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Illinois Supreme Court Further Defines Product Liability Seller Exception

January 28, 2019 | Michael Hunter

Plaintiff Mark Cassidy was injured while at work in Mendota, Illinois. He filed a Complaint in Cook County against U.S.-based China Vitamins, a distributor of an imported flexible bulk container of vitamins that allegedly broke and injured him.  He alleged strict product liability, negligent product liability and res ispa loquitur.  China Vitamins denied that it manufactured the container, and it identified the manufacturer of the containers as Chinese-headquartered Taihua Shanghai Taiwei Trading Company Limited (Taihua). 

Cassidy then filed an Amended Complaint adding Taihua.  Taihua filed an Answer, but its counsel then withdrew.  The court entered a default judgment after Taihau failed to retain new counsel.  After Cassidy presented evidence, the court entered judgment of over $9.1 million against Taihua. 

In the interim, China Vitamins sought and obtained summary judgment on the basis that it was a mere distributor pursuant to 735 ILCS 5/2-621(b).

Thereafter, Cassidy sought to discover and collect assets from Taihua, as well as third-parties.  He was unsuccessful and filed a motion to reinstate China Vitamins under 735 ILCS 5/2-621(b)(4).  China Vitamins opposed the motion.  The trial court denied Cassidy’s motion, finding that he had not met the statutory reinstatement requirements. The trial court made the order final and appealable under Illinois Supreme Court Rule 304(a). 

The Illinois Appellate Court for the First District rejected its prior interpretation of 2-621(b) as set forth in Chraca vs. U.S. Battery Manufacturing Co., 214 Il App. (1st ) 132325, 24  N.E.3d 183.  The court interpreted the statutory language to require a showing that the manufacturer is “judgment proof” or “execution proof” rather than “bankrupt or no longer in existence” before a previously dismissed seller or distributor could be reinstated as a party.  It remanded the case to the trial court for an initial determination of whether Taihua group was unable to satisfy the default judgment entered against it under this new standard.  The Illinois Supreme Court granted China Vitamins’ petition for leave to appeal pursuant to Supreme Court Rule 315(a).

The Illinois Supreme Court addressed how subsection 2-621(b)(4), requiring the plaintiff to show that “the manufacturer is unable to satisfy any judgment as determined by the court” prior to reinstatement of a seller or distributor, is be applied. 

The majority opinion, authored by Justice Kilbride, overruled Chraca to the extent it held that the plaintiff must show the manufacturer is either bankrupt or no longer in existence under 2-621(b)(4).  The court held that if a plaintiff asserting product liability claims can establish “other circumstances” that effectively bar recovery of the full damages awarded against a manufacturer, a non-manufacturer in the chain of distribution may be reinstated as a defendant under section 2-621(b)(4).  The court remanded the case to the trial court for consideration of the sufficiency of the evidence concerning Cassidy’s efforts to collect the default judgment.

While the Supreme Court declined to detail the specific evidentiary showing necessary, instead noting that “the precise formula needed to satisfy the plaintiff’s evidentiary reinstatement burden is best adduced by the trial court,” it appears to have impliedly provided some direction. For example, the Court noted there was evidence Taihua group had a functioning website which strongly suggested it has close continuing business ties with Europe and North America.  The website also mentioned a domestic sales office in the state of Georgia, foreign sales offices in France and Germany and a central warehouse in Germany.  The court found that the record suggests viable avenues for Cassidy’s collection efforts may remain untapped.

In reaching its conclusion, the majority noted that if section (b)(4) was interpreted to mean bankrupt or no longer in existence as Chraca suggests, it would be duplicative of section (b)(3), which is contrary to fundamental rules of statutory construction.  The court noted the language in (b)(4) is much broader than (b)(3).  The court also noted the fundamental policies underlying Illinois strict product liability law and public policy remain the same: “[T]o provide full compensation to plaintiffs injured due to defective or unsafe products whenever possible based on differences of the parties’ degree of culpability."  The majority found that its interpretation of (b)(4) “harmonizes the plain language of Section 2-621(b), when read in its entirety, the legislature’s intent, and the public policies underlying the enactment of our strict product liability laws to create cohesive and consistent statutory scheme.”

Justice Karmier authored the dissent, taking issue with how the majority framed the question before it.  He opined that the majority erroneously focused on a plaintiff’s ability to enforce a judgment rather than a manufacturer’ ability to satisfy it.  He opined a plaintiff must provide evidence that a manufacturer has no ability to meet its obligation, as opposed to evidence of his or her efforts to enforce it, in order to seek reinstatement a non-manufacturer defendant pursuant to 2-621(b)(4).  He further took issue with the majority’s emphasis on the public policy behind strict product liability law generally.  He argued that to the extent policy purposes are to be considered it should be those behind 2-621, which is to limit financial exposure of sellers, not to ensure full recovery for plaintiffs.

There remain open questions as to how 2-621(b)(4) is to be applied by a trial court.  Ultimately, the analytical dispute between the majority and the dissent may be one of semantics. Focusing on evidence of plaintiff’s efforts to collect the judgment from the manufacturer rather the manufacturer’s ability to satisfy it may be two sides of the same analytical coin. Both analyses will focus on the identification of a manufacturer’s assets and the plaintiff’s ability to secure those assets for payment.     


Related Services: Product Liability
Attorneys: Michael Hunter

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