Clarifying Primary vs. Secondary Fault: Fourth Circuit Recognizes Implied Indemnification Between Joint Tortfeasors in Maryland Strict-Liability Actions, But Reaffirms the American Rule on Attorneys’ Fees

Introduction

Stradis Healthcare, LLC v. Geri-Care Pharmaceuticals Corporation, decided by the United States Court of Appeals for the Fourth Circuit on 16 July 2025, settles two recurring questions under Maryland law:

1. When may one jointly-liable tortfeasor obtain implied (tort) indemnification from another in a strict products-liability setting?
2. Can the successful indemnitee also compel the indemnitor to reimburse the attorneys’ fees incurred defending the underlying suit?

The Fourth Circuit—predicting Maryland law—held that (i) implied indemnification is available where the indemnitee’s fault is secondary or passive and the indemnitor’s is primary or active, even when both are strictly liable; but (ii) the American Rule bars recovery of defense fees unless a statute, rule, or contract expressly shifts them.

Summary of the Judgment

• Issue 1 – Indemnification: The district court properly ordered Geri-Care to reimburse Stradis for KeraLink’s $606,415.49 product-liability judgment (plus prejudgment interest). Stradis’ liability was merely for passing along Geri-Care’s defective eyewash; Geri-Care’s liability was primary because it functioned as the apparent manufacturer, orchestrated labeling, FDA registration, and marketing.
• Issue 2 – Attorneys’ Fees: Consistent with Maryland’s American Rule, the district court correctly denied Stradis’ demand for $220,950 in defense costs. No statute, contract, or narrow exception applied.
• Disposition: Affirmed in all respects (opinion by Senior Judge Keenan; Judges Harris and Quattlebaum concurring).

Analysis

a. Precedents Cited

The panel’s opinion canvassed both state and federal authorities:

1. Maryland Strict-Liability & Sealed-Container Cases
   • Phipps v. General Motors Corp., 363 A.2d 955 (Md. 1976) – core elements of strict liability.
   • Md. Code, Cts. & Jud. Proc. § 5-405 – sealed-container defense and its exceptions.
   • KeraLink Int’l v. Geri-Care Pharm., 60 F.4th 175 (4th Cir 2023) – earlier appeal establishing joint/several liability and finding Geri-Care an apparent manufacturer.
2. Indemnity Doctrine
   • Pulte Home Corp. v. Parex, Inc., 942 A.2d 722 (Md. 2008) – three sources of indemnity (express, implied-in-fact, implied-in-law).
   • Franklin v. Morrison, 711 A.2d 177 (Md. 1998) – equitable nature; necessity of disparity in fault.
   • Max’s of Camden Yards v. A.C. Beverage, 913 A.2d 654 (Md. Ct. Spec. App. 2006) – classic passive-active paradigm; skepticism on fee-shifting.
   • Restatement (Second) of Torts § 886B – illustrative scenarios.
3. Attorneys’-Fee Principles
   • Bausch & Lomb Inc. v. Utica Mut. Ins. Co., 735 A.2d 1081 (Md. 1999) – American Rule baseline.
   • Jones v. Calvin B. Taylor Banking Co., 253 A.2d 742 (Md. 1969) & Nova Research, Inc. v. Penske Truck Leasing Co., 952 A.2d 275 (Md. 2008) – narrow “indemnity exception” where contract impliedly covers defense costs.
   • Federal standard of review cases (RXD Media, 986 F.3d 361; SouthPeak, 777 F.3d 658).

These precedents collectively shaped two holdings: (1) Maryland courts would recognize tort-based indemnity among strict-liability co-defendants if their culpability meaningfully differs; (2) Maryland’s highest court has not extended fee-shifting to such tort indemnity situations.

b. Legal Reasoning

1. Primary vs. Secondary Culpability
   • The panel adopted the active-passive or primary-secondary dichotomy.
   • Geri-Care’s conduct was active/primary because it branded, labeled, registered, and exclusively distributed the eyewash while failing to test it.
   • Stradis’ conduct was passive/secondary; it merely relied on Geri-Care’s representations and incorporated the product in its surgical packs.
2. Applicability to Strict Liability
   • Although strict liability does not hinge on fault, Maryland’s equitable indemnity doctrine focuses on the qualitative difference in roles between the tortfeasors. The Fourth Circuit reasoned that nothing in Maryland jurisprudence bars applying that doctrine to strict-liability chains—indeed, distribution chains generate archetypal “upstream vs. downstream” disparities.
3. Equitable Unjust-Enrichment Rationale
   • Without indemnity, the downstream seller (Stradis) could shoulder the whole judgment via joint and several liability, unjustly benefitting the more culpable upstream supplier (Geri-Care). The panel viewed indemnity as the equitable safety-valve preventing such enrichment.
4. Attorneys’ Fees Analysis
   • The court started from Maryland’s American Rule and found no statutory or contractual fee-shifting provision.
   • Max’s dictum made recovery “very doubtful” in passive-active settings; Nova Research and Jones involved express or implied contractual indemnity, not tort indemnity.
   • Hence, equitable indemnity covers the underlying judgment, but not the indemnitee’s defense fees.

c. Likely Impact of the Decision

• New Guidance in Product Chains: Maryland actors (manufacturers, private-label distributors, assemblers, and retailers) now have appellate-level confirmation that indemnity may reallocate strict-liability judgments according to relative fault—even absent a written contract.
• No Automatic Fee-Shifting: Businesses cannot assume they will recoup defense costs merely by being the less guilty tortfeasor. Contractual clauses must be drafted if fee recovery is desired.
• Litigation Strategy: Upstream entities branding or registering products face heightened indemnity exposure. They may respond with (i) tighter quality-control, (ii) negotiated indemnity limitations, or (iii) insurance endorsements.
• Predictive Value for State Courts: Because the Fourth Circuit sat in diversity and explicitly predicted Maryland law on an unanswered question, state trial courts are likely to treat this decision as persuasive, if not controlling.

Complex Concepts Simplified

Implied (Tort) Indemnification

A court-created remedy letting a less-culpable tortfeasor shift the entire judgment to the more-culpable tortfeasor when equity demands it.

Apparent Manufacturer Doctrine

A distributor that brands, labels, and markets a product as its own is treated as a manufacturer for liability purposes, even if it did not physically produce the item.

American Rule

Each party pays its own attorneys’ fees unless a contract, statute, or narrowly-drawn common-law exception says otherwise.

Active vs. Passive Fault

Active/Primary: The party’s own conduct directly creates the hazard.
Passive/Secondary: The party’s liability arises only from failure to detect or remedy another’s defect, or from vicarious liability.

Conclusion

Stradis Healthcare confirms two complementary rules in Maryland tort practice:

1. A downstream seller held strictly liable may invoke implied indemnification against an upstream apparent manufacturer when their respective fault levels materially differ.
2. The equitable reach of that indemnity stops at the underlying judgment; absent a fee-shifting clause or statute, the American Rule bars recovery of defense costs—even for the passive tortfeasor.

By bridging the gap between indemnity principles and strict products liability, the Fourth Circuit’s opinion supplies a roadmap for allocating risk and drafting contracts in complex supply chains while reaffirming Maryland’s longstanding caution against implied fee-shifting. Businesses should reassess their quality-control and contract provisions accordingly.