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Torts - Definition of "Seller" Chain of Distribution

Grubb v. Do It Best Corp., 633 Ariz. Adv. Rep. 40 (App. Div. II, May 4, 2012) (J. Howard)

CO-OP THAT NEVER POSSESSES A PRODUCT, HAS NO SAY IN THE DESIGN, MANUFACTURE AND PACKAGING OF PRODUCT AND MERELY COLLECTS A SMALL FEE TO COVER BILLING EXPENSES, IS NOT A SELLER IN THE CHAIN OF DISTRIBUTION AND CANNOT BE STRICTLY LIABLE FOR A DEFECT IN THE PRODUCT

Plaintiff was seriously injured when a space heater he was trying to install blew up. He then sued a number of parties allegedly in the chain of distribution of the space heater including defendant Do it Best Corp. [DIB] the alleged seller. DIB was granted summary judgment on plaintiff's claims. The Arizona Court of Appeals affirmed.

Plaintiff argued that because DIB was part of the chain of distribution of the product it had some degree of fault under Arizona's products liability common law. However, the court of appeals relied upon the products liability statute, ARS § 12-681 to find DIB was not a “seller” as defined by that statute and therefore could not be liable under a chain of distribution theory. ARS § 12-681(9) defines a seller as “a person or entity, including wholesaler, distributor, retailer or lessor, that is engaged in the business of leasing any product or selling any product for resale, use or consumption.”

DIB is a cooperative hardware store which negotiates prices with vendors on behalf of member stores and then allows these stores to purchase the products from its warehouse or order them directly from the vendor. DIB retains a small fee from every item sold directly from the vendor however most of this fee is rebated to member stores or covers the cost of billing. In this case the member store ordered the space heater directly from the vendor. DIB guaranteed payment and was billed by the vendor then billed the member store for the space heater and other products it had purchased through the co-op.

Based upon these facts the court held that DIB was not a “seller” nor did it “participate significantly in the stream of commerce as to this particular heater.” Recognizing that DIB did collect a fee for the transaction, the court characterized this as more of a “financing” of the purchase rather than a selling of the product. The court found it significant that DIB never owned or possessed the heater, was not involved in the design, manufacture or packaging of the product and issued no warranties concerning the product. Further, the court found the fact DIB advertised the heater in its catalogue made it only a “product distribution facilitator” and not a seller (See Restatement § 20).

Finally, plaintiff alleged that even if its strict products liability claim failed, it should be entitled to go forward on a negligence theory. Plaintiff alleged that DIB was negligent in failing to inspect the product and its packaging. Had it properly inspected, plaintiff claimed, it would have found that the packaging did not meet DIB's own standards for packaging. The court recognized such a theory might have vitality however summarily dismissed it based upon a failure to produce evidence establishing a standard of care for a co-op under these circumstances.

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