Maynard Cooperative v. Zeneca Inc. ( 1998 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 97-1267
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Maynard Cooperative Co., *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the
Zeneca, Inc., doing business as * Northern District of Iowa
ICI Seeds, formerly doing business *
as ICI Americans, Inc., *
*
Appellee. *
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Submitted: October 21, 1997
Filed: May 7,1998
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Before McMILLIAN, FLOYD R. GIBSON1 and LAY, Circuit Judges.
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McMILLIAN, Circuit Judge.
1
At the panel’s conference on October 21, 1997, following oral argument of the
case, Judge Floyd R. Gibson concurred in the result reached in this opinion. Judge
Gibson has been disabled by illness from reviewing the opinion, which is being filed
in the interest of avoiding undue delay.
Maynard Cooperative Co. (Maynard) appeals from a final order entered in the United States District
2
Court for the Northern District of Iowa, granting summary judgment in favor of Zeneca, Inc. (Zeneca), on
Maynard’s claims of negligence, negligent misrepresentation, breach of an implied warranty of fitness, and
contribution or indemnity. Maynard Cooperative Co. v. Zeneca, Inc., No. C94-2063 (N.D. Iowa Dec. 17, 1996)
(hereinafter “slip op.”). For reversal, Maynard argues that the district court erred in dismissing its claims of
negligent misrepresentation and contribution or indemnity under Iowa law. For the reasons stated below, we
affirm.
Jurisdiction
Jurisdiction in the district court was proper based upon 28 U.S.C. § 1332. Jurisdiction in this court is
proper based upon 28 U.S.C. § 1291. The notice of appeal was timely filed pursuant to Fed R. App. P. 4(a).
Background
In the spring of 1993, Robert J. McSweeney, Sr., and Robert M. McSweeney, Jr. (the McSweeneys),
Iowa dairy farmers, hired Maynard to assist them in an effort to “burn down” a failed alfalfa crop and replace it
with a new crop in time to harvest within the same planting season. Maynard consulted Walt Osborne, the area
representative for Zeneca, regarding the McSweeneys’ circumstances. Osborne suggested to Maynard that the
McSweeneys apply two products, Gramoxone (one of Zeneca’s products) and 2,4-D (a herbicide produced by
another manufacturer), wait seven days, and then replant. Maynard informed the McSweeneys of Osborne’s
recommendation and then implemented the plan suggested by Osborne. After the Gramoxone and 2,4-D were
applied, the failed alfalfa plants were destroyed as
2
The Honorable Edward J. McManus, United States District Judge for the
Northern District of Iowa.
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expected. However, the new crop (planted seven days later) died, presumably as a result of chemical residue left
in the soil.
The McSweeneys made a demand to Maynard for compensation of their losses. Maynard settled with
them and obtained a release by the McSweeneys of all claims against Maynard and Zeneca. Maynard then
brought the present action against Zeneca in state court, alleging negligence, negligent misrepresentation, breach
of an implied warranty of fitness, and contribution or indemnity. Maynard alleged that Osborne gave Maynard
bad advice because the correct period of time to wait before replanting, after applying 2,4-D, is twenty-one days,
not seven days.
Zeneca removed the case to federal district court on diversity grounds and moved for summary judgment.
The district court granted Zeneca’s motion and entered judgment for Zeneca on all four counts. The district court
held, in relevant part, that the negligent misrepresentation claim was barred under Iowa’s “economic loss”
doctrine for the following reasons.
The performance or service expected of the chemicals in this matter was that they would
be applied to exterminate a crop, and that they would become harmless within seven days after
application, in order that a new crop might be planted. It appears undisputed that the 2,4-D did
not become harmless within seven days, and that the replanted crop was unsuccessful as a result.
The record demonstrates that the question of how long the 2,4-D would take to become harmless
was central to what the application was to accomplish, and therefore the failure to satisfy this
performance level was not a hazard peripheral to the product’s function.
Slip op. at 5-6 (citing Tomka v. Hoechst Celanese Corp., 528 N.W.2d 103, 106 (Iowa 1995) (Tomka)). The
district court also reasoned that, because the economic loss doctrine operated as a legal bar to Zeneca’s liability
for the alleged harm, Maynard could not recover on a theory of contribution or indemnity as a matter of law.
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Accordingly, the district court dismissed that claim in the complaint as well. Id. at 7. This appeal followed.
Discussion
We review a grant of summary judgment de novo. The question before
the district court, and this court on appeal, is whether the record, when
viewed in the light most favorable to the non-moving party, shows that
there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see,
e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Get Away Club, Inc. v.
Coleman, 969 F.2d 664, 666 (8th Cir. 1992); St. Paul Fire & Marine Ins. Co.
v. FDIC, 968 F.2d 695, 699 (8th Cir. 1992). Where the unresolved issues
are primarily legal rather than factual, summary judgment is particularly
appropriate. Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-06 (8th
Cir. 1990). We review the district court’s determinations of state law de
novo. Salve Regina College v. Russell, 499 U.S. 225, 231 (1991).
Maynard argues on appeal that the district court erred in holding, as a matter of Iowa law, that the
economic loss doctrine applies under the facts of this case. Maynard argues that the economic loss doctrine only
applies where the plaintiff’s claim is based upon the alleged failure of a product to meet the plaintiff’s commercial
expectations. Here, Maynard argues, there is no issue as to whether the chemicals performed their commercially
expected function of destroying the first crop. Rather, Maynard argues, the basis of its claim against Zeneca is
the incorrect advice given by Osborne that replanting would be safe after seven days. Maynard argues that this
case is clearly distinguishable from Tomka, in which the plaintiff was held not to have a tort claim against the
manufacturer of a synthetic cattle growth hormone, based upon the failure of that product to perform up to the
plaintiff’s expectations. In Tomka, the Iowa Supreme Court explained that “the distinguishing central feature
of economic loss is .
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. . its relation to what the product was supposed to accomplish.” 528 N.W.2d at 106; see also Nelson v. Todd’s
Ltd., 426 N.W.2d 120, 123-25 (Iowa 1988) (discussing economic loss doctrine).
Moreover, Maynard contends, it has sufficiently established its claims of negligent misrepresentation and
contribution or indemnity to withstand a motion for summary judgment. Maynard notes that the elements of a
negligent misrepresentation claim under Iowa law are defined in the Restatement (Second) of Torts § 552 (1977).
See, e.g., Haupt v. Miller, 514 N.W.2d 905, 909-10 (Iowa 1994) (Haupt). In Haupt, the Iowa Supreme Court
stated:
Our court has recognized the tort of negligent misrepresentation. . . . [S]ection 552 of
the Restatement (Second) of Torts (1977) . . . details the necessary proof as follows:
One who, in the course of his [or her] business, profession or other employment, or
in any other transaction in which he [or she] has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is subject to
liability for pecuniary loss caused to them by their justifiable reliance upon the
information, if he [or she] fails to exercise reasonable care or competence in obtaining
or communicating the information.
Maynard argues that, in the present case, the district court erred in dismissing its negligent
misrepresentation claim on summary judgment because genuine issues of material fact remain as to whether: (1)
Zeneca was in the business of supplying information; (2) Zeneca had a pecuniary interest in supplying the
information; (3) the information supplied was false; (4) Zeneca intended to supply the information for the benefit
of Maynard or its customers; (5) Zeneca intended the information to influence Maynard or its customers; (6)
Maynard acted in reasonable reliance upon the truth of
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the information supplied by Zeneca; and (7) Maynard sustained damage as a proximate result of the false
information supplied by Zeneca.3
In addition, Maynard argues that it sufficiently established a claim for contribution or indemnity to survive
Zeneca’s summary judgment motion because: Zeneca is a joint-tortfeasor vis-a-vis the harm done to the
McSweeneys; Maynard fully paid the McSweeneys and obtained a release of the McSweeneys’ claims against both
Maynard and Zeneca; and the McSweeneys had a viable negligent misrepresentation claim against Zeneca which
was separate from Maynard’s claim.
We agree with the district court’s application of the economic loss doctrine to the present case. The
district court correctly interpreted Maynard’s negligent misrepresentation claim as essentially based upon the
failure of 2,4-D to meet Maynard’s commercial expectation that the chemical would dissipate within seven days.
The failure of the 2,4-D to perform in that respect was the cause of the McSweeneys’ damages. Moreover,
Maynard is seeking to recover compensation for a purely economic loss – namely, the amount of money it paid
to compensate the McSweeneys. The distinction drawn by Maynard between the advice given by Zeneca and the
product about which the advice was given is, in our opinion, a distinction without a difference. Cf. Bailey Farms,
Inc. v. NOR-AM Chemical Co., 27 F.3d 188, 191-92 (6th Cir. 1994) (holding that a farmer had to seek a remedy
under the UCC for consequential losses for property damage resulting from the failure of an agricultural product
to perform as expected, notwithstanding farmer’s argument that the product worked properly but he was
misinformed about its proper use). Even though Maynard may not have had a claim against Zeneca under the
UCC or contract theories, the
3
In support of the assertions that Zeneca was in the business of supplying the
information in question and had a “pecuniary interest” in supplying the information,
Maynard highlights Osborne’s statement in his deposition that part of his job was “[t]o
increase the market share of [his] company’s products.” Joint Appendix at 132
(deposition of Walt Osborne).
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economic loss doctrine still applies to its negligent misrepresentation claim. In Tomka, 528 N.W.2d at 107-08,
the Iowa Supreme Court enforced the economic loss doctrine to dismiss a negligent misrepresentation claim
against a manufacturer because the only damages sought by the plaintiff were economic damages which clearly
fell within contract warranty theories, not tort theories, even though the plaintiff had no claim against the
manufacturer for breach of implied warranties.
We also hold that Maynard’s negligent misrepresentation claim fails as a matter of law under the
Restatement (Second) of Torts § 552, because Maynard cannot, as a matter of law, show at least three essential
elements of its claim. First, Zeneca was not in the business of supplying information but, rather, offered advice
and information merely as a service provided in connection with its retail operations, notwithstanding Osborne’s
generalized statement that part of his job was “[t]o increase the market share of [his] company’s products.” Joint
Appendix at 132 (deposition of Walt Osborne). See, e.g., Meier v. Alfa-Laval, Inc., 454 N.W.2d 576, 581 (Iowa
1990) (holding that the defendant, a seller and dealer of a milking machine, owed no duty of care for purposes of
a negligent misrepresentation claim based upon statements made in connection with the machine’s repair, because
the defendant was not in the business of supplying information) (cited in Haupt, 514 N.W.2d at 910). Second,
Zeneca did not have a pecuniary interest in supplying information to Maynard regarding 2,4-D, because that
product was manufactured by a different company. Third, Maynard could not reasonably rely on the truth of the
advice given by a Zeneca representative regarding the correct use of another manufacturer’s product. On this latter
point, Maynard could have, and clearly should have, consulted with the manufacturer of 2,4-D before using that
product in the manner suggested by Osborne. Thus, it is beyond genuine dispute that Maynard’s reliance solely
on Osborne’s advice regarding 2,4-D was not justified.
In short, the district court correctly held that Maynard has failed, as a matter of law, to establish any basis
in tort for imposing liability on Zeneca for the losses
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sustained by the McSweeneys and compensated by Maynard. Stated differently, Zeneca is not a joint-tortfeasor
vis-a-vis the harm done to the McSweeneys, despite Maynard’s assertion to the contrary. Consequently, Maynard
cannot, as a matter of law, recover on a theory of contribution or indemnity.
Conclusion
Accordingly, we hold that the district court did not err in holding that Zeneca is entitled to judgment as
a matter of law on Maynard’s claims of negligent misrepresentation and contribution or indemnity. The order of
the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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