Along, I am sure, with many of you, I was intrigued at Ken’s recent post on the case of DeBenedetto v. Denny’s Corporation, filed recently in Middlesex County, New Jersey by the Center for Science in the Public Interest.  Most interesting to me, of course, was the claim that Denny’s food violated the warranty of merchantability contained in contracts for the sale of goods under Article 2 of the Uniform Commercial Code.  I have blogged on the warranty of merchantability in connection with food recalls. 

Paragraph 59 of the complaint states as follows:

59.  Denny’s meals purchased by Plaintiff and New Jersey Consumers are not adequately described on the menu to advise Plaintff and New Jersey Consumers that they are consuming high amounts of sodium in one meal that are in excess of the advised daily limit.

In Paragraph 60, the complaint claims that this violates the warranty of merchantability because of, among other claims, the alleged inadequate description.

A recent decision of the Ninth Circuit Court of Appeals, Millenkamp v. Davisco Foods International, Inc., seriously calls into question the validity of the plaintiff’s claims in the case against Denny’s.  That case involved the implied warranty of fitness for a particular purpose, not the implied warranty of merchantability, but the reasoning is sufficiently applicable that it can be inferred that Denny’s should prevail on this claim.

In Millenkamp, the plaintiffs had purchased milk permeate as cattle feed.  The cows fed the milk permeate subsequently died and the plaintiffs sued the supplier as well as a feed company that had advised them about how to use the milk permeate (they later settled against the feed company).  One of the claims was that the failure to label the milk permeate as required by Idaho law resulted in a breach of the warranty of fitness for a particular purpose.  After prevailing in the trial court, judgment for the plaintiffs was reversed by the Ninth Circuit, which held,

compliance with Idaho’s Milk Permeate Labeling Requirement does not address whether Davisco breached a warranty of fitness for a particular purpose. 

In order to breach the warranty, a mislabeling must breach "a part of the bargain between the parties."  In Millenkamp, the contract between the parties did not include an express requirement that the milk permeate comply with all laws, or comply with all labeling laws.

Is there a difference with the warranty of merchantability?

The Ninth Circuit, in footnote 3 of its opinion, implies that there might be.  That footnote is dictum, however, and with all due respect to the Ninth Circuit, misses an important part of the labeling language of Article 2.

Section 2-314(2)(e) of the Uniform Commercial Code contains as a requirement of the warranty of merchantability that the goods "are adequately contained, packaged, and labeled as the agreement may require."  Comment 9 to Section 2-314 states, "Paragraph (e) applies only where the nature of the goods and of the transaction require a certain type of package or label."  In other words, the result under the warranty of merchantability should be exactly the same as under the warranty of fitness for a particular purpose:  if it’s not in the contract, then it’s not possible to violate it through the implied warranty.  Plaintiffs have expressly disclaimed that there is any kind of special contract involved in buying food at Denny’s (they need to, in order to avoid any contract that would have disclaimed these implied warranties).  Thus, the claim for breach of the implied warranty of merchantability by means of inadequate labeling should fail.