A pair of recent decisions from the S.D.N.Y. reaffirms the growing consensus among district courts within the Second Circuit that establishing privity is not a requirement for breach of
express warranty claims seeking recovery for purely economic loss.[1]
In general, “To prevail on a claim of breach of express warranty, a plaintiff must show 'an affirmation of fact or promise by the seller, the natural tendency of which was to induce the buyer to purchase and that the warranty was relied upon.” Factory Assocs. & Exporters, Inc. v. Lehigh Safety Shoes Co., LLC, 382 F. App'x 110 (2d Cir. 2010). For contracts for the sale of
goods, the UCC further provides that “any 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 creates an express warranty that the goods shall conform to the affirmation or promise." N.Y. U.C.C. § 2-313(1)(a). Moreover, "[a]ny description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description." Id. § 2-313(1)(b). It should also be noted that federal jurisdiction exists over many warranty claims due to the Magnusson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., though that act expressly does not restrict state law rights and remedies. 15 U.S.C. § 2311(b)(1).
Turning to the specific issue of privity, the New York Court of Appeals in Randy Knitwear, Inc. v. Amer. Cyanamid Co., 11 N.Y.2d 5 (1962), modified the previous common-law rule requiring privity for breach of express warranty claims, recognizing that “the significant warranty, the one which effectively induces the purchase, is frequently that given by the manufacturer through mass advertising and labeling to ultimate business users or to consumers with whom he has no direct contractual relationship.” Id. at 12.
However, Randy Knitwear predated New York’s 1975 adoption of the U.C.C., § 2-318, which provides that express (and implied) warranties extend to any natural person if it is reasonable to expect that such a person might use the goods and suffers a personal injury. However, this section is silent on the question of purely economic loss, an exclusion that is especially notable considering that the drafters of the UCC provided three alternative versions of this section for states to consider enacting, one of which states that warranties extend to any injury suffered by anyone who might be expected to use the goods, not just personal injuries. Compare U.C.C. § 2-318 Alternative B (adopted by N.Y.) with Alternative C. Accordingly, a series of district court decisions held that New York’s enactment of the U.C.C. abrogated Randy Knitwear and restored the privity defense for express warranty claims. See, e.g., Koenig v. Boulder Brands, Inc., 995 F. Supp. 2d 274 (S.D.N.Y. 2014); Ebin v. Kangadis Food, Inc., No. 13 Civ. 2311(JSR), 2013 WL 6504547 (S.D.N.Y. Dec. 11, 2013); Dibartolo v. Abbott Laboratories, 914 F. Supp. 2d 601 (S.D.N.Y. 2012). Similar conclusions were reached by several state appellate courts. See, e.g., Mfrs. & Traders Trust Co. v. Stone Conveyor, Inc., 91 A.D.2d 849 (4th Dept. 1982); Hole v. General Motors Corp., 83 A.D.2d 715, 716 (3d Dept. 1981).
Additionally, a series of decisions described Randy Knitwear as a narrow exception to the general rule, holding that the requirement of privity was waived only for express warranties contained in public advertising or sales literature.; Silva v. Smucker Natural Foods, Inc., Case No. 14-CV-6154 (JG)(RML), 2015 WL 5360022 (E.D.N.Y. Sep. 14, 2015); Weisblum v. Prophase Labs, Inc., 88 F. Supp. 3d 283 (S.D.N.Y. 2015); Arthur Glick Leasing, Inc. v. William J. Petzold, Inc., 51 A.D.3d 1114 (3d Dept. 2008); Murrin v. Ford Motor Co., 303 A.D.2d 475 (2d Dept. 2003); Carcone v. Gordon Heating & Air Conditioning Co., Inc., 212 A.D.2d 1017 (4th Dept. 1995).
Finally, yet another line of authority has held that Randy Knitwear continues to waive the requirement of privity for all express warranty claims, based upon Comment 2 of the Official Comments UCC § 2-313, which states that, “[a]lthough this section is limited in its scope and direct purpose to warranties made by the seller to the buyer as part of a contract for sale, the warranty sections of [Article 2] are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined either to sales contracts or to the direct parties to such a contract.” See Sitt v. Nature's Bounty, Inc., 15-CV-4199 (MKB), 2016 WL 5372794 (E.D.N.Y. Sep. 26, 2016); Mahoney v. Endo Health Sols., Inc., 15-cv-9841(DLC), 2016 WL 3951185 (S.D.N.Y. July 20, 2016).
The most recent decisions on this issue have generally agreed with the most expansive line of authority. For example, the court in Brady v. Anker Innovations Ltd., No. 18-cv-11396 (NSR), 2020 WL 158760 (S.D.N.Y. Jan. 13, 2020) conducted an extensive review of the case law on this issue, before explicitly following Mahoney and Sitt, while rejecting Koenig and Ebin. A similar result was reached in Wedra v. Cree, Inc., 19 CV 3162 (VB) (S.D.N.Y. Mar. 20, 2020), where the court found that privity was not required though it dismissed the claim on other grounds. Accordingly, until the Second Circuit provides definitive guidance in this area, it appears that the current trend is to waive the requirement of privity for breach of express warranty claims.
[1] Notably, this analysis does not extend to claims for breach of implied warranties of merchantability and fitness for a particular purpose where the only loss claimed is economic. In such cases, it is well-established that privity is a requirement. See Wedra v. Cree, Inc., 19 CV 3162 (VB) (S.D.N.Y. Mar. 20, 2020); Catalano v. BMW of North America, LLC, 167 F. Supp. 3d 540 (S.D.N.Y. 2016)