Texas Supreme Court Clarifies Chapter 82 Application for General Contractors

A recent Texas Supreme Court opinion has provided limits to who may be considered a “seller” under Chapter 82 of the Civil Practice and Remedies Code (also known as the Texas Products Liability Act). Chapter 82 was intended to provide a defense to an innocent reseller of an allegedly defective product by providing a statutory right to indemnity from the product’s manufacturer for losses arising out of a product liability action. In Centerpoint Builders GP, LLC v. Trussway,¹ the Texas Supreme Court considered whether a general contractor for an apartment construction project could benefit from a Chapter 82 indemnity when Centerpoint had been reimbursed for purchases of roofing trusses which, during construction, were involved in a worker’s severe injury.

Evidence presented in the case established that the worker, Merced Fernandez, was rendered a paraplegic after falling from a truss that had not yet been installed. Following his injuries, the plaintiff sued the owner, Centerpoint, the roofing truss manufacturer, and the subcontractor responsible for installation. Centerpoint cross-claimed against Trussway asserting that it was an innocent seller entitled to indemnification under Chapter 82. The trial court granted partial summary judgment in favor of Centerpoint on the issue and certified its order for an agreed interlocutory appeal. The court of appeals reversed and Centerpoint sought review by the Texas Supreme Court.

The only issue on appeal was whether or not Centerpoint was a seller, defined in Chapter 82 as “a person who is engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component thereof.” Centerpoint argued that based on the prior Supreme Court decision reached in Fresh Coat, Inc. v. K-2, Inc., 318 S.W.2d 893 (Tex. 2010), the court of appeals’ reversal was incorrect. The Supreme Court found that the two decisions were not in conflict, but determined that there was “a genuine dispute about whether the court of appeals correctly applied Fresh Coat….”

On the merits, the Court focused on a single phrase in the definition of “seller,” specifically, whether or not a party was “engaged in the business of” distributing a product, and held that the phrase does not include providing a product that would be “incidental to selling services.” The Court also distinguished Fresh Coat, stating that where Fresh Coat held that a subcontractor installing synthetic stucco on exterior walls was a “seller” entitled to indemnity under Chapter 82, several key factual differences supported that reasoning. Including, specific witness testimony in Fresh Coat that Fresh Coat was not only an installer of synthetic stucco, but also sold synthetic stucco separate from installation services.

In analyzing Centerpoint’s role in the case, the Court specifically examined case law from other jurisdictions and Texas authority regarding whether or not the plaintiff could maintain a common law strict liability claim against a general contractor. Asking specifically, if a general contractor could not be considered a seller as a defendant in a product liability lawsuit, how could it be a “seller” in relation to Chapter 82? Ultimately, a majority of the Court agreed with the reasoning that a company is not “engaged in the business of” selling a product if the product is incidental to selling its services. Because Centerpoint was acting as a general contractor, it was selling construction services when it agreed to undertake construction of the entire building and be reimbursed for the costs of materials, and was not acting as a seller. Therefore, no Chapter 82 indemnity was owed.

The holding in Centerpoint reverses many years of thinking in Texas that all contractors are entitled to indemnity under Chapter 82. Instead, Centerpoint establishes that each case needs to be considered on an individual basis in order to determine if the products at issue in the product liability action were merely incidental to the contractor’s business or not.

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¹ Centerpoint Builders GP, LLC and Centerpoint Builders, Ltd. v. Trussway, Ltd., No. 14-0650, slip op. (Tex. June 17, 2016) , available at http://www.txcourts.gov/media/1395917/140650.pdf.