California Court Imposes Strict Product Liability On Car Dealer Despite Its Limited Role In Transaction Between Manufacturer And Customer : By Kevin A. Adams
By Kevin A. Adams on December 11, 2013
Earlier this week, in an unpublished opinion, a California appellate court imposed strict products liability on a Ventura County car dealership despite its limited role as a non-profiting, “pass-through” participant of a car sale between General Motors and the customer.
In 2008, plaintiff Fernando Ibarra was paralyzed after a rollover accident while driving a 2000 Chevrolet pickup truck. Some eight years earlier, the truck was purchased directly from General Motors Company (“GM”) by one of GM’s “National Account Customers.” The truck was later sold to plaintiff’s employer and then used by plaintiff at the time of his accident.
Defendant Todey Motor Co. was a franchised Chevrolet dealer in Oxnard, California. Although Todey sold Chevy trucks at its dealership, it was not involved in the in GM’s sale of this particular truck to the National Account Customer.
After the truck was ordered, GM manufactured the vehicle and delivered it to Todey. Todey then conducted a “pre-delivery inspection” (also known as “dealer prep”) – generally consisting of the removal of temporary transport covers, installation of certain “non-essential accessories,” general operations checks, and verifying compliance with California Vehicle Code requirements – and delivered the truck to the customer.
As part of its dealer prep, Todey did not examine the truck for design defects, handling characteristics, stability, roof strength or crash worthiness. Todey charged a flat $74.56 fee for the dealer prep, but did not profit from the prep or the delivery of the truck.
After the accident, plaintiff and his wife brought suit against Todey in California Superior Court asserting claims for strict liability, negligence, breach of warranty and loss of consortium. The claims all arise out of alleged design and manufacturing defects with the truck.
Similar to most other states, California imposes strict liability (liability without fault) for any injury proximately caused by a product that is defective and not reasonably safe. To establish strict liability, the injured plaintiff only needs to show that:
- (1) the product was defective, and
- (2) the product’s defect was the direct cause of the injury.
In this analysis, the focus is on the safety of the product – even if the manufacturer took every possible precaution. If the product is determined to be defective, and caused an injury, the manufacturer will be held strictly liable. The doctrine of strict products liability is not limited to manufacturers, and was expanded to impose strict liability on all of the participants in the chain of distribution of the defective product. This, of course, can include dealerships, distributors and franchisees.
In response to the plaintiffs’ claims, Todey moved for summary judgment arguing, among other things, that it cannot be strictly liable because:
- (1) it did not place the truck in the “stream of commerce”; and
- (2) it had no duty to detect the alleged defects during its pre-delivery inspection.
The trial court agreed with Todey and granted the summary judgment request. The court found that Todey was just “‘a pass-through for the subject vehicle’and that ‘imposing [strict] liability … would serve none of the policies that justify the doctrine.’” The plaintiffs appealed.
The California Court of Appeal reversed the trial court’s ruling. According to the appellate court, Todey was part of GM’s “marketing enterprise” because Todey marketed, sold and delivered new Chevy vehicles to consumers through its Chevrolet dealership.  Although Todey did not sell the truck involved in plaintiff’s accident, Todey “was the last link in getting the vehicle from its franchisor to the consumer.”
The appellate court found that Todey’s limited “role in getting the product from its franchisor to the consumer” was sufficient to expose Todey to strict liability for the alleged product defects.
The appellate court’s decision suggests that strict products liability is not limited to those who profit from the sale of the defective product, but extends to anyone who may have passed the party along to the end user.
While professional delivery services and postal carriers should not concern themselves with the appellate court’s rationale – as they are not in the business of marketing and selling the same products they deliver – the implications of the appellate court’s decision are far reaching in the franchise community.
For example, a sub sandwich franchisee may be opening itself up to strict liability by sending an employee to assist a neighboring franchisee with a large food delivery to a corporate event. Should someone get sick from bad deli meat, the helpful franchisee likely finds itself liable as part of the chain of distribution. Similar scenarios can be played out in many franchise and dealer models.
The Todey court also concluded that its imposition of liability on Todey was not unjust as “Todey was in a position to either directly or indirectly exert pressure on GM to enhance the safety of Chevrolet vehicles.” This appellate court’s position may be ideal in theory, but it is unrealistic in application as a single dealer in a network of thousands does not have any real leverage with the manufacturer.
The Todey opinion appears to disregard the nature of the dealer’s role in the chain of distribution – so long as a role has been played. This blind imposition of strict liability apportions fault to even those parties that participated in miniscule tasks, including the final delivery of the product.
Disclaimer: While every effort has been made to ensure the accuracy of this article, it is not intended to provide legal advice as individual situations will differ and should be discussed with an experienced franchise lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
 GM’s national account customers purchase vehicles directly from GM as the original equipment manufacturer – and not from GM dealers.
 While not directly relevant to the chain of distribution at issue in this case, it is worth noting that Todey serviced the truck on two or three separate occasions during the life of the truck. The services were limited to repairing a door handle, replacing a fuel tank pressure sensor and performing an oil change. Ibarra v. Todey Motor Co., 2013 Cal. App. Unpub. LEXIS 8671, *5 (Cal. App. 2d Dist., Dec. 2, 2013).
 GM was not involved in the lawsuit as a result of its bankruptcy status.
 Greenman v. Yuba Power Products, Inc., 59 Cal. 2d 57 (Cal. 1963).
 Id. at 63.
 Ibarra v. Todey Motor Co., 2013 Cal. App. Unpub. LEXIS 8671, *6 (emphasis added).
 Id. at *12-13.
 Id. at *17.
 Id. at *15.