Dismissal of manufacturer's product liability claim vs. supplier reversed.

Byline: Eric T. Berkman

A manufacturer that alleged another company breached the implied warranty of merchantability by selling it defectively designed parts was not required to prove the defect was foreseeable by reasonable testing in order to sustain its claim, the 1st U.S. Circuit Court of Appeals has ruled.

Plaintiff AcBel Polytech, which produced power supply units for EMC Corp. to use in its data storage devices, claimed that thousands of re-designed microcircuits it purchased from its own supplier, defendant Fairchild Semiconductor Corp., to serve as voltage regulators for the units, were defectively designed, causing EMC's devices to falter and resulting in economic harm to the plaintiff.

The microcircuits apparently did not malfunction when subjected to industry-standard testing, and Fairchild's expert testified at a bench trial that the failure could only be duplicated by creating extreme conditions.

After trial, a U.S. District Court judge dismissed AcBel's claim, holding that the plaintiff failed to show that Fairchild could have discovered that the product was either dangerous or defective through reasonable testing.

But the 1st Circuit reversed, holding that reasonableness of testing is "inconsequential" in a breach of implied warranty case that alleges harm only to the product itself.

"By considering foreseeability by reasonable testing for its analysis of the implied warranty of merchantability test, the district court improperly commingled contract-based and tort-based theories of implied warranty," Judge Juan R. Torruella wrote for the court. "When economic loss is the only injury that is claimed, recovery for breach of an implied warranty should be construed as contract-based, not tort-based, under Massachusetts law."

The 40-page decision is AcBel Polytech, Inc. v. Fairchild Semiconductor International, Inc., et al., Lawyers Weekly No. 01-152-19. The full text of the ruling can be found here.

Important clarification

Zeb Landsman of New York, lead counsel for the plaintiff, said he was pleased the 1st Circuit agreed that there is no foreseeability requirement when bringing a contract claim for breach of implied warranty of merchantability.

"We look forward to prosecuting our breach and fraud claims before the District Court," Landsman added.

Matthew Iverson of Boston, who represented the defendant, did not respond to requests for comment.

But David B. Mack, a business litigator in Burlington, said the 1st Circuit has drawn...