Keralink Intl., Inc. v. Stradis Healthcare, LLC, 2025 WL 1947764 (4th Cir. 2025), is a rare published appellate decision on common-law implied indemnity in the context of prescription medical product liability litigation.  The case involves two commercial intermediate seller parties already held liable to a buyer of the product (corneal eyewash) that had been rendered useless due to contamination.  

The rarity of this kind of decision is underscored by the almost total lack (remarked in the opinion) of legal standards for implied indemnification. Doing what it could with available Maryland precedent, the decision more or less split the baby, in the sense that the downstream party succeeded on its claim for indemnification against the upstream party, but did not succeed on its claim for attorney fees. 

Tort indemnity is a form of indemnification implied in law. Implied indemnity could exist even though the party seeking indemnification has some degree of fault (some states require blamelessness, but not Maryland). Indemnification can also be contractually bargained for, but that is not what happened here. In cases of contractual indemnification, the task for the court is, obviously, contractual interpretation.  That might have been easier for the Keralink court than figuring out, against an almost blank slate, whether Maryland law would imply indemnification.

The key principles for implied indemnification were categorization of fault and avoidance of unjust enrichment.  The upstream seller, who arranged to purchase the product from its Korean manufacturer, was more extensively involved with the product and had more extensive culpable conduct.  The upstream entity’s liability to the original plaintiff could be categorized as “primary, active, and direct” while the downstream distributor’s liability could be categorized as “secondary, passive, technical, or imputed.” That’s how the district court saw it, at least in relative terms, and granted the downstream entity’s motion for summary judgment and awarded it indemnification. 

The Fourth Circuit reviewed the grant of summary judgment de novo and affirmed. The upstream entity put its name on the product as apparent manufacturer (no other entity had its name on the package), it reviewed the label for “accuracy,” made changes to the Drug Facts section of the label, and received FDA registration. The appellate court agreed with the district court’s assessment of relative liability.  

Moreover, the court was concerned that if the upstream manufacturer’s no-indemnification position prevailed, then only the actual manufacturer, which was in South Korea, could be subject to tort indemnification in favor of a downstream supplier.  No Maryland precedent stood for that proposition. Further, the trial court’s conclusion “also was consistent with the equitable nature of the remedy of implied indemnity under Maryland law, ensuring that [the upstream entity] was not ‘unjustly enriched’ by [the downstream entity’s] exposure to payment of the entire judgment despite [the upstream entity’s] primary culpability.” The upstream company was properly held liable for indemnity.  

But tort indemnity extends only to the recoverable damages, not to attorney fees. Again, Maryland law was hardly pellucid as to the issue, and the district court seized upon dicta from an earlier case in denying attorney fees. Again, the Fourth Circuit again smiled upon the district court’s decision, reasoning that Maryland follows the American rule that each side bears their own attorney’s fees.  The only exception is for innocent parties, who may recover fees. But while the downstream entity could be characterized as less culpable than the upstream entity, it could not be characterized as entirely innocent. 

The downstream company fought hard for attorney fees. That is unsurprising.  In some cases, the attorney fees can be significant, sometimes even approaching the substantive damage awards. The downstream entity relied on a couple of cases awarding attorney fees where there were indemnity contracts. But the Keralink district court held, and the Fourth Circuit agreed, that cases involving contractual indemnification were inapplicable.  In sum, the Fourth Circuit declined the downstream entity’s “request that we recognize an exception to the American rule to permit indemnification of attorneys’ fees incurred in defending against a tort action in which that defending party has been found secondarily culpable.”