Ohio Supreme Court Declines to Clarify Boundaries of Implied Warranty in Tort Claims

April 26, 2016Articles

On April 20, 2016, the Ohio Supreme Court declined to accept jurisdiction of an appeal from the Fourth District Court of Appeals, which ruled that a commercial buyer could pursue an implied warranty in tort claim against a remote manufacturer for purely economic loss. This was a lost opportunity to clarify the fuzzy boundaries of the implied warranty in tort cause of action.

The claim for breach of implied warranty has had a tortured history in Ohio case law. For years, parties and courts have confused claims for implied warranties in contract (under the Ohio Commercial Code) with implied warranties in tort. Additionally, parties and courts often did not distinguish whether an implied warranty in tort claim was available to commercial parties or solely consumers. Consequently, Ohio precedent is confusing as to how and when claims for breach of the implied warranty in tort may be alleged.

In Caterpillar Financial Services v. Harold Tatman & Son’s, Enterprises, Inc., the Ross County Court of Common Pleas dismissed the implied warranty in tort claim on the basis of the economic loss rule – that plaintiffs who have only suffered an economic loss from a defective product cannot recover economic losses premised on tort theories of recovery. It was undisputed that Tatman, the commercial purchaser of a Vermeer Horizontal Grinder (Grinder), sought purely economic damages from the manufacturer of the Grinder, associated with alleged defects which Tatman claimed existed in the Grinder.

However, the Fourth District Court of Appeals overturned the trial court’s dismissal of the implied warranty in tort claim, and held that the economic loss rule did not bar tort recovery, finding: (1) the implied warranty in tort claim can be maintained by a commercial party, against a commercial party, for purely economic losses; (2) this claim was not abrogated by the Ohio Product Liability Act (OPLA); and, (3) this claim can be maintained, even though the remote supplier defendant issued an express written warranty on the subject vehicle.

The Fourth District Court of Appeals’ holding in the Tatman case that a commercial purchaser may sue for breach of the implied warranty in tort for solely economic loss is supported by only a single Ohio Appellate Court decision, i.e., Ohio Dep’t of Adm. Servs. Robert P. Madison Internat’l, Inc., 138 Ohio App.3d 388 (10th Dist. 2000). However, Ohio decisions out of other districts have held the opposite, i.e., a commercial purchaser may not maintain an economic loss claim against a remote manufacturer. Apostolos Group, Inc. v. BASF Constr. Chems., LLC, 9th Dist. Summit No. 25415, 2011 WL 1847723 (May 11, 2011); Midwest Ford, Inc. v. C.T. Taylor Co., Inc., 118 Ohio App.3d 798 (9th Dist. 1997); Norcold, Inc. v. Gateway Supply Co., 154 Ohio App.3d 594 (3rd Dist. 2003). Ohio courts of appeals are obviously split on whether a commercial purchaser not in privity with the defendant manufacturer can bring a tort claim for economic loss under these circumstances.

Moreover, courts have expressed doubt that an implied warranty in tort claim is actionable where a valid, express written warranty exists. See, e.g., Risner v. Regal Marine Indus., 8 F. Supp. 3d 959, 995 (S.D. Ohio 2014) (Litkovitz, J.) (court stated it was not “persuaded that Ohio courts would recognize an implied warranty in tort claim when there is a valid, enforceable written warranty”); Hartman v. Mercedes-Benz, U.S.A., LLC, 2010 WL 907969, at *7 (N.D. Ohio Mar. 11, 2010) (court stated it is “unclear” an implied warranty in tort claim exists when there is a valid written warranty).

The remote manufacturer in the Tatman case sought the discretionary appeal of the Fourth Appellate District Court to the Ohio Supreme Court based on several theories, including: (1) the implied warranty in tort claim is expressly abrogated by the OPLA; (2) the implied warranty in tort claim should not be maintained when the remote product supplier has issued an express written warranty on the product; and (3) the implied warranty in tort claim should be dismissed based upon the economic loss doctrine.

The Ohio Supreme Court declined jurisdiction and an opportunity to provide product suppliers clarity. As such, for the time being, Ohio product suppliers should remain wary of relying exclusively on their express warranties to define the limits of their obligations and liabilities to remote commercial purchasers.