Dealerships that inspect and deliver new vehicles on behalf of manufacturers may be held strictly liable for any defect, even if they didn't actually sell the vehicles and weren't negligent themselves, the California Court of Appeal has ruled.
The ruling reinstated part of a product liability case against Todey Motor Co. Inc. in Oxnard, Calif., formerly an authorized Chevrolet dealership, by Fernando Ibarra, who was paralyzed in a rollover accident involving his employer's 2000 Chevrolet C3500 crew cab pickup.
While California law has long held that a selling dealership was in the "chain of commerce" for strict liability purposes, Todey unsuccessfully tried to differentiate inspection and delivery of a vehicle on behalf of the manufacturer that sold it.
Strict liability is a defendant's legal responsibility for injury or damages, even if the defendant isn't negligent or at fault.
"The fundamental purpose of applying strict liability to retailers and distributors of new products is to shift the cost of injuries away from consumers," the appeals court said.
The three-judge panel's unanimous decision means that California dealerships that service and deliver to national account customers are treated the same as stores that sell the vehicles, said the plaintiffs' lawyer, Jeffrey Ehrlich of Encino, Calif.
In this case, General Motors directly sold the new pickup to a federal agency through a national account and paid Todey $74.56 to perform a pre-delivery inspection and then deliver the vehicle, according to legal documents. Todey later serviced the pickup two or three times for the federal agency, but those repairs didn't involve the pickup's stability, handling, crashworthiness or roof strength, the court said.
In 2007, the federal agency sold the C3500 pickup at auction to Ibarra's employer. Ibarra was seriously injured the following year, eight years after the original transaction, in an accident allegedly caused by a manufacturing or design defect.
Ibarra and his wife sued Todey but not GM, "apparently due to its bankruptcy status," the court said.
The store denied liability and argued that it had received no "direct financial benefit" from the pickup's sale, wasn't "integral to" bringing the vehicle safely to market and had no control or substantial influence over its manufacture or distribution.
A lower-court judge threw out the case against the dealership.
But the appeals panel allowed Ibarra to pursue a strict liability claim and reinstated his wife's related loss of consortium claim.
"Todey's inspection and delivery of the truck placed it within the vertical chain of distribution for purposes of imposing strict liability for manufacturing or design defects," Justice Steven Perren wrote for the panel. "Typically, the vertical chain of distribution ends when the product reaches the consumer.
"Although Todey did not sell the pickup, it was the last link in getting the vehicle from its franchisor to the consumer," the decision said. Its involvement wasn't "random or accidental," and it had a "substantial ongoing relationship" with GM, grossing $600 million in Chevrolet sales from 1991 to 2009.
"Todey was in a position to either directly or indirectly exert pressure on GM to enhance the safety of Chevrolet vehicles. Todey was also in a position to share with GM the costs of ensuring product safety," the court said.
Defense lawyers did not return calls seeking comment.