In Denny, the plaintiff was injured when her Ford Bronco II rolled over after she slammed on her brakes to avoid hitting a deer. She brought suit against defendant Ford, claiming that the vehicle was defectively designed. The action was pled under negligence, strict liability, and breach of the implied warranty of merchantability. In the District Court for the Northern District of New York, Denny was successful in warranty but not on the strict liability claim. Ford moved for a new trial, claiming the jury verdict was inconsistent. Unsuccessful in the trial court, Ford appealed to the Second Circuit, which certified three questions to the New York Court of Appeals.
Ford's argued that the two claims are identical, and thus a jury verdict denying one claim and upholding the other is inconsistent. The New York Court of Appeals held that the two actions are not identical. The dissent espoused the view that the two claims, while different in most situations, are the same in cases concerning defectively designed products.
The three questions certified to the court were as follows:
A. Prior state of the law in New York
Under UCC § 2-318, the remedy of implied warranty of merchantability is available to any plaintiff who may be personally injured by the product.
The court reviewed the history of strict products liability and breach of implied warranty causes of action. Holding that the two causes of action remain separate, the court determined that a lack of recovery under one does not preclude recovery under the other. Specifically, a cause of action under a breach of implied warranty claim can be broader than a cause of action arising under a strict products liability claim.
First, the court examined the history of products liability litigation, discussing past courts' early reliance on contractual warranty theories as the only means of recovery. The courts accomplished this goal by positing the existence of an implied warranty. This contractually based theory, however, had significant weaknesses, including the need for strict privity. Consequently the courts developed strict products liability sounding in tort rather than contract, allowing broader compensation for injured parties. This development greatly diminished the need and utility of the older breach of implied warranty causes of action, but did not entirely supplant or subsume it. The court found that the viability and separate nature of the breach of implied warranty cause of action is evidenced by its retention and expansion in New York's version of the Uniform Commercial Code (UCC §§ 2-314(2)(c) - 318).
The principal difference between these two causes of action concerns the definition of an actionable "defect." The New York standard for determining a defect under a strict products liability theory requires an assessment of whether a reasonable person would conclude that the utility of the product did not outweigh the risk inherent in marketing a product designed in that manner if the design defect were known at the time of manufacture. This approach is called a "risk/utility" balance. Under the UCC-based breach of implied warranty cause of action, however, a "defective" product is one that is not fit for the ordinary purpose for which such goods are used. This test focuses on the consumer's expectations.
The court noted that generally both tests will yield the same result but that this case clearly illustrates how the tests can diverge. Ford appropriately defended against a strict products liability claim by demonstrating that the design features plaintiff complained of were necessary for off-road travel. Because the "intended use" for which the Bronco II was designed was off-road travel, this defense satisfies the risk/utility balance. Nevertheless, plaintiff demonstrated that the Bronco II, while suitably designed for off-road travel, was in fact marketed and sold as a vehicle suitable for everyday suburban driving. Because everyday suburban driving was the "ordinary purpose" for which the Bronco II was sold, it was unsafe.
The court took notice, not of how the product was designed or what it was designed to do, but rather, faced with an implied warranty claim, of how the product was sold and marketed as well as what the consumer was led to believe during its sale.
Judge Simons primarily argues the third certified question, that of whether the claims in this case, as charged to the jury, were reconcilable. Because the language of the charge and the general definitions of "defective" in both strict liability and implied warranty are similar, Judge Simons found that, in spite of the two claims' difference on their face, the strict liability claim includes any claim that could be made based on breach of implied warranty with respect to a defectively designed product. The dissent finds little to distinguish "ordinary use," under warranty, from "intended or reasonably foreseeable" use, under strict liability. But by focusing on the tests used for each claim, Judge Simons spends a great deal of time on issues not directly addressed by the majority.
Underlying the dissent's views on the relationship between strict liability and implied warranty is a firm grasp of the historical development of products liability. The majority cites the Restatement to support a distinction between strict liability and implied warranty, leaving out the dissent's fundamental issue, the test used to determine defectiveness. In the end, the dissent equates the implied warranty claim with the consumer expectation test.
The primary effect of the dissent in Denny is to illustrate how narrow the class of cases is in which claims under strict liability and warranty will not overlap. The majority finds that the class exists, without deciding that the verdict in Denny places it among such cases. Judge Simons examines the two groups, finding differences in their normal application, but no cases of product defectiveness in which the two are not co-extensive.
The general position in products liability law is that the claims of strict liability for product defect and for breach of implied warranty of merchantability are overlapping, but not equivalent for all purposes. Restatement (Third) of Products Liability, Tentative Draft No.2, Comments m, q (March 13, 1995). The court cites several cases from other jurisdictions in support of the overlap theory. See, e.g., Gumbs v. International Harvester, 718 F.2d 88 (3d Cir. 1983) (strict liability and implied warranty are neither always distinctive nor identical); Larsen v. Pacesetter Sys., 837 P.2d 1273 (Haw. 1992) (implied warranty claim for personal injury must avoid summary judgment standard in a strict products liability action in tort). Larsen decided a slightly different issue than Denny. The distinction between the two claims, as in all of these cases, is whether the facts on which each claim is based differ enough to distinguish the two actions.
Plaintiffs may assert multiple theories of liability in most states. In Fernandez v. Char-Li-Jon, Inc., 888 P.2d 471 (N.M. Ct. App. 1994), the court held that an implied warranty claim was not eliminated although similar claims under strict liability and negligence were barred by the statute of limitations. Although the defendant argued that the underlying claim was in the nature of a personal injury, the court barely addressed that argument. Unfortunately, Fernandez does not discuss the claim identity issue in detail. (Note that the tort statute of limitations provided was a default rule, which any specific statute would override. The court considered the UCC to be such a statute.)
West Virginia's high court came to the opposite conclusion from Fernandez in Taylor v. Ford Motor Co., 408 S.E.2d 270 (W. Va. 1991). Interestingly, Taylor also involved a Ford Bronco II rollover. The court, having never addressed the issue, surveyed the case law and discovered three distinct positions: first, that the UCC statute of limitations applies regardless of type of injury or damages claimed; second, that the general statute of limitations on tort actions should apply in cases of personal injury or injury to personal property; third, that the UCC only applies in cases where the plaintiff and defendant are in privity, i.e., in normal contract situations. Taylor, 408 S.E.2d at 272. The West Virginia court noted the time-honored distinction between contract and tort, holding that personal injury claims, regardless of the theory on which the claim is based, are subject to the statute of limitations (and its attendant procedural rules, e.g., tolling, accrual, etc.) for tort actions.
The question of which statute of limitations to apply is not the direct question addressed by the Court of Appeals in Denny. However, the fundamental issues are the same. Is a contract action claiming damages for personal injury essentially the same as a tort action?
The dividing line between implied warranty and strict liability for defective design clearly exists in the majority view. It remains for the court to set other rules for organizing this area of law. For example, one of the primary reasons that implied warranty is still often accepted as a basis of liability is the longer statute of limitations. Many of the cases cited by the court directly address this issue. For example, if the disjunction in this case between the intended use of the Bronco II as a sport-utility vehicle and its ordinary use as a passenger vehicle did not exist, would the majority maintain its position that implied warranty has a separate existence? The language of the opinion indicates the importance of this factual point. Recall that Gumbs v. International Harvester, 718 F.2d 88 (3d Cir. 1983), turned on the inability of a plaintiff to articulate distinguishable facts proving breach of the implied warranty.
One of the clearest implications of this case is the renewed viability of a cause of action based on a breach of implied warranty of merchantability for a defective design. Of course, the court has seriously limited the scope of this action to avoid its use in situations where a tort action is more appropriate.
What the court has not done is decide that all such claims are identical. The primary hurdle remaining for plaintiffs is showing that the jury charges make out distinct claims, i.e., tests for "defect." A case that might otherwise contain two claims will fall if the jury instructions do not express the existence of separate defects. Plaintiff's lawyers are likely to search for new expressions of defect in order to maintain the safety net of an additional claim.
Another difficulty that should be anticipated is the possible reemergence of the statute of limitations issue. See Andrea G. Nadel, Annotation, What Statute of Limitations Applies to Actions for Personal Injuries Based on Breach of Implied Warranty Under UCC Provisions Governing Sales (UCC § 2-725(1), 20 A.L.R.4th 915 (1983) (New York cases at § 6b). This issue arises when the strict liability action is time-barred and the UCC action remains viable. The court's position anticipates a system wherein each claim is subject to its own time limits, except in instances when the implied warranty claim is identical to the strict liability claim. When the warranty claim for personal injury damages is distinct from the strict claim, then the warranty action will enjoy the longer time limit of UCC actions. If, however, the warranty claim is not distinguishable for the strict claim, then the shorter limit for tort actions will apply.
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