Opinion ID: 588206
Heading Depth: 2
Heading Rank: 1

Heading: The Requirement of Reliance

Text: 9 As the district court correctly noted, [w]hether tort-like reliance is a necessary element in a claim for a breach of express warranty is a difficult question, at best. The court determined, however, that the law of Minnesota appears to require some form of reliance on the part of the buyer as an element for a breach of express warranty claim. In this diversity case, the elements of a breach of warranty claim are a question of Minnesota law. We review a district court's determination of state law de novo. Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1225, 113 L.Ed.2d 190 (1991). 10 In concluding that reliance is required, the district court cited only one case, Midland Loan Finance Co. v. Masden, 217 Minn. 267, 14 N.W.2d 475, 481 (1944) (To enable a party relying upon a breach of express or implied warranty to recover, it must be clear and definite that there was reliance upon the warranties involved.). Hendricks argues that Midland no longer reflects the current law in Minnesota and urges us to hold that the buyer's reliance is irrelevant in a breach of warranty claim. We decline to do so. 11 Hendricks gives several reasons why we should not follow Midland. First, he argues that because Midland was decided prior to Minnesota's adoption of the Uniform Commercial Code (UCC), its discussion of express warranties is no longer valid. In 1966, the UCC became effective in Minnesota. It defines an express warranty as an affirmation which relates to the goods and becomes the basis of the bargain. Minn.Stat.Ann. § 336.2-313 (1966). This provision replaced § 512.12 of the statutes and omitted the requirement that a buyer rely on an express warranty. 2 Hendricks contends the Minnesota legislature has omitted the requirement of reliance in this context and, in effect, overruled Midland. 12 We need not discuss in detail the subtle differences between reliance and basis of the bargain. The transaction in this case (as well as the transaction in Midland 3 ) was not a transaction[ ] in goods and therefore is not covered by the provisions of the UCC. See Minn.Stat.Ann. § 336.2-102 (1966). Even if we apply the UCC warranty provisions by analogy, we are not convinced Minnesota has completely abandoned the requirement of reliance. Compare Minnesota Code Comment to § 336.2-313, at 280 (This difference in terminology [between reliance and basis of the bargain] probably brings about no great change in the results of cases.) with Uniform Commercial Code Comment to § 336.2-313, at 282 ([N]o particular reliance on such statements [i.e., express warranties] need be shown to weave them into the fabric of the agreement.). See also Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 489 (Minn.Ct.App.1987) (applying § 336.2-313, the court stated [a]ppellant admitted that he did not rely on the representations in purchasing [the tractor] ..., therefore, the trial court properly granted partial summary judgment on his claims of misrepresentation and breach of an express warranty. (Emphasis added)). 13 Hendricks also argues that Midland has been overruled sub silentio by recent Minnesota Supreme Court decisions. He relies on Peterson v. Bendix Home Systems, 318 N.W.2d 50 (Minn.1982), for the proposition that the Minnesota Supreme Court no longer requires reliance as an element of a breach of warranty claim. In Peterson, the court stated, To establish a warranty claim the plaintiff must basically prove: the existence of a warranty, a breach, and a causal link between the breach and the alleged harm. 318 N.W.2d at 52-53. That these are the elements of a breach of warranty claim under the UCC in Minnesota is beyond dispute. See Schweich v. Ziegler, Inc., 463 N.W.2d 722, 730 (Minn.1990); Craft Tool & Die Co. v. Payne, 385 N.W.2d 24, 26 (Minn.Ct.App.1986); Imdieke v. Blenda-Life, Inc., 363 N.W.2d 121, 124 (Minn.Ct.App.1985). Hendricks argues that because the requirement of reliance is not an enumerated element in these breach of warranty cases, Minnesota no longer requires reliance. 14 We are unpersuaded by this argument for two reasons. One, all the cases which recite the three elements of a breach of warranty claim dealt with transactions in goods which are governed by § 336.2-313. Again, neither Midland nor the present case involved transactions in goods. Two, although appellants correctly note that none of the elements in Peterson requires reliance, they ignore the fact that the first element--the existence of an express warranty--requires the warranty to be the basis of the bargain. In each case which recites the three Peterson elements, the court found no dispute as to the first element--that an express warranty existed--and therefore never addressed the issue of whether the warranty was the basis of the bargain. See Schweich, 463 N.W.2d at 731; Peterson, 318 N.W.2d at 52; Craft Tool & Die, 385 N.W.2d at 26; Imdieke, 363 N.W.2d at 124. In a case decided before Peterson, however, the Minnesota Supreme Court briefly discussed whether an express warranty existed and stated that an express warranty arises when a seller makes an affirmation of fact ... which becomes part of the 'basis of the bargain' between the parties. Easton Farmers Elevator Co. v. Chromalloy Am., 310 Minn. 568, 246 N.W.2d 705, 710 (1976). The court went on to find that the alleged statements, if credited by the jury, clearly constituted express warranties which were central to the negotiated bargain between the parties. Id. 15 Finally, Hendricks urges us to hold that Minnesota would adopt the modern view which provides that the buyer's reliance on the warranty is wholly irrelevant. This is the position adopted by the New York Court of Appeals in CBS, Inc. v. Ziff-Davis Publishing Co., 75 N.Y.2d 496, 553 N.E.2d 997, 1000-01, 554 N.Y.S.2d 449, 452-53 (1990) (This view of 'reliance'--i.e., as requiring no more than reliance on the express warranty as being part of the bargain between the parties--reflects the prevailing perception of an action for breach of express warranty as one that is no longer grounded in tort, but essentially in contract.). We are not persuaded Minnesota would adopt this position; rather we are convinced it would require some sort of reliance. 16 In Alley Construction Co. v. State, 300 Minn. 346, 219 N.W.2d 922 (1974), the Minnesota Supreme Court as much as held that reliance on the warranty was required in a breach of warranty case. In that case, the state requested bids be submitted for the construction of a highway. The plans and specifications designated certain portions of the highway as balance areas. In a balance area, the amount of fill material required was to be approximately equal to the amount of material to be cut. After the plaintiff was awarded the contract and completed the project, it sued the state alleging a breach of warranty because the balance areas were not at all balanced. In fact, none of the balance areas was balanced and the plaintiff experienced significant increases in the cost of hauling material. The plaintiff was successful at trial and [o]n appeal, the state contend[ed] that it was improper to submit the issue of breach of warranty since there [was] no evidence that plaintiff relied upon the contract and specifications in submitting its bid. Id. 219 N.W.2d at 924. The supreme court determined that when a party submits a bid in this situation, an inference of reliance [on the plans and specifications] properly arises. Id. The trial court instructed the jury that for a breach of warranty claim, the plaintiff had the burden to establish five elements, one of which was [t]hat the plaintiff relied on that warranty, or representation, and was induced thereby to bid on the contract. Id. at 925 n. 1. The supreme court held that the trial court's instruction to the jury was in accordance with the applicable law. Id. at 925. 17 In sum, because this transaction is not governed by the UCC, because Peterson and its progeny are UCC cases, because the Minnesota Supreme Court has affirmed the use of jury instructions which require reliance in a related context, and because the Minnesota Supreme Court has not expressly overruled Midland, we are not persuaded that Midland no longer reflects the current law in Minnesota. Having determined that appellants must show some form of reliance on the warranty to succeed, 4 ] we turn to the merits of the two warranty claims in issue.