Attorney for Appellant
Attorney for Appellee
Frederick R. Hovde Jeffrey R. Mitchell
Hovde Law Firm Yarling & Robinson
Indianapolis, Indiana Indianapolis, Indiana
Additional Appearance On Behalf
Seth M. Lahn
Indiana University School of Law
Appeal from the Hamilton Circuit Court, No. 29C01-9810-CT-829
The Honorable Judith S. Profitt, Judge
On Petition to Transfer from the Indiana Court of Appeals, No. 29A02-0110-CV-674
April 21, 2004
As amended, the Kennedys complaint sought damages against Guess, Inc., Callanen International, Inc.
(formerly known as Watches CGI, Inc.), Interasia Bag Manufacturers, Ltd., and Interasian Resources,
Ltd. The complaint asserted both negligence and strict liability.
Interasia Bag, a Hong Kong corporation, manufactured the umbrella. Interasian Resources, located
in New York, is a domestic affiliate of Interasia Bag. Callanen, a
Connecticut corporation, is licensed by Guess to market products bearing the Guess logo,
including the watch and umbrella at issue. Callanen and Guess filed cross-claims
against Interasia Bag and Interasian Resources. The Kennedys attempted service of process
on Interasia Bag, but were unsuccessful.
Callanen and Guess moved for summary judgment, which the trial court granted.
The Court of Appeals reversed.
Kennedy v. Guess, 765 N.E.2d 213(Ind. Ct.
We granted transfer to address: (1) how the burden of establishing the absence
of any genuine issue of material fact operates with respect to a statutory
provision treating the principal distributor or seller as a manufacturer, and (2) whether
§ 400 of the Restatement (Second) of Torts imposes a duty on Callanen
and Guess akin to that of a manufacturer.
Standard of Review. Summary judgment should be granted only if the evidence authorized by Indiana Trial Rule 56(C) shows that there is no genuine issue of material fact and the moving party deserves judgment as a matter of law. Ind. T.R. 56(C). We view the facts and reasonable inferences drawn from those facts in the light most favorable to the non-moving party. Wright v. Carter, 622 N.E.2d 170, 171 (Ind. 1993).
On appeal from summary judgment, the reviewing court faces the same issues that were before the trial court and analyzes them the same way, although the trial court's decision is "clothed with a presumption of validity." Id. While the non-movant bears the burden of demonstrating that the grant of summary judgment was erroneous, we carefully assess the trial court's decision to ensure that the non-movant was not wrongly denied his or her day in court. Id.
Callanen and Guess moved for summary judgment alleging that they were not manufacturers
of the umbrellas and thus were entitled to summary judgment. To support
their contention that they are not manufacturers of the umbrella or the principal
distributor or seller, Callanen and Guess each submitted in affidavits from managerial employees
to show that none of the factual predicates for the statutory exceptions under
which a seller can be deemed a manufacturer were met.
The affiants also stated that neither Guess nor Callanen has any ownership interest
in Interasia Bag, the actual manufacturer, or its affiliate, Interasian Resources. They
added that neither Guess nor Callanen is owned in whole or significant part
by Interasia Bag or Interasian Resources.
This evidence was adequate to satisfy Guess and Callanens burden of proving their
contention that they are not manufacturers of the umbrella as defined by the
and would, if unrebutted, have warranted summary judgment under Indiana Code §
In response to the motion of Callanen and Guess, the Kennedys replied that they were entitled to hold the movants in the lawsuit by virtue of a provision in the Act that imposes liability through treating certain parties as though they were manufacturers:
If a court is unable to hold jurisdiction over a particular manufacturer of a product or a part of a product alleged to be defective, then that manufacturers principal distributor or seller over whom a court may hold jurisdiction shall be considered, for the purposes of this chapter, the manufacturer of the product.
Ind. Code § 34-20-2-4 (1999) (well call it the domestic distributor exception.)
Thus, the Act may extend to Guess and Callanen only if two conditions
are met: (1) Callanen and Guess must be Interasia Bags principal distributor
or seller over whom the court can hold jurisdiction; and (2) the court
must be unable to hold jurisdiction over Interasia Bag, the actual manufacturer.
The Kennedys supplied certain evidence in support of their contention that Guess and
Callanen fit within this section.
A. Jurisdiction over Interasian Bag. The Kennedys attempted service on the
manufacturer of the bag, Interasia Bag, at an address in Hong Kong, but
were unsuccessful. They received an affirmation of non-service indicating that there
was no corporation named Interasia Bag Manufacturers Ltd. at the address provided by
the Kennedys and therefore service was not effected. Designating this evidence, the
Kennedys claimed that Interasia Bag is no longer in business and is not
subject to the jurisdiction of this court leaving Guess and Callanen as principal
distributor or seller. (Appellants App. at 66.)
The Kennedys also point to the affidavits designated by Callanen and Guess to
support that there is no basis for an Indiana court to exercise personal
jurisdiction over Interasia Bag. They say there is no evidence that
Interasia Bag had any contacts with Indiana or had any knowledge that its
umbrellas were to be sold in Indiana. They state that Callanen ordered
the umbrellas from its Connecticut office through Interasia Bags affiliate Interasian Resources (located
in New York) and made payment for the umbrellas from its Connecticut office.
The umbrellas themselves were shipped from Hong Kong to Callanens Connecticut office.
Based on the above, the Kennedys argue that the umbrellas randomly found their
way into Indiana through the marketing promotions of Callanen and Guess and such
is not a sufficient basis for exercising jurisdiction under Indiana Trial Rule 4.4(A).
(Appellants App. at 69, citing
North Texas Steel v. Donnelly & Sons,
679 N.E.2d 513 (Ind. Ct. App. 1997) (mere knowledge that a product is
to be sold and used in a state held insufficient to subject manufacturer
While this evidence is not especially impressive, it was potent enough to demonstrate
a genuine issue of material fact on the question whether Callanen and Guess
are manufacturers under the domestic distributor exception of Section 4. Callanen and
Guess are manufacturers under the domestic distributor exception of Section 4. Summary
judgment for Callanen and Guess on this point was therefore inappropriate.
In rebuttal, Callanen and Guess have argued that the lack of service on
Interasia Bag resulted from less than diligent effort by the Kennedys. They
say the Kennedys did not make any effort to determine whether Interasia had
moved to another location in the half decade since the umbrellas were made
The Kennedys attempted service using a payment address found in a memo Callanen
and Guess produced during discovery. Callanen and Guess observe that the memorandum
was dated August 1996 and contend that more recent documents dated January 1998
reflected a different address for Interasia Bag. They argue that the Kennedys
made no effort to investigate whether they could serve Interasia Bag at the
more recent address.
The existence of another possible address is not enough by itself to rebut
the inference that jurisdiction could not be obtained. The general rule, of
course, is that doubts must be resolved against the moving party.
Indiana University Medical Center, Riley Hospital for Children v. Logan, 728 N.E.2d 855
(Ind. 2000). Callanen and Guess are always entitled to prove that the
second address is in fact the correct and actual address for Interasia Bag.
But because the general burden of proof falls on Callanen and Guess
as movants under Trial Rule 56 there must be some additional evidence supporting
their claim that the second address was a viable means to serve process
on Interasia Bag.
Of course, Section 4 domestic distributor exception does not turn solely on whether
a plaintiff achieves service of process, though the ability or inability to get
service is certainly relevant. Rather, the legislature has chosen to permit liability
of a domestic distributor or seller when the court is unable to hold
jurisdiction over the actual manufacturer.
See, e.g., Bond v. E.I. DuPont, 868
P.2d 1114 (Colo. Ct. App. 1993). Whether a court can hold jurisdiction
is obviously a mixed question of fact and law.
In the end it was for the moving party to establish that there
were no material issues of fact and that they were entitled to judgment
as a matter of law. On the record as far as it
got developed here, they did not carry the day.
B. Principal Distributor or Seller. To impose liability on a non-manufacturer,
the claimant must also demonstrate that the defendant is a principal distributor or
The code tells us what a seller is when it says that for
purposes of Indiana Code § 34-20, [a seller] means a person engaged in
the business of selling or leasing a product for resale, use or consumption.
Ind. Code § 34-6-2-136 (1999). The code does not tell us
what a principal means or what a distributor is.
Blacks Law Dictionary defines principal as chief; leading; most important or considerable; primary;
Blacks Law Dictionary 1210 (7th Edition 1999). Distributor is defined
as any individual, partnership, corporation, association, or other legal relationship which stands between
the manufacturer and the retail seller in purchases, consignments, or contracts for sale
of consumer goods; a wholesaler. Blacks Law Dictionary 475-76 (6th Edition 1990).
We agree with the Kennedys that based on the language in Indiana Code
§ 34-20-2-4, it seems clear the legislatures object was to provide a remedy
for Indiana consumers who are injured by defective products manufactured by an overseas
entity over which Indiana courts have no jurisdiction. Achieving this objective would
hardly require imposing liability on all distributors, and the language chosen by the
General Assembly creating an exception to the general policy against liability seems consistent
with that fact. Ind. Code § 34-20 (that manufacturers principal distributor or
In responding to the motion for summary judgment, the Kennedys designated as a
material fact that the umbrella bore only a Guess logo. They also
presented invoices produced by Callanen regarding its orders from Interasia Bag. These
documents demonstrate that in August 1996 Callanen ordered and paid for 1,500 tri-fold
umbrellas, amounting to $5625. In September 1996, Callanen purchased an additional 15,000
tri-fold umbrellas and 3,000 Guess tri-fold umbrellas all at a cost of $56,250.
The evidence reveals that in 1996 Callanen purchased more than 93,000 umbrellas
from Interasia Bag.
Between April and September of 1996, Callanen purchased other items from Interasia Bag,
such as rafts, binders, bags, umbrellas, agendas and coolers. The value of
items Callanen bought from Interasia Bag during this six-month period was about $235,000.
All the documented purchases thus totaled nearly $617,000.
The volume of business established from the above evidence sufficiently establishes a genuine
issue of material fact as to whether Callanen is a principal distributor.
Such evidence, however, does not create a factual issue as to whether Guess
may be deemed a principal distributor. It satisfies the second condition as
to Callanen but not as to Guess.
Where Guess is concerned, the designated information shows that Guess is not a
distributor or seller of
any sort, principal or otherwise. Guess neither ordered
nor received the umbrellas at issue. It was never in possession of
any of the umbrellas nor did it manufacture, supply, distribute, assemble, design, or
sell them. Rather, Guess simply licensed its name to Callanen for placement
on various products. There is no issue of fact disputing Guess contention
that it is not a principal distributor or seller. Summary judgment in
favor of Guess on this issue was proper.
Callanen, on the other hand, was not entitled to summary judgment on this
issue. Kennedys evidence provided an inference that Callanen is the principal distributor,
so Callanen was required to rebut the inference. To do so, Callanen
relied solely on the designated affidavits, which contained a plain statement indicating that
Callanen is not a principal distributor or seller.
A simple statement that Callanen is not a principal distributor or seller is
not sufficient. There must be some additional evidence showing why Callanen cannot
be deemed a principal distributor. Accordingly, we conclude that Callanen did not
demonstrate an absence of a genuine issue of material fact, and summary judgment
on this issue as to Callanen was not warranted.
To prevail in a negligence action, the claimant must establish: (1) a
duty, (2) a breach of that duty, and (3) injury resulting from that
Bamberger & Feibleman v. Indianapolis Power & Light Co., 665 N.E.2d
933 (Ind. Ct. App. 1996). Ordinarily, summary judgment is inappropriate in negligence
cases. Dillman v. Great Dane Trailers, Inc., 649 N.E.2d 665 (Ind. Ct.
App. 1995). Issues of duty, however, are questions of law for the
court and may be appropriate for disposition by summary judgment. Holt v.
Quality Motor Sales, Inc., 776 N.E.2d 361 (Ind. Ct. App. 2002).
Dudley Sports, the Kennedys argue that Guess and/or Callanen owe them a
duty because Guess and/or Callanen can be considered apparent manufacturers of the umbrella
under § 400. Section 400 provides, One who puts out as his
own product a chattel manufactured by another is subject to the same liability
as though he were its manufacturer.
Restatement (Second) of Torts § 400
The court in
Dudley Sports employed § 400 to hold a vendor liable
for the negligence of the manufacturer where the vendor placed its name on
the product and gave no indication of who was the actual manufacturer.
The Dudley court reasoned:
When a vendor puts his name exclusively on a product, in no way indicating that it is the product of another, the public is induced to believe that the vendor was the manufacturer of the product. This belief causes the public to rely upon the skill of the vendor. When products are held out in this manner, the ultimate purchaser has no available means of ascertaining who is the true manufacturer. By this act of concealment, the vendor vouches for the product and assumes the manufacturers responsibility as his own.
Dudley Sports, 279 N.E.2d at 273. A similar conclusion was reached in Lucas v. Dorsey Corp., 609 N.E.2d 1191 (Ind. Ct. App. 1993). This case represents our first occasion to explore the liability of trademark licensors.
The Court of Appeals reversed summary judgment on this claim finding that a
question of fact remains as to whether Guess or Callanen or both exercised
the requisite degree of involvement in the stream of commerce to be considered
an apparent manufacturer.
Guess, 765 N.E.2d at 222. We think this
does not hold true with respect to Callanen.
Callanen argues that
Dudley Sports and § 400 are inapplicable to it because,
as the undisputed record shows, Callanens name is not on the umbrella and
it in no way held itself out as the umbrellas manufacturer. (Appellees
Pet. for Transfer at 14.)
Whether a holding out has occurred should be judged from the viewpoint of
the purchasing public, examining whether the public has been induced to believe that
the vendor was the actual manufacturer of the product.
See Hebel v.
Sherman Equipment, 442 N.E.2d 199 (Ill. 1982). There is nothing to suggest
that the Kennedys were induced to believe Callanen was the manufacturer of the
umbrella in question. The only name on the umbrella was Guess; the
name Callanen was nowhere to be found.
To support their claim that Callanen
held itself out as the umbrellas manufacturer,
the Kennedys rely heavily on the fact that Callanen and Guess had a
trademark licensing agreement which gave Callanen the right to distribute products bearing the
Guess name. Such evidence does not suggest Callanen held itself out as
the manufacturer. From the consumers perspective, Callanen had nothing to do with
the manufacture of the umbrella. There is no reference to Callanen that
would lead a reasonable purchaser to believe that it was the manufacturer of
That Callanen was permitted to use the Guess name is by itself insufficient
to hold it liable as an apparent manufacturer under the
Dudley Sports rule.
Callanen did not design, manufacture, assemble, or test the umbrella. Any
involvement Callanen had with the umbrella occurred after it was designed and manufactured.
While Callanen did purchase the umbrellas for distribution, it received the umbrellas
already packaged for distribution from Interasia Bag. (Appellants App. at 94.)
Generally, Callanen did not even open the packaging unless it was going to
send less than ten umbrellas to a particular store. Id.
Callanen presented sufficient evidence to demonstrate that it did not hold itself out
as a manufacturer. The burden thus shifted to the Kennedys to demonstrate
otherwise, and they have failed to carry their burden. The trial court
was correct to grant Callanen summary judgment on the negligence claim.
We reach a different conclusion as to whether
Guess could be considered an
Some jurisdictions impose liability on trademark licensors without any additional involvement in the
stream of commerce.
See, e.g., Carter v. Joseph Bancroft & Sons Co.,
360 F. Supp. 1103 (E.D. Pa. 1973); Connelly v. Uniroyal, Inc., 389 N.E.2d
155 (Ill. 1979). Guess argues that merely licensing the use of its
trademark is insufficient to hold it liable under § 400 and that something
more should be required. (Appellees Br. at 18-20; Appellants App. at 11-13.)
Guess relies on Chief Justice Peters observation for the Connecticut Supreme Court
that although a non-manufacturer may under certain circumstances be held liable in the
same manner as a manufacturer or seller of a defective product . .
. most cases impose liability [under section 400] only after finding that the
licensor had a significant role in the chain of distribution. Burkett v.
Petrol Plus of Naugatuck, Inc., 579 A.2d 26, 33-34 (Conn. 1990).
Justice Peters explained that in jurisdictions where additional involvement is required, various factors
determine whether there is sufficient involvement in the stream of commerce such that
an entity is an apparent manufacturer.
Id. at 33-35. Some factors
courts examine to make this determination are the licensors right of control over
the product design, the fees received for the use of the trademark, the
prominence of the trademark, supply of components, participation in advertisement and the degree
of economic benefit to be gained from the licensing agreement. Id.
Petrol Plus case, General Motors had licensed the use of its
trademarked Dextron II transmission fluid. The fluid was actually manufactured by other
companies, subject to GM testing, and eventually sold to Burkert by Petrol Plus.
The Connecticut court held that General Motors was not an entity that
put out the product since GM was in no way involved with the
sale, leave, gift or loan of the defective automatic transmission fluid. Id.
at 33. This distinguished GMs role from that played by Armour &
Co., which the Connecticut high court had earlier held to be an apparent
manufacturer of a can of corned beef labeled Armour Veribest Products from Armour
and Company, Foreign Distributors. Burkert v. Armour & Co., 161 A.2d 385
(Conn. 1932). The can had been placed in American commerce by Armour
& Co., an Illinois corporation, which had obtained it from an Argentine Company
named Frigoritico Armour de la Plata, which had purchased it from an Argentine
packing corporation, and so on. Id. at 391.
Dudley Sports decision bears some of the characteristics of Armour. Dudley
Sports put its own name on a baseball pitching machine manufactured by someone
else and acted as the exclusive distributor of the device. Dudley Sports,
279 N.E.2d at 271.
The present case is more like
Petrol Plus. Like General Motors, Guess
exercised some control over the product itself (like approving placement of the logo)
but did not play any role as seller, manufacturer or distributor.
It might well be plausible to assess whether a trademark licensor is, as
the Restatement puts it, subject to the same liability as though he were
[the product] manufacturer, by pouring over the licensors level of involvement in the
manufacture or distribution of the product. On the other hand, such an
approach creates a regime in which liability is binary (either the same as
the manufacturer or altogether non-existent) based on the examination of commercial activity that
is anything but.
As Chief Justice Peters pointed out in
Petrol Plus, trademark licensors have a
duty under the Lanham Act to take reasonable measures to detect and prevent
misleading or deceptive uses of the trademark. Petrol Plus, 579 A.2d at
32. They are thus likely to take some ongoing role in the
products bearing their mark lest they risk loss of the right associated with
ownership of it.
A common law product liability system that, when it encounters muscular supervision by
a licensor, imposes liability identical to that of the manufacturer, however, pushes the
trademark holder in the opposition direction. It encourages the licensor to play
as minor a role as possible in overseeing the design and manufacturing of
products bearing the mark in order to preserve the Sergeant Schultz defense.
This is hardly in the best interest of consumers.
Thus, we conclude that Indiana common law should treat trademark licensors as having
responsibility for defective products placed in the stream of commerce bearing their marks,
but only so much of the liability for those defects as their relative
role in the larger scheme of design, advertising, manufacturing, and distribution warrants.
Consumers rightly expect that products bearing logos like Guess have been subject to
some oversight by those who put their name on the product, but those
same consumers can well imagine that in modern commerce the products they buy
may have actually been manufactured by someone else.
The process of sorting out comparative fault in such settings can well be
left to juries. Summary judgment for Guess on the negligence claim was
Sullivan and Rucker, JJ., concur.
Dickson, J., concurs in result without separate opinion.
Boehm, J., concurs in result with separate opinion in which Dickson, J., joins.