment action on the grounds of lack of personal jurisdiction. The trial court dismissed the action on its own motion, on the basis of the entire controversy doctrine. Harley appealed. The Appellate Division reversed. It held that the entire controversy doctrine did not apply because the indemnity action had not accrued until after the settlement. It explained that a stricter interpretation would ignore, or make mandatory, the permissive joinder rule and the impleader rule. The Appellate Division also relied on N.J.S.A. 12A:2-607(5)(a), a provision of the Uniform Commercial Code that allows a buyer to "vouch-in" sellers when the buyer is sued for a product defect by a third party and further permits the buyer to bind the seller to the factual determinations in the action when the seller declines to defend. The Appellate Division held that the goals of the entire controversy doctrine were ultimately satisfied through the "vouching-in" procedure. It remanded to the Law Division to determine certain factual inquiries. The Court granted certification limited to the issue of the entire controversy doctrine. HELD: The entire controversy doctrine applies to a claim for indemnification by a retailer of a defective product from a supplier of the product or a component thereof, but the notice given the supplier under N.J.S.A. 12A:2-607(5)(a), as well as the notice given the courts, satisfied the fairness concerns of the entire controversy doctrine. 1. There may be a class of indemnity claims that are not subject to the entire controversy doctrine because they are unaccrued. However, "upstream" claims for contribution or indemnity are within the reach of the doctrine. Here, the factual circumstances giving rise to the controversy are common to DiMaria's claim and Harley's claim for indemnification, and Advance had a material interest in the outcome of DiMaria's claim. Thus, absent the effect of "vouching-in," party-joinder would be required in this action to satisfy the entire controversy doctrine. In the context of this case, the "vouching-in" procedure was a satisfactory substitute for party-joinder since the required notice was given to Advance. Additionally, both courts were also informed of the other pending action. The twin pillars of the entire controversy doctrine, fairness to the parties and fairness to the court, were satisfied here. (pp. 8-14) 2. The parties complain of inconsistencies in the Rules of Civil Practice and Procedure in respect of the applicability of the entire controversy doctrine to a case such as this. For example, Harley notes that R. 4:30A mandates party-joinder, while Rule 4:8, on third-party practice, speaks in the permissive about joining third parties. And, Rule 4:7-5 mandates joinder of claims for indemnity against a party to an action. The Court acknowledges that refinements to the Rules may be required to clarify the circumstances in which the entire controversy doctrine may apply. The Court directs the Civil Practice Committee to consider whether Rule 4:8 should be amended in light of the entire controversy doctrine. (pp. 14-17) The judgment of the Appellate Division is AFFIRMED. Stein, J., concurring in the result, is of the view that the preclusive aspect of the entire controversy doctrine is not the appropriate mechanism to enforce mandatory party joinder, and that less intrusive measures should be used to encourage party joinder in civil litigation. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI and COLEMAN join in JUSTICE O'HERN's opinion. JUSTICE STEIN has filed a separate concurring opinion. SUPREME COURT OF NEW JERSEY
A- 117 September Term 1996
HARLEY DAVIDSON MOTOR COMPANY,
Plaintiff-Respondent, v. ADVANCE DIE CASTING, INC., NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendants-Appellants, and ABC CORP., and XYZ CORP., Defendants. Argued March 17, 1997 -- Decided July 16, 1997 On certification to the Superior Court, Appellate Division, whose opinion is reported at 292 N.J. Super. 62 (1996). Judson L. Hand argued the cause for appellants (Bumgardner, Hardin & Ellis, attorneys; William R. Bumgardner, of counsel and Mr. Hand and Mr. Bumgardner, on the briefs). John I. Lisowski argued the cause for respondent (Morgan, Melhuish, Monaghan, Arvidson, Abrutyn & Lisowski, attorneys; Mr. Lisowski, Robert G. Klinck and Steven F. Gooby, on the briefs).
The opinion of the Court was delivered by O'HERN, J. The question in this appeal is whether, in a consumer's products liability action, the claim by a retailer of the defective product for indemnification from a supplier of the product or a component thereof, is subject to the procedural requirements of the entire controversy doctrine. We hold that the requirements of the entire controversy doctrine apply to such claims but agree with the Appellate Division that the notice given to the supplier under N.J.S.A. 12A:2-607(5)(a) and to the courts involved in the two matters satisfied the fairness concerns of the entire controversy doctrine.
I
Upon impact, the front bumper of the car hit just behind the peg, driving
DiMaria's left foot into the cover which shattered. DiMaria's heel was
forced against the exposed rotating chain and clutch plate and both the
skin and muscle surrounding his left heel were torn down to the bone.
on October 31, 1994, the Appellate Division affirmed the finding of
a manufacturing defect, but reversed on the issues of causation and damages,
and sent the case back for a new trial on these issues. Harley's petition
to this Court was denied. 142
N.J. 448 (1994).
$150,000. Harley notified Advance of the settlement and Advance agreed
that it was reasonable. At the settlement proceeding before Judge Boggia,
Harley stated:
In August 1995, Advance sought to dismiss the declaratory
judgment action on the grounds of lack of personal jurisdiction, because
Advance is incorporated and has its place of business in Wisconsin. The
trial court dismissed the action on its own motion, on the basis of the
entire controversy doctrine. Harley appealed. The Appellate Division reversed
and remanded. 292
N.J. Super. 62 (App. Div.), certif. granted in part, 146
N.J. 568 (1996). The court held that the entire controversy doctrine
did not apply because the indemnity action had not accrued until after
the settlement.
[Id. at 68-69.] The court further explained that the New Jersey Rules of Evidence support the finding that the entire controversy doctrine is inapplicable to the facts in this case. Id. at 69. Evidence Rule 803(c)(26) provides that an indemnitor who has notice of and an opportunity to defend the first action may be bound by an indemnitee in a second action with the judgment acquired in the first action. In addition, the panel relied on N.J.S.A. 12A:2-607(5)(a), a provision of the Uniform Commercial Code that allows a buyer to "vouch in" sellers when the buyer is sued for a product defect by a third party and permits the buyer to bind the seller to the factual determinations in the action when the seller declines to defend the buyer.See footnote 2 Ibid. The court interpreted the statute and the rule as foreseeing separate indemnification actions irrespective of whether the indemnitor was joined as a party to the first action. Ibid. Because recent entire controversy doctrine opinions have not displaced the U.C.C. or the rules of evidence, the panel "assume[d] that a subsequent separate suit for indemnification is not barred by the entire controversy doctrine, at least where an indemnitor had been vouched in with notice and an opportunity to defend the underlying action." Ibid. Although it would have been more prudent had Harley joined Advance as a third-party defendant in the underlying action, the Appellate Division held that the goals of the entire controversy doctrine were ultimately satisfied through the "vouching-in" procedure. Id. at 69-70. The Appellate Division remanded the matter to the Law Division for certain factual inquiries concerning indemnification: (1) whether respondent satisfied the "vouching- in" requirements of N.J.R.E. 803(c)(26), and (2) whether petitioners-appellants in fact made the cover at issue. Id. at 76. In so doing, the court held both that the entire controversy doctrine did not bar the second action and that there was "ample basis for in personam jurisdiction." Ibid. We granted certification limited to the issue of the entire controversy doctrine. 146 N.J. 568 (1996).
II
that stem from the same transactional facts, even those against different parties." Joel v. Morrocco, 147 N.J. 546, 548 (1997). The entire controversy doctrine fosters the "goals of efficient judicial administration and fairness" to parties. Prevratil v. Mohr, 145 N.J. 180, 187 (1996).
A.
to another. The right to common-law indemnity arises "without agreement, and by operation of law to prevent a result which is regarded as unjust or unsatisfactory." [Ibid. (quoting W. Keeton, et al., Prosser & Keeton on The Law of Torts, §51 at 341 (5th ed. 1984)).] Generally, common law indemnification shifts the
cost of liability from one who is constructively or vicariously liable
to the tortfeasor who is primarily liable. Adler's Quality Bakery, Inc.,
supra, 32 N.J. at 80. This "shifting" of the risk up the
distribution chain to, in most cases, the actual manufacturer of the offending
product, fulfills the basic goal of distributing the risk to the party
best able to bear it. Promaulayko, supra, 116 N.J.
at 513. Thus, as a general rule, indemnification is expected to follow
the chain of distribution. Ibid.
The "factual circumstances giving rise to the controversy
itself" are common to both claims of DiMaria and Harley. Joel,
supra,
147 N.J. at 550. DiMaria claims that his injuries were caused by
both manufacturing and design defects. Harley claims that it is entitled
to indemnity because of the defects alleged by DiMaria. DiMaria's case
was tried before a jury that concluded that although a manufacturing defect
existed, it was not the cause of the accident. Application of the doctrine
here is consistent with Cogdell, which sets forth a test for determining
when the entire controversy doctrine should apply.
argue that it is unfair to give plaintiff "a second bite at the apple."
Cogdell, supra, 116 N.J. at 13.
defective product in the marketplace. 54
N.J. 585, 600-01 (1969). There, the Court stated:
[Ibid.] In fact, in this case the retailer of the motorcycle and the manufacturer of the component were more properly viewed as joint tortfeasors. The defect could have been due to a design defect or a manufacturing defect or a combination of each. A jury could have apportioned the liability between the two tortfeasors. N.J.S.A. 2A:15-5.2; Renz v. Penn Central Corp., 87 N.J. 437, 465 (1981).
B.
agree to immediately assume the defense of Harley-Davidson, Inc. and indemnify Harley-Davidson, Inc. for any damages, costs, fees, or judgments entered against Harley-Davidson, Inc. in this case. This case is presently scheduled for trial on May 11, 1993. Therefore, I ask that you advise of your decision in this matter as soon as possible. The court in the underlying action (DiMaria's action) was informed, if belatedly, of Harley's claim against Advance, before the first case settled on May 1, 1995. The court in the first case did not defer the settlement of the first claim in order to consolidate the actions; the second court was informed of the first action in plaintiff's complaint filed March 10, 1995. It also took no action to consolidate the claims. The twin pillars of the entire controversy doctrine, fairness to parties and fairness to the court, were satisfied by these actions of Harley.
III
Within 90 days after the service of the original answer, a defendant, as third-party plaintiff, may file and serve a summons and third-party complaint, together with a copy of plaintiff's complaint, upon a person not a party to the action who is or may be liable to defendant for all or part of the plaintiff's claim against defendant and may also assert any claim which defendant has against the third-party defendant involving a common question of law or fact arising out of the same transaction or series of transactions as the plaintiff's claim. Harley emphasizes that although Rule 4:30A has preclusive effect,
Rule
4:8 speaks in the permissive when it says "may join."
[R. 4:7-5(b) (emphasis added).]
Advance argues that the Appellate Division ignored the impact of Rule 4:7-5 in determining that Harley's indemnification claim against Advance did not accrue until DiMaria and Harley settled. Advance asserts that in ruling that Harley's claim was "unaccrued," the Appellate Division took the word out of its proper context. Advance argues that "[a]fter the 1979 revisions to R. 4:7-5, the fact that a claim has not `accrued,' in the
technical sense of starting the statute of limitations period to run, does
not affect the impact of the entire controversy doctrine upon that claim."
See Bendar v. Rosen, 247
N.J. Super. 219, 237 (App. Div. 1991) (stating that "[w]hile technically
a right of contribution does not arise until a tortfeasor has paid more
than his pro rata share, . . . the entire-controversy doctrine and judicial
economy militate for the claim being asserted in the underlying [ ] action").
This Court has stated that "[t]he accrual of a cause of action [for purposes
of the entire controversy doctrine] occurs when a plaintiff knows or should
know the facts underlying those elements, not necessarily when a plaintiff
learns the legal consequences of those facts." Circle Chevrolet Co.
v. Giordano, Halleran & Ciesla, 142
N.J. 280, 296 (1995).
doctrine. Some forms of indemnity will truly not have accrued until
the conclusion of the underlying litigation. See generally Berry,
A Bridge Too Far, supra, 28 Rutgers L.J. 41. However,
in a products liability action, a claim for common-law indemnification
from a third party should ordinarily be joined in the original action because
of related issues of contribution. Harley's use of the "vouching-in" procedure
and notice to both courts satisfied the fairness requirements of the entire
controversy doctrine.
CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI and COLEMAN join in JUSTICE O'HERN's opinion. JUSTICE STEIN has filed a separate concurring opinion. SUPREME COURT OF NEW JERSEY
A- 117 September Term 1996
HARLEY DAVIDSON MOTOR COMPANY,
Plaintiff-Respondent, v. ADVANCE DIE CASTING, INC., NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendants-Appellants, and ABC CORP., and XYZ CORP., Defendants. STEIN, J., concurring.
NO. A-117 SEPTEMBER TERM 1996
ON CERTIFICATION TO Appellate Division, Superior Court
HARLEY DAVIDSON MOTOR COMPANY,
DECIDED July 16, 1997
PRESIDING
Justice O'Hern
Footnote: 1DiMaria's expert report explains: [A motorcycle's] front chain housing cover assembly, which includes the cover plate, serves several purposes. It is first a simple cover to protect the clutch plate and chain mechanism from contamination and damage from road debris and corrosion. In addition, it serves as a mounting location for the operator's foot peg through which the foot shift lever assembly penetrates the housing and as a bearing support for the starter motor jack shaft. The operator's foot peg bolts to the front chain housing cover at the elongated opening in the forward portion of the cover. Footnote: 2 N.J.S.A. 12A:2-607(5)(a) states: (5) Where the buyer is sued for breach of a warranty or other obligation for which [the] seller is answerable over (a) [the buyer] may give [the] seller written notice of the litigation. If the notice states that the seller may come in and defend and that if the seller does not do so [the seller] will be bound in any action against [the seller] by [the] buyer by any determination of fact common to the two litigations, then unless the seller after seasonable receipt of the notice does come in and defend [the seller] is so bound.
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