Opinion ID: 196901
Heading Depth: 2
Heading Rank: 1

Heading: Vernay's Liability

Text: 16 The district court found that Vernay breached certain express and implied warranties in the sale of the Vernatube to Young Brothers, all in violation of Me.Rev.Stat. Ann. tit. 11, §§ 2-313 (express warranty), 2-314 (implied warranty of merchantability), and 2-315 (implied warranty of fitness for a particular purpose), and that Vernay was also liable under theories of strict liability for product defects and negligence. The district court arrived at its conclusions after making extensive findings regarding the Vernatube and the VPIS which were based both on trial testimony, exhibits entered into evidence and the parties' joint stipulations, dated June 1, 1994 (Joint Stipulations). On appeal, Vernay challenges, for a number of reasons, the district court's conclusions that Vernay is liable for breach of express warranties, breach of implied warranties, and strict liability for product defects. Breach of Express Warranty 17 Pursuant to the Maine Uniform Commercial Code, express warranties by the seller are created by [a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain. Me.Rev.Stat. Ann. tit. 11, § 2-313. Furthermore, [i]t is not necessary to the creation of an express warranty that the seller use formal words such as 'warrant' or 'guarantee' or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty. Id. In general, the question whether certain language creates an express warranty is reserved for the trier of fact. See Cuthbertson v. Clark Equip. Co., 448 A.2d 315, 320 (Me.1982). Below, Sullivan contended that: the Vernatube had insufficient nominal wall thickness; the Vernatube was porous on the inner surface, affecting the tube's overall integrity; and the longitudinal strength was insufficient for the application and could have been increased through changes in the tube's manufacture. Based on an extensive review of the technical evidence presented, the district court agreed, finding that the deficiency in the nominal wall thickness and the substandard longitudinal strength were not what Vernay expressly warranted in its VPIS, and that the porous nature of the inner surface of the Vernatube contributed to the weakening of the fibers and the fatigue crack which caused the vessel to sink. The district court ultimately concluded that the breach of these express warranties was collectively the cause of the failure of this section of Vernatube. Vernay challenges the district court's conclusion that it breached an express warranty arising from the VPIS on several grounds. We reject all of them. 18 First, Vernay points out that neither Sullivan nor Young Brothers pled any violation of an express warranty arising from the VPIS. Sullivan only pled a violation of the express and implied warranties of merchantability and fitness for a particular purpose, and Young Brothers only pled a breach of an implied warranty of merchantability. Accordingly, Vernay argues, the district court erred when it held Vernay breached certain express warranties made in the VPIS. We do not agree. 19 Under Fed.R.Civ.P. 15(b), 2 we find that the express warranty arising from the VPIS was tried by implied, if not express, consent of the parties and, thus, we treat[ ][it] in all respects as if [it] had been raised in the pleadings. Id.; see Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 1493 (1990) (Rule 15(b) does not require that a conforming amendment be made and there is no penalty for failing to do so.). In his pretrial memorandum, Sullivan argues that Vernay Products breached certain express warranties in connection with the sale of the Vernatube, citing to Me.Rev.Stat. Ann. tit. 11, § 2-313 and referring to the statements made in the VPIS. Although in its pretrial memorandum Vernay did point out, albeit somewhat in passing and without reference to any legal rule, that Sullivan had not originally pled breach of an express warranty arising from the VPIS, we find that, because issues relating to both express and implied warranties arising from the VPIS were tried interchangeably and without further objection, the breach of an express warranty arising from the VPIS was tried by implied, if not express, consent under Fed.R.Civ.P. 15(b). The record shows that Vernay did not object to the presentation of evidence regarding express warranties made in the VPIS, and that Vernay itself introduced considerable testimony regarding its interpretation of the VPIS. 20 Furthermore, we are unpersuaded by Vernay's counterargument that, because the VPIS was only admitted and discussed for purposes of the strict liability claim's failure to warn issue, its failure to object to the admission of the VPIS or to related testimony cannot be deemed an implied consent to amend the pleadings. Not only was the evidence and testimony regarding the VPIS related directly to the breach of warranties claims that Sullivan and Young Brothers had pled, but Vernay failed to raise any sort of objection or state for the record that it was not consenting to Sullivan's claim of a breach of an express warranty claim arising from the VPIS. In addition, Vernay's counsel explicitly admitted to the breach of warranties claims, without reference to the fact that an express warranty arising from the VPIS had not been pled: In support of defendants' motion for judgment as a matter of law, Vernay's counsel stated that [w]ell, we have a breach of contract account here, but I would say there is [an] absolute defense to Vernay under [Me.Rev.Stat. Ann. tit. 11, § ] 2-607(3) given that Vernay was not given notice of the defect. (6/21/94 Tr. p. 223). In any event, even assuming, arguendo, that Vernay had not consented to the amendment of the pleadings, it does not affect the outcome of the appeal as we nonetheless affirm the district court's findings that Vernay breached the express and implied warranties which had originally been pled. 21 Second, Vernay argues that, even if a breach of express warranty is deemed to have been pled, there was no evidence proffered at trial to show that either Young Brothers or Sullivan relied on the representations made in the VPIS. In support of his argument, Vernay cites Phillips v. Ripley & Fletcher Co., 541 A.2d 946, 950 (Me.1988), and cases from other jurisdictions for the proposition that reliance is an element of a breach of express warranty claim in Maine. As Phillips notes, comments to Me.Rev.Stat. Ann. tit. 11, § 2-313 suggest that the requirement that the affirmation become part of the 'basis of the bargain' is meant to continue the uniform sales act requirement that the purchaser must show reliance on the affirmation in order to make out a cause of action for breach of warranty. Phillips, 541 A.2d at 950 (internal citations omitted). 22 Although the district court did not explicitly discuss reliance as an element of the breach of express warranty claim in its memorandum, testimony was given that Young Brothers relied on the VPIS. The following colloquy ensued between counsel for Sullivan and Colby Young, part owner and vice president of Young Brothers: 23 Q. Is it fair to state that you made the decision to change your installation practice and use vernatubing for your wet exhaust tube based upon the representations set forth in the [VPIS]? 24 A. Yes, sir. 25 . . . . . 26 Q. So [sic] in other words, your decision to use the vernatube was based upon the content of the information set forth in [the VPIS]? 27 A. That's correct. 28 . . . . . 29 Q. If Vernay in its brochure had told you that a rigid installation was improper, you wouldn't have done it? 30 A. Certainly not. It never would have been done. 31 (6/21/94 Tr. T. at 199, 203). Following up on this and other testimony by Young, counsel for Vernay engaged in this exchange with Young: 32 Q. Mr. Young, you said that you relied on this document to decide whether or not to install Vernay in your first boat; isn't that right? 33 A. That and the representation from the rep [from H & H Propeller], yes. 34 Q. Okay. So you relied on things that [the representative] from H & H Propeller Shop, Inc. told you? 35 A. In fact, he brought it to us and asked us to try it, yes. 36 Q. You say that [the VPIS] is the only thing that Vernay gave you? 37 A. Yes. 38 (6/21/94 Tr. T. at 207). 39 Based on Young's testimony, including cross-examination by Vernay's counsel, we conclude that the district court could have reasonably inferred reliance. Thus, although the district court did not explicitly address reliance, we nonetheless affirm the breach of an express warranty claim based on the record evidence and the failure of Vernay's counsel to object to it, finding that the district court's failure amounts to harmless error in this case, since the failure to make findings of fact and conclusions of law dealt here with an issue on which most relevant facts are undisputed and the law can be applied without the district court's assistance. See Conservation Law Found. v. Busey, 79 F.3d 1250, 1271 (1st Cir.1996); Associated Elec. Coop., Inc. v. Mid-America Transp. Co., 931 F.2d 1266, 1272 (8th Cir.1991). Lack of Privity 40 We dismiss as meritless Vernay's next claim that Sullivan may not enforce the express warranty because there was no evidence proffered that Sullivan ever saw the VPIS prior to litigation, let alone relied on its representations. In Maine, [l]ack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer, seller or supplier of goods for breach of warranty, express or implied, although the plaintiff did not purchase the goods from the defendant, if the plaintiff was a person whom the manufacturer, seller or supplier might reasonably have expected to use, consume or be affected by the goods. Me.Rev.Stat. Ann. tit. 11, § 2-318 (1995); see Stanley v. Schiavi Mobile Homes, Inc., 462 A.2d 1144, 1147 n. 4 (Me.1983) (noting that lack of privity is no defense in breach of implied warranty actions). Although there is a lack of privity between Sullivan and Vernay in that Sullivan did not purchase the Vernatube directly from Vernay, Sullivan was certainly a person whom Vernay might reasonably have expected to use, or be affected by, the Vernatube. Indeed, Vernay itself stipulated to this very fact. See Joint Stipulations, No. 6. Even without the stipulation, the record supports this finding. As Vernay points out in its brief, approximately 70-75% of its products are sold directly to boat builders and the rest are sold to wholesale distributors and engine dealerships. H & H Propeller Shop was Vernay's distributor in Maine and the parts supplier from which Young Brothers purchased the Vernatube installed aboard the SEA FEVER. As a purchaser of a new vessel from a Maine boat building company which purchased goods from Vernay's Maine distributor, Sullivan was certainly a person whom Vernay might reasonably expect to use, or be affected by, its product. Notice Requirement 41 Vernay contends that the district court erred in holding it liable under a breach of warranty theory, arguing that it cannot be held responsible for the damages because Sullivan failed to comply with the notice requirements set forth in Me.Rev.Stat. Ann. tit. 11, § 2-607(3). That section requires that, where the tender has been accepted, the buyer must notify the seller of any breach within a reasonable time after he or she discovered or should have discovered any breach or be barred from any remedy. Id., § 2-607(3). The seller is defined as a person who sells or contracts to sell goods. Me.Rev.Stat. Ann. tit. 11, § 2-103(1)(d). The district court found that Sullivan satisfied the notice requirement, because he notified Young Brothers, his immediate seller, of the 1991 crack. 42 On appeal Vernay contends----as it did below----that Sullivan is barred from any remedy because he failed to notify Vernay of the undisputed 1991 crack which caused water to enter the SEA FEVER's holds. Vernay argues as follows: If the 1992 crack is considered to be a breach of any warranty then the similar 1991 crack must also be considered a breach and, because it is undisputed that neither Sullivan nor Young Brothers provided Vernay with any notice of the 1991 crack, 3 Sullivan is barred from any remedy. For support, Vernay argues that the majority of courts have held that for claims of economic loss, remote manufacturers must be notified, and that notice to the seller of the product alone is insufficient for purposes of Section 2-607(3). The consequence of not receiving notice of the first crack, Vernay explains, is that it never had an opportunity to offer a cure. See Me.Rev.Stat. Ann. tit. 11, § 2-605. The district court rejected Vernay's argument, concluding that the majority of courts in fact have held that buyers need only notify their immediate sellers. Sullivan, 893 F.Supp. at 1159 (collecting cases). However, Vernay disputes the cases that the district court cited, and argues that a majority of courts hold the opposite. 43 However, even accepting, arguendo, Vernay's argument, the record supports the conclusion that Vernay had constructive notice and knowledge of the 1991 crack. As the district court noted when denying defendants' motion for judgment as a matter of law, viewing the evidence in the light most favorable to the plaintiff----as the verdict here requires us to--a fact finder could conclude that Vernay was effectively notified via communication to H & H Propeller, Vernay's representative in Maine. The district court concluded, and we agree, that a fact finder could reasonably infer that the representative had the apparent authority to accept reports for Vernay and that notice given to that agent was effectively constructive knowledge to Vernay, who retained that representative and that company as its exclusive representative in Maine. 44 Finally, Vernay raises an additional argument based on the district court's finding that Sullivan was aware of a new crack in 1992 which he had been meaning to repair. Vernay now contends that because there is no evidence that Sullivan provided anyone with notice of the 1992 crack prior to the sinking, Sullivan is barred from any remedy. Vernay further contends that on the facts of this case (namely, that the 1991 crack almost resulted in the sinking of the SEA FEVER and the new crack had the potential to do the same), reasonable notice of this new crack could be nothing less than immediate notice. 45 Vernay has failed to adduce legal authority for the proposition that, under Maine's version of Article 2 of the UCC, Sullivan's failure to give immediate notice voids his claim. In contrast, an applicable comment to the UCC states that: 46 [a] reasonable time for notification from a retail consumer is to be judged by different standards [than notice from a merchant buyer], ... for the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy. 47 Uniform Commercial Code, § 2-607 cmt. 4. In this case, where the 1992 crack had given Sullivan no indication of trouble, we must reject Vernay's immediate notice gloss on what constitutes a reasonable time. To adopt Vernay's reading would require consumers to give notice of problems that amount to little more than a nuisance, and would tend to defeat worthy claims with little off-setting benefit to anyone. Even if consumers were to comply with this burden, manufacturers would be deluged with notices about harmless defects. In light of the UCC comment's apt caution regarding the notice requirement and retail consumers, we think that it would be unwise to shift the balance in this flow of information in the manner that Vernay urges. 48 As a result, we uphold the district court's conclusion that Vernay was liable for breach of its express warranties regarding the Vernatube's nominal wall thickness, porosity of its inner surface, and longitudinal strength. Furthermore, given the expert testimony heard by the district court, its finding of causation cannot be clear error. See Clement v. United States, 980 F.2d 48, 53 (1st. Cir.1992) (stating that, under Maine law, causation-in-fact is a factual inquiry); Greenstreet v. Brown, 623 A.2d 1270, 1271 (Me.1993) (stating that [p]roximate cause is a question of fact and [w]e will not disturb the trial court's finding of fact unless there is no competent evidence in the record to support it); Laferriere v. Paradis, 293 A.2d 526, 528-29 (Me.1972). Because we uphold the district court's finding of Vernay's liability based on a breach of its express warranty, we need not consider Vernay's liability with respect to theories of implied warranty, or with respect to negligence or strict liability for product defects. 4 See Dudley v. Bungee Int'l Mfg., 76 F.3d 372, 1996 WL 36977,  2, (4th Cir.1996) (per curiam) (finding it unnecessary to address the question of whether labelling on the [product] created any express warranties, since the court had affirmed claim for compensatory damages on a negligence count); Compton v. Wyle Laboratories, 674 F.2d 206, 208 n. 1 (4th Cir.1982) (declining to address alternate theory of breach of warranty on which plaintiff had prevailed below, since the court of appeals affirmed district court's finding of liability based on negligence); Drayton v. Jiffee Chem. Corp., 591 F.2d 352, 358 (6th Cir.1978) (upholding district court's conclusion of liability solely on breach of express warranty grounds, without ruling with respect to court of appeals' concerns regarding district court's conclusions of liability on bases of breach of implied warranty, strict liability and negligent design). 5 Sullivan's Conduct 49 Vernay also appeals the district court's finding that its acts were the proximate cause of Sullivan's injuries. Vernay contends that Sullivan's own actions were an intervening and superseding cause of his loss. Because proximate cause is a factual inquiry, the district court's determination must stand unless it is clearly erroneous. See Clement, 980 F.2d at 53 ([c]ausation-in-fact is, by definition a factual inquiry under Maine law); Greenstreet, 623 A.2d at 1271 ([p]roximate cause is a question of fact). 50 The district court ruled that the breach of the express warranties was collectively the cause of the failure of the Vernatube, which in turn caused the complained-of harm. Sullivan, 893 F.Supp. at 1159. Vernay correctly identifies evidence that Sullivan's own actions could have contributed to the SEA FEVER's sinking. However, the district court also considered expert testimony regarding the Vernatube's physical defects and their role in the SEA FEVER's sinking. Furthermore, the district court reduced Sullivan's recovery accordingly. Based on our review of this evidence, we conclude that there was sufficient evidence to render the district court's conclusion reasonable. As a result, we cannot conclude that the district court's finding that Vernay proximately caused the complained-of harm was clearly erroneous. Accordingly, we affirm the district court's conclusion that Vernay is liable to Sullivan for breach of its express warranty. 51 We note in passing that we do not opine on whether Sullivan's recovery under a breach of express warranty theory could appropriately be reduced under comparative negligence principles, since Sullivan does not cross-appeal the reduction. As the district court properly noted, whether such a reduction is permissible regarding a breach-of-warranty theory is an open question under Maine law. Sullivan, 893 F.Supp. at 1161 (citing Dongo v. Banks, 448 A.2d 885, 891 (Me.1982) (expressly declining to decide the issue of whether plaintiff's negligence is or should be a defense to an action for breach of implied warranty)). The district court reduced Sullivan's recovery under both express warranty and implied warranty theories on the basis of trends in case law applying comparative negligence principles to actions for breach of implied warranties. Id. We neither adopt nor reject the principle that express warranties implicate the same interests as implied warranties with respect to this question. 6 Rather, we uphold the reduction of Sullivan's award because of his waiver by failing to cross-appeal. As a result, we caution that our decision to allow a reduction under an express warranty theory for comparative negligence does not stand for an endorsement of comparative negligence's applicability to express warranty theory-based claims.