Arizona Court of Appeals Division Two Holds That A Cooperative Does Not Qualify as a Seller for Purposes of Product Liability When a Member Store Orders the Product Directly From the Vendor in a Drop-Ship Order, But the Vendor Sends the Bill to the Cooperative

While trying to install a space heater, Michael Grubb was injured in an explosion and ultimately died from his injuries. His wife, Briza Grubb (“Grubb”), sued the following parties: DESA, the heater’s manufacturer; B & D Lumber and Hardware (“B&D”), the heater’s seller; and Do It Best Corporation (“DIB”) as the heater’s “seller and/or wholesaler.”

DIB is a cooperative of hardware stores that negotiates with suppliers on behalf of its member stores. Member stores then purchase directly from DIB’s warehouses or order products directly from suppliers, who then directly drop-ship the products to the store. B&D is a member of DIB. In this case, B&D ordered the space heater directly from DESA. DESA directly shipped the heater to B&D after DIB confirmed that it would guarantee payment. The invoice listed the heater as being “sold to” B&D but with DIB being billed. DIB later billed B&D for the heater.

In the trial court, DIB moved for summary judgment on Grubb’s product liability and negligence claims. The court granted summary in favor of DIB. Grubb appealed, arguing that because DIB was part of the chain of distribution, it was at least partly at fault on product liability grounds. Grubb also argued that she had shown DIB was negligent because it had not inspected the heater’s packaging and the heater’s packaging would not have passed DIB’s standards.

The Court of Appeals affirmed. It explained that with some exceptions, sellers may be held strictly liable for the harm caused by defective and unreasonably dangerous products they have sold. Pursuant to A.R.S. § 12-681(9), a seller is “a person or entity, including wholesaler, distributor, retailer or lessor, that is engaged in the business of leasing any product or selling any product for resale, use or consumption.” Although Arizona courts have defined seller broadly, they have excluded from liability entities which do not participate significantly in the stream of commerce and do not have “the right to control the incidents of manufacture or distribution.’” The court held that DIB did not participate significantly in the stream of commerce and thus did not qualify as a seller for purposes of product liability because it never owned or possessed the heater and also because B&D ordered the heater directly from DESA in a drop-ship order. The Court also rejected Grubb’s negligence claim against DIB because Grubb had not cited any facts establishing the standard of care that DIB had a duty to meet nor any facts showing that DIB breached any duty owed to Grubb.

Judge Howard authored the opinion; Judges Eckerstrom and Brammer concurred.