“Casual” Sellers of Products Immune from Subrogation Suit

In New York, generally, wholesalers or retailers of goods (such as Sears, WalMart, etc.) may be sued and held liable for damage caused by products they sold even if the wholesaler simply purchased a product in a sealed box and sold it.  Many wholesalers and retailers have contractual or common law indemnification from the manufacturers and many times subrogation lawsuits are simply turned over to the manufacturer, who picks up the seller’s defense and indemnity.  However, if the manufacturer has declared bankruptcy, the wholesaler or retailer is still on the hook and may still be held strictly liable.

In the last few years, New York’s highest court has stated a “casual” seller exception to the general rule of strict vendor liability.  The Court ruled that only companies that routinely sell products to the public should be held strictly liable.  Recently, the court held that a manufacturer cannot be sued for damages allegedly caused by a used piece of equipment it sold. [1]   In the case before the court, Mario Jaramillo injured his right hand in 2002 while working with a Flexo Folder Gluer (“FFG”) machine.  The FFG was manufactured in 1964 by a company that went bankrupt in 1986.  Defendant Weyerhauser (“D”) bought the FFG used in 1971 and sold it “as is, where is” to Mario’s employer in 1986 (i.e., sixteen years prior to the accident).  “W” is in the business of manufacturing cardboard boxes and occasionally sells its used, obsolete equipment.  The court found that “W” was a “casual” seller and could not held strictly liable for Mario’s personal injuries allegedly caused by a defect in the equipment.  In so ruling, the Court found that those who sell products in the normal course of business, by reason of their continuing relationships with manufacturers, are in a position to exert pressure for the improved safety of products and can recover increased costs within their commercial dealings, or through contribution or indemnification in litigation. Further, regular sellers “may be said to have assumed a special responsibility to the public, which has come to expect them to stand behind their goods."  By contrast, a “casual” seller "has neither the opportunity, nor the incentive, nor the protection of the manufacturer or seller who puts that product into the stream of commerce as a normal part of its business, and the public consumer does not have the same expectation when it buys from such a seller."

Bottom Line:  In a products liability subrogation case, the retailer or wholesaler should (as well as the manufacturer) be put on notice of the carrier’s subrogation interests and given an opportunity to view the scene and inspect the product.  However, a mere “casual” seller of a product may have a defense against a strict liability claim.

[1] Jaramillo v. Weyerhaeuser Co., New York Court of Appeals, March 31, 2009