Supreme Court says auctioneer had no duty to warn buyer of defect (even though it held title to the car
in this case; the automobile had previously been returned because it was sold understating its
odometer reading by 50,000 miles)
New Texas Auto Auction Services, LP. v. Gomez de Hernandez,
No. 06-0550 (Tex. Mar. 28, 2008)(Brister) (no auctioneer liability for defective automobile)
Terms: Consumer protection, product liability, automobile safety, defective tires, personal injury death
Case Details: NEW TEXAS AUTO AUCTION SERVICES, L.P. D/B/A BIG H AUTO AUCTION v. GRACIELA GOMEZ
DE HERNANDEZ, ET AL.; from Hidalgo County; 13th district (13- 03-00728-CV, 193 S.W.3d 220, 04-06-06)
The Court reverses the court of appeals' judgment and reinstates the trial court's judgment.
Justice Scott A. Brister delivered the opinion of the Court.
Opinion below: Gomez de Hernandez v. New Texas Auto Auction Services, LP,
No. (13- 03-00728-CV, (Tex. App. - Corpus Christi, April 6, 2006)(mem. op.)
Secondary Links for this case:
Briefing: Link to briefs in the Supreme Court including three amicus curiae briefs
Commentary: Justice Brister's Darwinism (Jefferson Court Blog)
Texas SC: Auto auctions not liable for defective vehicles (Southeast Texas Record)
Other recent Supreme Court Cases involving or affecting consumers rights and/or consumer safety:
Bic Pen Corp. v. Carter, No. 05-0835 (Tex. Apr. 18, 2008)(Medina) (child safety, cigarette lighter, products liability,
design defect claim, implicit federal preemption of state tort law, manufacturing defect claim)
Grimes Construction, Inc., No. 06-0332 (Tex. 2007)(per curiam) (liability insurance coverage for defective work by
Daimler Chrysler Corp. v. Inman, No. 03-1189 (Tex. Feb. 1, 2008)(Opinion by Justice Nathan Hecht)(class action re
allegedly defective car seat belts dismissed on standing grounds, jurisdictional dismissal, DWOJ)
See more ---> Texas Supreme Court Opinions | Texas Opinions Home Page |
OPINION BY JUSTICE SCOTT A. BRISTER
Argued October 17, 2007
Justice Brister delivered the opinion of the Court.
Auctioneers are usually neither buyers nor sellers, but agents for both. While they are obviously engaged in
sales, the only thing they sell for their own account is their services; the items they auction are generally sold for
others. In this case, the court of appeals held an auto auctioneer could be liable in both strict liability and negligence
for auctioning a defective car. But product-liability law requires those who place products in the stream of commerce
to stand behind them; it does not require everyone who facilitates the stream to do the same. Accordingly, we
The 1993 Ford Explorer at issue here was repossessed by a finance company, who consigned it for sale in Houston
by Big H Auto Auction. Big H sold the car at auction for $4,000 on October 12, 2000, receiving a fee of $145 from
the seller and $90 from the buyer. When the buyer discovered a discrepancy in the car’s odometer, a quick
arbitration was held and an arbitrator found Big H had made a clerical error, rescinded the sale, and ordered Big H
to buy the car back. Big H took title to the car and sold it again at auction on October 17, 2000 for $3,100 to
Houston Auto Auction, which auctioned the car a week later to Progresso Motors, which sold it three days later to
Jose Angel Hernandez Gonzalez in Progresso, Texas. About a year later, Gonzalez was killed in a rollover accident
Twelve plaintiffs (Gonzalez’s wife, parents, children, and six others whose relationship to him is unclear) filed suit
in Hidalgo County against the car manufacturer (Ford Motor Co.), tire manufacturer (Bridgestone/Firestone Corp.),
Progresso Motors, and the two auto auctioneers. The trial court granted summary judgment for Big H and severed
that claim. The court of appeals reversed, finding Big H was not entitled to summary judgment on either the plaintiffs’
strict liability or negligence claims. We address each claim in turn.
II. Strict Liability
Modern American product-liability law is derived primarily from section 402A of the Second Restatement of Torts,
“the most influential section of any Restatement of the Law on any topic,” and perhaps in all of tort jurisprudence.
 This Court adopted section 402A in 1967 in McKisson v. Sales Affiliates, holding those who sell defective
products strictly liable for physical harm they cause to consumers.
From the beginning, section 402A did not apply to everyone. By its own terms, section 402A limits strict liability to
those “engaged in the business of selling” a product:
One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his
property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is
Like many other short statements of legal doctrine, this one has been construed through the years to mean both
more and less than what the plain words appear to say. For example, although section 402A appears to limit
recovery to users or consumers of a defective product, we long ago extended it to innocent bystanders as well.
Similarly, section 402A explicitly applies only to those whose business is “selling” a product, but from the outset we
have applied it more broadly. Thus, in McKisson itself we held strictly liable a distributor who handed out free
samples, reasoning that the samples were distributed with “the expectation of profiting therefrom through future
sales.” Since then, we have applied strict liability to manufacturers, distributors, lessors, bailors, and
On the other hand, we have limited the scope of those “engaged in the business of selling” to those who actually
placed a product in the stream of commerce. “Imposition of strict liability demands more than an incidental role in
the overall marketing program of the product.” An advertising agency that provides copy, a newspaper that
distributes circulars, an internet provider that lists store locations, and a trucking business that makes deliveries all
might be “engaged” in product sales, but they do not themselves sell the products. Since McKisson, we have applied
strict liability only to businesses that are “in the same position as one who sells the product.”
The reason for this limitation arises from the justifications for strict liability itself, namely: (1) compensating injured
consumers, (2) spreading potential losses, and (3) deterring future injuries. Businesses that play only an
incidental role in a product’s placement are rarely in a position to deter future injuries by changing a product’s
design or warnings. If required to spread risks, they must do so across far more products than the one that was
defective. And while many businesses may be able to pay compensation, consumers normally expect a product’s
manufacturer to be the one who stands behind it.
The Third Restatement of Torts adopted in 1998 recognized these developments in products law, expanding strict
liability to those “engaged in the business of selling or otherwise distributing products,” and defining those terms
as a business that either “transfers ownership” or “provides the product.” In a comment, the Third Restatement
specifically excluded auctioneers:
Persons assisting or providing services to product distributors, while indirectly facilitating the commercial distribution
of products, are not subject to liability under the rules of this Restatement. Thus, commercial firms engaged in
advertising products are outside the rules of this Restatement, as are firms engaged exclusively in the financing of
product sale or lease transactions. Sales personnel and commercial auctioneers are also outside the rules of this
Nevertheless, the court of appeals held section 402A applied to auctioneers because Texas law “requires only that
the defendant be responsible for introducing the product into the stream of commerce.” It is true we have
sometimes referred to strictly liable defendants as “introducing” products into the stream of commerce, although
more often we have referred to them as “placing” them in that current, as has the Legislature. But both
concepts were intended to describe producers, not mere announcers like an auctioneer or an emcee at a trade
show who “introduces” a product to a crowd but has nothing to do with making it.
The court of appeals also pointed to chapter 82 of the Civil Practices and Remedies Code to support its conclusion.
But that chapter was not intended to replace section 402A or the common law except in limited circumstances.
Moreover, its broad definitions were drafted to provide indemnity for all retailers, even if they are not proper
defendants in an underlying products claim. To the extent chapter 82 addresses product claims generally, it
reflects a legislative intent to restrict liability for defective products to those who manufacture them.
The Plaintiffs’ counsel concedes that auctioneers are generally not sellers under section 402A, but distinguished
this case because Big H actually held title to the Explorer when it was finally sold at auction. But it was undisputed
that Big H normally never took title to the cars it auctioned, and did so here only because an arbitrator ordered it to
do so. Section 402A applies to those whose business is selling, not everyone who makes an occasional sale.
Courts in other jurisdictions have consistently held that auctioneers are not subject to section 402A. We agree,
and hold that because Big H was not in the business of selling automobiles for its own account, it cannot be held
The plaintiffs alleged Big H was negligent in failing to replace the tires on this Explorer pursuant to a recall issued a
few weeks before the auction took place. We agree with the trial court that Big H had no such duty on the facts here.
The existence of a legal duty is a question of law for the court. In determining whether a duty should be
recognized, we consider a number of factors including the risk of injury compared to the burden on the defendant
and social utility of the conduct involved. We have also considered whether one party has superior knowledge of
the risk, or a right to control the actor whose conduct precipitated the harm.
Unquestionably, ignoring a recall may run the risk of severe injury. But there are a huge number of recalls, and
the risks they involve varies widely. Federal law generally places the duty on manufacturers of products to report
potential defects, notify the public, and make necessary repairs.
By contrast, imposing a duty on auto auctioneers to discover and repair defects would require them to go into a side
business other than their own. The evidence establishes that Big H auctions about 1,000 vehicles each week, with
many of them moving on and off the premises in a matter of hours. It does not inspect or repair vehicles unless a
customer specifically requests and pays for such services. Many of the cars sold at its auctions need repairs, and
some have to be towed on and off the auction block.
Moreover, Big H does not sell to the public. Only licensed, bonded, commercial dealers are permitted to buy or sell
vehicles at Big H’s auctions. Accordingly, whatever access to recall information Big H may have, the dealers who buy
at the auction, prepare the cars for display, and sell them to the public would have at least the same access.
Moreover, Big H’s knowledge is clearly inferior to that of the car and tire manufacturers the plaintiffs sued for these
same defects, and there is no indication that Big H had any control over how those manufacturers made their
Additionally, Big H made no warranties of its own at the auction, serving merely as a conduit for warranties made by
sellers. The car here was sold under a red light, indicating the the car was being sold “as is.” Generally, those who
buy a product “as is” accept the risk of potential defects, and thus cannot claim a seller’s negligence caused their
injuries. Imposing a different duty here would effectively prohibit car dealers from selling cars “as is.” And as one
federal court has pointed out, imposing such a duty on auctioneers would seem to require imposing it on every
person who ever sold a used car, as there is “no sensible or just stopping point.” We decline to impose so
sweeping a duty.
The plaintiffs’ summary judgment response included deposition testimony from a representative of Houston Auto
Auction (the buyer from Big H) that had he possessed actual knowledge of the defect here (which he denied), he
would have done “something to at least give notice to the buyer that there are Firestone tires, don’t drive on them,
or take them off.” But Houston Auto Auction was more than a mere auctioneer; its business included buying and
selling cars for its own account, and it made sales to the general public as well as dealers. Moreover, one’s moral
duty to warn of known dangers does not impose a legal duty to discover and remedy unknown dangers too.
* * *
Accordingly, the court of appeals erred in concluding Big H owed the plaintiffs a duty under either section 402A or in
negligence. We reverse the court of appeals’ judgment and reinstate the trial court’s take-nothing judgment for Big H.
Scott Brister, Justice
OPINION DELIVERED: March 28, 2008
 Brock v. Jones, 8 Tex. 78, 79-80 (1852) (“The auctioneer may be the agent of both parties.”).
 Big H Auto Auction is the assumed name of defendant New Texas Auto Auction Services, L.P.
 The car’s mileage was listed as 34,075 miles rather than the actual 84,075 miles.
 Progresso Motors is the assumed name of defendant Eleazar Perez.
 The plaintiffs listed the surviving spouse as Graciela Gomez De Hernandez, her children Jose Angel Hernandez Gomez and
Elizabeth Hernandez Gomez, another child Arely Hernandez, and his parents Olvido and Juan Hernandez; the last three have settled
and are not involved in this appeal. Listed as intervenors below are Guillermo Mujica Gutierrez, Marta Covarrubias Gutierrez, Juan
Lorezo Guttierez Hernandez, Victor Manuel Maldonado Castañon, Pedro Alfonso Castillo Cardenas, and Jacinto Loyde Frayde.
 193 S.W.3d 220.
 Restatement (Second) of Torts § 402A (1965).
 David G. Owen, The Puzzle of Comment J, 55 Hastings L.J. 1377, 1377 n.1 (2004) (noting that “section 402A had been cited in
judicial opinions more often than any other section of any Restatement”).
 1 M. Stuart Madden, Products Liability § 6.1, at 190 (2d ed. 1988) (calling section 402A “the most influential development ever
experienced in tort jurisprudence”).
 416 S.W.2d 787, 789 (Tex. 1967).
 Restatement (Second) of Torts § 402A(1) (emphasis added).
 Darryl v. Ford Motor Co., 440 S.W.2d 630, 633 (Tex. 1969) (“We hold that recovery under the strict liability doctrine is not limited to
users and consumers.”).
 McKisson, 416 S.W.2d at 790 n.3 (“Strict liability in tort lies against a distributor as well as a manufacturer.”).
 Id. (“Strict liability in tort lies against a distributor as well as a manufacturer.”).
 Rourke v. Garza, 530 S.W.2d 794, 800 (Tex. 1975).
 See Armstrong Rubber Co. v. Urquidez, 570 S.W.2d 374, 377 (Tex. 1978) (distinguishing cases in which bailment for mutual
benefit accompanied a sale of goods or services, and thus fell under section 402A).
 Henderson v. Ford Motor Co., 519 S.W.2d 87, 92 (Tex. 1974) (“The car manufacturer and its dealer are liable for unreasonably
dangerous products . . . .”).
 See, e.g., Firestone Steel Prods. Co. v. Barajas, 927 S.W.2d 608, 616 (Tex. 1996) (holding section 402A inapplicable to company
that licensed design but did not manufacture tire that caused injury); Armstrong Rubber, 570 S.W.2d at 376 (holding section 402A
inapplicable to tire sent to test track for testing).
 Firestone Steel, 927 S.W.2d at 616.
 McKisson, 416 S.W.2d at 792; see FFE Transp. Servs., Inc. v. Fulgham, 154 S.W.3d 84, 89 (Tex. 2004) (holding section 402A
inapplicable to trailers trucking company supplied for its drivers); Firestone Steel, 927 S.W.2d at 616 (holding section 402A
inapplicable to tire designer that licensed concept royalty-free).
 Restatement (Second) of Torts § 402A cmt. c (1965); W. Page Keeton et al., Prosser and Keeton on Torts § 98, at 692-93 (5th ed.
1984); see, e.g., Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 425 (Tex. 1984) (noting that “failure to allocate accident costs in
proportion to the parties’ relative abilities to prevent or to reduce those costs is economically inefficient”); Boatland of Houston, Inc. v.
Bailey, 609 S.W.2d 743, 750 (Tex. 1980) (“One of the policy reasons for the doctrine of strict liability is that the manufacturer or supplier
can spread the losses occasioned by the supplier’s defective product”); Mid Continent Aircraft Corp. v. Curry County Spraying Serv., Inc.,
572 S.W.2d 308, 312 (Tex. 1978) (“Strict liability arose initially to compensate consumers for personal injuries caused by defective
products . . . .”); George W. Conk, Punctuated Equilibrium: Why Section 402A Flourished and the Third Restatement Languished, 26
Rev. Litig. 799, 809-10 (2007); David Krump & Larry A. Maxwell, Should Health Service Providers Be Strictly Liable for Product-Related
Injuries? A Legal and Economic Analysis, 36 Sw. L.J. 831, 848 (1982).
 Restatement (Third) of Torts § 1 (1998).
 Id. § 20.
 Id. cmt. g (emphasis added).
 193 S.W.3d 220, 225-26.
 FFE Transp. Servs., Inc. v. Fulgham, 154 S.W.3d 84, 88 (Tex. 2004); Firestone Steel Prods. Co. v. Barajas, 927 S.W.2d 608, 616
(Tex. 1996); Rourke v. Garza, 530 S.W.2d 794, 800 (Tex. 1975).
 Torrington Co. v. Stutzman, 46 S.W.3d 829, 844 (Tex. 2000); Am. Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 438 (Tex. 1997);
Houston Lighting & Power Co. v. Reynolds, 765 S.W.2d 784, 785 (Tex. 1988); Morgan v. Compugraphic Corp., 675 S.W.2d 729, 732
(Tex. 1984); Armstrong Rubber Co. v. Urquidez, 570 S.W.2d 374, 376 (Tex. 1978); Gen. Motors Corp. v. Hopkins, 548 S.W.2d 344, 352
 See Tex. Civ. Prac. & Rem. Code § 82.001(3).
 See Gaulding v. Celotex Corp., 772 S.W.2d 66, 68 (Tex. 1989) (“A fundamental principle of traditional products liability law is that
the plaintiff must prove that the defendants supplied the product which caused the injury.”); see also Firestone Steel, 927 S.W.2d at
614 (“It is not enough that the seller merely introduced products of similar design and manufacture into the stream of commerce.”).
 See, e.g., Tex. Civ. Prac. & Rem. Code § 82.005(e) (“This section is not declarative, by implication or otherwise, of the common law
with respect to any product and shall not be construed to restrict the courts of this state in developing the common law with respect to
any product which is not subject to this section.”).
 See, e.g., Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 867 (Tex. 1999) (holding defendant who did not sell
product that injured plaintiff was nevertheless entitled to indemnity).
 See Tex. Civ. Prac. & Rem. Code § 82.003(a) (providing that with certain exceptions, “[a] seller that did not manufacture a product is
not liable for harm caused to the claimant by that product”). As this suit was filed in 2002, it is not governed by these provisions. See Act
of June 2, 2003, 78th Leg., R.S., ch. 204, § 23.02(c), 2003 Tex. Gen. Laws 899 (“An action filed before July 1, 2003, is governed by the
law in effect immediately before the change in law made by [the above provisions], and that law is continued in effect for that purpose.”).
 Restatement (Second) of Torts § 402A cmt. f (“This Section is also not intended to apply to sales of the stock of merchants out of
the usual course of business, such as execution sales, bankruptcy sales, bulk sales, and the like.”); see also Galindo v. Precision Am.
Corp., 754 F.2d 1212, 1219 (5th Cir. 1985).
 Pelnar v. Rosen Sys., Inc., 964 F. Supp. 1277, 1281 (E.D. Wis. 1997); Antone v. Greater Ariz. Auto Auction, 155 P.3d 1074, 1079
(Ariz. Ct. App. 2007); Musser v. Vilsmeier Auction Co., 562 A.2d 279, 283 (Pa. 1989); Brejcha v. Wilson Mach., Inc., 206 Cal. Rptr. 688,
694 (Cal. Ct. App. 1984); Tauber-Arons Auctioneers Co. v. Superior Court, 161 Cal. Rptr. 789, 798 (Cal. Ct. App. 1980).
 Tri v. J.T.T., 162 S.W.3d 552, 563 (Tex. 2005).
 Edward D. Jones & Co. v. Fletcher, 975 S.W.2d 539, 544 (Tex. 1998); Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525
 Graff v. Beard, 858 S.W.2d 918, 920 (Tex. 1993).
 The National Highway Traffic Safety Administration reports that since 1966 more than 390 million cars, trucks, buses, recreational
vehicles, motorcycles, and mopeds, as well as 46 million tires, 66 million pieces of motor-vehicle equipment, and 42 million child
safety seats have been recalled. See Nat’l Highway Traffic Safety Admin., Motor Vehicle Safety Defects and Recalls: What Every Vehicle
Owner Should Know I (2006), available at http://www-odi.nhtsa.dot.gov/recalls/recallprocess.cfm.
 See id. at 3 (listing safety-related defects including steering defects that may cause loss of control, fuel-system defects resulting in
potential for fire, cooling-fan defects that could injure mechanics working on engines, and windshield-wiper defects).
 See, e.g., 15 U.S.C. § 2064(b)(2), (b)(3) (stating that if manufacturer becomes aware of substantial product hazard, it must
immediately inform Consumer Product Safety Commission who may order the product repaired, replaced, or refunded); 40 C.F.R. §
159.184(a), (b) (recognizing manufacturer’s duty to report incidents involving pesticide’s toxic effects that may not be adequately
reflected on its labels); 14 C.F.R. § 21.3 (imposing on aviation manufacturers an affirmative duty to report failures of parts it
 Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995).
 Pelnar v. Rosen Sys., Inc., 964 F. Supp. 1277, 1284 (E.D. Wis. 1997).
 See Buchanan v. Rose, 159 S.W.2d 109, 110 (Tex. 1942) (“[A] mere bystander who did not create the dangerous situation is not
required to become the good Samaritan and prevent injury to others. Under the last rule, a bystander may watch a blind man or a child
walk over a precipice, and yet he is not required to give warning. He may stand on the bank of a stream and see a man drowning, and
although he holds in his hand a rope that could be used to rescue the man, yet he is not required to give assistance. He may owe a
moral duty to warn the blind man or to assist the drowning man, but being a mere bystander, and in nowise responsible for the
dangerous situation, he owes no legal duty to render assistance.”).