Products Liability Law Daily Loudspeaker maker’s design decisions make it ineligible for implied indemnification
Thursday, June 29, 2017

Loudspeaker maker’s design decisions make it ineligible for implied indemnification

By John W. Scanlan, J.D.

A loudspeaker manufacturer that settled a product liability suit with a marine vessel employee whose eye was injured by paint particles was not eligible for implied indemnification from the manufacturer of component metal castings used in the loudspeaker system because its own design decisions made it at least partially at fault, a federal district court in Illinois ruled in granting in part and denying in part the casting manufacturer’s motion for summary judgment. However, the loudspeaker maker may be entitled to contractual indemnification even though a written indemnification agreement for the purchase could not be found (Federal Signal Corp. v. Tammcor Industries, Inc., June 28, 2017, Leinenweber, H.).

The employee, who alleged that he had suffered permanent partial blindness from wind-borne paint particles, brought suit against Federal Signal Corp., the manufacturer of the Atkinson Dynamics Model AD-TB-25 Speaker affixed to the weather bulkhead, alleging that the powder coating applied to a part of the speaker did not congeal or adhere properly, causing it to degrade into particles of paint. Tammcor Industries, which was alleged to be responsible for the painting, was not named in the employee’s suit. Federal Signal settled the suit for $450,000. It also entered into agreements with two other defendants to the suit, in which it was assigned all rights they had against Tammcor in exchange for $25,000 each.

Federal Signal then brought suit against Tammcor seeking indemnity to recover defense and settlement costs for itself and the two co-defendants, including claims for contractual indemnification, implied indemnification, and equitable contribution. According to Federal Signal, the specific parts that failed were metal castings it bought from Tammcor. Tammcor was responsible for obtaining the parts from a Federal Signal supplier and coating and painting them, but a Federal Signal expert opined that the castings were not properly painted for use in a marine environment and that they should have been pretreated to resist corrosion. Tammcor moved to dismiss, arguing that Federal Signal could not produce the written indemnity agreement and that Federal Signal was at least partially at fault due to its alleged design failure to ensure satisfaction of corrosion performance criteria.

Implied indemnity. Federal Signal was not entitled to take advantage of the doctrine of implied indemnity because it was not blameless for the situation. While the evidence showed that Tammcor was responsible for painting the castings and may have failed to do so in accordance with the engineering specifications, Federal Signal’s expert stated that the specifications were not appropriate for a maritime environment and the company admitted in a letter to the purchaser of the speaker that its product had failed to pass salt spray testing based on corrosion performance criteria. Although Federal Signal argued that this letter was inadmissible hearsay, the court found it admissible under the rules of evidence.

Equitable contribution. Federal Signal cited no cases supporting a cause of action for equitable contribution, and while comparative fault principles could allow a finder of fact to allocate contributions to a judgment, this would require a repeat trial of the underlying personal injury case. Federal Signal waived this argument because it did not rely upon comparative fault during the original case.

Contractual indemnity. Although the written indemnity agreement could not be found, there was sufficient circumstantial evidence from the two companies’ course of dealings that an indemnity agreement covering the sale of these parts existed to preclude summary judgment on this issue. Tammcor argued that the Uniform Commercial Code did not apply because this transaction involved a sale of painting services rather than a castings product, but it was clear from the offer document that Tammcor was to supply painted castings and was paid for supplying them.

The case is No. 14 C 7683.

Attorneys: Darrell J. Graham (Roeser Bucheit & Graham LLC) for Federal Signal Corp. Howard Todd Trafman (Law Offices of Meachum Starck Boyle & Trafman) for Tammcor Industries, Inc.

Companies: Federal Signal Corp.; Tammcor Industries, Inc.

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