Summary of a Recent
Judicial Development in
Commercial Transactions

Violation of Labeling Regulation Was Not a Breach
of Express Warranty or Implied Warranty
of Fitness for a Particular Purpose

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In Millenkamp v. Davisco Foods International, Inc., 562 F.3d 971 (9th Cir. 2009), the United States Ninth Circuit Court of Appeals affirmed in part and reversed in part the ruling of the district court, which had entered judgment on the jury's verdict in favor of buyers' warranty claims. The buyers brought action against sellers of milk permeate to recover for breach of warranty and negligence in causing the deaths of calves. The instant court held that the violation of the milk labeling regulation did not provide a basis for breach of warrantees, and seller's liability for breach of warranty was not removed by a nutritionist's comparative negligence.

Background

The plaintiffs engaged in calving activities, and the defendant operated a cheese-making operation. Id. at 974. Both parties' business activities were conducted in Idaho. Id. During the process of making cheese, milk permeate is produced as a by-product. Id. The defendant sold his milk permeate to several nearby livestock feeding operations. Id. After consulting with both an employee of the defendant and a Cargill nutritionist concerning the use of milk permeate in calf-raising operations, the plaintiffs began incorporating milk permeate into their calf feed. Id. Within days, several of the plaintiffs' calves became sick, failed to gain weight, or died. Id. The plaintiffs' veterinarians conducted necropsies on the dead calves and determined that because the plaintiffs had stored the milk permeate at an improper temperature, the lactose "ferment[ed] into a harmful lactic acid that caused the calves to fall prey to rumen acidosis." Id. In October 2004, the plaintiffs filed suit against the defendant for breach of express warranties, breach of the implied warranty of fitness for a particular purpose, general negligence, and negligence per se. Id. Eventually, the parties proceeded to trial on the plaintiffs' claims for breach of express warranty and breach of implied warranty of fitness for a particular purpose. Id. At trial, the jury held in favor of the plaintiffs and awarded damages. Id. Thereafter, the defendant moved for judgment as a matter of law or, in the alternative, for a new trial. Id. The court denied the defendant's motions, and the defendant appealed. Id.

Arguments

The defendant argued that: (1)"the district court mishandled the issue of Cargill's involvement by failing to give the jury instructions regarding Cargill's comparative negligence"; and (2) "the district court should not have allowed evidence or instructed the jury concerning Idaho's statutory requirement to label milk permeate for safe use." Id. at 975.

Analysis and Holdings

The court first addressed whether the trial court erred by declining to give a comparative negligence jury instruction, which would have allowed the jury to compare the negligence of Defendant with the negligence of the Cargill Inc. representative. Id. at 975. After considering Defendant's request within the purview of Idaho law, the court held that, "[Defendant] was not entitled to a jury instruction regarding Cargill's comparative negligence, because negligence is not a defense to liability for breach of warranty claims in Idaho." Id.

The court then addressed whether the district court erred in its "instruction to the jury that it must consider Idaho's 'legal requirement that the milk permeate contain a label' that includes 'directions for use and precautionary statements' in determining whether [the defendant] breached its warranty to the [plaintiffs] . . . ." Id. at 976. At trial, the district court essentially "told the jury that a violation of Idaho's Milk Permeate Labeling Requirement [was] a basis to find breach of an express warranty and/or the implied warranty of fitness for a particular purpose." Id. at 977. Ultimately, the court agreed with the defendant, holding that "the district court erred by instructing the jury that a violation of Idaho's Milk Permeate Labeling Requirement [was] a breach of these warranties." Id. Regarding the express warranty claim, the court reasoned "that the legal requirement to label milk permeate had no bearing on the [plaintiffs'] breach of express warranty claim, because there was no evidence of an express warranty by [defendant] that the milk permeate would comply with labeling laws." Id. Regarding the alleged implied warranty of fitness for a particular purpose, the court reasoned that Idaho's legal requirement to label was irrelevant "because it did not affect [the defendant's] knowledge of the intended use or the fitness of the milk permeate as delivered." Id. at 978. For these reasons, the court held that the district court erroneously applied Idaho law concerning breach of the two warranties.

The case was decided on April 14, 2009.