Dunn v. Kanawha County Board of Ed.
Annotate this Case
January 1995 Term
___________
No. 22550
___________
JESSICA DUNN and JASON DUNN, ET AL.,
Plaintiffs Below, Appellants,
v.
KANAWHA COUNTY BOARD OF EDUCATION, ET AL.,
Defendants Below, Appellees
____________________________________________________________
Certified Question from the Circuit Court of Kanawha County
Honorable Paul Zakaib, Judge
Civil Action Nos. 90-C-2297, 91-C-3140, 91-C-3990
CERTIFIED QUESTION ANSWERED
____________________________________________________________
Submitted: February 28, 1995
Filed: May 19, 1995
Guy R. Bucci
Robert C. Chambers
Bucci, Chambers & Willis, L.C.
Charleston, West Virginia
and
James T. Cooper
Henry R. Glass, III
Lovett, Cooper & Glass
Charleston, West Virginia
and
Carl S. Kravitz
David N. Webster
Caplin & Drysdale
Washington, D.C.
Attorneys for the Appellants
Jeffrey M. Wakefield
William L. Ballard
Christine Fox
Richard D. Jones
Tracy L. Webb
Flaherty, Sensabaugh & Bonasso
Charleston, West Virginia
Attorneys for the Appellee,
Kanawha County Board of Education
Paul M. Friedberg
David Johnson
Lewis, Friedberg, Glasser, Casey & Rollins
Charleston, West Virginia
and
Donald W. Fowler
Joe G. Hollingsworth
Katharine R. Latimer
Bruce J. Berger
Spriggs & Hollingsworth
Washington, D.C.
Attorneys for the Appellee,
Velsicol
Charles R. McElwee
Robinson & McElwee
Charleston, West Virginia
Attorney for Amicus,
The WV Hospital Association
Anita R. Casey
Renatha S. Garner
Meyer, Darragh, Buckler, Bebenek & Eck
Charleston, West Virginia
Attorneys for Amicus,
CSM Systems, Inc.
A. L. Emch
Anthony Majestro
William D. Esbenshade
Jackson & Kelly
Charleston, West Virginia
Attorneys for Amicus,
WV Retailers Association
Cheryl A. Eifert
Blake Benton
Offutt, Eifert, Fisher, Duffield & Nord
Huntington, West Virginia
Attorneys for Amicus,
American Medical Association and
West Virginia State Medical Association
David L. Shuman
Shuman, Annand & Poe
Charleston, West Virginia
and
Avrum Levicoff
Brown, Levicoff & McDyer
Beckley, West Virginia
and
Michael Fisher
Offutt, Eifert, Fisher, Duffield & Nord
Huntington, West Virginia
and
William J. Cooper
Jacobson, Maynard, Tuschman & Kalur
Charleston, West Virginia
Attorneys for Amicus,
WV General & Plastic Surgeons
Arden J. Curry, II
Pauley, Curry, Sturgeon & Vanderford
Charleston, West Virginia
Attorney for Amicus,
The Builders Supply Association of WV
JUDGE FOX delivered the Opinion of the Court.
JUSTICE BROTHERTON did not participate.
JUDGE FOX sitting by temporary assignment.
SYLLABUS BY THE COURT
1. "'The general principle of implied indemnity arises
from equitable considerations. At the heart of the doctrine is the
premise that the person seeking to assert implied indemnity -- the
indemnitee -- has been required to pay damages caused by a third
party -- the indemnitor. In the typical case, the indemnitee is
made liable to the injured party because of some positive duty
created by statute or the common law, but the actual cause of the
injury was the act of the indemnitor.' Syllabus Point 2, Hill v.
Joseph T. Ryerson & Son, Inc., 165 W.Va. 22, 268 S.E.2d 296
(1980)." Syllabus point 1, Sydenstricker v. Unipunch Products,
Inc., 169 W.Va. 440, 288 S.E.2d 511 (1982).
2. "The doctrine of contribution has its roots in
equitable principles. The right to contribution arises when
persons having a common obligation, either in contract or tort, are
sued on that obligation and one party is forced to pay more than
his pro tanto share of the obligation. One of the essential
differences between indemnity and contribution is that contribution
does not permit a full recovery of all damages paid by the party
seeking contribution. Recovery can only be obtained for the excess
that such party has paid over his own share." Syllabus point 4,
Sydenstricker v. Unipunch Products, Inc., 169 W.Va. 440, 288 S.E.2d 511 (1982).
3. "A defendant in a civil action has a right in advance
of judgment to join a joint tortfeasor based on a cause of action
for contribution. This is termed an 'inchoate right to
contribution' in order to distinguish it from the statutory right
of contribution after a joint judgment conferred by W.Va. Code, 55-
7-13 (1923)." Syllabus point 2, Board of Education of McDowell
County v. Zando, Martin & Milstead, Inc., 182 W.Va. 597, 390 S.E.2d 796 (1990).
4. "A party in a civil action who has made a good faith
settlement with the plaintiff prior to a judicial determination of
liability is relieved from any liability for contribution."
Syllabus point 6, Board of Education of McDowell County v. Zando,
Martin & Milstead, Inc., 182 W.Va. 597, 390 S.E.2d 796 (1990).
5. "A seller who does not contribute to the defect in a
product may have an implied indemnity remedy against the
manufacturer of the product, when the seller is sued by the user."
Syllabus point 1, Hill v. Joseph T. Ryerson & Son, Inc., 165 W.Va.
22, 268 S.E.2d 296 (1980).
6. In a multiparty product liability lawsuit, a good
faith settlement between the plaintiff(s) and the manufacturing
defendant who is responsible for the defective product will not
extinguish the right of a non-settling defendant to seek implied indemnification when the liability of the non-settling defendant is
predicated not on its own independent fault or negligence, but on
a theory of strict liability.
Fox, Judge:See footnote 1
We accepted this certified question from the Circuit
Court of Kanawha County, West Virginia, to consider whether a good
faith settlement between a plaintiff and a defendant in a
multiparty lawsuit extinguishes the rights of non-settling
defendants to seek indemnification from the settling defendant.
The sixty-seven plaintiffs from three consolidated
lawsuits are students, parents, teachers, and others who allege
injuries resulting from exposure to toxic substances at Andrew
Jackson Junior High School, in Cross Lanes, West Virginia. One of
the toxic substances was a termiticide known as chlordane.
The plaintiffs initially asserted numerous theories of
liability against various defendants, including negligence,
willful, wanton, and reckless misconduct, breach of warranty,
strict product liability, and deliberate intent to injure an
employee. However, the focus of this certified question is the
plaintiffs' product liability claim against Velsicol Chemical
Corporation. Velsicol is the only United States manufacturer of technical chlordane, which is chlordane in its purest form and is
used to make other chlordane-containing compounds.See footnote 2 In addition to
suing Velsicol, the plaintiffs are pursuing product liability
claims against others in the chain of distribution, including
distributors and applicators of chlordane. Defendants Kanawha
County Board of Education and Robert Klatzkin, a former principal
at Andrew Jackson Junior High School (hereinafter referred to
collectively as the BOE), contend the defendant manufacturer
Velsicol is ultimately responsible for damages caused by its
defective product.
On 1 April 1994, the plaintiffs agreed to dismiss all
claims against Velsicol in exchange for a substantial monetary
settlement. Pursuant to court order, the amount of the settlement
remained confidential, but non-settling defendants were informed
and given the opportunity to challenge its reasonableness.
Velsicol intends for this settlement, reached prior to a judicial
determination of liability, to extinguish all potential claims
arising from this lawsuit, including claims for implied indemnity.
However, because Velsicol's settlement agreement did not include
therein a release from liability, the non-settling defendants in
the chain of distribution want to be able to seek indemnification
from Velsicol if they are subsequently made to pay damages to the plaintiffs for injuries they contend Velsicol was solely
responsible for as the manufacturer of the defective product.
On 22 April 1994, the plaintiffs and Velsicol jointly
requested that the circuit court find their settlement was in good
faith in order to extinguish any potential claims against Velsicol
for both contribution and indemnification. The non-settling
defendants potentially affected by this settlement objected on the
grounds that (1) a factual determination of good faith was
premature, and (2) a finding of a good faith settlement does not
extinguish claims for implied indemnity.See footnote 3 Following a hearing, the
circuit court tentatively found the settlement was in good faith
but deferred its ruling on the settlement's effect on any cross-
claims against Velsicol.
After a second hearing on 6 May 1994, the circuit court
concluded the settlement was negotiated in good faith and it barred
claims for contribution against Velsicol. However, the circuit court ruled that claims for implied indemnity would not be
extinguished by the good faith settlement.
On 24 May 1994, the plaintiffs and Velsicol moved for
reconsideration of the 6 May 1994 ruling on the implied
indemnification issue. The circuit court denied the motion for
reconsideration on 31 May 1994, and an order certifying the
indemnification issue to this Court was entered on 8 July 1994.
On 12 October 1994, this Court granted the joint petition
for review of the following certified question:
Whether a good faith settlement by a
defendant extinguishes rights of non-settling
defendants and others for implied indemnity
against the settling defendant under West
Virginia law?
The Circuit Court of Kanawha County, West Virginia, the Honorable
Paul Zakaib, Jr., presiding, answered the question in the negative,
finding there is a legal and factual distinction between claims of
implied indemnification and claims for contribution.
Relying primarily on language found in Smith v.
Monongahela Power Co., 189 W.Va. 237, 429 S.E.2d 643 (1992), the
plaintiffs and Velsicol now contend the 6 May 1994 circuit court
ruling was erroneous, and argue this Court's prior decisions
establish that their good faith settlement extinguishes all
contribution and indemnification claims the non-settling defendants
might wish to assert against Velsicol.
However, the BOE argues the plaintiffs and Velsicol have
confused the issues by treating contribution and indemnification as
identical legal concepts, when, in fact, "the concept of
indemnification plays a unique role and is clearly distinct from
contribution in product liability cases." We agree.
Indemnification and contribution are separate and
distinct legal concepts. "The idea of indemnity implies a primary
or basic liability in one person, though a second person is also
for some reason liable with the first, or even without the first,
to a third person. Discharge of the obligation by the second
person leaves him with a right to secure compensation from the one
who, as between themselves, is primarily liable."See footnote 4 There are two
types of indemnity. Express indemnity is based upon a written
agreement between the parties, while implied indemnity is based
upon the relationship between the parties. In syllabus points 1
and 2 of Sydenstricker v. Unipunch Products, Inc., 169 W.Va. 440,
288 S.E.2d 511 (1982), this Court explained:
1. "The general principle of implied
indemnity arises from equitable
considerations. At the heart of the doctrine
is the premise that the person seeking to
assert implied indemnity -- the indemnitee --
has been required to pay damages caused by a
third party -- the indemnitor. In the typical
case, the indemnitee is made liable to the
injured party because of some positive duty
created by statute or the common law, but the
actual cause of the injury was the act of the
indemnitor." Syllabus Point 2, Hill v. Joseph T. Ryerson & Son, Inc., 165 W.Va. 22, 268 S.E.2d 296 (1980).
2. Implied indemnity is based upon
principles of equity and restitution and one
must be without fault to obtain implied
indemnity.
"Very broadly, contribution is the right of one who owes
a joint obligation to call upon his fellow obligors to reimburse
him if compelled to pay more than his proportionate share of the
obligation. Limiting this definition to the tort context,
contribution is a method to promote an equitable distribution of
loss among those who are jointly and severally liable for a given
wrong."See footnote 5 Contribution was distinguished from indemnity in syllabus
point 4 of Sydenstricker:
The doctrine of contribution has its
roots in equitable principles. The right to
contribution arises when persons having a
common obligation, either in contract or tort,
are sued on that obligation and one party is
forced to pay more than his pro tanto share of
the obligation. One of the essential
differences between indemnity and contribution
is that contribution does not permit a full
recovery of all damages paid by the party
seeking contribution. Recovery can only be
obtained for the excess that such party has
paid over his own share.
The doctrine of contribution and the effect of a good faith
settlement between a plaintiff and one of multiple joint
tortfeasors on the rights of non-settling joint tortfeasors to
contribution were discussed at length by this Court in Board of Education of McDowell County v. Zando, Martin & Milstead, Inc., 182
W.Va. 597, 390 S.E.2d 796 (1990). In syllabus point 2, we
explained:
A defendant in a civil action has a right
in advance of judgment to join a joint
tortfeasor based on a cause of action for
contribution. This is termed an "inchoate
right to contribution" in order to distinguish
it from the statutory right of contribution
after a joint judgment conferred by W.Va.
Code, 55-7-13 (1923).
Further, in syllabus point 6 of Zando, this Court
explained that contribution rights are terminated by a good faith
settlement, stating that "[a] party in a civil action who has made
a good faith settlement with the plaintiff prior to a judicial
determination of liability is relieved from any liability for
contribution." However, whether a good faith settlement terminates
a non-settling defendant's right to seek implied indemnification
against the settling defendant is an issue that has not been
addressed by this Court until now.
The principles of Zando regarding contribution rights
among joint tortfeasors were reiterated in Smith, supra, an opinion
in which this Court set forth specific criteria to aid in
determining whether a settlement is in fact made in good faith. As
we noted above, the plaintiffs and Velsicol now rely upon language
found in Smith to support their contention that the law in West
Virginia is that any indemnification claims a non-settling defendant might wish to assert against the settling defendant are
also extinguished by a good faith settlement.
In Smith, John Q. Hutchinson was electrocuted when he was
working on a truck manufactured by Dico which came into contact
with a power line owned and operated by Monongahela Power Company.
Dennis Dwight Smith, as administrator of Hutchinson's estate, sued
Monongahela Power for negligence, and Monongahela Power filed a
third-party complaint against manufacturer Dico for contribution,
alleging that defective truck design was a proximate cause of
Hutchinson's death. Smith, 429 S.E.2d at 646.
Dico settled with the Hutchinson estate before trial.
After the verdict, Monongahela Power and the estate reached a
settlement, under which Monongahela Power reserved its right to
pursue contribution claims from others, including Dico. Dico moved
to dismiss Monongahela Power's claim on the grounds that its
settlement with the estate insulated it from Monongahela Power's
claims for contribution. The trial court granted Dico's motion.
Id. at 647.
The issue in Smith was whether a settlement entered into
between a nonparty (Dico) and a claimant (Smith) prior to the
instigation of a lawsuit would discharge the nonparty (Dico) from
further obligation to either the claimant (Smith) or the nonparty's
joint tortfeasor (Monongahela Power). This Court agreed with the lower court's finding that Monongahela Power's right to seek
contribution from nonparty/joint tortfeasor Dico was extinguished
by the good faith settlement between Dico and Smith.
In the case now before us, the plaintiffs and Velsicol
rely heavily on Smith because of the following language contained
in the opinion: "Accordingly, we find Monongahela Power's right to
seek contribution or indemnification from Dico was extinguished by
the settlement between the Hutchinson estate and Dico, provided
that the settlement was in good faith." Id. at 649 (emphasis
added). Despite this reference to indemnification, the facts
indicate quite clearly that Smith was only about a claim for
contribution.See footnote 6 This single reference to indemnification was
unnecessary in the context of the opinion.See footnote 7
Smith is also distinguishable from the case now before us
because the relationship between Monongahela Power and Dico did not
give rise to a right of implied indemnity. Monongahela Power and
Dico were joint tortfeasors. Dico settled with the claimant before
trial, and Monongahela Power settled afterwards. The issue was
whether Monongahela Power had a right to pursue a contribution
claim against Dico, not an indemnification claim. A non-settling
defendant's right to seek indemnification from the settling
defendant following a good faith settlement in a product liability
case is the only issue now before this Court. Reliance upon Smith
as precedent is pointless, because although that case addressed a
similar question, the issue was raised in the context of
contribution claims.
To argue that both contribution and implied indemnity
claims should be extinguished by a good faith settlement is to
ignore the substantive differences between the two legal concepts.
"While contribution permits one tortfeasor to shift a part of the
loss to another, the purpose of indemnity is to shift the whole loss."See footnote 8 As we noted above, a fundamental distinction between
indemnity and contribution is the absence of fault on the part of
the party who seeks indemnification. Contribution claims involve
joint tortfeasors who share some degree of fault; their liability
is premised upon independent negligent acts. However, the only
real tortfeasor in an implied indemnity action is the indemnitor,
who commits the tort which causes injury.
In product liability cases, the manufacturer is often the
culpable tortfeasor as a result of conduct associated with
designing or manufacturing a defective product. Product liability
law in this State permits a plaintiff to recover where the
plaintiff can prove a product was defective when it left the
manufacturer and the defective product was the proximate cause of
the plaintiff's injuries. Morningstar v. Black & Decker Mfg. Co.,
162 W.Va. 857, 253 S.E.2d 666, 677 (1979). Strict liability in
tort relieves the plaintiff from proving the manufacturer was
negligent, and instead permits proof of the defective condition of
the product as the basis for liability. Because the product
manufacturer is not always accessible to the plaintiff, strict
liability extends to those in the product's chain of distribution.
Thus, an innocent seller can be subject to liability that is
entirely derivative simply by virtue of being present in the chain
of distribution of the defective product.
Extending liability to those in the chain of distribution
in this manner is meant to further the public policy that an
injured party not have to bear the cost of his injuries simply
because the product manufacturer is out of reach. The liability of
a party in the chain of distribution is based solely upon its
relationship to the product and is not related to any negligence or
malfeasance. For this reason, this Court acknowledged the right of
implied indemnity in note 22 of Morningstar, supra. In syllabus
point 1 of Hill v. Joseph T. Ryerson & Son, 165 W.Va. 22, 268 S.E.2d 296 (1980), we held that "[a] seller who does not contribute
to the defect in a product may have an implied indemnity remedy
against the manufacturer of the product, when the seller is sued by
the user." "[I]n the field of product liability, the concept
underlying allowance of indemnity is that the indemnitee has been
rendered liable because of a nondelegable duty arising out of
common or statutory law, but the actual cause of the injury has
been the act of another person." Hill, 268 S.E.2d at 301. The
remedy of implied indemnity provides an innocent seller, or
indemnitee, with the means to seek restitution from the actual
wrongdoer, or indemnitor.
Again, we emphasize that the right to seek implied
indemnity belongs only to a party who is without fault. If a
seller in some way contributes to a product defect, the seller and
manufacturer are jointly responsible for damages the product
causes, and the seller has no right to seek implied indemnity. Instead, because of the shared fault, the rules of contribution
would apply. However, the rules of both contribution and indemnity
could apply where a seller does not contribute to a defect in a
product, but commits an independent act of negligence or is at
fault in some other manner.
Indemnification is a remedy available to innocent parties
who have been held strictly liable and made to pay for injuries
caused by others. It would defeat all notions of fairness and
equity to deprive an innocent party of the means to seek
reimbursement from a culpable manufacturer simply because that
manufacturer reached a "good faith" settlement with the injured
plaintiff. Velsicol now complains that: "Notwithstanding
Velsicol's good faith, its payment of substantial proceeds to
plaintiffs, and its motivation to buy peace, Velsicol has not
obtained peace. Velsicol has instead bought only the risk of
continued liability via implied indemnification claims and the
burden of having to continue to defend its products."
However, we believe if Velsicol truly wanted to "buy
peace," then, as the manufacturer of the allegedly defective
product, Velsicol should have included lesser defendants in the
chain of distribution within the terms of the settlement agreement,
thereby eliminating its own risk of continued liability via implied
indemnification claims. If chlordane is determined to be a
defective product, and it is also determined the non-settling defendants did nothing independently wrong or in no way contributed
to the defect, then equity demands that Velsicol indemnify the non-
settling defendants if they are ultimately found liable for damages
caused by its product.
Therefore, our answer to the certified question is
negative: In a multiparty product liability lawsuit, a good faith
settlement between the plaintiff(s) and the manufacturing defendant
who is responsible for the defective product will not extinguish
the right of a non-settling defendant to seek implied
indemnification when the liability of the non-settling defendant is
predicated not on its own independent fault or negligence, but on
a theory of strict liability.
In fact, it is arguable that basic fairness and sound
public policy dictate that a settlement by a plaintiff with the
manufacturing defendant solely responsible for the defective
product covers all damages caused by that product and extinguishes
any right of the plaintiff to pursue others in the chain of
distribution who did not make the product, contribute in any way to
the defect, or commit any independent acts of negligence or fault.
However, this issue was not raised by this certified question, and
we leave its resolution for a later time.
Certified question answered.
Footnote: 1
Pursuant to an administrative order entered by this
Court on 18 November 1994, the Honorable Fred L. Fox, II, Judge of
the Sixteenth Judicial Circuit, was assigned to sit as a member of
the West Virginia Supreme Court of Appeals commencing 1 January
1995 and continuing through 31 March 1995, because of the physical
incapacity of Justice W. T. Brotherton, Jr. On 14 February 1995 a
subsequent administrative order extended this assignment until
further order of said Court. Footnote: 2
The defendant BOE states that in October 1987 the EPA
issued a Final Cancellation Order prohibiting all sale, use, or
distribution of chlordane after 15 April 1988.Footnote: 3
The non-settling defendants who objected to the
settlement were the Kanawha County Board of Education and Robert
Klatzkin, Bruce Terminex of West Virginia, Inc., Terminex
International Company, L.P., and Forshaw Distribution, Inc.
According to the defendant BOE, Forshaw Distribution,
Inc., a distributor of chlordane, was sued because it sold
chlordane to a commercial applicator. Forshaw and other defendants
have since settled. The Board, Alford Termite & Pest Control
(which has not participated in the defense of this case), and
General Exterminating (which has not entered an appearance in this
case) are remaining defendants.Footnote: 4
Leflar, Robert A., Contribution and Indemnity Between
Tortfeasors, 81 U.Pa.L.Rev. 130, 146 (1932).Footnote: 5
Stoneking, James B., Beyond Bradley: A Critique of
Comparative Contribution in West Virginia and Proposals for
Legislative Reform, 89 W.Va.L.Rev. 167, 170 (1986).Footnote: 6
Although indemnification and contribution are separate
and distinct legal concepts, leading commentators have noted that
these terms are sometimes incorrectly treated as interchangeable:
There is an important substantive
difference between, first, an order
distributing loss among tortfeasors by
requiring others each to pay a proportionate
share to one who has discharged their "joint"
liability and, second, an order requiring
another to reimburse in full one who has
discharged a common liability. In the
prevailing usage, the first is referred to as
contribution; the second, as indemnity.
Because of either confusion or deliberate
departure from prevailing usage, however,
there are decisions in which full
reimbursement has been allowed under the name
of contribution, or some form of distribution
has been allowed under the name of indemnity.
W. Page Keeton, et al., Prosser and Keeton on Torts, § 51 (5th ed. 1984) (footnotes omitted).Footnote: 7 We realize this language could again be cited to support the proposition that a good faith settlement between a plaintiff and defendant in a multiparty litigation extinguishes a non- settling defendant's right to seek indemnification from the settling defendant. We believe, however, that the inclusion of "or indemnification" in the Smith case was mere surplusage and, therefore, should be disregarded.Footnote: 8 Stoneking, supra, note 9, at 168.
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