Manufacturers are not liable when an authorized dealer sells 'knock-offs,' appeals court rules

David Yates Dec. 11, 2008, 7:00am

Perhaps setting a precedent, the Texas Ninth District Court of Appeals ruled on Thursday, Dec. 4, that a manufacturer is not liable as principal when an authorized dealer for the manufacturer's product sells another company's product sporting a similar name to a customer.

The ruling stemmed from a lawsuit filed by Robin Broussard, who sued Hamilton Pools Inc. two years ago after discovering cracks in her pool and learning that her presumed San Juan Capistrano fiberglass swimming pool was in actuality a "knock-off" manufactured by a company with a similar name, San Juan Pools of Texas.

Over the last two years, the Record has reported on several suits filed against Howard "Buddy" Hamilton, an authorized San Juan Capistrano pool retailer who has allegedly been selling San Juan "knock-offs."

Plaintiff's attorney Hubert Oxford, who represents Broussard and several other dissatisfied pool purchasers, writes in his clients' lawsuits that they entered into a contract with Hamilton for the purchase and installation of what they thought was a San Juan Capistrano pool � but unknowingly ended up buying a pool manufactured by a company with a similar name selling similar pools.

The suits named San Juan Capistrano (San Juan Products) as a co-defendant and claimed the company was aware of Hamilton's deceptions but neglected to intervene.

In April, Oxford told the Record in an e-mail that Hamilton Pools was allegedly selling San Juan Pools, but the pools were not actually San Juan Pools.

"San Juan knew what their agent was doing but failed to stop him," Oxford wrote. "No different than you buying fake Rolex watch and Rolex knowing that their agent was selling these watches."

However, justices seated on Texas Ninth Court of Appeals were not persuaded by the attorney's argument and affirmed a lower court's ruling that granted San Juan's no-evidence summary judgment motion.

"Broussard alleges that (San Juan Products) is vicariously liable for the deceptive and fraudulent acts of Buddy Hamilton and Hamilton Pools but she does not allege that ... SJP committed a deceptive trade practice or fraud other than through Buddy Hamilton and Hamilton Pools as the alleged agents of SJP," states the opinion authored by Chief Justice Steve McKeithen.

"We hold the trial court did not err in granting summary judgment on the grounds that ... SJP (is) not vicariously liable. Accordingly, the judgment is affirmed."

Judge Donald Floyd, 172nd Judicial District, had approved San Juan's summary judgment motion earlier this year, which severed the company into its own suit. In October, Broussard appealed the decision, arguing that San Juan was liable since it allowed Hamilton to do business on its behalf.

Case background

The appeal questioned whether a manufacturer may be held liable as principal when an authorized dealer for the manufacturer's product sells another company's product, using a similar product name, to a consumer, the opinion states.

Broussard had initially sued Hamilton Pools, who was doing business as San Juan Pools of Beaumont, and San Juan Pools of Texas, Inc. -- the alleged sellers and manufacturer of the defective pools -- for deceptive trade practices, fraud and breach of contract.

Broussard later amended her petition, adding as defendants the manufacturer of genuine San Juan Capistrano swimming pools, American Environmental Container Corporation, and its licensor, San Juan Products, Inc.

Broussard alleged in her suit that Hamilton Pools and Buddy Hamilton as agents of AECC, breached the contract and warranty and engaged in deceptive trade practices and fraud. The trial court granted the traditional and no-evidence motions for summary judgment filed by SJP and AECC and severed those claims into the separate suit from which Broussard appeals.

On appeal, Broussard's attorney, Oxford, contended she presented legally sufficient summary judgment evidence that the appellees gave Hamilton Pools the authority to transact business on behalf of the appellees and that she presented legally sufficient evidence to raise a fact issue on all of the elements necessary to establish apparent authority so as to hold the appellees vicariously liable for the conduct of Hamilton Pools and Buddy Hamilton.

"To succeed in a motion for summary judgment ... a movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law," the opinion states.

"In reviewing a summary judgment, we consider the evidence in the light most favorable to the non-movant and resolve any doubt in the non-movant's favor. Under Rule 166a(i), a party may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial."

"Unless the respondent produces summary judgment evidence raising a genuine issue of material fact, the court must grant the motion. Because the trial court's order granting summary judgment does not specify the basis for the ruling, we must affirm the trial court's judgment if any of the theories advanced are meritorious."

AECC (San Juan) was represented in part by attorneys Rocky Lawdermilk and Eric Paul Edwardson.

Appeals case No. 09-08-00082-CV
Trial case No. E176-089A

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