United States District Court, D. North Dakota, Eastern Division
MEMORANDUM OF DECISION
WILLIAM G. YOUNG, D.J. 
a serious and complex products liability action now nearing
trial. The Plaintiffs (collectively “Marchan”)
have sued a variety of defendants. A rough schematic of the
relevant corporate relationships between and among the
manufacturer (on the right) and the retailer (on the left)
heard a number of different motions for summary judgment, the
Court denied them all on October 4, 2018 due to the existence
of genuine issues of fact for the jury. This explanation of
the Court's action suffices here notwithstanding the
exhortation in Federal Rule of Civil Procedure 56(a) to
provide a more detailed explication for even a denial of a
motion for summary judgment. See United States v.
Massachusetts, 781 F.Supp.2d 1, 19-20 (D. Mass. 2011);
Federal Trade Comm'n v. D-Link Sys., Inc., No.
17-cv-00039-JD, 2018 U.S. Dist. LEXIS 199023, at *1-3 (N.D.
Cal. Nov. 5, 2018).
issues, however, warrant more extended analysis and the Court
takes them up in turn.
Indemnity Claim of the Seller
asserted in its crossclaim that, contractually and under the
common law, TerraMarc and KRG were required to indemnify it.
Crary Answer Crossclaims 8-9, ¶¶ 25-36, ECF No. 72.
KRG and TerraMarc moved for summary judgment on Crary's
crossclaims. KRG Mot. Summ. J. Crossclaims 1, ECF No. 94;
TerraMarc Mot. Summ. J. Crossclaims 1, ECF No. 96. Crary
settled with the Plaintiffs prior to the June 1, 2018 motion
session. During the motion session, Crary asserted that
despite its recent settlement with the Plaintiffs, it was
remaining a party in the case because it was entitled to
statutory indemnification from the manufacturer,
Harriston-Mayo or KRG. Crary argued that a seller is entitled
to indemnity even if the manufacturer is found not liable.
to section 28-01.3-05 of the North Dakota Century Code, a
seller has a right to indemnity against a manufacturer:
If a product liability action is commenced against a seller,
and it is alleged that a product was defectively designed,
contained defectively manufactured parts, had insufficient
safety guards, or had inaccurate or insufficient warning;
that such condition existed when the product left the control
of the manufacturer; that the seller has not substantially
altered the product; and that the defective condition or lack
of safety guards or adequate warnings caused the injury or
damage complained of; the manufacturer from whom the
product was acquired by the seller must be required to assume
the cost of defense of the action, and any liability
that may be imposed on the seller. The obligation to
assume the seller's cost of defense should also extend to
an action in which the manufacturer and seller are ultimately
found not liable.
N.D. Cent. Code § 28-01.3-05 (emphasis supplied). Crary
argues that it maintains its indemnity right even if the
manufacturer is found not liable. Crary Mem. Opp'n KRG
and Terramarc Mot. Summ. J. 5-8 (“Crary's
Opp'n”), ECF No. 113. It bases its argument on the
provision's last sentence which says: “[t]he
obligation to assume the seller's cost of defense should
also extend to an action in which the manufacturer and seller
are ultimately found not liable.” N.D. Cent. Code
§ 28-01.3-05; Crary's Opp'n 7.
North Dakota Supreme Court previously had taken a different
approach to this issue. See Kaylor v. Iseman Mobile
Homes, 369 N.W.2d 101, 104 (N.D. 1985); Winkler
v. Gilmore & Tatge Mfg. Co., 334 N.W.2d
837, 841 (N.D. 1983). In Winkler, the North Dakota
Supreme Court interpreted section 28-01.1-07, the former
indemnity provision, which was the same as the present
statute but did not include the last sentence. 334 N.W.2d at
838-42. There, the court determined that “the intent of
§ 28-01.1-07, NDCC [was] to allow indemnity in those
cases where only the manufacturer is found liable and the
seller is absolved.” Id. at 841. In
Kaylor, the North Dakota Supreme Court reaffirmed
its holding in Winkler, emphasizing that it would be
“absurd” for the North Dakota Century Code to
allow indemnity in cases where the manufacturer was found not
liable. 369 N.W.2d at 104 (quoting Winkler, 334
N.W.2d at 841).
section 28-01.3-05 provides for a result different than that
in Winkler and Kaylor. When “the
provisions of a statute differ from previous case law, the
statute prevails.” Bornsen v. Pragotrade,
LLC, 804 N.W.2d 55, 61 (N.D. 2011) (quoting Vandall
v. Trinity Hosps., 676 N.W.2d 88, 93 (N.D. 2004)). Thus,
section 28-01.3-05 abrogated section 28-01.1-07 and the case
law interpreting it.
there appear to be no cases analyzing section 28-01.3-05, the
proper interpretation of the statute is a matter of first
impression for the Court. The legislature made clear that there
was an “urgent need for additional legislation to
establish clear and predictable rules with respect to certain
matters relating to products liability actions.” N.D.
Cent. Code § 28-01.3-07.
question, then, is whether Crary has any right to indemnity
after settling with Marchan, regardless of whether the
manufacturer is found liable. The general rule is that
“an indemnitee who settles a claim before judgment must
prove that it was not a volunteer, but was actually liable,
in order to recover indemnity.” Grinnell Mut.
Reinsurance Co. v. Center Mut. Ins. Co., 658 N.W.2d 363,
378 (N.D. 2003); see also 42 C.J.S.
Indemnity § 46 (1991); 41 Am. Jur. 2d
Indemnity § 46 (1995). A good faith settlement,
however, “is entitled to indemnity, or subrogation,
even though it develops that he in fact had no interest to
protect.” Grinnell, 658 N.W.2d at 378 (quoting
Aetna Life & Cas. Co. v. Ford Motor Co.,
Cal.Rptr. 852, 854 (Ct. App. 1975)). There is no indemnity
“to one who has paid voluntarily.” 42 C.J.S.
Indemnity § 46. Thus, Crary must show at trial
that its payment was not that of a volunteer. Id.
addition, KRG and Terramarc argue that Crary is a
manufacturer under North Dakota law. KRG Reply 4-6, ECF No.
120; TerraMarc Reply 3-4, ECF No. 121. The parties do not
dispute that Harriston Mayo manufactured and North Valley
Equipment sold the conveyor while both were subsidiaries of
TerraMarc. Id. North Dakota Century Code section
28-01.3-01 provides that a “seller of a product who is
owned in whole or significant part by the manufacturer, or
owns, in whole or significant part, the manufacturer”
is treated as a manufacturer. To be shielded from liability,
Crary must show that it should be treated solely as a seller.
N.D. Cent. Code § 28-01.3-04(1). Therefore, Crary's
right to indemnity here is not a foregone conclusion and the
issue ought be decided at trial.
Piercing the Corporate Veil: Who Decides - Jury or
the manufacturer appears to be defunct, as a practical matter
Marchan will need to pierce the corporate veil and reach its
owner, KRG Capital Partners LLC, in order to obtain any
will decide this important question? The Supreme Court of
North Dakota commits the issue to the judge under North
Dakota law. Watts v. Magic 2 x 52 Mgmt., Inc., 816
N.W.2d 770, 772-75 (N.D. 2012). Neither the United States
Supreme Court nor the Eighth Circuit has addressed this
issue. The first federal circuit court to address it was the
Fifth Circuit. As far back as 1980, it had held that the
issue of veil piercing was for the jury. FMC Fin. Corp.
v. Murphee, 632 F.2d 413, 421 n.5 (5th Circ. 1980)
(observing that “whether a judge or jury decides an
issue is one of federal law, with no Erie analysis
problems.”). In 1991, after an exhaustive historical
analysis, the Second Circuit likewise held that the jury must
decide, Wm. Passalacqua Builders v. Resnick
Developers, 933 F.2d 131, 135-37 (2d Cir. 1991), and the
First Circuit, citing Passalacqua -- as have all
federal cases on point after its issuance -- followed suit in
Crane v. Green & Freedman Baking Co., 134 F.3d
17, 22 (1st Circ. 1998). Only the Seventh Circuit goes the other
way. International Fin. Servs. Corp. v. Chromas Techs.
Can., Inc., 356 F.3d 731, 738 (7th Cir. 2004). Who's
Court holds that the jury must decide the veil-piercing
the jurisprudence of North Dakota is well developed, see
Watts v. Magic 2 x 52 Mgmt., 816 N.W.2d at 772;
Coughlin Construction Co. v. Nu-Tec Indus., Inc.,
755 N.W.2d 867, 870 (N.D. 2008); Intercept Corp. v.
Calima Financial, LLC, 741 N.W.2d 209, 213 (N.D. 2007);
Axtmann v. Chillemi, 740 N.W.2d
838, 843 (N.D. 2007); Jablonsky v. Klemm, 377 N.W.2d
560, 565 (N.D. 1985); Hilzendager v. Skwarok, 335
N.W.2d 768, 772 (N.D. 1983), these cases, ultimately
dependent on the Constitution of North Dakota, are of no
moment here as this federal case depends on the Seventh
Amendment to the United States Constitution. See
Byrd v. Blue Ridge Rural Elec. Co-op., Inc.,
356 U.S. 525, 531 (1958); Full Spectrum Software,
Inc. v. Forte Antomation Sys., 858 F.3d 666,
677-78 (1st Cir. 2017) (Barron, J.) (holding that the Seventh
Amendment requires a jury trial in federal court for cases
under the Massachusetts consumer protection statute, even if
no jury is required in state courts for the same).
Jury Trial Clause of the Seventh Amendment
provides that "[i]n Suits at common law, where the value
in controversy shall exceed twenty dollars, the right of
trial by jury shall be
preserved." U.S. Const. amend. VII (emphasis
supplied). The phrase "suits at common law" refers
not only to causes of action that existed in 1791, when the
Seventh Amendment was adopted, but also to new
causes of action created by statute, as long as those
statutes "create legal rights and remedies,
enforceable in an action for damages in the ordinary courts
of law." Curtis v. Loether, 415 U.S. 189, 194
(1974). To determine whether a statute "creates ...