In a move with implications for all retailers that sell products under their own brand names in the State of Washington, Division 1 of Washington's Court of Appeals has agreed to hear an interlocutory appeal in Monika Johnson v. Recreational Equipment, Inc., Case No. 65463-2-1. The court will be asked to reconcile two provisions of Washington product liability law—one that imposes on a product seller the liability of a product manufacturer when the product is marketed under the seller's brand name, and another that allows any party alleged to be at fault for a product user's injury to attribute fault for that injury to another entity. Reconciling these two provisions will determine whether a company that sells a house-branded product may reduce its liability to a consumer injured by the product in proportion to the fault attributable to the product's actual manufacturer.

The case arose out of a bicycle accident. Johnson bought a replacement part for her bicycle from REI. The replacement part—a carbon fiber fork—was manufactured by a Taiwanese company called Aprebic Industries Co., Ltd., but it bore REI's "Novara" brand name. Johnson claims that the fork sheared off while she was riding her bicycle due to a latent manufacturing defect. She sued REI, but not Aprebic, under RCW 7.72.040(2)(e)—a provision of the 1981 Washington Product Liability Act (WPLA) that provides that a seller shall have "the liability of a manufacturer" for products it markets under its own brand name. Johnson argues that this provision places REI in the shoes of the manufacturer, Aprebic, and that REI is barred from attributing fault to Aprebic, under Washington's comparative fault scheme, to reduce its own liability to Johnson.

REI takes a different view. Washington's comparative fault scheme, codified at RCW 4.22.070, establishes a pure system of comparative fault. It allows any party who is alleged to have caused injury to another to attribute fault for that injury to any other entity (except the plaintiff's immune employer in the case of a workplace injury), and to reduce its liability to the plaintiff in direct proportion to the fault attributable to others. The intended result of this scheme is to ensure that parties pay only the percentage of a plaintiff's damages for which they are responsible. REI asserted in the trial court that it could attribute fault to Aprebic, the actual manufacturer of the allegedly defective fork, and so reduce its liability to Johnson to the extent that Johnson's damages were attributable to the conduct of Aprebic.

The trial court agreed with Johnson, holding that WPLA has the effect of transforming the seller of a house-branded product into the actual manufacturer of that product under RCW 7.71.040(2)(e). Because a party may not attribute fault to itself, the trial court reasoned, REI is not permitted to attribute fault to Aprebic, the actual manufacturer of the fork.

At REI's request, the Court of Appeals has agreed to immediately review the trial court's decision. The court will now review whether the seller of a house-branded product is permitted to attribute fault to the manufacturer of that product, if the product causes harm to a consumer. The court may also decide whether such a retail seller may seek contribution from the product's manufacturer, in the event the court holds the seller of a branded product liable as a "manufacturer" under RCW 7.72.040(2)(e). Resolution of these issues has the potential to significantly impact any company that sells products under its own brand name in Washington.

While the case will focus specifically on Washington law, several other states—including Colorado, Delaware, Idaho, Kansas, Louisiana, Maryland, New Jersey, and Ohio—also have statutes treating as manufacturers those sellers that hold themselves out as manufacturers, which usually include sellers of house-branded products. The Model Uniform Product Liability Act and the Restatement (2d) of Torts contain similar provisions. As a result, both sellers and manufacturers of such products should be aware of the issue when negotiating indemnity contracts with one another. Although consumers will maintain their ability to bring direct actions against both sellers and manufacturers, in situations like this one—with a domestic seller of house-branded products and a foreign manufacturer that may not be amenable to suit domestically—the indemnification provisions in these contracts may well determine whether sellers will bear the full risks associated with their branded products.

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