Opinion ID: 1248354
Heading Depth: 1
Heading Rank: 9

Heading: Does Iowa Law Allow Plaintiff to Recover From a Cigarette Manufacturer for Breach of Implied Warranty of Merchantability When the Cigarettes Smoked by Plaintiff Were in the Condition Intended by the Manufacturer and Plaintiff Alleges Defendants' Cigarettes Are Substantially Interchangeable?

Text: Because the implied warranty of merchantability is statutory, we begin our discussion of this issue with a reference to the governing act: 1. Unless excluded or modified (section 554.2316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.... 2. Goods to be merchantable must be at least such as a. pass without objection in the trade under the contract description; and b. in the case of fungible goods, are of fair average quality within the description; and c. are fit for the ordinary purposes for which such goods are used; and d. run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and e. are adequately contained, packaged, and labeled as the agreement may require; and f. conform to the promises or affirmations of fact made on the container or label if any. Iowa Code § 554.2314 (1999). The plaintiff claims the cigarettes sold by the defendants were not fit for the ordinary purposes for which such goods are used because the cigarettes were carcinogenic and addictive. See id. § 554.2314(2)( c ). [5] He argues that a design defect could infect an entire product line, thereby rendering the product unmerchantable, even though the product is in the condition intended by the manufacturer and conforms to similar products. The defendants assert that when a product is manufactured as intended and is like other products of that type, there is no breach of the implied warranty of merchantability. If a health risk associated with use of a product renders the product unmerchantable, contend the defendants, then warranty claims could be brought against manufacturers of butter, meat, and alcohol, not to mention bicycles, ladders, and knives, precisely because they all carry a risk of disease or injury. In reviewing case law from other jurisdictions, we find support for both views. Courts have held that a product that is unreasonably dangerous or lacks adequate warning is likewise not fit for ordinary use. E.g., Hill v. Searle Labs., 884 F.2d 1064, 1070 n. 10 (8th Cir.1989) ([I]nadequate warning can be evidence of a breach of warranty on the part of a manufacturer.); Bly v. Otis Elevator Co., 713 F.2d 1040, 1045 (4th Cir.1983) (A manufacturer may breach its implied warranty of merchantability by failing to warn or instruct concerning dangerous propensities or characteristics of a product even if that product is flawless in design and manufacture.); Pritchard v. Liggett & Myers Tobacco Co., 295 F.2d 292, 296, 297 n. 14 (3d Cir.1961) (reversing dismissal of claim for breach of implied warranty of merchantability based on allegation that cigarettes were unfit because they caused physical injury to the smoker, notwithstanding lack of allegation that the cigarettes smoked by plaintiff were not of the same quality as those generally sold); Kyte v. Philip Morris Inc., 408 Mass. 162, 556 N.E.2d 1025, 1029 (1990) (denying summary judgment on plaintiff's breach of implied warranty claim based upon an alleged design defect, not in all cigarettes, but in Marlboro and Parliament cigarettes in particular that made those cigarettes inherently carcinogenic and addictive). In contrast, other courts have rejected the argument that an unreasonably dangerous product for purposes of strict liability is per se unmerchantable. E.g., Spain v. Brown & Williamson Tobacco Corp., 230 F.3d 1300, 1310 (11th Cir. 2000) (ruling that complaint alleging that cigarettes were unfit for the ordinary purpose for which they are used because they caused cancer, making them unreasonably dangerous did not state a claim for breach of an implied warranty of merchantability); Green v. Am. Tobacco Co., 409 F.2d 1166, 1166 (5th Cir.1969) (affirming judgment for cigarette manufacturer on breach of implied warranty claim, holding that warranty was not breached where there was no proof that cigarettes were adulterated); Tompkins v. R.J. Reynolds Tobacco Co., 92 F.Supp.2d 70, 94 (N.D.N.Y.2000) (dismissing implied warranty claim based on allegation that all cigarettes are carcinogenic, noting that warranty of fitness for ordinary purposes `provides for a minimal level of quality' (citation omitted)); Ark. Carpenters' Health & Welfare Fund, 75 F.Supp.2d at 945 (holding plaintiff had failed to state a claim for breach of the implied warranty of merchantability based on allegation that a typical cigarette, like all cigarettes, is `generally defective'); Shell v. Union Oil Co., 489 So.2d 569, 571-72 (Ala.1986). Although this court has not addressed the precise issue presented in the certified question, we think the answer lies in the interrelationship of warranty claims and tort product-defect claims, an issue we have considered. Almost twenty years ago, we observed that a warranty of merchantability is based on a purchaser's reasonable expectation that goods ... will be free of significant defects and will perform in the way goods of that kind should perform. Van Wyk v. Norden Labs., Inc., 345 N.W.2d 81, 84 (Iowa 1984) (emphasis added). More recently, this court has held that proof of a serious product defect was sufficient to support submission of strict liability and breach of warranty theories. Ballard v. Amana Soc'y, Inc., 526 N.W.2d 558, 562 (Iowa 1995). Notwithstanding a shared focus on defects, warranty claims have been distinguished from strict liability claims on the ground that `defects of suitability and quality are redressed through contract actions and safety hazards through tort actions.' Am. Fire & Cas. Co. v. Ford Motor Co., 588 N.W.2d 437, 439 (Iowa 1999) (citations omitted); cf. Shell, 489 So.2d at 571 (The implied warranty mandated by this section of the U.C.C. is one of commercial fitness and suitability.... That is to say, the U.C.C. does not impose upon the seller the broader obligation to warrant against health hazards inherent in the use of the product when the warranty of commercial fitness has been complied with. Those injured by the use of or contact with such a product, under these circumstances, must find their remedy outside the warranty remedies afforded by the U.C.C.). Despite this distinction, we have found no error in submitting personal injury claims under both strict liability and breach of warranty theories. See Mercer, 616 N.W.2d at 621. In contrast, where only economic loss is alleged, recovery is limited to warranty claims. E.g., Tomka v. Hoechst Celanese Corp., 528 N.W.2d 103, 107 (Iowa 1995) (affirming dismissal of negligence and strict liability claims in case alleging purely economic injuries). Although this court has approved submission of both theories in personal injury cases, we have noted the same evidence sufficient to support a negligence claim based on product defects is likewise adequate to support a breach-of-implied-warranty claim. Mercer, 616 N.W.2d at 621. Similarly, this court has stated that while strict liability, negligence, and breach of warranty are distinct theor[ies] of recovery, the same facts often give rise to all three claims. Lovick, 588 N.W.2d at 698. As this review of our case law reveals, we have distinguished product claims premised on tort theories from product claims grounded on warranty theories on the basis of the damages sought rather than on the basis of the nature of the wrongful conduct. And, although we have limited cases involving only economic loss to warranty theories, personal injury plaintiffs are permitted to seek recovery under tort and warranty theories that in essence allege the same wrongful acts. We conclude, therefore, that under Iowa law a seller's warranty that goods are fit for the ordinary purposes for which such goods are used gives rise to the same obligation owed by manufacturers under tort law with respect to the avoidance of personal injury to others. The Products Restatement is consistent with this position. It suggests that cases involving harm to persons should satisfy the definition of product defect under section 2, whether the claim is brought under a theory of implied warranty of merchantability or under a tort theory. Products Restatement § 2 cmt. n, at 35; accord Vassallo v. Baxter Healthcare Corp., 428 Mass. 1, 696 N.E.2d 909, 923 (1998) (adopting Products Restatement test for failure-to-warn claim based on breach of implied warranty of merchantability); cf. 1 James J. White and Robert S. Summers, Uniform Commercial Code § 9.8, at 521 (4th ed.1995) (stating authors' belief that merchantability standard and tort standard for defective condition under section 402A are interchangeable). We think this suggestion reflects current Iowa law: conduct that gives rise to a warranty claim based on fitness for ordinary purposes mirrors conduct that gives rise to tort liability for a defective product. Thus, warranty liability under section 554.2314(2)( c ) requires proof of a product defect as defined in Products Restatement section 2. Having defined the nature of the conduct that violates a warranty of merchantability, we now turn to the question before us: can a cigarette manufacturer be liable for breach of the implied warranty of merchantability when the cigarettes smoked by the plaintiff were in the condition intended by the manufacturer and the plaintiff alleges the defendants' cigarettes are substantially interchangeable? If the defect alleged by the plaintiff is a manufacturing defect, see Products Restatement § 2(a), then the answer is no for the same reasons that we have previously held that a plaintiff may not recover from a cigarette manufacturer under a manufacturing defect theory when the cigarettes smoked by the plaintiff were in the condition intended by the manufacturer. Obviously, the fact that the cigarettes were in the condition intended by the manufacturer would not preclude recovery under an implied warranty theory where the defect alleged arises from a defective design or inadequate instructions or warnings. See Products Restatement § 2(b), (c).