Fourth Circuit Clarifies Implied Indemnity Between Joint Tortfeasors in Strict Products Liability While Re-affirming the American Rule on Attorneys’ Fees

1. Introduction

The published opinion in Geri-Care Pharmaceuticals Corp. v. Stradis Healthcare, LLC, Nos. 23-1181 & 23-1246 (4th Cir. July 16 2025), addresses two interrelated questions of Maryland law as applied in a diversity action:

Whether a downstream distributor (Stradis) found jointly and severally liable in strict products liability may obtain implied (tort) indemnity from an upstream entity (Geri-Care) that functioned as an apparent manufacturer of the defective product.
Whether the successful indemnitee may also shift the attorneys’ fees it incurred defending the underlying tort action, notwithstanding the American Rule.

KeraLink International, a network of eye banks, sued both Stradis and Geri-Care after contaminated Geri-Care-branded eyewash rendered donated corneal tissue unusable. The district court entered judgment for KeraLink on a strict products liability theory, holding Stradis and Geri-Care jointly and severally liable for over $606,000. In the later indemnity phase, the court granted Stradis full indemnity over against Geri-Care but refused to award the roughly $221,000 in attorneys’ fees Stradis spent defending the KeraLink suit. Both sides cross-appealed; the Fourth Circuit affirmed.

2. Summary of the Judgment

The Fourth Circuit, per Senior Judge Keenan, concluded:

Implied indemnity affirmed. Applying Maryland law, the court held that Geri-Care’s fault was primary and Stradis’s fault merely secondary. Equity therefore entitled Stradis to full indemnity for the products-liability judgment.
Attorneys’ fees denied. The panel rejected Stradis’s effort to recover defense fees, ruling that Maryland’s American Rule presumptively bars fee-shifting in tort indemnity actions based on active-passive distinctions, absent statute, contract, or a special “innocent party” status.

3. Analysis

3.1 Precedents Cited and Their Influence

Phipps v. General Motors Corp., 363 A.2d 955 (Md. 1976) – Defines the four elements of strict products liability adopted by Maryland; forms the substantive basis for KeraLink’s original recovery.
KeraLink Int’l v. Geri-Care Pharm., 60 F.4th 175 (4th Cir. 2023) – Earlier appeal in the same litigation; established that Geri-Care was an apparent manufacturer barred from asserting the sealed-container defense and that Stradis breached an express warranty of sterility.
Franklin v. Morrison, 711 A.2d 177 (Md. 1998) – Maryland’s leading case on implied indemnity; emphasizes equitable nature and need for a “disparity in the nature or the extent of fault.”
Max’s of Camden Yards v. A.C. Beverage, 913 A.2d 654 (Md. Ct. Spec. App. 2006) – Discusses the intersection of implied indemnity and attorneys’ fees; dicta suggests such fees are “very doubtful” absent a true innocent party. The Fourth Circuit relied heavily on this dictum.
Pulte Home Corp. v. Parex, Inc., 942 A.2d 722 (Md. 2008) – Clarifies the three origins of indemnity in Maryland: express contract, implied-in-fact, and implied-in-law (tort). Guides the court’s taxonomy.
Nova Research, Inc. v. Penske Truck Leasing Co., 952 A.2d 275 (Md. 2008) & Jones v. Calvin B. Taylor Banking Co., 253 A.2d 742 (Md. 1969) – Fee-shifting in contractual indemnity; distinguished by the Fourth Circuit because they involved contracts, not tort indemnity between joint tortfeasors.

3.2 Court’s Legal Reasoning

Determining relative culpability. Maryland does not require complete innocence; it requires a qualitative difference in culpability. Geri-Care:
- Branded, labelled, and FDA-registered the eyewash solely in its own name.
- Requested label changes and held itself out as the exclusive source.
- Failed to test for sterility.
- Set the defective product into the stream of commerce.
Stradis, by contrast, was a downstream seller who relied on Geri-Care’s representation, merely repackaged the sealed bottles, and extended its own (breached) warranty. The court deemed this secondary/passive in nature.
Equitable policy against unjust enrichment. Without indemnity, the less culpable distributor might shoulder the entire joint-and-several judgment, unjustly enriching the more culpable apparent manufacturer.
Extent of Maryland precedent. Although no Maryland case had squarely applied implied indemnity to co-defendants in strict products liability, the Fourth Circuit predicted—under Erie principles—that Maryland’s highest court would allow it, noting analogous reasoning in Max’s and the Restatement (Second) of Torts § 886B.
Attorneys’ fees analysis.
- General rule: Fee-shifting barred unless statute, rule, or contract says otherwise.
- “Innocent party” exception (e.g., Chang v. Brethren Mut.) does not apply where indemnity rests on an active-passive distinction—Stradis was not wholly innocent.
- Max’s dicta, consistent with Maryland’s policy, persuaded the court that allowing fees here would impermissibly expand the exception.
- Nova Research and Jones did not control because they dealt with contractual indemnity and different categories of fees (defense vs. first-party pursuit).

3.3 Likely Impact on Future Litigation

Clarifies Maryland law. This is the first authoritative prediction that Maryland would permit implied indemnity among joint tortfeasors in strict products liability actions. Downstream distributors and retailers now have a clearer path to shift ultimate liability up the chain when they merely pass along a defective product.
Apparent manufacturers beware. Entities that brand or register products without actually manufacturing them assume “manufacturer-level” exposure not only to plaintiffs, but also to indemnity claims from co-defendants.
Fee-shifting remains narrow. The decision cements the idea that, in Maryland, tort-based implied indemnity generally does not override the American Rule; litigants should not expect reimbursement for defense costs unless they negotiate for it in advance.
Strategic considerations.
- Contractual indemnity clauses with explicit fee provisions will become more common in supplier agreements.
- Defendants may stipulate active-passive status early to manage exposure.
- Upstream entities may implement stricter quality-control and clearer labeling to avoid “apparent manufacturer” treatment.

4. Complex Concepts Simplified

Strict Products Liability: Liability imposed on anyone in the distribution chain for selling a defective product that is unreasonably dangerous, regardless of fault or negligence.
Implied (Tort) Indemnity: A judicially created right allowing a less culpable tortfeasor to shift the entire loss to a more culpable tortfeasor, based on equitable principles, even without a contract.
Primary vs. Secondary (Active vs. Passive) Fault: Primary/active fault involves direct wrongdoing (e.g., designing or labelling a defective product). Secondary/passive fault is more derivative, such as failing to discover or correct another’s defect.
Apparent Manufacturer Doctrine: Under Maryland Code § 5-405(b), a “distributor” that holds itself out as the manufacturer is treated as a manufacturer for liability purposes and loses certain defenses, like the sealed-container defense.
Sealed-Container Defense: A statutory defense for sellers of sealed products who had no reasonable opportunity to inspect; unavailable to apparent manufacturers or sellers who give express warranties that turn out false.
The American Rule: Each party pays its own attorneys’ fees unless a statute, court rule, or contract provides otherwise. Maryland adheres strictly to this rule, with narrow exceptions.

5. Conclusion

The Fourth Circuit’s decision in Geri-Care v. Stradis establishes two significant guideposts for Maryland-based litigation:

Downstream sellers held liable in strict products liability may obtain full implied indemnity from an upstream apparent manufacturer when their own culpability is merely secondary.
The American Rule remains robust; even a prevailing indemnitee cannot recoup its defense fees absent contractual or statutory authorization or a showing of complete innocence.

By combining flexible equitable principles with a firm commitment to fee-shifting limitations, the court provides both clarity and caution. Businesses should reassess their supply-chain contracts, diligence procedures, and labeling practices to align with the clarified risk landscape, while litigators must calibrate indemnity strategies accordingly.