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Harley Davidson Motor Co., Inc. v. Advance Die Casting

July 16, 1997

HARLEY DAVIDSON MOTOR COMPANY, INC., PLAINTIFF-RESPONDENT,
v.
ADVANCE DIE CASTING, INC., NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, DEFENDANTS-APPELLANTS, AND ABC CORP., AND XYZ CORP., DEFENDANTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 292 N.J. Super. 62 (1996).

The opinion of the Court was delivered by O'hern, J. Chief Justice Poritz and Justices Handler, Pollock, Garibaldi and Coleman join in Justice O'HERN's opinion. Justice Stein has filed a separate Concurring opinion.

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Harley Davidson Motor Company v. Advance Die Casting, Inc. (A-117)

Argued March 17, 1997 -- Decided July 16, 1997

O'HERN, J., writing for a majority of the Court.

The question in this appeal is whether, in a consumer's products liability action, the claim by a retailer of the defective product for indemnification from a supplier of the product or a component thereof, is subject to the procedural requirements of the entire controversy doctrine.

In June 1988, Mario DiMaria was riding his 1977 Harley Davidson motorcycle when it was hit by a car. His left foot was on the foot peg attached to the aluminum front chain housing cover, which shields the clutch plate and rotating chain. On impact, the front bumper of the car drove DiMaria's left foot into the cover, which shattered. DiMaria's heel was forced against the exposed rotating chain and clutch plate and both the skin and muscle surrounding his left heel were torn down to the bone.

In 1990, DiMaria sued the driver of the car and Harley Davidson. Against Harley, DiMaria claimed that a defect in the front chain housing cover aggravated his injuries. He alleged that the housing cover had been defectively designed and defectively manufactured. The other driver settled with DiMaria for his policy limits.

Advance Die Casting, Inc. (Advance) had manufactured the housing cover for Harley. By letter dated March 1, 1993, Harley asked Advance to assume Harley's defense against DiMaria and to indemnify Harley against any judgment in the trial scheduled for July 1993. The insurance carrier for Advance declined to assume Harley's defense or to indemnify Harley. Harley renewed its demands, but failed to join either Advance or its insurance company in the action.

DiMaria's trial against Harley took place in July 1993. Harley successfully moved to dismiss the design defect claim. The jury decided that the front chain housing cover had been defectively manufactured, but that the defect was not the proximate cause of DiMaria's injuries. DiMaria appealed, and the Appellate Division reversed on the issue of causation and damages.

Harley wrote to Advance and its insurance company, Northbrook Property and Casualty Insurance Company, in November 1994, informing them of the Appellate Division's decision and again demanding that Advance or Northbrook assume its defense and agree to indemnify it against any judgment. Northbrook refused.

In March 1995, during the pendency of the underlying tort action, Harley filed this declaratory judgment action claiming that Advance and Northbrook were obliged to provide a defense for Harley and to indemnify it against any judgment. Harley informed the court of the underlying tort action by including the complaint of that action as an exhibit. At no time did a party or the court attempt to consolidate the two matters.

On April 28, 1995, before the retrial of the tort action, counsel for Advance and Northbrook attended a settlement conference in that action. On May 1, 1995, Harley and DiMaria agreed to a settlement of $150,000. Harley notified Advance of the settlement, and Advance agreed that it was reasonable. At the settlement proceeding, Harley's attorney advised the court of the pending declaratory judgment action, as well as Northbrook's agreement that the settlement was fair.

In August 1995, Advance sought to dismiss the declaratory judgment action on the grounds of lack of personal jurisdiction. The trial court dismissed the action on its own motion, on the basis of the entire controversy doctrine. Harley appealed. The Appellate Division reversed. It held that the entire controversy doctrine did not apply because the indemnity action had not accrued until after the settlement. It explained that a stricter interpretation would ignore, or make mandatory, the permissive joinder rule and the impleader rule. The Appellate Division also relied on N.J.S.A. 12A:2-607(5)(a), a provision of the Uniform Commercial Code that allows a buyer to "vouch-in" sellers when the buyer is sued for a product defect by a third party and further permits the buyer to bind the seller to the factual determinations in the action when the seller declines to defend. The Appellate Division held that the goals of the entire controversy doctrine were ultimately satisfied through the "vouching-in" procedure. It remanded to the Law Division to determine certain factual inquiries.

The Court granted certification limited to the issue of the entire controversy doctrine.

HELD: The entire controversy doctrine applies to a claim for indemnification by a retailer of a defective product from a supplier of the product or a component thereof, but the notice given the supplier under N.J.S.A. 12A:2-607(5)(a), as well as the notice given the courts, satisfied the fairness concerns of the entire controversy doctrine.

1. There may be a class of indemnity claims that are not subject to the entire controversy doctrine because they are unaccrued. However, "upstream" claims for contribution or indemnity are within the reach of the doctrine. Here, the factual circumstances giving rise to the controversy are common to DiMaria's claim and Harley's claim for indemnification, and Advance had a material interest in the outcome of DiMaria's claim. Thus, absent the effect of "vouching-in," party-joinder would be required in this action to satisfy the entire controversy doctrine. In the context of this case, the "vouching-in" procedure was a satisfactory substitute for party-joinder since the required notice was given to Advance. Additionally, both courts were also informed of the other pending action. The twin pillars of the entire controversy doctrine, fairness to the parties and fairness to the court, were satisfied here. (pp. 8-14)

2. The parties complain of inconsistencies in the Rules of Civil Practice and Procedure in respect of the applicability of the entire controversy doctrine to a case such as this. For example, Harley notes that R. 4:30A mandates party-joinder, while Rule 4:8, on third-party practice, speaks in the permissive about joining third parties. And, Rule 4:7-5 mandates joinder of claims for indemnity against a party to an action. The Court acknowledges that refinements to the Rules may be required to clarify the circumstances in which the entire controversy doctrine may apply. The Court directs the Civil Practice Committee to consider whether Rule 4:8 should be amended in light of the entire controversy doctrine. (pp. 14-17)

The judgment of the Appellate Division is AFFIRMED.

Stein, J., Concurring in the result, is of the view that the preclusive aspect of the entire controversy doctrine is not the appropriate mechanism to enforce mandatory party joinder, and that less intrusive measures should be used to encourage party joinder in civil litigation.

CHIEF JUSTICE PORITZ and JUSTICES HANDLER, POLLOCK, GARIBALDI and COLEMAN join in JUSTICE O'HERN's opinion. JUSTICE STEIN has ...


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