                                                                          F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                          MAR 4 2004
                                 TENTH CIRCUIT
                                                                     PATRICK FISHER
                                                                             Clerk

 KRISTOPHER McCROY, a minor, by
 and through his mother and next
 friend, MARIE McCROY, and MARIE                        No.02-3394
 McCROY, individually,

                Plaintiffs,
           v.                                        District of Kansas
 COASTAL MART INC.,                              (D.C. No. 99-1090 MLB)

                Defendant-Cross-
                Claimant-Appellant,
 and

 WILBUR CURTIS COMPANY,

                Defendant-Cross-
                Defendant-Appellee.


                              ORDER AND JUDGMENT        *




Before MURPHY , HOLLOWAY , and McCONNELL , Circuit Judges.




       This order and judgment is not binding precedent, except under the
       *

doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
                                          I.

      This appeal involves Appellant Coastal Mart’s claim against Appellee

Wilbur Curtis for indemnification of litigation expenses stemming from a

products liability lawsuit. The facts are largely undisputed. Plaintiff Kristopher

McCroy, an eleven year old boy, and his mother, Marie, filed a products liability

lawsuit against Coastal Mart and Wilbur Curtis after hot chocolate spilled on

Kristopher’s lap, while sitting in his car, causing severe burns to the groin and

genital area. The hot chocolate was purchased at a Coastal Mart store in Salina,

Kansas, and was brewed by a Primo Cappuccino Beverage Dispenser

manufactured by Wilbur Curtis.

      In its First Amended Answer and Cross-Claim, Coastal Mart demanded

indemnification by Wilbur Curtis under two theories. The first was premised on

the express language of the indemnity provision in the purchase order contract for

the sale of the brewing machine. The second put forth a theory of “a contract of

indemnification implied in law.” First Amended Answer and Cross-Claim 9, App.

60.

      Thereafter, Wilbur Curtis moved for judgment on Coastal Mart’s claims of

indemnity. In its order of May 9, 2000, the district court first determined that the

contract’s choice-of-law provision mandated that Texas law be applied to the

contract. As to the substantive issues, the court found that Texas courts would


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allow Coastal Mart to recover indemnification from Wilbur Curtis, provided that

it could make the necessary factual showings demonstrating that it is entitled to

indemnity. Specifically the court held:

             Although the two most recent cases deciding indemnification
             of a retailer against a manufacturer do not involve contractual
             indemnification (one involves common law indemnification,
             the other uses the Texas Products Liability Act’s statutory
             indemnification), the cases do offer guidance and support for
             this decision. In both cases, the retailers were allowed to
             recover indemnification from the manufacturer. . . . An
             analogy can be properly made between the reasoning of these
             cases and Texas contract indemnification law.

Op. 9-10, App. 116-17. The court found, however, that in light of the outstanding

factual issues, resolution of the indemnity claims would be premature.

      The Amended Pre-trial Order of November 14, 2000, indicated that these

two indemnification claims remained squarely before the district court before trial

of the underlying lawsuit:

             Defendant Coastal Mart, Inc. has asserted a claim for
             indemnification against Wilbur Curtis Company for any
             amount awarded against it and in favor of Plaintiffs, and for its
             attorney fees and defense costs, under two theories: an express
             contract of indemnification between the parties and a theory of
             implied indemnification.

Pre-trial Order 21, App. 165.

      The case was tried to a jury pursuant to Kansas law. The jury found

damages of $75,000, and distributed the blame amongst the four principals.

Marie McCroy was assessed with 50% of the blame, while her son Kristopher was

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assessed with 20%. Wilbur Curtis was assessed 20% at fault and Coastal Mart

was assessed with 10% of the blame.

      Following trial, both Coastal Mart and Wilbur Curtis filed motions to set

aside the jury’s verdict. Additionally, Wilbur Curtis renewed its motion for

judgment on Coastal Mart’s indemnification theories. In response, Coastal Mart

filed a motion (“Cross-Claim Motion”) which again presented Coastal Mart’s

claims for indemnification for the damage award and litigation expenses. The

filing also alerted the district court to the Texas Supreme Court’s then-new

decision in Meritor Automotive, Inc. v. Ruan Leasing Co., 44 S.W.3d 86 (Tex.

2001), which interpreted the Texas Products Liability Act, Tex. Civ. Prac. &

Rem. Code § 82.002 (“TPLA”), as requiring manufacturers to indemnify innocent

sellers for both damage awards and reasonable costs of defense, including

attorney’s fees. Coastal Mart argued that Meritor reenforced its position

regarding implied-in-law indemnification under Texas law.

      On June 21, 2002, the district court issued an order granting both Coastal

Mart’s and Wilbur Curtis’s Rule 50 motions, rendering the damages-indemnity

issue moot. Thereafter, Coastal Mart filed a Supplemental Memorandum in

Support of its Indemnification Fees and Expenses (“Supplemental Memo”). This

filing did not cite Meritor or the TPLA, but based its arguments solely on




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principles derived from interpretation of indemnity provisions pursuant to Texas

contract law. The Supplemental Memo’s opening footnote stated:

             Coastal Mart has previously filed a motion for its attorney fees
             and expenses. . . . Coastal Mart’s supporting memorandum [for
             the Cross-Claim Motion] was not as extensive as it could have
             been in citing legal authority in support of its claim for
             indemnification of attorney fees and expenses; hence, this
             supplemental memorandum.

App. 299.

      The district court denied Coastal Mart’s motion for indemnification,

finding that the express indemnity provision in the purchase order contract failed

to meet Texas’s requirement that indemnity provisions be “conspicuous,” and was

thus unenforceable. Op. 7-8, App. 318-319. The district court did not analyze

Coastal Mart’s implied-in-law claim, summarily dismissing this claim in a

footnote stating:

             Coastal Mart originally based its indemnity claim upon two
             distinct theories: (1) An express contract of indemnity between
             the parties, and (2) A theory of implied indemnity applicable in
             products liability law. Coastal Mart has not raised implied
             indemnity as a basis for its renewed motion for judgment,
             focusing instead upon the express language of the indemnity
             agreement. The court deems Coastal Mart’s implied
             indemnity claim abandoned and limits its analysis accordingly.

Op. 5 n.5, App. 316 (citations to record omitted).

                                         II.




                                         -5-
      On appeal, Coastal Mart does not contest the district court’s reading and

application of Texas contract law, which found the express contractual indemnity

provision unenforceable. Rather, Coastal Mart argues that the district court erred

in not reading the contract “in accordance with the Texas Products Liability Act.”

Br. 20. Coastal Mart argues that the district court incorrectly deemed the implied-

in-law theory abandoned, and thus erred in denying the motion for

indemnification. After carefully reviewing the record on appeal, we agree that

the implied-in-law claim was not abandoned.

      The implied indemnity theory was considered by the district court in its

first order, where the court found that reaching a determination on the issue

would be premature. The claim was separately identified in the pretrial order.

After trial, Coastal Mart’s Cross-Claim Motion cited extensively from the Texas

Supreme Court’s Meritor decision, which interpreted the TPLA as requiring

manufacturers to indemnify innocent sellers for attorney’s fees and litigation

expenses. Although the Cross-Claim Motion did not distinguish between the two

variants of Coastal Mart’s indemnification theories, it clearly advocated the

relevance of the TPLA to this action. And while it is true that the Supplemental

Memo focused exclusively on arguments relevant to Coastal Mart’s contractual

claim, its opening footnote stressed the supplemental nature of the filing.

Considering that the Cross-Claim Motion and the Supplemental Memo cite to


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different cases and rely on entirely different legal principles (See App. 298-304),

we are inclined to interpret the former as forwarding the implied in law claim, and

the latter as pressing the contractual claim.

       Although the Cross-Claim Motion did not use the implied-in-law

terminology, it urged the district court to consider that “an analogy can be

properly made between the reasoning of a case deciding indemnification of a

retailer against a manufacturer using the Texas Products Liability Act and a case

deciding Texas contract indemnification law.” Cross-Claim Motion 6, App. 248.

This mode of expression undeniably blurred the distinction between Coastal

Mart’s express contractual claim and its implied-in-law claim, but in substance it

continued the same legal arguments that Coastal Mart had pursued throughout the

litigation.

       Further, Wilbur Curtis was aware of the TPLA-based claims and defended

against them. Although Wilbur Curtis did not specifically refer to the TPLA or

Meritor in its February 9, 2002 filing, responding to Coastal Mart’s Cross-Claim

Motion, the memorandum did make arguments that were substantively responsive

to this claim. See App. 257. Thus, Wilbur Curtis will not be prejudiced by

consideration of this claim.

       We understand Coastal Mart's implied-in-law claim as resting on Texas

contractual indemnity principles, as reflected both in the common law and in the


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TPLA. In considering the application of the TPLA, it must be determined

whether it applies in a case where the retailer manufactures its own derivative

product using equipment purchased from another company, or whether the TPLA

applies exclusively to cases where the retailer merely acts as a conduit from the

manufacturer to the ultimate consumer. Because the district court did not have an

adequate opportunity to consider this and other issues bearing on the implied-in-

law claim, and as they were not fully addressed in the parties’ briefing before this

Court, we remand them to the district court.

      We REVERSE the district court’s order denying Coastal Mart’s motion for

indemnification and REMAND to the district court for further proceedings

consistent with this opinion.

                                               Entered for the Court,



                                               Michael W. McConnell
                                               Circuit Judge




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