Thursday, February 28, 2013
I recently reviewed a new decision out of West Virginia involving the implied warranty of merchantability ("IWM"), Teamsters v. Bristol Myers Squibb. Many Contracts Profs teach IWM as part of their UCC coverage but some do not. For those unfamiliar...any sale of good by a merchant comes with the IWM assuming that the state has adopted its own version of UCC 2-314. Under West Virginia law (and under the UCC), goods are "merchantable" if they "are fit for the ordinary purposes for which such goods are used." Although IWM cases are common, this case is particularly interesting (at least to me) because it involved the following issue: What is the "ordinary" purpose of a supposedly "extraordinary" product?
In Teamsters, the product was Plavix, a prescription anti-coagulant. According to the FDA, Plavix's blood-thinning properties could help treat "patients who experienced a recent heart attack [or] stroke." The drug reportedly was marketed as a superior alternative to Aspirin, a much cheaper, over-the-counter anti-coagulant taken by similar patient groups. Plaintiffs alleged that Plavix's "ordinary and intended pharmacological purpose" was "being a superior alternative to asprin for certain indicated usages." Because Plavix allegedly worked no better than Aspirin, Plaintiffs alleged breach of IWM. Defendants countered that the "ordinary purpose" of Plavix was "to act as an anticoagulant" and nothing more.
The West Virginia court agreed with Defendants. The court gave the following fact-based reasons:
"The FDA approved Plavix for its blood-thinning properties in treating patients who experienced a recent heart attack, stroke, PAD, or ACS. There is no indication that the FDA approval was related to Plavix's efficacy compared to aspirin and other alternatives. Also, this Court has reviewed the Plavix labeling information, and has found nothing on that label suggesting that Plavix's ordinary purpose was to act as a superior alternative to aspirin or Aggrenox."
These reasons were supported by citations to Williston on Contracts and other sources indicating that IWM "requires only that the goods be fit for their ordinary purpose, not that they be...outstanding or superior....or function as well as the buyer would like." Thus, because "Plaintiffs [did] not allege that Plavix was not fit for its ordinary purpose of being an anticoagulant," the IWM was not breached.
When I read the case, I wasn't entirely convinced by the cited sources because they dealt with claims involving products marketed as ordinary (as far as I could tell). I also couldn't help but think back to the (in)famous claim of Papa John's regarding its pizza--"Better Ingredients, Better Pizza--Papa John's." I recalled that being an express warranty case but it turns out that it was a Lanham Act case brought by Pizza Hut. I suppose that if a product is marketed as extraordinary, the warranty claims will be based on those assertions (whether under express warranty, false advertising, etc.) and not on IWM. So, the "ordinary" purpose of an "extraordinary" product becomes irrelevant. Regardless, I'm still a bit puzzled by the question.
[Heidi R. Anderson, h/t to student, Shawn Matter]
SCOTUSblog has linked to the transcript from yesterday's oral arguments in American Express Co. v. Italian Colors Restaurants. SCOTUSblog, as always, has full materials on the case here. The issue in the case is:
Whether the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.
The plaintiffs in the case are merchants who claim that American Express violates antitrust laws by requring it to accept American Express credit cards if they also accept American Express charge cards. The plaintiffs claim that, since the expense associated with individual arbitrations outweighs the individual recovery that any one merchant can expect, their claims are effectively denied if they cannot bring them as part of a class action lawsuit.
According to the New York Times' coverage, there are at least six votes on the Court for enforcing the arbitration agreements. Justice Scalia set the tone for the presumptive majority, stating on page 24 of the transcript, "I dont' see how a Federal statute is frustrated or is unable to be vindicated if it's too expensive to bring a Federal suit. That happened for years before there was such a thing as class action[s] in Federal courts. Nobody thought the Sherman Act was a dead letter, that it couldn't be vindicated." On the Times reading of the tea leaves, that position will be attractive to the five Justices who formed the majority in Concepcion, but this time Justice Breyer (pictured) also seemed inclined to reject the argument that there was no cost-effective way for plaintiffs to bring their claims through arbitration.
On last night's Colbert Report, Stephen announced that he, a company man, was contractually obligated to provide a sponsor integration for Halls Mentho-Lyptus cough drops. He does so by changing the name of his intern Jay to "Halls Mentho-Lyptus with Triple-Soothing Action Presents Jay the Intern."
Ahh, the power of contracts.
Tuesday, February 26, 2013
Sunday, February 24, 2013
The 8th Annual International Conference on Contracts was a success! Thanks to Frank Snyder and Texas Wesleyan for organizing and hosting. All of the panels were videotaped, so we will provide a link once it is made available to us.
The blog was privileged to present a replica of the 5-foot contract from the Hobbit movie to the conference honoree, Chancellor John E. Murray. (Here's an "amazingly detailed" legal analysis of that contract, which includes a non-disclosure provision and a mandatory arbitration clause).
Next year we will trade the Lonestar State for the Sunshine State... so mark your calendars for February 22-23, 2014 at St. Thomas University School of Law in Miami... where we contracts profs will "party in the city where the heat is on, all night on the beach till the break of dawn."
[Meredith R. Miller]